Kyoto Bank, Two Years After Becoming a Financial Group: Upward Revision Thanks to Nintendo Stock Sale Shows How Far It's Come from Being a "Plain Old Lender"

The business model of regional banks has undergone a dramatic transformation in recent years. The old way of just "taking deposits and making loans" no longer cuts it. Competing purely on interest rates is a race to the bottom. That's why an upward revision to the earnings forecast for the year ending March 2026, announced in March by Kyoto Financial Group (Kyoto FG), which counts Kyoto Bank as its core unit, has become a hot topic among market watchers.

Evolving toward a "more profitable" structure: The impact of selling Nintendo shares

What's so impressive? It's proof that a profit structure beyond just interest income is finally firing on all cylinders. The standout figure is the recording of roughly ¥160 billion in gains from stock sales, centred on a ¥75.1 billion gain from selling Nintendo shares held by subsidiary Kyoto Bank. As a result, the group expects profit attributable to parent company shareholders of ¥95 billion – far exceeding the earlier forecast of ¥45 billion.

This isn't just a short-term play of "realising unrealised gains." It's also a moment where the fruits of relationship banking, built up over many years, have crystallised in the form of a capital strategy. With this, the ROE for FY2025 is expected to exceed 8%. For a regional bank, that figure is a major milestone, signalling that management efficiency has moved up a gear.

Moving beyond "plain old lending": Two years of the FG structure

Rewind to October 2023. That's when Kyoto Bank transitioned to a standalone holding company structure, becoming Kyoto Financial Group. At the time, then-president Nobuhiro Doi (now president of the FG) said, "If we rely solely on the deposit and lending business, our management won't be sustainable in the future," declaring a transformation into a comprehensive solutions provider. Fast forward two years, and those words haven't just been empty promises.

Mr Doi's strategy of "no growth without expansion" is also clearly visible in the branch network.

• Kyoto Prefecture: 111 branches. A truly embedded, web-like presence across areas like Rakusai, Fushimi, and Muko Town.
• Osaka and Hyogo Prefectures: 31 branches + 8 branches. Strengthening its footprint in the Hanshin region, including Settsu, Kawanishi, and Amagasaki.
• Shiga and Nara: Locations like Kusatsu and Yamatokoriyama, positioned to reflect integrated commercial zones.
• Head Office & Nagaoka Branch: Solidifying the traditional home base in Kyoto City while covering growth areas in southern Kyoto such as Nagaokakyo and Muko Town.

While maintaining these real-world touchpoints, the bank is also pushing ahead with its shift to "data-driven management". In January 2026, Munenobu Hanaki, head of the Data-Driven Promotion Office, took the stage at a seminar, showcasing how the bank is "promoting a cross-organisational framework and talent development simultaneously," rather than just introducing tools. There's no doubt that loan screening and management support based on numbers – rather than just gut feel and old rules of thumb – are helping boost profit margins.

How DX is changing the "face of banking"

What's even more interesting is how quickly the bank has been teaming up with external partners lately. Just the other day, it announced a business tie-up with LayerX, a company drawing attention for its back-office DX solutions. From April 2026, they will begin offering "Kyoto FG with Bakuraku", using the AI cloud service "Bakuraku". The aim is to boost the productivity of client companies by automating their accounting tasks.

In addition, they've also partnered with TIS. From May 2026, they plan to roll out "DX Connect Gate" – a digital invoice payment solution – in the Kansai region. What these moves reveal is that Kyoto FG is not simply "lending and done". Instead, it's building a framework to dive deep into the digitalisation of its clients' operations and generate recurring revenue.

The stock market's valuation is also riding this wave. As of March 2026, the bank's PER stood at 24.4x – a premium well above the regional banking industry average of 14.3x. That's a clear sign that the market has stopped looking at past earnings figures and is beginning to price in a future growth trajectory as a "comprehensive solutions provider."

A model for the future of regional banking

Of course, challenges remain. Maintaining the branch network (optimising regional outposts like the Settsu and Nagaoka branches) and securing consulting talent are urgent tasks. Even so, the pace of transformation coming from that corner of Shijo-Karasuma where the Kyoto Bank Head Office sits feels like a glimmer of hope in an otherwise stagnant Japanese economy.

What will be demanded of regional banks going forward is the quality of how deeply they embed themselves in their communities and how many problems they can solve. Kyoto FG's challenge is embodying that answer ahead of the pack. Will this growth continue from next fiscal year onwards? It's definitely worth keeping an eye on.