Procrea Holdings, Inc.

Business Details

At the branches of Aomori Michinoku Bank, Ltd. (formed in January 2025 through the merger of Bank of Aomori and Michinoku Bank, with a subsequent trade name change), the segment conducts deposit-taking, lending, securities investment, and domestic/foreign exchange business, among others. One consolidated subsidiary handles peripheral operations such as real estate management and leasing. As the central segment accounting for approximately 84% of Group ordinary income, it provides comprehensive financial services to individuals, corporations, and public-sector clients within Aomori Prefecture.

Recent Overview

Higher interest rates drove a substantial expansion in fund management income, and Banking segment profit recovered sharply to ¥5,439 million, up ¥2,418 million year on year.

Against the backdrop of the Bank of Japan's policy rate hike (to around 0.75%) in December 2025, interest income on loans rose substantially to ¥42,980 million (¥36,606 million in the prior fiscal year) and interest income on deposits with banks rose to ¥7,255 million (¥3,642 million in the prior fiscal year), expanding consolidated fund management income to ¥61,395 million (¥47,434 million in the prior fiscal year). On the other hand, interest expense on deposits surged to ¥9,180 million (¥2,879 million in the prior fiscal year), and fund procurement costs also expanded to ¥11,988 million (¥3,898 million in the prior fiscal year). Aomori Michinoku Bank's standalone core net business profit rose substantially to ¥14,293 million (¥5,249 million in the prior fiscal year). Credit costs increased to ¥3,884 million (¥1,296 million in the prior fiscal year), but the drop-off in merger-related expenses (a decrease of ¥2,540 million in property-related expenses) supported profit. Disclosed claims under the Financial Reconstruction Act stood at ¥65,487 million (a disclosed claims ratio of 1.82%), a slight increase from the prior fiscal year-end.

Key Products

Growth Drivers

• Further increases in loan yields and interest income on deposits with banks, supported by the expected continuation of additional Bank of Japan rate hikes (loan yield of 1.23% and total interest margin of 0.18%, both on an improving trend)
• Expansion of investment income from an increase in the securities balance (¥1,039,108 million) and a rise in the securities yield (1.03%)
• Continuation of cost reduction effects (operating expenses of ¥41,618 million, down ¥3,429 million year on year) as merger synergies at Aomori Michinoku Bank take full effect
• Expansion of the fee business through growth in assets under custody such as investment trusts and insurance (¥557,467 million, up ¥32,483 million from the prior fiscal year-end)
• Increases in fund management income and gains on securities in pursuit of the FY2026 (ending March 2026) earnings forecast of ordinary profit of ¥11,300 million (up 72.3% year on year) and net income of ¥7,000 million (up 85.0% year on year)

Risks

• Increase in credit costs: the consolidated provision for allowance for loan losses rose substantially to ¥3,749 million (¥1,342 million in the prior fiscal year), and Aomori Michinoku Bank's standalone credit costs also expanded to ¥3,884 million (¥1,296 million in the prior fiscal year). Risk claims increased to ¥38,552 million (up ¥2,063 million from the prior fiscal year-end), with the risk of further increases depending on future economic conditions
• Rising funding costs amid higher interest rates: interest expense on deposits surged to ¥9,180 million (¥2,879 million in the prior fiscal year), and further increases in fund procurement costs during future rate-hike phases could pressure the interest margin
• Unrealized losses on securities: on a consolidated basis, net unrealized losses on other securities remained at ¥(18,582) million, continuing an excess of unrealized losses. Unrealized losses on held-to-maturity bonds also widened to ¥(11,706) million, leaving a residual risk of bond price declines in a rising rate environment
• Declining trend in loan balances: due to decreases in personal and public-sector loans, the consolidated loan balance contracted to ¥3,495,123 million (down ¥12,660 million from the prior fiscal year-end), acting as a downward factor on interest income
• Population decline and aging in Aomori Prefecture: risk of a medium- to long-term decline in loan demand and deposit balances due to a shrinking business base. The loan balance within Aomori Prefecture continued its declining trend, falling to ¥2,506.2 billion (down ¥23.4 billion from the prior fiscal year-end)