Can growth in equity and investment trust fees sustain operating profit growth in FY2027-H1?

In the first quarter of the fiscal year ending March 2027, operating revenue was ¥6,251 million, up 43.2% year on year; operating income was ¥1,748 million, up 342.6%; and ordinary income was ¥2,067 million, up 208.1%. The operating margin rose from approximately 9.0% in the same quarter of the previous year to approximately 28.0%. A key point for the interim results will be whether this reflected more than increased trading volume, including an improved revenue mix and greater cost absorption.

Revenue items included equity acceptance fees of ¥2,092 million, investment trust offering fees of ¥1,516 million and trust fees of ¥2,419 million. In the cumulative second-quarter results, it will be necessary to determine whether first-quarter operating profit growth depended solely on equity brokerage fees or whether investment trust offering fees and balance-linked trust fees also grew at the same time. The company reports a single segment, “Investment and Financial Services,” and does not disclose profit by business, such as face-to-face sales, investment trusts or underwriting.

Recent reports indicated preliminary second-quarter operating income of ¥3,201 million and stated that operating revenue, ordinary income and interim net income also exceeded the previous year’s levels. However, these are preliminary figures, and specific amounts for operating revenue and ordinary income, as well as the breakdown by equities, investment trusts and bonds, have not been provided. In the formal FY2027-H1 results, we will check the difference from the preliminary figures, the cumulative H1 operating margin and the year-on-year change in each fee item.

Quarterly net income in Q1 was ¥1,413 million, up only 2.1% year on year, a substantial divergence from the 342.6% increase in operating income. Non-operating and extraordinary items may have contributed. In Q1, a ¥4 million provision for the Financial Instruments Transaction Liability Reserve was recorded as an extraordinary loss, while the full year included extraordinary gains such as a ¥533 million gain on the extinguishment of shares in a merger. The interim results should be used to assess how much operating profit growth remains in net income and the underlying earnings excluding extraordinary items.