Tsukuba Bank, Ltd.

Business Details

The only reportable segment of the Bank's group. Through its head office, branches, and sub-branches centered on Ibaraki Prefecture, the segment conducts Deposit Business, Lending Business, domestic exchange, foreign exchange operations, and more. Primary customers are local small and medium-sized enterprises, individuals, and local governments. While expanding the loan balance centered on housing loans and financing for small and medium-sized enterprises, the segment is also strengthening fee income from Assets in Custody Sales such as investment trusts and life insurance. Disclosure is omitted for consolidated subsidiaries (System Development, Consulting, and Investment Business) as they are deemed to lack materiality.

Recent Overview

Ordinary profit increased significantly, up 66.6% year on year, driven by a surge in loan interest income and cost improvements

In FY2026 (ending March 2026), interest income on loans and bills discounted expanded to ¥34,562 million in interest income on fund management, primarily due to loan interest income of ¥28,520 million (an increase of ¥5,320 million from the prior period). On the other hand, deposit interest expense also rose, reflecting higher funding costs, to ¥5,089 million (an increase of ¥3,617 million from the prior period). Credit-related costs contracted significantly to ¥984 million (an improvement of ¥1,641 million from the prior period), and the allowance for loan losses balance also decreased to ¥10,971 million. While a loss on sales of government bonds and other bonds of ¥6,027 million (an increase of ¥3,877 million from the prior period) was incurred, this was offset by gains/losses related to stocks and other securities of ¥3,355 million (an increase of ¥2,212 million from the prior period). Comprehensive income was ¥14,506 million (a significant improvement from negative ¥4,990 million in the prior period), with unrealized gains/losses on other securities improving from negative ¥32,761 million to negative ¥26,925 million. For FY2027 (ending March 2027), the Bank forecasts ordinary profit of ¥7,700 million (up 3.2% year on year) and net income of ¥6,700 million (up 0.4% year on year). Additionally, with the aim of securing flexibility in financial strategy, a capital reduction transferring ¥17,500 million of capital stock to other capital surplus is planned to be implemented as of September 30, 2026 (subject to shareholder meeting approval and regulatory authorization).

Key Products

Growth Drivers

• Increase in interest income on loans: Due to rising loan interest rates amid the Bank of Japan's rate hike phase, full-year interest income on loans surged to ¥28,520 million (an increase of ¥5,320 million from the prior period). Loan yield rose to 1.31% (up 0.19 percentage points from the prior period)
• Continued expansion of loan balance: Due to increases in housing loans (¥620,099 million) and lending to small and medium-sized enterprises, the period-end balance reached ¥2,207,188 million (an increase of ¥91,116 million from the prior period). On an average balance basis, the figure was also up, at ¥2,166,807 million (an increase of ¥97,897 million from the prior period)
• Significant improvement in credit-related costs: Full-year credit-related costs were ¥984 million (an improvement of ¥1,641 million from the prior period), aided by a provision for specific allowance for loan losses of ¥1,048 million (a decrease of ¥2,648 million from the prior period) and a reversal of general allowance for loan losses of ¥751 million
• Expansion of assets in custody balance: The balance increased to ¥399,300 million (an increase of ¥49,741 million from the prior period), centered on investment trusts of ¥202,465 million and life insurance of ¥186,525 million, contributing to an uplift in fee income
• Improvement in gains/losses related to stocks: Gains on sales of stocks and other securities of ¥3,827 million (an increase of ¥2,124 million from the prior period) led to a significant improvement in gains/losses related to stocks and other securities to ¥3,355 million (an increase of ¥2,212 million from the prior period)
• Promotion of the 6th Medium-Term Management Plan (April 2025 to March 2028): Targets have been set for ROE of 5% or more, net income of ¥5.0 billion or more, and a capital adequacy ratio of 9% or more. In FY2026 (ending March 2026), the Bank achieved ROE of 6.7% (consolidated), a level exceeding the target

Risks

• Rising funding costs: Deposit interest expense surged to ¥5,089 million (an increase of ¥3,617 million from the prior period) due to the Bank of Japan's additional rate hikes. The total interest margin remains at a low level of 0.16%, and the risk of margin compression continues amid further rate hike phases
• Continued unrealized losses on securities: Unrealized gains/losses on other securities remained at a significant unrealized loss of negative ¥29,772 million (non-consolidated, as of the end of March 2026). Unrealized losses on held-to-maturity bonds also stood at negative ¥1,911 million. There is a risk of additional losses if the prolonged rise in domestic and overseas interest rates continues
• Expansion of losses on sales of government bonds and other bonds: Full-year losses on sales of government bonds and other bonds increased significantly to ¥6,027 million (an increase of ¥3,877 million from the prior period). Managing the bond portfolio amid the phase of rising domestic long-term interest rates remains a challenge
• Structural challenges in the regional economy: Long-term risk of shrinking loan demand due to population decline and the aging/low birth rate in Ibaraki Prefecture. Concerns over deteriorating credit costs due to rising raw material costs and labor shortages among local small and medium-sized enterprises
• Disclosed claims under the Financial Reconstruction Act: The balance of disclosed claims was ¥52,837 million (a disclosed claims ratio of 2.36%). While this has improved from the prior period, doubtful claims of ¥37,234 million account for the majority of the balance, requiring continuous management of the coverage ratio (70.11%) and allowance ratio (31.80%)
• Outflow of public fund deposits: The period-end deposit balance decreased by ¥79,591 million from the prior period due to a decline in public fund deposits. The average deposit balance also decreased by ¥56,677 million from the prior period, making the maintenance of a stable funding base a challenge