Kyoto Bank, two years after becoming part of a financial group: Upward revision of earnings from Nintendo share sale shows how far it has come in moving beyond 'just lending'

The business model of regional banks has changed dramatically over the past few years. Simply taking deposits and making loans – as in the old days – is no longer enough. There's no end to competing purely on interest rates. Against this backdrop, the upward revision of earnings forecasts for the year ending March 2026, announced this March by Kyoto Financial Group (Kyoto FG), which counts Kyoto Bank as its core, has become a hot topic among market players.

Evolving into a 'profitable' structure: the impact of selling Nintendo shares

What's so impressive about this? It's proof that a profit structure beyond mere interest income is starting to work properly. The standout item is the booking of around ¥160 billion in gains from share sales, centred on a ¥75.1 billion gain from the sale of 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 previous forecast of ¥45 billion.

This isn't just a short-term move to 'realise unrealised gains'. It's also a moment when the fruits of relationship banking, built up over many years, have materialised in the form of capital strategy. The group now expects ROE for fiscal 2025 to exceed 8%. That figure is a major milestone for a regional bank, indicating that management efficiency has moved up a gear.

Moving beyond 'just lending': results two years into the FG structure

Rewind to October 2023. At that time, Kyoto Bank transitioned to a standalone holding company structure, becoming 'Kyoto Financial Group'. Back then, President Nobuhiro Doi (now Group CEO) said, 'If we rely only on the deposit and lending business, our operations won't be sustainable in the future,' and declared a transformation into a comprehensive solutions company. Two years on, those words have not remained just a pipe dream.

The strategy Mr Doi outlined – 'no expansion, no growth' – is clearly reflected in the branch network.

• Within Kyoto Prefecture: 111 branches. A truly dense, community-rooted presence in areas such as Rakusai, Fushimi and Muko.
• Osaka and Hyogo Prefectures: 31 + 8 branches. Strengthening its presence in the Hanshin region, including Settsu, Kawanishi and Amagasaki.
• Shiga and Nara: Locations such as Kusatsu and Yamatokoriyama, chosen with an eye to commercial integration.
• Head Office and Nagaoka Branch: Solidifying the traditional base in Kyoto city while covering growth areas in southern Kyoto, such as Nagaokakyo and Muko.

While maintaining these physical touchpoints, the group is simultaneously pushing forward with a transformation to 'data-driven management'. In January 2026, Munenobu Hanaki, head of the Data-Driven Promotion Office, spoke at a seminar, revealing that the group is not just introducing tools but also 'promoting a cross-organisational framework and human resource development at the same time'. There's no doubt that loan screening and business support based on numbers – rather than relying solely on gut instinct and experience – is helping to improve profit margins.

How DX is changing the 'face of banking'

Even more interesting is the speed of recent tie-ups with external companies. Just the other day, the group formed a business partnership with LayerX, a company drawing attention for its back-office DX. From April 2026, it will begin offering 'Kyoto FG with Bakuraku', using the AI cloud service 'Bakuraku'. This is an attempt to boost the productivity of client companies by automating accounting processes.

In addition, the group is also working with TIS. From May 2026, it plans to start offering 'DX Connect Gate' – a service that digitises the entire invoice payment process – in the Kansai region. What these moves reveal is that Kyoto FG is not just 'lending and finishing the job', but is increasingly building a structure to dive deep into the digitalisation of corporate management and secure recurring revenue.

The stock market's valuation is also benefiting from this tailwind. As of March 2026, its PER (price-to-earnings ratio) stood at 24.4x – a premium well above the regional banking industry average of 14.3x. This is surely evidence that the market has started to price in not past earnings figures, but the future growth trajectory of a 'comprehensive solutions company'.

A blueprint for the future of regional banking

Of course, challenges remain. Maintaining the branch network (optimising regional hubs such as Kyoto Bank's Settsu and Nagaoka branches) and securing consulting talent are urgent tasks. Nevertheless, the pace of change radiating from the corner of Shijo-Karasuma, where Kyoto Bank's Head Office is located, looks like a glimmer of hope in Japan's economy, which is weighed down by a sense of stagnation.

What regional banks now need is quality: how deeply they can embed themselves in their communities and how many problems they can solve. Kyoto FG's challenge is a front-running embodiment of that answer. Whether this growth can be sustained from next fiscal year onwards – it's a story worth watching closely.