The Chiba Kogyo Bank, Ltd.

Business Details

Chiba Kogyo Bank comprehensively conducts deposit-taking, lending, domestic exchange, and foreign exchange operations, among others, at its head office, branches, and sub-branches (80 domestic locations). Its primary customers are individuals, small and medium-sized enterprises (SMEs), and local public bodies within Chiba Prefecture, with the core value proposition centered on uncovering funding demand and supporting asset formation through consulting-driven engagement ("kodo"). Of the consolidated ordinary income of ¥68,872 million for FY2026 (ending March 2026), the Banking segment's ordinary income (external customers) was ¥60,125 million, accounting for approximately 87% and making it the core segment.

Recent Overview

Net interest income increased substantially owing to the benefit of rate hikes, with both core net business profit and ordinary income reaching new record highs

Banking segment profit for FY2026 (ending March 2026) was ¥12,295 million (up ¥1,627 million, or +15.2%, year on year). Against the backdrop of the Bank of Japan's phased rate hikes, interest income on loans increased substantially to ¥30,521 million (versus ¥24,015 million in the prior period), expanding net interest income to ¥32,482 million (up ¥3,440 million year on year). Core net business profit improved to ¥13,733 million (up ¥1,511 million year on year). Meanwhile, deposit interest expenses also increased sharply to ¥6,326 million (versus ¥1,835 million in the prior period). The non-performing loan balance improved to ¥34,891 million (down ¥6,247 million year on year), and the non-performing loan ratio declined to 1.37% (versus 1.67% in the prior period). On March 25, 2026, a business integration agreement was concluded with The Chiba Bank, with the establishment of a joint holding company, "Chiba Financial Group, Inc.," planned for April 1, 2027. In addition, all 481,500 shares of the First Series Seventh Class Preferred Stock were acquired and cancelled in full on April 1, 2026 (total acquisition price of ¥24,076 million), advancing the streamlining of the capital structure.

Key Products

Growth Drivers

• Increase in interest income on loans and fund investment income (interest income on loans: ¥23,989 million in the prior period → ¥30,486 million in the current period) driven by the Bank of Japan's policy rate hikes (negative interest rate policy lifted in March 2024, followed by phased rate hikes in July 2024, January 2025, and December 2025)
• Continued expansion of loan balances, centered on loans to SMEs (non-consolidated period-end balance of ¥2,515,253 million, up ¥94,922 million year on year)
• Boost to fee income from expansion of assets in custody such as investment trusts (¥233.8 billion, up ¥47.0 billion, or +25.3%, year on year)
• Improvement in extraordinary gains/losses driven by an increase in gains/losses related to stocks and other securities (non-consolidated: ¥4,957 million, versus ¥2,321 million in the prior period)
• Expansion of scale, sharing of management resources, and strengthening of regional financial capabilities through business integration with The Chiba Bank (planned for April 1, 2027)
• Leveraging the regional economic potential of Chiba Prefecture, which has a population of over 6.2 million, amid progress in infrastructure development such as the Ken-O Expressway

Risks

• Risk of margin compression due to a sharp increase in deposit interest expenses (non-consolidated deposit interest: ¥1,835 million in the prior period → ¥6,326 million in the current period, an approximately 3.4-fold increase) accompanying additional rate hikes by the Bank of Japan
• Risk of expanding unrealized losses on held-to-maturity bonds (non-consolidated: -¥15,056 million) and valuation risk on the bond portfolio amid the rising interest rate environment
• Integration costs and integration risks associated with the business integration process with The Chiba Bank (contingent on approval at an extraordinary general meeting of shareholders and authorization from relevant authorities, among other conditions)
• Impact on capital levels associated with the acquisition of treasury preferred stock (Second Series Second Class, Second Series Sixth Class, and Second Series Seventh Class Preferred Stock, with a combined acquisition cap of approximately ¥14.5 billion) (non-consolidated capital adequacy ratio of 8.94%, down 0.24 percentage points year on year)
• Risk of slowing loan demand due to some softness in housing and capital investment within the Chiba Prefecture economy
• Risk of increased credit costs associated with deteriorating business conditions at SMEs within the prefecture due to rising prices, labor shortages, and the need to respond to digital transformation (DX), among other factors (non-consolidated substantial credit cost of ¥1,179 million)
• Intensifying competition in financial services due to advances in financial technology and entry by companies from other industries