The Shikoku Bank, Ltd.

Business Details

A single reportable segment in which the Group as a whole, centered on The Shikoku Bank, Ltd. and including six consolidated subsidiaries (including Shigin General Lease Co., Ltd.), conducts banking operations. With Kochi Prefecture as its primary base, the Group provides financial services to individuals, corporations, and local public bodies through its Lending Business, Securities Investment Business, and Fees and Commissions (Fee Income). In FY2026 (ending March 2026), Shigin General Lease Co., Ltd. became a wholly owned subsidiary, bringing the Leasing Business into the scope of consolidation.

Recent Overview

Ordinary profit and net profit reached record highs due to rising interest rates, portfolio improvement, and one-time gains from the subsidiary conversion

In FY2026 (ending March 2026), against the backdrop of additional interest rate hikes by the Bank of Japan, interest income on loans expanded to ¥28,522 million (up ¥3,590 million year on year) and interest and dividends on securities rose to ¥16,718 million (up ¥1,669 million year on year), driving growth in fund-based income. On the other hand, ordinary expenses also increased due to losses on sales and redemption of bonds associated with securities portfolio improvement and higher deposit interest expenses. As a result of recording a gain on negative goodwill of ¥12,777 million as extraordinary income in connection with the full subsidiary conversion of Shigin General Lease, profit attributable to owners of parent increased substantially to ¥17,445 million (up 156.0% year on year). For FY2027 (ending March 2027), net profit is forecast to decline to ¥8,800 million (down 49.5% year on year) as one-time factors fall away. The dividend payout ratio target was raised from 30% or more to 40% or more, and the annual dividend forecast for FY2027 (ending March 2027) is ¥86.

Key Products

Growth Drivers

• Increase in interest income on loans due to interest rate normalization: The yield on loans rose to 1.31% (up 0.12 percentage points year on year) amid rising domestic interest rates, and combined with expansion in advanced financial areas such as LBO loans and ship finance, interest income on loans increased to ¥28,522 million
• Improved yield through securities portfolio improvement: Active sales of low-yield bonds and investment trusts raised the securities yield to 1.69% (up 0.17 percentage points year on year), increasing interest and dividends on securities to ¥16,718 million
• Expansion of assets under custody through the comprehensive business alliance with Daiwa Securities: The establishment of a bank-securities collaboration model expanded the Daiwa Securities intermediary account balance to ¥537,599 million (up ¥140,777 million from the previous fiscal year-end), increasing fees and commissions income to ¥10,604 million
• Continued expansion of loan balance: Increases in commercial loans, individual loans, and loans to local public bodies pushed the non-consolidated loan balance at fiscal year-end to a record ¥2,232,077 million
• Increase in gains related to equities: Profit-taking amid rising stock prices resulted in a non-consolidated gain on sales of equities of ¥4,165 million (up ¥2,055 million year on year)

Risks

• Increase in funding costs due to rising interest rates: Deposit interest expenses surged to ¥5,820 million (up ¥3,698 million year on year) and borrowing interest expenses to ¥651 million (up ¥567 million), with risk of further cost increases from additional rate hikes
• Significant expected decline in profit for FY2027 (ending March 2027): Consolidated net profit is forecast to decline to ¥8,800 million (down 49.5% year on year) as one-time gains associated with the full subsidiary conversion of Shigin General Lease (including the ¥12,777 million gain on negative goodwill) fall away
• Continued losses on sales and redemption associated with securities portfolio improvement: Other operating expenses increased substantially to ¥17,269 million (up ¥6,662 million year on year), with risk of continued losses as portfolio improvement continues
• Decline in the non-performing loan coverage ratio: The coverage ratio declined to 80.86% (down 2.62 percentage points from the previous fiscal year-end), a downward trend that poses a risk of increased credit costs (real credit-related expenses for FY2027 (ending March 2027) are forecast at ¥3.9 billion, up ¥2.5 billion year on year)
• Decline in non-consolidated capital adequacy ratio: Risk assets increased due to loan growth and an increase in the equity risk weight under transitional measures, causing the non-consolidated capital adequacy ratio to decline to 8.17% (down 0.47 percentage points from the previous fiscal year-end)
• Continued incurrence of costs related to head office rebuilding: ¥258 million was recorded in FY2026 (ending March 2026), with risk of additional costs as rebuilding work progresses
• Long-term risk of shrinking regional economy and declining loan demand due to population decline and aging