FY2027 plan on track in Q1, with interest expense and market gains and losses in focus for the first half

In Q1, ordinary revenue was ¥35,718 million, up 31.4% year on year, ordinary profit was ¥10,806 million, up 22.4%, and net income attributable to owners of the parent was ¥7,469 million, up 18.5%. Against ordinary profit of ¥32,369 million and net income of ¥21,819 million in the previous full fiscal year, the company forecasts ¥36,600 million and ¥25,000 million, respectively, for the current fiscal year. The company’s own plan is therefore also set above the previous year’s results.

Banking is the main driver of profit growth. Banking segment revenue in Q1 increased to ¥32,929 million from ¥24,442 million a year earlier, while segment profit rose by more than ¥2,000 million to ¥10,580 million from ¥8,471 million. By contrast, revenue from other businesses increased only slightly, to ¥2,788 million from ¥2,747 million, while profit declined to ¥196 million from ¥361 million. Accordingly, assessing the sustainability of consolidated profit growth requires separately confirming whether continued revenue growth in banking can absorb the decline in other businesses.

Q1 ordinary profit of ¥10,806 million represented 29.5% of the full-year forecast of ¥36,600 million, while net income of ¥7,469 million represented 29.9% of the ¥25,000 million forecast. Bank profits are prone to fluctuations in market gains and losses and credit costs between the first and second halves, so exceeding 25% alone does not indicate an upside surprise. At least as of Q1, however, the start toward achieving the plan was not weak. For the cumulative six months through Q2, we will use ordinary profit of ¥18,300 million and net income of ¥12,500 million as interim checkpoints and examine the gap between results and the company’s forecasts.

The company attributed the Q1 profit increase to higher net interest income, as the increase in interest on loans exceeded the increase in interest on deposits and other instruments, as well as increases in gains and losses on stocks and other securities and net fees and commissions. Supplementary information shows net interest income of ¥2,214 million and interest on loans of ¥3,218 million, while gains and losses on government bonds and other bonds declined. In Q2, disclosure of how much profit was reduced by funding costs after the deposit-rate increase, market investment gains and losses, and credit costs will help assess the likelihood of achieving the ¥36,600 million full-year forecast.