Kyoto Bank, two years after becoming part of FG: Upward revision of earnings from 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. Gone are the days when simply "taking deposits and making loans" was enough. Competing solely on interest rates is a losing game. Amid this backdrop, 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 buzz among market players.
Evolution towards a profitable structure: The impact of selling Nintendo shares
What makes this so impressive is that it signals the start of a solid profit engine beyond just interest income. The standout factor is the booking of approximately ¥160 billion in gains from share sales, centred on ¥75.1 billion from selling Nintendo shares held by its subsidiary, Kyoto Bank. As a result, it now expects profit attributable to parent company shareholders of ¥95 billion – far surpassing the previous forecast of ¥45 billion.
This move isn't just a short-term "realisation of latent gains". It also marks the moment when the fruits of relationship banking, built up over many years, have materialised in the form of capital strategy. With this, ROE for FY2025 is expected to exceed 8%. That figure is a major milestone for a regional bank, indicating that management efficiency has stepped up a level.
Breaking away from "lending-only": Two years of FG transformation
Rewind to October 2023. Kyoto Bank transitioned to a standalone holding company structure, "Kyoto Financial Group". At the time, then-President Nobuhiro Doi (now President of FG) declared, "If we rely only on the deposit and lending business, we won't be able to sustain management in the future," and announced a transformation into a comprehensive solutions company. Two years on, those words have not remained a pipe dream.
The strategy envisioned by Doi – "no growth without expansion" – is clearly evident in the branch network.
- Within Kyoto Prefecture: 111 branches. A dense, community-rooted network spanning Rakusai, Fushimi, Muko Town, and more.
- Osaka and Hyogo Prefectures: 31 + 8 branches. Strengthening presence in the Hanshin area, including Settsu Branch, Kawanishi Branch, Amagasaki, etc.
- Shiga and Nara: Branches in Kusatsu, Yamatokoriyama, etc., strategically placed considering the integrated commercial zone.
- Head Office and Nagaoka Branch: Solidifying the traditional base in Kyoto city while covering growth areas in southern Kyoto like Nagaokakyo and Muko Town.
While maintaining these physical touchpoints, the bank is simultaneously pursuing a transformation toward "data-driven management". In January 2026, Munenobu Hanaki (Head of the Data-Driven Promotion Office) took the stage at a seminar, showcasing his skill – not just introducing tools, but "simultaneously advancing a cross-organisational promotion structure and human resource development". There's no doubt that data-based loan screening and management support, rather than relying solely on gut feel and past experience, are driving improvements in profit margins.
The changing "face of banking" through DX
What's even more interesting is the speed of recent partnerships with external companies. Just the other day, they formed a business alliance with LayerX, a company gaining attention for back-office DX. Starting 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.
Additionally, they have teamed up with TIS. From May 2026, they plan to start offering "DX Connect Gate", which digitally completes invoice payments, in the Kansai region. What these moves reveal is that Kyoto FG is moving away from a "loan and done" model, and is instead building a structure that deeply engages in the digitalisation of corporate management and generates recurring revenue.
The stock market's assessment is also riding this tailwind. As of March 2026, its PER (price-to-earnings ratio) stands at 24.4x – a premium valuation far exceeding the regional banking industry average of 14.3x. This is likely evidence that the market has begun pricing in the future growth trajectory of a "comprehensive solutions company", rather than past earnings figures.
An embodiment of the future regional bank
Of course, challenges remain. Maintaining the branch network (optimising area bases like Kyoto Bank's Settsu and Nagaoka branches) and securing consulting talent are urgent issues. Nevertheless, the speed of transformation radiating from the corner of Shijo-Karasuma, where Kyoto Bank's Head Office stands, looks like a beacon of hope in Japan's stagnant economy.
What future regional banks need is the quality of "how deeply they can embed themselves in their communities and how many problems they can solve". Kyoto FG's challenge is embodying that answer ahead of the pack. Will this growth continue beyond the next fiscal year? One to watch.