Hokkoku Financial Holdings,Inc.

Business Details

The Banking segment encompasses Hokkoku Bank, Ltd. as its core entity, and includes traditional banking operations such as deposits, lending, and securities investment, as well as credit guarantee operations related to consumer finance, credit card operations, receivables collection management, system development and operations management, investment advisory services, consulting and administrative outsourcing services, and fund management operations. As a regional bank group based in Ishikawa Prefecture, it serves individuals, corporations, and local governments as its main customers, playing a central role in regional finance. Segment assets for FY2026 (ending March 2026) stood at ¥6,531,145 million, accounting for the majority of consolidated total assets.

Recent Overview

Ordinary income more than doubled year on year, driven by significant increases in loan interest income and gains on sales of equities and other securities

Ordinary income in the Banking segment for FY2026 (ending March 2026) stood at ¥151,752 million (up ¥76,066 million year on year), and segment profit was ¥19,183 million (up ¥7,304 million year on year). Loan interest income reached ¥35,716 million (up ¥9,040 million year on year), reflecting the impact of the Bank of Japan's interest rate hikes. Gains on sales of equities and other securities of ¥64,276 million (up ¥13,363 million year on year) significantly boosted revenue. On the other hand, losses on sales of government bonds and other securities amounted to ¥54,748 million (up ¥5,478 million year on year). Business loans captured robust demand, growing 25.2% from the prior fiscal year-end, and the overall interest margin improved to 0.24% (up 0.12 percentage points year on year). Impairment losses on fixed assets amounted to ¥724 million (up ¥370 million year on year), and goodwill amortization of ¥909 million was recorded.

Key Products

Growth Drivers

• Increase in loan interest income against the backdrop of the Bank of Japan's policy rate hikes (¥35,716 million in FY2026 (ending March 2026), up +34.9% year on year) and improvement in the overall interest margin (0.24%, up 0.12 percentage points year on year)
• Capturing robust demand for business loans (Hokkoku Bank non-consolidated period-end balance of ¥1,558,183 million, up +25.2% from the prior fiscal year-end) and expansion of loans to local governments and related entities (up +28.8% from the prior fiscal year-end)
• Recognition of gains on sales of equities and other securities through the sale of strategic shareholdings (¥64,276 million in FY2026 (ending March 2026)) and restructuring of the securities investment portfolio
• Increase in fee and commission income (consolidated ¥12,810 million, up +15.3% year on year) and expansion of consulting and investment advisory revenue
• Increase in the balance of assets under management for individual customers, including Hokkoku Omakase Navi and investment trusts (Hokkoku Omakase Navi balance of ¥30,123 million, up +35.0% from the prior fiscal year-end), leading to expanded fee income
• Diversification of revenue through new business development, including the sports and entertainment business unit (establishment of CCI Entabase, and making Honey Bee Sports and Kanazawa Samurais subsidiaries) and the overseas business unit (establishment of CCI Cross Border)

Risks

• Increase in funding costs such as deposit interest expenses amid rising interest rates (deposit interest expense of ¥7,891 million in FY2026 (ending March 2026), up ¥5,527 million year on year)
• Continued high levels of losses on sales of government bonds and other securities (¥54,748 million in FY2026 (ending March 2026)) pressuring gross operating profit and net business profit (consolidated net business profit of ¥-37,370 million)
• Risk of increased provisions for individual loan loss allowances (¥7,048 million in FY2026 (ending March 2026), up ¥2,624 million year on year) and rising credit costs associated with loan growth
• Volatility risk in gains on sales of equities and other securities (dependent on the progress of sales of strategic shareholdings and market conditions)
• Increased amortization burden in the Banking segment due to impairment losses on fixed assets (¥724 million in FY2026 (ending March 2026)) and increased capital expenditure (increase in tangible and intangible fixed assets of ¥21,445 million)
• Fluctuation in the deposit base due to a decline in public fund deposits (down ¥106,450 million, or -17.8%, from the prior fiscal year-end on a Hokkoku Bank non-consolidated basis)
• Intensifying competition from new entrants from other industries and the rise of fintech companies amid advances in generative AI and fintech technology
• Trends in the regional economy based in Ishikawa Prefecture (continued impact of the 2024 Noto Peninsula Earthquake and the Okunoto heavy rainfall) and uncertainty in the overseas economy