Yokohama FG Q1 FY2027: Operating Profit Up 18.6%, Hits 24.8% of Full-Year Target

Yokohama FG posted its fourth consecutive quarter of profit growth, starting FY2027 on a strong note. Revenue grew 15.9% year-on-year to ¥130.9 billion, ordinary profit increased 18.6% to ¥45.4 billion, and net profit attributable to shareholders rose 18.4% to ¥32.0 billion. The main driver was a 22.9% jump in net interest income and other revenue from operations to ¥97.6 billion, with loan interest income surging 21.4% to ¥75.4 billion, reflecting both a ¥531.3 billion increase in average loan balances and a 0.28 percentage point rise in loan yields, thanks to the Bank of Japan’s rate hikes. Fee and commission income fell ¥1.67 billion to ¥16.1 billion, largely due to weaker investment trust sales. Other expenses included ¥6.3 billion in losses from bond disposals and trust redemptions for portfolio rebalancing, but credit costs remained contained at ¥2.7 billion, up only ¥2.6 billion year-on-year. Progress against full-year forecasts stood at 23.7% for ordinary profit and 24.8% for net profit, indicating a smooth start. Annualized ROE improved 0.6 percentage points to 8.9%.

The group operates primarily in banking, with its core subsidiary Yokohama Bank leading results. Yokohama Bank’s gross business profit grew ¥8.8 billion year-on-year to ¥70.0 billion, while core operating profit expanded ¥7.6 billion to ¥42.3 billion, driven by a ¥12.5 billion increase in net interest income as it capitalized on rising rates. Higashi-Nihon Bank posted roughly flat gross profit at ¥5.9 billion and a ¥0.1 billion dip in core profit to ¥1.4 billion. Kanagawa Bank saw modest gains: gross profit up ¥0.2 billion to ¥2.3 billion, core profit up ¥0.1 billion to ¥0.7 billion. Across the three banks, net interest income on loans and deposits rose ¥7.1 billion to ¥48.0 billion, reflecting a ¥527.4 billion increase in average loan balances, with Yokohama Bank alone contributing ¥498.5 billion of the rise. Securities-related income also grew, up ¥4.0 billion to ¥13.7 billion, supporting diversification. On the deposit side, retail deposits edged up ¥18.7 billion to ¥13,993.8 billion, while corporate deposits increased ¥196.6 billion to ¥5,115.8 billion, though a ¥372.3 billion decline in public-sector deposits led to a slight overall contraction.

Total assets at the end of the quarter stood at ¥25,082.9 billion, down ¥587.5 billion from the prior fiscal year-end, mainly due to a ¥612.9 billion decline in deposits to ¥20,264.2 billion. Loans, however, grew ¥19.9 billion to ¥17,687.3 billion, while securities holdings declined ¥43.4 billion to ¥3,034.1 billion as portfolio rotation progressed. Net assets increased ¥51.2 billion to ¥1,469.6 billion, pushing the equity ratio up to 5.8% from 5.4%, reflecting improved financial stability. Depreciation and amortization remained steady at ¥3.45 billion (vs. ¥3.23 billion a year earlier), with goodwill amortization of ¥0.18 billion. On the shareholder return front, Yokohama FG raised its annual dividend forecast for FY2027 by ¥9 to ¥47 per share (interim ¥23, year-end ¥24). The group also announced a share buyback program, signaling a commitment to higher total payout ratios. The average number of shares outstanding during the quarter was 1,111.56 million (excluding treasury shares), lifting EPS to ¥28.81 from ¥23.68 in the prior first quarter.

While rising rates boost lending income, they also push up funding costs, with deposit interest expenses surging 43.4% to ¥18.8 billion in the quarter, lifting total funding costs by 28.5% to ¥28.5 billion, which could narrow net interest margins over time. Credit costs remain low but need monitoring: watch-list loans totaled ¥1,396.8 billion (down ¥14.6 billion from year-end but still elevated), posing a risk of higher loan-loss provisions in an economic downturn. Non-performing loan ratios at Higashi-Nihon Bank (2.6%) and Kanagawa Bank (3.0%) are relatively high. The securities portfolio holds ¥181.4 billion in net unrealized gains (an improvement of ¥63.5 billion from year-end), but bond holdings alone carry ¥99.8 billion in unrealized losses, exposing the group to interest rate volatility. Portfolio restructuring-related losses could also weigh on future earnings. Additionally, the acquisition of a stake in Mitsui Sumitomo Trust Panasonic Finance, announced on July 30, 2026, offers diversification benefits but will require time to yield material contributions.

Yokohama FG maintained its full-year consolidated earnings guidance for FY2027. Ordinary profit is forecast at ¥191.5 billion, up 23.5% from the previous year, with net profit seen at ¥129.0 billion, a 21.1% increase. First-quarter progress of 23.7% and 24.8%, respectively, puts the group on track toward these targets. Management expects the tailwind from rising loan yields and more efficient securities investment to drive earnings, while risks include higher deposit rates, potential credit cost increases, and portfolio adjustment losses. Barring sharp currency or equity market swings, the company considers the forecasts achievable.

On July 30, 2026, Yokohama FG signed a definitive agreement to acquire a partial stake in Mitsui Sumitomo Trust Panasonic Finance from Sumitomo Mitsui Trust Bank and Fuyo General Lease. The transaction is expected to close on October 1, 2026, after which the company will be accounted for as an equity-method affiliate. The move aims to expand Yokohama FG’s presence in the leasing and finance sector, strengthening the group’s earnings base. While the concrete financial impact is still under review, the acquisition is viewed as a medium- to long-term growth driver.