Two years after becoming a FG, Kyoto Bank raises earnings forecast on Nintendo share sale – how far has it come in moving beyond 'just lending'?

The business model for regional banks has changed dramatically in recent years. Gone are the days when simply 'taking deposits and making loans' was enough – that approach no longer cuts it. And there's no end to competing purely on interest rates. Against this backdrop, an upward revision to earnings forecasts for the year ending March 2026, announced in March by Kyoto Financial Group (Kyoto FG), which counts Kyoto Bank as its core subsidiary, is generating plenty of buzz among market watchers.

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

So what's so impressive about this? It's evidence that a profit model beyond just interest income is gaining real traction. The standout factor is the booking of around ¥160 billion in gains from share sales, centred on a ¥75.1 billion gain from selling Nintendo shares held by subsidiary Kyoto Bank. As a result, the group expects net profit attributable to parent company shareholders to reach ¥95 billion – far surpassing the initial forecast of ¥45 billion.

This isn't just a short-term move to 'realise unrealised gains'. It also marks a moment where the relationship banking built up over many years has paid off in the form of a capital strategy. The outlook now is for ROE to exceed 8% in fiscal 2025. That figure represents a major milestone for a regional bank, signalling that management efficiency has stepped up to a new level.

Moving beyond 'just lending': Two years of the FG structure

Rewind to October 2023. That's when Kyoto Bank transitioned to a pure holding company structure, becoming 'Kyoto Financial Group'. At the time, President Nobuhiro Doi (now Group CEO) declared the bank would transform into a comprehensive solutions provider, saying, 'If we just rely on the deposit and lending business, our management won't be sustainable in the future.' Two years on, that pledge hasn't remained a pipe dream.

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

• Kyoto Prefecture: 111 branches. A truly grassroots network covering areas like Rakusai, Fushimi and Muko-machi.
• Osaka and Hyogo Prefectures: 31 + 8 branches. Strengthening presence in the Hanshin region, including the Setsu, Kawanishi and Amagasaki branches.
• Shiga and Nara: Branches in Kusatsu and Yamatokoriyama, strategically placed to reflect integrated commercial zones.
• Head Office and Nagaoka Branch: Reinforcing the traditional Kyoto City stronghold while also covering growth areas in southern Kyoto, such as Nagaokakyo and Muko-machi.

While maintaining these physical touchpoints, the group is simultaneously pushing ahead with a shift toward 'data-driven management'. In January 2026, Munenobu Hanaki, who leads the bank's data-driven promotion office, spoke at a seminar and showcased their approach – not just introducing tools, but 'building a cross-organisational promotion structure while developing people at the same time'. There's little doubt that loan screening and business support based on numbers – rather than just gut feel and experience – are helping boost profit margins.

How DX is changing the 'face of banking'

What's even more interesting is how quickly the group has been forming partnerships with external companies. Just recently, it struck a business tie-up with LayerX, a company gaining attention for back-office DX. From April 2026, the group will launch 'Kyoto FG with Bakuraku', using the AI cloud service 'Bakuraku' to automate accounting tasks and boost productivity for client companies.

In addition, the group is also working with TIS. From May 2026, it plans to roll out 'DX Connect Gate', a digital solution for completing invoice payments, in the Kansai region. What emerges from these moves is that Kyoto FG isn't just 'making a loan and calling it a day' – it's building a structure that embeds deeply into the digital side of corporate management and generates recurring revenue from ongoing services.

The stock market's assessment is also riding this wave. As of March 2026, the company's PER (price-to-earnings ratio) stands at 24.4x – a significant premium over the regional banking industry average of 14.3x. This is likely evidence that the market has begun pricing in not just past earnings figures, but the future growth trajectory of a 'comprehensive solutions provider'.

A model for the future of regional banking

Of course, challenges remain. Maintaining the branch network (optimising regional bases like the Kyoto Bank Setsu and Nagaoka branches) and securing consulting talent are urgent issues. Still, the pace of change emanating from the corner of Kyoto Bank's Head Office at Shijo-Karasuma looks 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 can embed themselves in local communities and how effectively they can solve problems. Kyoto FG's challenge is to be at the forefront of showing what that answer looks like. Can this growth be sustained from next fiscal year onwards? It's well worth keeping an eye on.