The 77 Bank, Ltd.

Business Details

The sole reportable segment of the Seventy-Seven Bank Group. It provides the full range of banking operations, including deposits, lending, securities investment, foreign exchange, trust services, and over-the-counter sales (investment trusts, insurance, public bonds). Its primary business base is within Miyagi Prefecture (approximately 93% of period-end deposit balances are from within Miyagi Prefecture), and it serves a financial intermediation function for SMEs, individuals, and local public bodies. Based on "Vision 2030," the Group is promoting the strengthening of consulting functions, productivity improvement, and support for regional growth.

Recent Overview

Ordinary profit rose 39% on higher interest rates and loan growth; dividend payout ratio reached 35.7%, prompting a review of shareholder return policy

In FY2026 (ending March 2026), against a backdrop of additional rate hikes by the Bank of Japan, the yield on loans rose to 1.22% (up 0.21pt year on year), and interest income on loans increased substantially to ¥79,181 million (up 30.7% year on year). In securities, gains on sales of equities of ¥29,298 million (up 76.7% year on year) contributed, and ordinary profit reached ¥78,469 million (up 39.4% year on year), while profit attributable to owners of parent reached ¥54,007 million (up 37.5% year on year). Meanwhile, interest expenses on deposits surged to ¥16,609 million (up 196.7% year on year), pushing up funding costs. Credit-related expenses also turned upward, rising to ¥4,386 million (up ¥4,447 million year on year). A 3-for-1 stock split was implemented effective April 1, 2026. The company revised its shareholder return policy, announcing plans to raise the dividend payout ratio to 40% or more by FY2027 (ending March 2027) and to conduct flexible share buybacks. For FY2027 (ending March 2027), ordinary profit is forecast at ¥89,500 million and profit attributable to owners of parent at ¥61,500 million.

Key Products

Growth Drivers

• Substantial increase in interest income on loans driven by higher loan yields (1.22%, up 0.21pt year on year) resulting from policy rate hikes and expanded loan balances (average balance up 7.4% year on year)
• Improvement in overall securities gains/losses, including a substantial increase in gains on sales of equities (¥29,298 million, up 76.7% year on year)
• Aggressive expansion of lending to SMEs and large corporations (period-end balances up 7.4% and 15.6% year on year, respectively)
• Continued improvement in core OHR (40.20%, down 5.14pt year on year), boosting profitability
• Expansion of Group assets under custody (¥978.1 billion, up 20.7% year on year) and increased fee income from the introduction of fee-based mortgage loans
• Moderate recovery of the regional economy driven by rising investment appetite associated with redevelopment projects in the Sendai area and increased visitor flows

Risks

• Continued pressure on funding costs from the sharp rise in interest expenses on deposits (¥16,609 million, up 196.7% year on year) amid interest rate hikes
• Increase in credit-related expenses (¥4,386 million, up ¥4,447 million year on year) and trends in non-performing loan balances (NPL ratio 1.86%, with claims against bankrupt and reorganized debtors up ¥8,960 million year on year)
• Risk of destabilized securities investment gains/losses due to a potential economic downturn triggered by US trade policy and volatility in financial and capital markets
• Burden on companies and households in Miyagi Prefecture from labor shortages and rising prices, along with an outflow trend in public deposits
• Pressure on returns from foreign-currency-denominated securities investments due to persistently high foreign currency funding costs (foreign bond interest income down ¥3.4 billion year on year)
• Risk of expanding valuation losses on held bonds (bond valuation losses of ¥82,321 million) associated with rising long-term interest rates (around 2.3% at period end)