Suruga Bank Ltd.

Business Details

This segment encompasses the overall banking operations conducted by Suruga Bank itself. It engages in deposit-taking, lending, domestic exchange operations, and over-the-counter sales of securities, investment trusts, and insurance, positioning individual retail banking as its core business. New growth areas such as Corporate Real Estate Loans & Structured Finance and Collaboration Loans, etc. are also expanding. Consolidated subsidiaries (engaged in lending, leasing, credit cards, guarantee business, etc.) are classified under "Others," making Bank the only reportable segment.

Recent Overview

Ordinary income and net income both increased significantly, driven by loan balance expansion and improved credit costs.

In FY2026 (ending March 2026) (non-consolidated), the loan balance at period-end expanded to ¥2,391,572 million, up ¥207,729 million from the end of the prior period, and the loan yield also rose to 2.80% (from 2.69% in the prior period). Core net business profit improved significantly to ¥32,135 million (up ¥7,407 million year on year). Credit costs were negative ¥1,221 million (a net gain), and substantive credit costs continued to improve at negative ¥8,981 million. The disclosed claims ratio under the Financial Reconstruction Act declined to 6.29% (from 8.56% at the end of the prior period), reflecting a marked improvement in asset quality. On the other hand, the deposit yield rose to 0.24% (from 0.08% in the prior period), increasing funding costs, and losses on sales of government bonds and other securities also expanded to ¥5,931 million. As a subsequent event, on April 24, 2026, the company resolved to establish a treasury stock repurchase framework (up to 5,000,000 shares / ¥12,000 million) and to retire 25,000,000 shares.

Key Products

Growth Drivers

• Expansion of loan balances: New lending expanded, centered on Corporate Real Estate Loans (up ¥84,500 million from the end of the prior period), Structured Finance (up ¥101,800 million), and Collaboration Loans, etc. (up ¥70,300 million), bringing the period-end balance to ¥2,391,572 million (up ¥207,729 million from the end of the prior period)
• Increase in interest income: Due to the rise in loan yields (from 2.69% to 2.80%) and expansion of loan balances, non-consolidated interest income increased to ¥66,545 million (up ¥4,568 million year on year), and the total interest margin expanded to 0.89% (from 0.70% in the prior period)
• Improvement in credit costs: Due to a decrease in non-performing loan disposal amounts (down ¥469 million year on year) and an increase in reversal gains on allowance for doubtful accounts (up ¥4,492 million year on year), substantive credit costs improved significantly to negative ¥8,981 million (from negative ¥2,168 million in the prior period)
• Decline in disclosed claims ratio: The disclosed claims ratio under the Financial Reconstruction Act declined to 6.29% (from 8.56% at the end of the prior period), and the ratio excluding organized negotiation counterparties improved to 3.86% (from 5.02% at the end of the prior period), reflecting improved asset quality
• Expansion of investment-type product sales: Investment-type product balances increased to ¥179,595 million (up ¥33,550 million from the end of the prior period), with the investment-type product ratio rising to 6.7% (from 5.4% at the end of the prior period), advancing diversification of the fee income base
• Improvement in OHR through cost reductions: Expenses were reduced to ¥33,228 million (down ¥1,979 million year on year), and OHR declined significantly to 50.8% (from 58.7% in the prior period)

Risks

• Increased funding costs due to rising interest rates: The deposit yield rose sharply from 0.08% to 0.24%, and non-consolidated funding costs increased significantly to ¥7,703 million (from ¥2,551 million in the prior period). In the event of further rate hikes, there is a continuing risk of narrowing loan-deposit spreads (currently 1.49%)
• Asset quality of investment real estate loans: Against a balance of ¥767,500 million in personal investment real estate loans, the delinquency rate is 5.93% (improved from 10.38% in the prior period but still elevated). Further improvement in the disclosed claims ratio of 6.29%, including organized negotiation counterparties, remains a challenge
• Volatility in gains/losses on government bonds and other securities: Non-consolidated gains/losses on government bonds and other securities deteriorated significantly to negative ¥8,465 million (from negative ¥1,648 million in the prior period). Losses on sales and redemption associated with securities portfolio rebalancing pressured gross business profit, with net business profit limited to ¥23,670 million
• Impact of Basel III finalization: The fully phased-in basis without transitional measures is applied. The non-consolidated capital adequacy ratio declined to 10.84% (from 11.27% at the end of the prior period), amid continued growth in risk assets (¥2,415,406 million). Balancing this against the medium-term management plan's target of an effective capital ratio of approximately 10% remains a challenge
• Declining trend in personal deposits: The personal deposit balance declined to ¥2,480,794 million (down ¥37,057 million from the end of the prior period), and maintaining the deposit funding base remains a challenge. While overall deposits are increasing, outflows of personal deposits continue
• Decline in net income forecast for the next fiscal year: The consolidated net income forecast for FY2027 (ending March 2027) is ¥32,000 million (down 7.8% year on year), indicating a decline in earnings. While an improvement in securities-related gains/losses is expected (forecast at ¥5,000 million), normalization of credit costs and rising funding costs are expected to weigh on results