1Q ordinary profit down, net income up; testing the upward revision to the FY2027 H1 forecast against actual results

In 1Q of FY2027/3, ordinary revenue rose 32.1% year on year to ¥25.814 billion, but ordinary profit was limited to ¥2.575 billion, down ¥2.009 billion, or 43.8%, from the same period a year earlier. Meanwhile, net income attributable to owners of the parent rose 92.6%, or ¥2.782 billion, to ¥5.784 billion. The fact that top-line growth has not flowed through to ordinary profit is the first point to verify in the next earnings release.

In the earnings forecast revision at the end of October, the ordinary profit forecast for April–September 2026 was raised from ¥3.2 billion to ¥4.5 billion, and the net income forecast from ¥4.8 billion to ¥7.1 billion. Comparing 1Q actual results mechanically with the H1 forecasts, ordinary profit had reached 57.2% of ¥4.5 billion and net income 81.5% of ¥7.1 billion. However, net income includes a non-recurring extraordinary gain, so the simple progress rate should not be treated as an indication of underlying earnings. It will be necessary to distinguish whether ordinary profit reached ¥4.5 billion in H1 and whether the net income outperformance came from repeatable earnings.

The full-year forecasts remain unchanged at ¥10.2 billion for ordinary profit and ¥9.0 billion for net income attributable to owners of the parent as of the 1Q results. Actual ordinary profit and net income for FY2026/3 were ¥13.434 billion and ¥8.601 billion, respectively. The FY2027 forecasts therefore assume ordinary profit below the previous year's actual result but net income above it. This can be read as a plan to secure bottom-line profit by incorporating merger-related expenses, deposit funding costs and credit costs, while also factoring in extraordinary gains and tax effects. In H1, ordinary profit progress and the quality of net income should be assessed separately.

At the next results announcement, it will be important not only to assess achievement against H1 ordinary profit of ¥4.5 billion and net income of ¥7.1 billion, but also to see whether the company discloses lending interest income, deposit interest expense, expenses, credit-related expenses and extraordinary gains and losses alongside the year-earlier figures. Even if net income exceeds ¥7.1 billion, the credibility of the ¥9.0 billion full-year forecast will remain limited if ordinary profit, excluding the reversal of extraordinary gains, is weak.