ENVALITH
株式会社紀陽銀行 logo

The Kiyo Bank, Ltd.

8370・Prime Market・Banks

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株式会社紀陽銀行 logo
The Kiyo Bank, Ltd.8370

Business

The Kiyo Bank, Ltd. is a long-established regional bank founded in 1895, operating as a community-based comprehensive financial group headquartered in Wakayama Prefecture with Osaka Prefecture as its primary business area. The bank itself (107 branches and 7 sub-branches) handles the Deposits and Negotiable Certificates of Deposit Business, Lending Business, exchange operations, and Foreign Exchange Business, while its 8 consolidated subsidiaries complement these operations through the Credit Guarantee Business, Leasing Business, Credit Card Business, information systems, investment operations, and other services. Its main customers are small and medium-sized enterprises (accounting for 75.9% of the loan ratio) and individuals, and as a regional financial group with consolidated total assets of ¥6,111,515 million, it supports the development of the local economy. It transitioned to the Prime Market in 2022, and recognition among institutional investors has been increasing.

Business Model

The Group raises deposits from individuals and corporations at low cost and deploys them primarily in loans to small and medium-sized enterprises to earn net interest income. In FY2026 (ending March 2026), net interest income was ¥59,090 million and net fee and commission income was ¥13,192 million, with the two together forming the core of revenue. In addition, eight group companies provide peripheral services such as credit guarantees, leasing, and cards, deepening customer touchpoints across multiple layers to complement fee income.

Company Strengths

The non-consolidated loan balance to SMEs and others as of the end of March 2026 stood at ¥3,318,562 million (up ¥165,409 million from the end of the previous fiscal year), accounting for 75.9% of total loans. The Bank has actively expanded its business primarily within Osaka Prefecture, with the consolidated loan balance growing to ¥4,344,661 million. The customer base built on long-standing business relationships represents a unique strength that competitors would find difficult to replicate in a short period.

Non-consolidated customer service business profit for FY2026 (ending March 2026) reached a record high of ¥22.8 billion, achieving the final-year target of ¥22.0 billion or more under the 7th Medium-Term Management Plan one year ahead of schedule. This was driven by the deposit-loan yield spread of 1.10% (up 0.11 percentage points year on year) and steady performance in fee business (services transactions) profit, demonstrating strong core earnings capability.

The consolidated capital adequacy ratio (domestic standard) stood at 12.26% (up 0.21 percentage points from the previous fiscal year), maintaining a level above the medium-term plan target of 10-11%. The ratio of normal claims remained at a high level against total assessed assets of ¥4,352,627 million, while claims against bankrupt and reorganizing debtors, etc. decreased to ¥3,005 million from the previous fiscal year. The Bank maintains high financial soundness and a financial base capable of funding loan growth and shareholder returns from internal resources.

ENVALITH's Perspective

In FY2026 (ending March 2026), interest on loans increased by ¥12,561 million year on year, while interest on deposits surged by ¥6,802 million year on year (¥9,604 million on a non-consolidated basis). Amid expectations of a further policy rate hike as an external factor, the forecast for FY2027 (ending March 2027) (assuming the policy rate remains flat at 0.75%) projects consolidated ordinary profit of ¥36,600 million (up 13.1% year on year), but there is a risk that a further rise in interest on deposits, etc. will squeeze the interest margin. It will be necessary to assess the sustainability of earnings as the net increase in net interest income narrows.

It is commendable that the company achieved the key targets of the 7th Medium-Term Management Plan—ROE of 9.0%, service business profit for customers of ¥22.8 billion, and net income of ¥21.8 billion—one year ahead of the final-year (FY2027, ending March 2027) targets. On the other hand, in FY2026 (ending March 2026), the company recorded extraordinary losses of ¥2,427 million, including a provision for head office rebuilding loss of ¥1,576 million, and one-time expenses related to the head office rebuilding are expected to continue to arise going forward. Excluding these, the disclosed underlying consolidated ROE is 9.69%, indicating that an analysis excluding the impact of one-time expenses is necessary to assess structural earnings power.

The company implemented a 1-for-3 stock split in October 2026 and continued to increase dividends, with the annual dividend at ¥137 (up ¥27 year on year, payout ratio of 40.3%). This proactive stance on shareholder returns is commendable. On the other hand, net unrealized gains (losses) on other securities, on a consolidated basis, stood at ¥(27,523) million (a deterioration of ¥4,485 million from the previous fiscal year-end), as valuation losses on bonds widened due to rising domestic interest rates, and comprehensive income remained at ¥19,379 million. In addition, the high concentration of credit to small and medium-sized enterprises in the Wakayama and Osaka regions (total risk-monitored loans of ¥59,389 million) continues to warrant attention as a risk of a sharp increase in credit costs in the event of a downturn in the regional economy.

Growth Strategy

Sustainable growth through transformation of the business model centered on transactions with small and medium-sized enterprises and promotion of regional DX

Loan balances were built up mainly through lending to small and medium-sized enterprises (non-consolidated period-end balance of ¥4,371,001 million, average balance during the period of ¥4,276,467 million), and combined with yield improvement in a rising interest rate environment (loan yield of 1.30%), net interest income expanded. For FY2027 (ending March 2027), an increase in interest income on loans is expected due to further growth in loan balances and rising yields.

By expanding assets under custody (non-consolidated balance of ¥559,614 million) through sales of investment trusts and insurance, and increasing fee income from services transactions (non-consolidated ¥9,974 million), the company strengthened its revenue base independent of interest income. Against the final-year target of the 7th Medium-Term Management Plan of ¥22.0 billion or more, the company achieved ¥22.8 billion in FY2026 (ending March 2026), reaching the target ahead of schedule.

Under a progressive dividend increase policy targeting a payout ratio of approximately 40%, the company implemented an annual dividend of ¥137 per share for FY2026 (ending March 2026), up ¥27 year on year. Consolidated ROE reached 9.0%, achieving the medium-term plan target of 8.0% or more ahead of schedule. Early achievement of the medium- to long-term target of 10.0% or more is also coming into view. A 1-for-3 stock split was implemented in October 2026 to improve share liquidity.

In September 2025, the basic plan for the new head office building was determined, and a shortened useful life for the north wing of the current head office and a provision for losses related to head office rebuilding (¥1,576 million) were recorded. While the head office rebuilding entails a one-time cost burden, its purpose is to strengthen branch functions in the region and maintain the brand over the long term.

Last updated: July 19, 2026