Resona Q1 FY2027: Net Profit Up 14%, Raises Full-Year Target on Loan Growth

Resona posted double-digit revenue and profit growth in the April-June quarter. Recurring revenue rose 20.0% year on year to ¥359,982 million, recurring profit increased 19.3% to ¥116,203 million, and net income attributable to parent shareholders grew 14.2% to ¥80,526 million.

The main driver was a surge in lending income following the Bank of Japan's rate increases. Net interest income and dividends on securities totaled ¥235,154 million (up 29.1%), with loan interest income alone climbing 31.7% to ¥165,153 million and securities income rising 43.1% to ¥37,785 million. Funding costs, chiefly deposit interest, expanded 41.0% to ¥72,015 million, but net interest income still grew 24.5% to ¥163,199 million.

Fee and commission income was solid at ¥54,836 million (up 6.6%), supported by trust fees, credit card revenue, and investment trust sales. However, the markets segment swung to a loss of ¥8,478 million from a previous profit of ¥4,349 million due to bond market volatility. Expenses rose 6.8% to ¥121,989 million on higher personnel and operating costs, yet core business profit (before credit costs) still advanced 15.9% to ¥95,571 million.

Credit costs turned into a net recovery of ¥1,335 million (versus a ¥923 million charge a year ago). Gains on stock holdings and other non-recurring items contributed ¥20,352 million (up 17.4%), pushing pre-tax profit to ¥116,102 million (up 19.3%). ROE improved to 12.92% from 11.96% a year earlier.

Resona operates through three main segments: Retail Banking, Corporate Banking, and Markets. Below is the first-quarter gross business profit and core business profit for each.

(Note: Retail and Corporate Banking include relevant subsidiaries. Year-on-year changes omitted for Markets due to deficit.)

Retail Banking saw gross business profit soar 39.8% to ¥146,793 million, driven by higher mortgage loan interest and steady fee income from investment trusts and insurance. Core business profit surged to ¥82,083 million from ¥43,719 million a year earlier, helped by a widening deposit-to-loan spread. Domestic individual deposits rose ¥266.8 billion to ¥39,657.3 billion.

Corporate Banking also benefited from domestic and overseas loan growth and higher interest margins, lifting gross business profit 23.2% to ¥138,113 million. Core business profit jumped 36.5% to ¥81,658 million, supported by SME lending and syndicated loans, with credit costs turning into recoveries.

The Markets segment was hit by bond valuation losses amid monetary policy normalization. Bond-related losses swung to ¥13,917 million from a profit of ¥899 million a year ago. As a result, gross business profit fell to a deficit of ¥55,059 million (from a deficit of ¥20,801 million) and core business loss widened to ¥57,260 million (from ¥22,442 million). The group’s overall core business profit remained solid thanks to the strong Retail and Corporate units.

Total assets at end-June 2026 stood at ¥77,007.9 billion, up ¥710.9 billion from March 2026. Loans expanded ¥880.9 billion to ¥48,515.6 billion. Deposits (including negotiable certificates) edged down ¥649.2 billion to ¥63,565.5 billion, but the loan-to-deposit balance stayed healthy. The capital adequacy ratio rose to 3.9% from 3.8%, with equity capital increasing to ¥3,009.7 billion.

Cash flows were not disclosed for the quarter, though depreciation was modestly higher at ¥9,362 million. Capital spending was limited, suggesting steady operating cash generation.

On shareholder returns, Resona raised its full-year dividend forecast to ¥37 per share (interim ¥18.5, year-end ¥18.5), an ¥8 increase from the previous year’s ¥29. The implied payout ratio is about 25% based on the net profit target of ¥330 billion and roughly 2.245 billion shares outstanding, pointing to a commitment to stable dividends. No new share buyback was announced, but treasury shares rose to 6.33 million from 5.40 million, likely related to employee stock plans.

The company highlights several key risks:

• Interest rate risk: Further BOJ tightening could deepen bond valuation losses in the Markets segment. While higher loan yields support revenue, a sharp rate rise may also raise credit costs.
• Credit risk: Although credit costs were a net recovery, an economic slowdown or deterioration in SME performance could increase bad-loan provisions. Individual loan-loss reserves are already showing a slight upward trend.
• External uncertainty: The financial report notes growing uncertainty from global economic conditions and forex movements, which could affect earnings.
• Deposit-loan spread: If deposit rates outpace loan yield increases, margins could shrink. Currently the spread is widening, but intensifying competition for deposits may raise funding costs.
• Equity market risk: Gains on stock holdings currently cushion earnings, but a market downturn could reverse that. The ongoing reduction of policy shareholdings also adds variability to future gains or losses.

Resona upgraded its full-year net profit target to ¥330 billion (up 27.6% year on year), reflecting a strong first quarter and expectations of continued loan interest growth. While revenue and recurring profit forecasts are undisclosed, the net profit revision signals confidence in the year ahead.

The annual dividend was raised to ¥37 per share, an ¥8 increase from the prior year. No exchange rate or interest rate assumptions were given, but enhanced shareholder returns, including possible buybacks, are increasingly anticipated. Nonetheless, watchpoints remain: persistent losses in the Markets segment and potential emergence of credit costs.