THE OITA BANK, LTD.

Business Details

Operating 93 head office and branch locations in Japan, primarily centered in Oita Prefecture, this segment engages in deposits, loans, foreign exchange, securities investment, financial product intermediation, and insurance over-the-counter sales, among other activities. It is the core segment, accounting for approximately 87% of consolidated ordinary income. The segment's mission is to contribute to the development of the regional economy by providing comprehensive financial services—including business financing, personal loans, and securities intermediation—to individual and corporate customers in the region. In FY2026 (ending March 2026), an increase in interest and dividends on securities, interest on loans, and gains on sales of equities, among others, drove revenue growth.

Recent Overview

Increases in securities interest, loan interest, and gains on sale of equities drove a 37.2% year-on-year increase in Banking Business segment profit.

In FY2026 (ending March 2026), ordinary income (external customers) in the Banking Business segment was ¥86,347 million (up ¥20,752 million year on year), and segment profit was ¥13,339 million (up ¥3,614 million year on year). Interest and dividends on securities (¥29,583 million), interest on loans (¥30,567 million), and gains on sales of equities (¥11,496 million) increased substantially. On the other hand, fund procurement costs also rose, including losses on sales of government bonds and other securities (¥24,218 million), interest on deposits (¥6,754 million), and interest on securities sold under repurchase agreements (¥4,276 million). Non-consolidated core net business profit (excluding gains/losses on cancellation of investment trusts) improved significantly to ¥20,153 million (up ¥6,950 million year on year, +52.6%). The consolidated capital adequacy ratio (domestic standard) stood at 9.53% (preliminary figure).

Key Products

Growth Drivers

• The main drivers were an increase in interest income on loans (non-consolidated loan interest of ¥30,567 million, up ¥6,097 million year on year) due to the Bank of Japan's policy rate hikes, and a yield factor (+¥4,125 million)
• A substantial increase in interest and dividends on securities (¥29,583 million, up ¥7,326 million year on year), led by a yield factor (+¥8,036 million) that exceeded the decline in average balances (−¥710 million) due to asset rebalancing
• Active promotion of business loans (period-end balance of ¥1,304.8 billion, up ¥125.7 billion from the previous fiscal year-end), contributed to by basket funds, structured finance, and expanded lending in the Tokyo and Osaka areas
• Continued growth in personal loans (period-end balance of ¥859.0 billion, up ¥65.5 billion from the previous fiscal year-end), driven by housing loans, which increased by ¥62.1 billion from the previous fiscal year-end
• Expansion of net fees and commissions (¥8,271 million, up ¥612 million year on year) through enhanced solution-based sales, driven by increases in loan-related fees and securities intermediation fees, among others
• An increase in gains on sales of equities (¥11,496 million, up ¥4,819 million year on year); unrealized gains on equities also remained solid at ¥82.5 billion, with the market-value balance of held equities at ¥155.3 billion (up ¥38.1 billion from the previous fiscal year-end)
• Substantial improvement in the non-consolidated OHR (overhead ratio) (49.56%, down 11.00 points year on year), as the increase in core gross business profit (¥53.3 billion, up ¥10.8 billion year on year) far exceeded the increase in expenses (+¥719 million)

Risks

• Risk of a sharp increase in fund procurement costs. Interest on deposits rose substantially to ¥6,754 million (up ¥4,526 million year on year), and interest on securities sold under repurchase agreements rose to ¥4,276 million (up ¥1,462 million year on year); further policy rate hikes could push procurement costs even higher
• Risk that losses on sales of government bonds and other securities remain elevated. In FY2026 (ending March 2026), gains/losses on government bonds and other securities (net of five accounts) posted a substantial loss of −¥23,900 million (a deterioration of ¥12,042 million year on year). Portfolio rebalancing aimed at future earnings is ongoing
• A downward trend in the consolidated capital adequacy ratio. The preliminary figure at the end of March 2026 was 9.53% (down 0.58 points from the previous fiscal year-end), as the increase in risk assets (¥2,058.3 billion, up ¥192.3 billion from the previous fiscal year-end) outpaced the increase in capital
• Risk of increasing credit costs. Credit costs in FY2026 (ending March 2026) were ¥738 million (up ¥95 million year on year). The FY2027 (ending March 2027) forecast anticipates a further increase to ¥1.8 billion on a consolidated basis (up ¥700 million year on year)
• Risk of a sluggish regional economy. The effective job openings-to-applicants ratio in Oita Prefecture continues to decline, housing investment continues to fall, and personal consumption remains flat. The proportion of loans to borrowers within Oita Prefecture fell to 71.6% (down 2.3 points from the previous fiscal year-end), continuing a downward trend
• Risk of valuation losses on the securities portfolio. Unrealized losses on bonds stood at −¥50.5 billion (worsening from −¥35.2 billion at the previous fiscal year-end). Amid a continuing upward trend in long-term interest rates, there is a risk that the impact on the bond portfolio will expand further
• An increase in impairment losses. Impairment losses in FY2026 (ending March 2026) rose to ¥125 million (up ¥95 million year on year), warranting attention to declining profitability of fixed assets