Kyoto Bank, Two Years After Holding Company Shift: Earnings Upgraded on Nintendo Stock Sale – Moving Beyond a “Lending-Only” Model

The business model for regional banks has changed dramatically in recent years. The old approach of simply "taking deposits and making loans" no longer cuts it, and competing solely on interest rates is a race to the bottom. Amid this environment, Kyoto Financial Group (Kyoto FG), which counts Kyoto Bank as its core, has drawn attention from market watchers with an upward revision to its earnings forecast for the fiscal year ending March 2026, announced this March.

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

What makes this so impressive? It’s proof that a profit model not reliant solely on interest income is starting to work effectively. The most eye-catching factor is a recorded gain of roughly ¥160 billion from stock sales, centered on ¥75.1 billion from the sale of Nintendo shares held by its subsidiary, Kyoto Bank. As a result, the bank now expects ¥95 billion in profit attributable to owners of the parent – far surpassing its earlier forecast of ¥45 billion.

This isn’t just a short-term move to "realize unrealized gains." It’s also a moment when the results of relationship banking built over many years have come to fruition in the form of capital strategy. The outlook now calls for ROE above 8% for fiscal 2025. That’s a major milestone for any regional bank, signaling a step up in management efficiency.

Breaking Free from "Lending-Only": Results Two Years After the Holding Company Shift

Rewind to October 2023. Kyoto Bank transitioned to a standalone holding company structure, forming Kyoto Financial Group. At the time, President Nobuhiro Doi (now Group CEO) said, "Relying solely on the deposit and loan business won’t sustain us in the future," and declared a transformation into a comprehensive solutions company. Two years later, those words have not been just empty promises.

Doi’s strategy of "no expansion, no growth" is clearly visible in the branch network as well.

• Kyoto Prefecture: 111 branches. A tightly woven local presence spanning areas like Rakusai, Fushimi, and Muko Town.
• Osaka and Hyogo Prefectures: 31 and 8 branches, respectively. A growing presence in the Hanshin region, including branches in Settsu, Kawanishi, and Amagasaki.
• Shiga and Nara: Locations in Kusatsu and Yamato-Koriyama, positioned to capture integrated trading zones.
• Head Office and Nagaoka Branch: While reinforcing the traditional base in Kyoto City, these also cover growing areas in southern Kyoto, such as Nagaokakyo and Muko Town.

While maintaining these physical touchpoints, the bank is simultaneously pushing forward with a shift to "data-driven management." In January 2026, Munenobu Hanaki, the bank’s data-driven promotion office head, spoke at a seminar, revealing that the bank is "advancing organization-wide promotion and talent development at the same time," not just introducing tools. Relying less on intuition and rule of thumb, data-based loan screening and business support are clearly helping improve profit margins.

How DX Is Changing the "Face of the Bank"

Even more interesting is the speed of recent partnerships with outside companies. Just the other day, the bank tied up with LayerX, a company drawing attention for back-office DX. Starting in April 2026, it will begin offering "Kyoto FG with Bakuraku" using the AI cloud service "Bakuraku." This initiative aims to boost client firms’ productivity by automating accounting tasks.

In addition, Kyoto FG is also working with TIS. From May 2026, it plans to roll out "DX Connect Gate," a digital payment completion service for invoices, in the Kansai area. What these moves reveal is that Kyoto FG is moving beyond "loan and done" toward a model that dives deep into corporate digital transformation and generates recurring revenue from ongoing services.

The stock market’s valuation reflects this momentum. As of March 2026, its PER stood at 24.4x, a significant premium over the regional bank industry average of 14.3x. That’s a clear sign that the market is no longer looking at past earnings, but beginning to price in 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 (optimizing area hubs like Kyoto Bank’s Settsu and Nagaoka branches) and securing consulting talent are urgent tasks. Still, the pace of change emanating from the corner of Shijo-Karasuma, home to Kyoto Bank’s Head Office, looks like a ray of hope in Japan’s stagnant economy.

What regional banks need going forward is the quality of "how deeply you can embed yourself in the community and how many problems you can solve." Kyoto FG’s push is leading the way in providing that answer. Whether this growth is sustainable in the coming fiscal years – it’s a story worth watching.