The Hyakugo Bank, Ltd.

Business Details

The Bank's head office and branches conduct deposit-taking, lending, and domestic/foreign exchange operations, while also focusing on over-the-counter sales of investment trusts and insurance, financial instruments intermediary services, and solution proposals such as business succession and structured finance. Subsidiaries including Hyakugo Business Service, Hyakugo Management Service, Hyakugo Real Estate Research, Hyakugo Office Service, and Hyakugo Staff Service support banking operations. This core segment accounts for approximately 86% of the Group's consolidated ordinary income, with loan income and securities income as the main revenue sources.

Recent Overview

Interest on loans and gains on sales of equities increased substantially, with segment profit up more than 43% year on year.

In FY2026 (ending March 2026), ordinary income in the Banking segment was ¥139,581 million (up ¥36,802 million year on year), and segment profit was ¥35,389 million (up ¥10,710 million year on year). Fund management income increased substantially, with interest on loans of ¥63,264 million and interest and dividends on securities of ¥34,414 million. Gains on sales of equities, etc. of ¥22,067 million (up ¥18,042 million year on year) boosted extraordinary income. On the other hand, gains/losses on JGBs and other bonds recorded a substantial negative figure of ¥(21,076) million (a deterioration of ¥15,885 million year on year), and net business profit decreased by ¥5,311 million year on year. Core net business profit increased to ¥37,513 million (up ¥10,412 million year on year), indicating an improvement in underlying earning power. The non-consolidated capital adequacy ratio declined to 11.09% (down 0.83 percentage points year on year) due to an increase in risk assets.

Key Products

Growth Drivers

• Increase in interest on loans: Non-consolidated interest on loans rose to ¥63,264 million (up ¥11,425 million year on year), driven by growth in housing loan balances (¥2,502,432 million, up ¥97,828 million from the previous fiscal year-end) and loans to SMEs
• Improvement in fund management yield due to the Bank of Japan's interest rate hikes: the overall fund management yield rose 0.28 percentage points year on year to 1.41%, with the loan yield at 1.23% (up 0.20 percentage points year on year)
• Increase in interest and dividends on securities: rose to ¥34,414 million on a non-consolidated basis (up ¥6,775 million year on year) due to an expanded securities balance and higher yields
• Substantial expansion of core net business profit: core net business profit, excluding the effects of provision for general allowance for loan losses and gains/losses on JGBs and other bonds, rose to ¥37,513 million (up ¥10,412 million year on year), reflecting improved underlying earnings
• Increase in assets under custody: non-consolidated investment trust balances rose to ¥243,524 million (up ¥57,548 million from the previous fiscal year-end), and cumulative insurance sales rose to ¥499,511 million (up ¥38,706 million from the previous fiscal year-end), continuing an expansionary trend
• Promotion of the five basic strategies (creation of social value, challenge toward growth, human capital strategy, DX, and strengthening of the strategic foundation) under the medium-term management plan 'KAI-KAKU150 FINAL STAGE: Challenge for the Future'

Risks

• Increase in funding costs due to rising interest rates: non-consolidated interest on deposits expanded to ¥13,013 million (up ¥8,899 million year on year), with a risk of further increases in funding costs from additional rate hikes
• Deterioration in gains/losses on JGBs and other bonds: on a non-consolidated basis, gains/losses on JGBs and other bonds continued to show a substantial negative figure of ¥(21,076) million (a deterioration of ¥15,885 million year on year), squeezing net business profit
• Risk of increasing credit-related costs: disclosed claims under the Financial Revitalization Act stood at ¥68,218 million (1.30% of total credit), with a risk of rising credit costs in specific industries, such as an increase of ¥3,152 million year on year in risk-managed claims to the medical and welfare sector
• Fluctuations in unrealized gains/losses on securities: unrealized losses on bonds expanded to ¥(67,061) million (a deterioration of ¥20,325 million year on year), with a risk of expanding unrealized losses in the bond portfolio amid rising interest rates
• Sluggish growth in fee income: non-consolidated fees and commissions were ¥15,495 million (down ¥1,159 million year on year), with the declining trend in housing loan handling fees continuing
• Decline in the capital adequacy ratio: the non-consolidated capital adequacy ratio fell to 11.09% (down 0.83 percentage points year on year), raising concerns over the impact on capital efficiency if the increase in risk assets continues
• Population decline and shrinkage of the regional economy: a decline in the working-age population in Mie and Aichi Prefectures, the Bank's main operating base, poses a risk of suppressing loan demand over the medium to long term