The Yamagata Bank,Ltd.

Business Details

The Banking segment, operated by the Bank of Yamagata itself, provides comprehensive financial services with Yamagata Prefecture as its main business base, through deposit business, lending business, securities investment business, foreign exchange business, and other operations. As the core business accounting for approximately 87% of the Group's total ordinary income, it serves individuals, corporations, and public entities in the region through business loans, personal loans, housing loans, investment trust sales, and other services. Performance has been driven by the expansion of interest income on fund management against the backdrop of the Bank of Japan's additional rate hikes.

Recent Overview

Interest income on fund management increased significantly amid the rate-hike environment, and ordinary profit rose 49.7% year on year to ¥8,411 million

In the Banking segment for FY2026 (ending March 2026), against the backdrop of the Bank of Japan's policy rate hikes (from 0.50% to 0.75%), interest income on fund management expanded significantly, with interest on loans reaching ¥25,755 million (up ¥5,338 million year on year) and interest and dividend income on securities reaching ¥13,561 million (up ¥3,221 million year on year). Meanwhile, interest on deposits also increased to ¥6,872 million (up ¥3,420 million year on year), raising fund procurement costs, but the total interest margin expanded to 0.32% (an improvement of 0.13 points year on year). Loans increased across business, personal, and public-sector categories, rising ¥79,603 million year on year in total. The non-performing loan ratio was 0.95%, down 0.03 points year on year, maintaining a favorable level. Core net operating profit improved significantly to ¥13,339 million (up ¥4,889 million year on year). For FY2027 (ending March 2027), non-consolidated ordinary profit is projected at ¥11,200 million (up 33.2% year on year).

Key Products

Growth Drivers

• Continued increase in interest on loans, interest on deposits with other banks, and interest and dividend income on securities against the backdrop of the Bank of Japan's additional rate hikes (policy rate at approximately 0.75%)
• Expansion of balances in business loans (¥1,122,594 million), personal housing loans (¥574,759 million), and loans to national and local government entities
• Growth in assets under custody and contribution to fee income through increased sales of investment trusts (¥113,296 million) and life insurance (¥235,321 million)
• Increase in interest and dividend income through the buildup of the securities portfolio, primarily government and municipal bonds (non-consolidated securities up ¥38,169 million year on year)
• Improvement in profitability through improvement in total interest margin (0.19% to 0.32%) and decline in core OHR (70.27% to 61.12%)
• Expansion of fee income through strengthened corporate consulting sales activities amid DX and labor-saving investment needs

Risks

• Risk of margin compression from further increases in fund procurement costs (interest on deposits of ¥6,872 million, up ¥3,420 million year on year) amid rising interest rates
• Risk of expanding valuation losses on securities (particularly bonds) (non-consolidated net unrealized gains/losses on other securities of ¥-15,204 million; bond valuation losses of ¥-27,367 million)
• Expansion of unrealized losses in the bond portfolio due to rising long-term interest rates (10-year government bond yield in the upper 2.3% range, the highest level in approximately 27 years)
• Medium- to long-term decline in loan demand and shrinkage of the regional economy due to population decline and aging in Yamagata Prefecture
• Rising credit risk stemming from deteriorating business conditions among manufacturers in Yamagata Prefecture (electronic components/devices, chemicals, etc.) due to the impact of U.S. tariff policy
• Capital constraints due to the declining trend in the capital adequacy ratio (domestic standard, non-consolidated, 9.32%, down 0.48 points year on year) and increasing risk assets
• Uncertainty in the operating environment due to the yen's depreciation trend (in the upper ¥159 range at period-end) and geopolitical risk (Middle East situation)