Kyoto Bank, Two Years After Becoming an FG: Upward Earnings Revision from Nintendo Share Sale Shows How Far It's Come from Being a "Just-Lend" Bank

The business model of regional banks has changed dramatically in recent years. The old way of simply "taking deposits and making loans" no longer cuts it. Competing solely on interest rates is a race to the bottom. In this context, an upward revision to the earnings forecast for the fiscal year ending March 2026, announced this March by Kyoto Financial Group (Kyoto FG), which has Kyoto Bank at its core, is generating buzz among market watchers.

Evolving Toward a More Profitable Structure: The Impact of Selling Nintendo Shares

What's so impressive about this? It's proof that a profit model beyond just interest income is now working effectively. The standout factor is the recording of approximately 160 billion yen in gains from share sales, centred on 75.1 billion yen from the sale of Nintendo shares held by subsidiary Kyoto Bank. As a result, the bank expects profit attributable to parent company shareholders to reach 95 billion yen, far surpassing the previous forecast of 45 billion yen.

This move isn't just a short-term play to "realize latent gains." It's also a moment where the fruits of relationship banking built up over many years have materialized in the form of a capital strategy. Looking ahead, ROE for fiscal 2025 is expected to exceed 8%. That figure is a major milestone for a regional bank, signalling that management efficiency has moved up a notch.

Moving Beyond "Just Lending": Two Years of FG Results

Rewind to October 2023. Kyoto Bank transitioned to a standalone holding company structure, becoming "Kyoto Financial Group." At the time, then-president Nobuhiro Doi (now CEO of the FG) declared a transformation into a comprehensive solutions provider, saying, "Relying solely on the deposit and lending business will make management unsustainable in the future." Two years on, those words haven't remained just a nice idea on paper.

Doi's strategy of "no growth without expansion" is clearly reflected in the branch network as well.

• Within Kyoto Prefecture: 111 branches. A truly granular, community-rooted network spanning areas like Rakusai, Fushimi, and Muko-machi.
• Osaka and Hyogo Prefectures: 31 branches + 8 branches. Strengthening presence in the Hanshin region, including Settsu Branch, Kawanishi Branch, and Amagasaki.
• Shiga and Nara: Strategic locations such as Kusatsu and Yamatokoriyama, reflecting integrated trade areas.
• Head Office and Nagaoka Branch: Solidifying the traditional base in Kyoto city while covering growth areas in southern Kyoto, such as Nagaokakyo and Muko-machi.

While maintaining these physical touchpoints, the bank is simultaneously pushing forward with a shift to "data-driven management." In January 2026, Munenobu Hanaki, the bank's head of the Data-Driven Promotion Office, spoke at a seminar, showcasing progress by noting that "we are advancing cross-organizational promotion and human resource development at the same time," not just introducing tools. There's no doubt that data-based loan screening and business support—moving beyond gut feelings and conventional experience—are helping improve profit margins.

The Changing "Face of Banking" Through DX

What's also interesting is the pace of recent partnerships with external companies. Just the other day, the bank announced a business alliance with LayerX, a company drawing attention for back-office DX. Starting in April 2026, they will begin offering "Kyoto FG with Bakuraku" using the AI cloud service "Bakuraku." This initiative aims to boost client companies' productivity through automation of accounting tasks.

Additionally, Kyoto FG is teaming up with TIS. From May 2026, they plan to launch "DX Connect Gate," a digital invoice payment solution, in the Kansai region. What these moves reveal is that Kyoto FG is not stopping at "making a loan and moving on." Instead, it's building a framework to dive deep into the digitalization of corporate management and generate recurring revenue (ongoing service income).

The stock market's assessment is also riding this tailwind. As of March 2026, the company's PER (price-to-earnings ratio) stands at 24.4x, a premium well above the regional banking industry average of 14.3x. This is likely evidence that the market has already begun pricing in the future growth trajectory of Kyoto FG as a "comprehensive solutions provider," rather than looking at past financial results.

A Blueprint for the Future of Regional Banking

Of course, challenges remain. Maintaining the branch network (optimizing regional hubs like Kyoto Bank's Settsu Branch and Nagaoka Branch) and securing consulting talent are urgent issues. Still, the pace of change radiating from the corner of Shijo-Karasuma, home to the Kyoto Bank Head Office, feels like a glimmer of hope in Japan's stagnant economy.

What regional banks will increasingly need is quality—how deeply they can embed themselves in their communities and how effectively they can solve local problems. Kyoto FG's initiatives are leading the way in providing that answer. Will this growth be sustainable beyond the next fiscal year? It's well worth watching.