Mebuki Q1 FY2027: Operating Profit Jumps 57%, Lifts Full-Year Outlook

Mebuki achieved strong growth across all earnings stages. Recurring revenue surged 39.2% year on year to ¥1,379.03 billion, operating profit climbed 57.3% to ¥498.58 billion, and net income attributable to shareholders rose 55.2% to ¥345.04 billion. The upswing was fueled by an expansion in net interest income and a large increase in stock sale gains.

Breaking down revenue, interest and investment income grew 21.9% to ¥79,289 million, driven by higher loan and securities income. Fee and commission income rose 9.5% to ¥16,899 million. Other recurring income ballooned 158.7% to ¥40,287 million, largely reflecting stock sale gains of ¥31,095 million and bond-related transactions.

Expenses, however, rose alongside rising funding costs. Total recurring expenses increased 30.8% to ¥88,044 million, with deposit and call money costs up 25.0% to ¥24,507 million. Other operating expenses, which include bond disposal losses and derivatives, soared 372.4% to ¥19,771 million. Personnel and administrative expenses edged up just 3.2% to ¥29,545 million, while credit costs eased 16.0% to ¥2,397 million. As a result, gross profit before credit costs stood at ¥50,406 million, down 11.5% year on year, but non-operating stock-related gains significantly boosted the bottom line.

Mebuki’s reported segment is banking, with its two main subsidiaries, Joyo Bank and Ashikaga Bank, driving results. Combined gross profit of the two banks fell 12.7% to ¥48,087 million, largely due to worsening bond-related losses. However, core business profit (excluding bond gains/losses) rose 25.5% to ¥37,915 million, signaling improving underlying strength. Net interest income increased 20.6% to ¥54,963 million, and fee income grew 8.6% to ¥11,468 million.

At Joyo Bank, operating profit surged 67.9% to ¥34,426 million, helped by ¥16,555 million in stock sale gains, though bond disposal losses amounted to ¥5,172 million. Credit costs were low at ¥1,342 million, and net income jumped 65.1% to ¥23,897 million. Ashikaga Bank’s operating profit rose 37.6% to ¥14,216 million, with stock-related gains of ¥14,540 million outweighing bond-related losses of ¥14,490 million. Core business profit at Ashikaga grew 31.4% to ¥14,467 million. Both banks benefited from higher loan volumes and improving yields.

In April 2026, Ashikaga Bank acquired all shares of Cateru Co., renamed Wing IT Solutions, to strengthen IT services and digital customer offerings.

Total assets expanded by ¥714.1 billion from the end of March 2026 to ¥21,887.7 billion. Cash and due from banks jumped ¥770.1 billion to ¥3,215.2 billion, while loans decreased by ¥118.6 billion to ¥13,878.9 billion. Securities inched up ¥14.1 billion to ¥3,862.3 billion. Deposits grew ¥135.5 billion to ¥17,967.2 billion, reflecting strong deposit gathering, though loan growth lagged, widening the deposit-loan gap.

Net assets increased ¥37.6 billion to ¥1,114.8 billion, with retained earnings of ¥783.8 billion. The capital adequacy ratio remained at 5.0%. Unrealized gains on securities (after hedging) stood at ¥167.1 billion, up ¥27.3 billion from March, with stock gains of ¥162.5 billion offset by bond losses of ¥61.6 billion.

The bank announced a 57.1% dividend increase, raising the annual payout to ¥44.00 per share (¥22.00 interim plus ¥22.00 year-end), up from ¥28.00 the prior year. No share buyback was disclosed.

Reflecting the strong first quarter, Mebuki upgraded its full-year forecast. Operating profit for FY2027 is now seen at ¥1,535 billion, up 32.7% from the prior year, and net income at ¥1,050 billion, a 24.7% increase. Compared with the previous outlook, operating profit was raised by ¥14.5 billion and net income by ¥10.0 billion. For the first half, the bank projects operating profit of ¥82.0 billion and net income of ¥56.0 billion.

The upward revision reflects:
1) Higher interest income from rising rates,
2) Front-loaded stock sale gains,
3) Continued low credit costs.
Loan yields improved, with Joyo Bank at 1.32% and Ashikaga Bank at 1.37%, and are expected to contribute to gross profit growth. However, uncertainty around bond gains/losses and overseas interest rate and currency volatility warrants caution.

Key risks facing Mebuki include:

• Interest Rate Volatility: Additional rate hikes by the Bank of Japan could expand unrealized bond losses (already ¥61.6 billion after hedging) and raise funding costs, pressuring profits.
• Protracted Deposit-Loan Gap: While deposits rise, loan demand remains sluggish, with the SME loan ratio falling to 68.66%. Efficiently deploying excess funds is critical for profitability.
• Credit Cost Upside: Although credit costs are low and the non-performing loan ratio stands at 1.23%, an economic downturn or higher costs could increase bad-loan charges.
• Securities Portfolio Risk: A stock market decline could reduce gains available to offset bond losses, as unrealized gains are predominantly equity-linked.
• Intensifying Competition: Regional bank consolidation and digital entrants threaten lending margins and fee business, underscoring the need for sustained digital investment and new revenue streams.