THE TAIKO BANK,LTD.

Business Details

The Bank Group designates banking as its sole reporting segment, conducting deposit-taking, lending, securities investment, foreign exchange, investment trust sales, insurance sales, and consulting operations centered on Niigata Prefecture. Under the group are the consolidated subsidiary Taiko Card Co., Ltd. (credit card and credit guarantee), Daiko Capital & Consulting Co., Ltd. (M&A brokerage and fund management), and the equity-method affiliate Daiko Lease Co., Ltd. (leasing). Its primary customers are small and medium-sized enterprises, individuals, and local public bodies within Niigata Prefecture, and it fulfills a role as social infrastructure supporting the revitalization of the regional economy.

Recent Overview

Achieved higher revenue and profit driven by increased fund utilization income from rising interest rates and expanded gains on sales of equities

In FY2026 (ending March 2026, full year), against the backdrop of the Bank of Japan's policy interest rate hikes, interest on loans increased substantially to ¥15,334 million (prior period: ¥12,575 million) and interest and dividends on securities rose to ¥4,479 million (prior period: ¥4,057 million), driving a large increase in fund utilization income. On the other hand, interest on deposits also surged to ¥3,086 million (prior period: ¥973 million), sharply increasing funding costs. Other ordinary income expanded to ¥4,631 million (prior period: ¥1,431 million), mainly due to gains on sales of equities and other securities of ¥4,209 million (prior period: ¥771 million). Gains/losses related to government bonds and other bonds resulting from the review of the securities portfolio worsened to a loss of ¥2,937 million. As a result, ordinary profit was ¥4,067 million (up 4.5% year on year) and profit attributable to owners of parent was ¥2,799 million (up 12.1% year on year). Comprehensive income improved substantially to ¥6,459 million (prior period: a loss of ¥2,161 million). For FY2027 (ending March 2027), the Bank forecasts ordinary income of ¥29,030 million, ordinary profit of ¥4,840 million, and profit for the year of ¥3,300 million. The annual dividend is planned at ¥106 (prior period: ¥89).

Key Products

Growth Drivers

• Increase in interest on loans and interest and dividends on securities accompanying the Bank of Japan's policy interest rate hikes (fund utilization income: ¥20,740 million, prior period: ¥17,088 million) and improvement in the overall interest margin (0.36%, prior period: 0.30%)
• Expansion of deposit balance, etc. driven by increases in corporate and individual deposits (non-consolidated period-end balance of ¥1,497,378 million, up ¥28,026 million year on year)
• Expansion of assets under custody balance due to increased sales of investment trusts and public bonds (¥198,086 million, up ¥22,188 million year on year)
• Expansion of loan balance due to increased lending to small and medium-sized enterprises and individuals (non-consolidated period-end balance of ¥1,193,451 million, up ¥22,268 million year on year)
• Expansion of gains/losses related to equities, etc. (¥1,240 million, prior period: a loss of ¥414 million), including gains on sales of equities of ¥4,209 million
• Strengthening of corporate consulting and expansion of individual loan products based on the 13th Medium-Term Management Plan "Value Up" (April 2024 to March 2027)
• Profit-boosting effect from a significant decrease in real credit-related costs (non-consolidated: ¥500 million, prior period: ¥1,017 million)

Risks

• Sharp increase in funding costs (consolidated: ¥3,476 million, prior period: ¥1,147 million): rising deposit interest rates are squeezing earnings, with risk of further expansion depending on future interest rate trends
• Continued unrealized losses on securities (unrealized loss of ¥4,933 million on both a non-consolidated and consolidated basis): risk of bond price declines amid rising interest rates, particularly an unrealized loss on bonds of ¥12,104 million
• Deterioration in gains/losses related to government bonds and other bonds due to review of the securities portfolio (a loss of ¥2,937 million, prior period: a loss of ¥461 million): pushed down real net business profit to ¥3,141 million (prior period: ¥5,187 million)
• Risk of stagnation in the Niigata Prefecture economy: population decline and industrial hollowing-out in the Bank's primary operating base could pressure the medium- to long-term earnings base
• Uncertainty in domestic and overseas economies and financial markets due to the effects of U.S. trade policy and other factors: deterioration in corporate earnings and market volatility could affect loan demand and asset quality
• Although the non-performing loan ratio is on an improving trend at 2.22% (prior period: 2.28%), the high level of claims against bankrupt and quasi-bankrupt obligors at ¥23,069 million continues
• Increase in operating expenses (consolidated: ¥12,915 million, prior period: ¥12,075 million): rising personnel and non-personnel expenses are pressuring earnings efficiency