Kyoto Bank, Two Years After Becoming an FG: Upward Revision After Selling Nintendo Shares – How Far Has It Come From Being a 'Loan-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. Competing purely on interest rates is a losing battle. Amidst this shift, the upward revision of earnings forecasts 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 considerable buzz among market players.

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

What makes this so impressive is that it's proof that a profit model beyond just interest income is now firing on all cylinders. The standout factor is the booking of around 160 billion yen in gains from stock sales, centred on a 75.1 billion yen gain from selling Nintendo shares held by its subsidiary, Kyoto Bank. As a result, the group expects a net profit attributable to parent company shareholders of 95 billion yen, far exceeding its earlier forecast of 45 billion yen.

This isn't just a short-term story of 'realising latent gains.' It also marks the moment when the relationship banking built up over many years has paid off in the form of capital strategy. Going forward, ROE for fiscal 2025 is expected to exceed 8%. For a regional bank, this figure is a major milestone, indicating that management efficiency has moved up a notch.

Moving Beyond 'Loan-Only': The Results of Two Years as an FG

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 President of the FG) declared a transformation into a comprehensive solutions provider, saying, 'If we rely only on the deposit and lending business, our management will become unsustainable in the future.' Two years on, those words have not remained a mere pipe dream.

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

• Within Kyoto Prefecture: 111 branches. An intricate, deeply-rooted local presence, including areas like Rakusai, Fushimi, and Muko Town.
• Osaka and Hyogo Prefectures: 31 branches + 8 branches. Strengthening presence in the Hanshin region, including Settsu Branch, Kawanishi Branch, and Amagasaki.
• Shiga & Nara: Strategic locations considering the integrated commercial sphere, such as Kusatsu and Yamatokoriyama.
• Head Office & Nagaoka Branch: Solidifying the traditional stronghold in Kyoto city while also covering growth areas in southern Kyoto like Nagaokakyo and Muko Town.

While maintaining these real-world touchpoints, the bank is simultaneously pushing forward with its transformation into a 'data-driven management' entity. In January 2026, Munenobu Hanaki, the bank's Data-Driven Promotion Office Manager, took the stage at a seminar, showcasing their approach: 'We are promoting a cross-organisational structure and human resource development simultaneously,' not just introducing tools. There's no doubt that loan screening and management support based on data, rather than relying solely on on-the-ground intuition and rules of thumb, are boosting profitability.

The 'Face of Banking' Changing with DX

What's even more interesting is the speed of recent tie-ups with external companies. Just the other day, the bank formed a business alliance with LayerX, a company attracting attention for its 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 the productivity of client companies by automating accounting tasks.

In addition, they have also partnered with TIS. From May 2026, they plan 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 system to dive deep into the digitalisation of corporate management and generate recurring revenue.

The stock market's valuation is also benefiting. As of March 2026, its PER (Price-to-Earnings Ratio) stands at 24.4x, commanding a premium valuation significantly higher than the regional banking industry average of 14.3x. This is likely evidence that the market has started pricing in the future growth trajectory of Kyoto FG as a 'comprehensive solutions provider', rather than just looking at past financial results.

An Embodiment of the Future Regional Bank

Of course, challenges remain. Maintaining the branch network (optimising area bases like Kyoto Bank's Settsu Branch and Nagaoka Branch) and securing consulting talent are urgent issues. Nevertheless, the pace of transformation emanating from a corner of Shijo Karasuma, where the Kyoto Bank Head Office is located, shines like a beacon of hope in Japan's stagnant economy.

What future regional banks need is the quality of 'how deeply you can embed yourself in the community and how many problems you can solve.' Kyoto FG's challenge is at the forefront of providing that answer. Will this growth be sustained from next fiscal year onwards? It's definitely a story to watch.