Expenses outpaced revenue growth, making profit recovery the key issue for the first half

Ordinary revenue in FY2027 Q1 was ¥7,572 million, up ¥1,351 million from ¥6,221 million in the same quarter of the previous year. Ordinary profit, however, was ¥503 million, down ¥739 million from ¥1,242 million. Ordinary revenue rose approximately 21.7%, while ordinary profit declined approximately 59.5%, showing a clear divergence between revenue growth and profitability.

The direct reason profit failed to grow was a ¥2,090 million increase in ordinary expenses, which exceeded the ¥1,351 million increase in ordinary revenue. The company said that income from funds management, including interest on loans and interest and dividends on securities, increased, while also citing higher funding costs, an increase in other ordinary expenses, and substantial credit-related expenses during the quarter. Net income attributable to owners of the parent was ¥344 million, down ¥518 million from ¥862 million in the same quarter of the previous year, indicating that the increase in expenses affected both ordinary profit and net income.

The full-year forecasts for ordinary profit and net income are ¥4,840 million and ¥3,300 million, respectively, leaving Q1 at a simple progress rate of approximately 10.4% for each. If H1 is mechanically assumed to account for 50% of the full year, ordinary profit of ¥2,420 million and net income of ¥1,650 million would serve as reference benchmarks. However, the company has only stated that its full-year and cumulative second-quarter forecasts remain unchanged. The information provided does not show the specific profit allocation for H1 after taking seasonality into account or the applicable forecast amounts.

At the next earnings release, it will be necessary to check not only whether income from funds management continues to increase, but also the cumulative amounts of funding costs, other ordinary expenses, and credit-related expenses incurred in H1. The only reported segment is banking, so there is no comparison across segments. In addition, because the company did not prepare a quarterly consolidated statement of cash flows for Q1, the extent to which it discloses the drivers of changes in profit and loss on an amount basis in H1 will also be important.