San ju San Financial Group,Inc.

Business Details

At the branches and offices of The Juroku Bank, Ltd. (Note: this refers to 33 Bank, Ltd.), the segment conducts deposit-taking, lending, domestic and foreign exchange operations, and over-the-counter sales of government bonds, investment trusts, and insurance products. It is the core business of the Group, accounting for approximately 81% of consolidated ordinary income, and provides diverse financial solutions to regional companies and individual customers primarily in Mie Prefecture. In FY2026 (ending March 2026), segment profit increased significantly year on year, driven by an expansion in net interest income centered on loan interest income and an increase in gains related to equities.

Recent Overview

Driven by a substantial increase in loan interest income and an expansion in gains related to equities, banking segment profit reached ¥16,494 million, a significant increase year on year.

In the Banking segment for FY2026 (ending March 2026), net interest income, driven mainly by loan interest income, expanded to ¥42,757 million (up ¥6,243 million year on year), and core net business profit improved substantially to ¥18,638 million (up ¥5,336 million year on year). Gains related to equities also increased to ¥5,856 million (from ¥3,686 million in the previous fiscal year), and ordinary profit came to ¥16,456 million (up ¥4,809 million year on year). On the other hand, amid rising interest rates, interest expenses on deposits surged to ¥8,366 million (from ¥2,585 million in the previous fiscal year), leading to a substantial increase in funding costs. The ratio of disclosed claims under the Financial Reconstruction Act declined to 1.91% (from 2.29% at the previous fiscal year-end), indicating improved asset quality. As a subsequent event, on May 13, 2026, the Company entered into a basic agreement for a business integration with Aichi Financial Group, Inc. via an absorption-type merger, targeting completion by April 1, 2027.

Key Products

Growth Drivers

• Increase in loan interest income: The loan balance of 33 Bank on a standalone basis expanded to ¥3,146,616 million (up ¥109,411 million from the previous fiscal year-end), and the loan yield also improved to 1.35% (up 0.29 percentage points year on year), resulting in a substantial increase in loan interest income to ¥41,944 million (from ¥31,946 million in the previous fiscal year)
• Expansion of gains related to equities: Gains related to equities at 33 Bank on a standalone basis increased by ¥2,170 million to ¥5,856 million (from ¥3,686 million in the previous fiscal year), boosting ordinary profit
• Tailwind from the rising interest rate environment: Against the backdrop of the Bank of Japan's monetary policy normalization, the yield on fund investment rose to 1.19% (from 0.90% in the previous fiscal year), and the overall interest margin improved to 0.11% (from 0.01% in the previous fiscal year)
• Increase in assets under custody for individuals: Through strengthened over-the-counter sales of investment trusts and insurance, the balance of assets under custody for individuals expanded to ¥3,944,759 million (up ¥190,388 million from the previous fiscal year-end), and net fee and commission income increased to ¥10,984 million (from ¥10,377 million in the previous fiscal year)
• Improvement in the non-performing loan ratio: The ratio of disclosed claims under the Financial Reconstruction Act to total credit balance declined to 1.91% (from 2.29% at the previous fiscal year-end), improving asset soundness. Credit costs also decreased to ¥2,043 million (from ¥2,136 million in the previous fiscal year)
• Business integration with Aichi Financial Group: The integration via an absorption-type merger, targeted for around April 1, 2027, is expected to strengthen presence and expand earnings opportunities in Aichi Prefecture, Mie Prefecture, and neighboring areas

Risks

• Rising funding costs due to a sharp increase in deposit interest expenses: Amid rising interest rates, interest expenses on deposits at 33 Bank on a standalone basis surged approximately 3.2-fold to ¥8,366 million (from ¥2,585 million in the previous fiscal year), posing a risk that further rate hikes could push up funding costs and pressure earnings
• Deterioration in gains/losses on government bonds and other securities: Gains/losses on government bonds and other securities at 33 Bank on a standalone basis worsened to ¥(5,975) million (from ¥(3,213) million in the previous fiscal year), with the risk of continued valuation losses and losses on sales of the bond portfolio amid rising interest rates
• Unrealized losses on securities (bonds): Unrealized gains/losses on bonds within other securities at 33 Bank on a standalone basis expanded to ¥(39,828) million (from ¥(32,734) million in the previous fiscal year), with the risk of further expansion of unrealized losses amid rising interest rates remaining
• Trends in non-performing loans: Claims against bankrupt and reorganizing debtors and equivalent claims at 33 Bank on a standalone basis increased to ¥16,083 million (up ¥1,298 million from ¥14,785 million at the previous fiscal year-end), requiring continued attention to the trend in individual provision for doubtful accounts of ¥2,108 million (from ¥2,306 million in the previous fiscal year)
• Structural challenges in the regional economy: In Mie Prefecture, the main operating base, population decline and aging are progressing, presenting risks of sluggish personal consumption and a medium- to long-term decline in loan demand
• Risks associated with the business integration: In the integration process with Aichi Financial Group, uncertainties exist regarding due diligence, merger ratio negotiations, and obtaining regulatory approvals, and realizing the benefits of the integration may take time
• Decline in the capital adequacy ratio: The consolidated capital adequacy ratio (domestic standard) declined to 8.41% (from 8.48% at the previous fiscal year-end), and the standalone ratio for 33 Bank declined to 8.09% (from 8.18% at the previous fiscal year-end), a downward trend that makes managing capital adequacy amid increasing risk assets a challenge