The Bank of Nagoya, Ltd.

Business Details

The Bank conducts deposit-taking, lending, domestic exchange, foreign exchange, securities investment, trading securities transactions, and bond trustee and registration services at its head office and branches. It forms the earnings base as a regional financial institution through lending to small and medium-sized enterprises, housing loans, and investment trust sales, mainly within Aichi Prefecture. This is the core segment, accounting for approximately 77% of the Group's ordinary income.

Recent Overview

Both ordinary income and profit increased significantly due to rising interest rates and loan growth

In FY2026 (ending March 2026), the Banking Business segment recorded ordinary income of ¥97,441 million (up ¥21,546 million, +28.4% year on year) and segment profit of ¥27,239 million (up ¥7,272 million, +36.4% year on year), a substantial increase in profit. The main drivers were an increase in interest on loans to ¥45,267 million and interest and dividends on securities to ¥22,063 million. The overall interest margin improved to 0.33% (up 0.12 percentage points year on year). Core net business profit was ¥32,242 million (up ¥9,825 million year on year). The ratio of disclosed problem loans improved to 1.79% (down 0.18 percentage points year on year). Additionally, on March 27, 2026, the Bank entered into a basic agreement for a business integration with Shizuoka Financial Group, and is discussing and considering making the Bank a wholly owned subsidiary through a share exchange, targeting April 1, 2028.

Key Products

Growth Drivers

• Increase in interest income on loans and interest and dividends on securities driven by the transition to a "world with interest rates" amid the Bank of Japan's policy rate hikes. In FY2026 (ending March 2026), interest income from fund management increased substantially to ¥72,042 million (up ¥20,404 million year on year), and the overall interest margin improved to 0.33% (up 0.12 percentage points year on year)
• Continued expansion of the loan balance. The non-consolidated loan balance at the end of FY2026 (ending March 2026) was ¥4,330,465 million (up ¥324,926 million year on year), driven by aggressive expansion of lending to small and medium-sized enterprises and housing loans (balance of ¥1,291,821 million)
• Expansion of assets under custody. The non-consolidated balance of assets under custody at the end of FY2026 (ending March 2026) was ¥700,569 million (up ¥90,421 million year on year), with increased fee income from higher sales of investment trusts (¥197,733 million) and insurance products (¥457,265 million)
• Reduction in credit costs due to improvement in the non-performing loan ratio (1.79% non-consolidated, down 0.18 percentage points year on year). Total disclosed claims under the Financial Reconstruction Act were ¥78,955 million (down ¥1,276 million year on year)
• Business integration with Shizuoka Financial Group (targeted for April 1, 2028), aiming to expand scale and enhance solution capabilities, with the goal of developing into a top-tier regional banking group

Risks

• A sharp rise in funding costs amid rising interest rates. In FY2026 (ending March 2026), funding costs increased substantially to ¥20,462 million (up ¥10,429 million year on year). Interest on deposits surged to ¥15,542 million (up ¥11,243 million year on year), and the risk of margin compression continues
• Interest rate risk in the securities portfolio. Valuation losses on held-to-maturity securities were ¥9,341 million (worsening by ¥1,350 million year on year). There is a risk of bond price declines amid rising interest rates. Valuation losses on bonds within other securities were ¥24,026 million
• Risk of deterioration in the regional economy due to geopolitical risk and the impact of U.S. trade policy, among other factors. There are concerns about the impact on the loan balance to manufacturers within Aichi Prefecture (¥531,932 million, non-consolidated)
• Increase in credit-related costs. Non-consolidated credit-related costs increased to ¥2,277 million (up ¥1,480 million year on year) in FY2026 (ending March 2026). Provision for individual allowance for loan losses increased substantially to ¥1,376 million (up ¥1,333 million year on year)
• Uncertainty related to the business integration with Shizuoka Financial Group. The share exchange ratio has not yet been determined and will be finalized following due diligence results, third-party valuations, and other processes. There is a risk of schedule delays due to possible changes in the integration structure or the status of regulatory approvals from relevant authorities
• Risk of shrinking regional demand for funds due to population decline and the falling birthrate combined with an aging population, and intensifying competition with rival regional financial institutions within Aichi Prefecture