THE SHIMANE BANK, LTD.

Business Details

The core business of the regional bank based in Shimane Prefecture. It conducts Deposit Business, Lending Business, Securities Investment Business, Domestic Exchange Business, and other operations. While leveraging the capital and business alliance with the SBI Group, it promotes lending to small and medium-sized enterprises, individuals, and local governments, as well as digital deposit acquisition through smartphone branches. In FY2025 (FY2026 ending March 2026), ordinary income was ¥9,838 million and segment profit was ¥379 million.

Recent Overview

Revenue increased, but profit declined sharply due to a surge in funding costs and expanded valuation losses.

In the Banking Business segment for FY2026 (ending March 2026), ordinary income increased to ¥9,838 million (up 21.0% year on year), but segment profit fell sharply to ¥379 million (down 52.3% year on year) due to a sharp increase in interest paid on deposits stemming from the Bank of Japan's rate hikes (from ¥698 million to ¥1,674 million) and an increase in operating expenses (from ¥4,652 million to ¥5,651 million). In addition, due to rising interest rates, valuation differences on available-for-sale securities deteriorated to ¥-12,606 million (from ¥-9,713 million in the prior period), putting pressure on net assets. Risk-monitored loans increased to ¥9,344 million (ratio of 2.34%) from ¥8,652 million (2.17%) in the prior period. Other operating income, including gains on the transfer of loan receivables, increased significantly to ¥930 million (from ¥140 million in the prior period), providing support on the revenue side.

Key Products

Growth Drivers

• Rising loan yields due to continued additional rate hikes by the Bank of Japan (loan yield of 1.56% in FY2026 ending March 2026, up 0.17 percentage points year on year)
• Expansion of the loan balance due to increased lending to local governments and small and medium-sized enterprises (non-consolidated term-end balance of ¥393,265 million, up ¥2,098 million year on year)
• Increase in interest and dividends on securities due to increased securities balances centered on government and municipal bonds and rising yields (¥1,343 million, up ¥232 million year on year)
• Maintenance and expansion of the deposit base through continued personal deposit acquisition via smartphone branches
• Expansion of revenue opportunities through deepening collaborative measures with the SBI Group
• Development of new revenue sources through business succession and growth support for regional companies utilizing Shimagin Regional Business Investment Co., Ltd. (established April 2025)

Risks

• Rapid narrowing of the interest margin (overall interest margin of 0.01%) due to a preemptive sharp increase in deposit funding costs accompanying Bank of Japan rate hikes (interest on deposits increasing from ¥698 million to ¥1,674 million, up ¥976 million year on year)
• Further expansion of valuation losses on available-for-sale securities due to continued interest rate rises (valuation difference of ¥-12,606 million as of the end of March 2026) and downward pressure on net assets and capital adequacy ratio
• Risk of increased credit costs due to an increase in risk-monitored loans (¥9,344 million, ratio of 2.34%) and a decline in the coverage ratio (from 37.38% to 31.94%)
• Sluggish non-interest income due to a declining trend in fee and commission income (from ¥1,267 million to ¥1,055 million)
• Long-term decline in loan demand due to shrinking of the regional economy in the San'in region caused by population decline and aging
• Declining trend in consolidated and non-consolidated capital adequacy ratios (consolidated from 7.86% to 7.38%, non-consolidated from 7.56% to 7.09%)