Kyoto Bank, Two Years After Joining the FG Group: Upward Revision of Earnings Forecast Thanks to Nintendo Share Sale – How Far Has It Come from Being a ‘Lending-Only’ Bank?
The business model of regional banks has undergone a dramatic transformation in recent years. The old way of simply 'taking deposits and making loans' no longer cuts it. And competing purely on interest rates is a race to the bottom. In this context, the upward revision of earnings forecasts for the year ending March 2026, announced in March by Kyoto Financial Group (Kyoto FG) – which has Kyoto Bank at its core – has been generating plenty of buzz among market watchers.
Evolving towards a more profitable structure: The impact of selling Nintendo shares
What makes this so impressive? It’s evidence that a profit model beyond just interest income is now firmly in place. The standout factor is the booking of roughly ¥160 billion in gains from share sales, centred on a ¥75.1 billion gain from the sale of Nintendo shares held by its subsidiary, Kyoto Bank. As a result, the group expects to post a net profit attributable to parent company shareholders of ¥95 billion – far exceeding the earlier forecast of ¥45 billion.
This isn’t just a short-term move to 'realise latent gains'. It also marks the moment when the relationship banking built up over many years has paid off in the form of a capital strategy. The group now expects ROE to exceed 8% for fiscal 2025. That figure is a significant milestone for a regional bank, signalling a clear step up in management efficiency.
Moving beyond 'lending-only': 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) declared that the bank would transform into a comprehensive solutions provider, saying, 'If we rely solely on deposit and lending business, our management will become unsustainable in the future.' Two years on, those words haven't remained empty promises.
Doi’s strategy – 'no expansion, no growth' – is clearly reflected in the branch network as well.
- Kyoto Prefecture: 111 branches. An intricately woven network deeply rooted in the community, covering areas like 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: Branches in Kusatsu and Yamatokoriyama, located with commercial integration in mind.
- Head Office and Nagaoka Branch: Solidifying its traditional base in Kyoto city while also covering growth areas in southern Kyoto, such as Nagaokakyo and Muko.
While maintaining these physical touchpoints, the bank is simultaneously pushing ahead with a shift towards 'data-driven management'. In January 2026, Munenobu Hanaki, who heads the bank’s data-driven promotion office, spoke at a seminar, demonstrating his team’s approach: 'We are advancing a cross-organisational promotion structure and human resource development at the same time,' rather than just introducing new tools. There’s no doubt that loan screening and business support based on hard data – not just gut instinct or experience – are helping to improve profit margins.
How DX is changing the 'face of the bank'
What’s even more interesting is the speed of recent partnerships with external companies. Just the other day, the group signed a business alliance 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' to automate accounting processes and boost productivity for client companies.
In addition, the group is also teaming up with TIS. From May 2026, it plans to launch 'DX Connect Gate' in the Kansai area, a service that digitises and completes invoice payments. What emerges from these moves is that Kyoto FG is not simply 'lending and done'. Instead, it is building a structure that delves deep into the digitalisation of corporate management and generates recurring revenue (ongoing service income).
The stock market’s valuation is also benefiting. As of March 2026, the group’s PER (price-to-earnings ratio) stood at 24.4x – a significant premium over the regional bank industry average of 14.3x. This is a clear sign that the market has begun to price in the future growth trajectory of a 'comprehensive solutions provider', rather than just past earnings figures.
A model for the future of regional banking
Of course, challenges remain. Maintaining the branch network (optimising regional bases such as Kyoto Bank’s Settsu and Nagaoka branches) and securing consulting talent are urgent tasks that can’t be postponed. Nevertheless, the pace of change radiating from the corner of Shijo-Karasuma, home to Kyoto Bank’s Head Office, looks like a beacon of hope in Japan’s stagnant economy.
What will be demanded of regional banks going forward is the quality of how deeply they embed themselves in their communities and how effectively they solve problems. Kyoto FG’s challenge is embodying that answer ahead of the pack. Will this growth be sustained from next fiscal year onwards? It’s well worth keeping an eye on.