The San-in Godo Bank,Ltd. Q3 FY2026 earnings call

• Corporate Mission and Strategy Direction
  • The bank's slogan is "Infinite Possibilities for Growth", launched when the new president took office in April 2025. Its mission is to act as the leading regional bank in Sanin (a region facing advanced demographic challenges), provide cutting-edge financial services, and contribute to solving local regional challenges.
  • The bank maintains an organizational culture of resilient talent and continuous reform DNA, aiming to build a bank trusted by customers that pursues continuous growth with all stakeholders.
• Network Footprint
  • Headquartered in Matsue, Shimane Prefecture, with 84 branches in the Sanin area and 24 branches in Hiroshima, Okayama, Hyogo, Osaka, and Tokyo. The bank has designated Sanyo and Kansai as strategic growth areas and has increased sales staffing there in recent years.
• Core Growth Initiatives
  1. Continuous structural reform: Driven efficiency gains and cost reduction to reallocate staff to strategic areas. Key actions include branch network restructuring, and the 2020 integration of bank and securities business lines via an alliance with Nomura Securities, an industry-first reform.
  2. All-Employee Consulting Project: Unlike the common industry model that centers consulting at headquarters specialist teams, the bank has built a system where frontline corporate sales staff gain consulting skills and deliver client solutions directly. All employees identify client challenges, provide partner-style support, and earn fee income for the bank from these services, aligning bank growth with client regional growth.
  3. Human capital management: The bank prioritizes reskilling and specialist talent development to maximize employee skills, as talent is its core asset.
• Key Historical Growth Milestones
  • Founded in 1941 via the merger of Matsue Bank (Shimane) and Yonago Bank (Tottori). Expanded outside Sanin via the 1991 merger with Fuso Bank (a second-tier regional bank in Tottori with existing branches in Hyogo and Okayama), creating the base for its current broad network. Only began active growth expansion into the Kansai region in the 2010s, built on relationship banking and regional contribution.

The transcript does not provide detailed segmented financial performance data. The provided historical balance data is for total loans and total deposits only: average loan balance exceeded 2 trillion yen in FY1996 March, broke 3 trillion yen in FY2019 March (23 years later), broke 4 trillion yen 4 years after that, and broke 5 trillion yen only 2 years and 1 month after that. Total employee count decreased from 3,250 in FY1995 March to 1,771 as of March 31, 2025. Average deposit balance shows the same accelerating growth trend as loans, breaking 4 trillion yen, 5 trillion yen, and 6 trillion yen milestones in sequence with faster growth in recent years. No revenue contribution percentages by product segment are provided.

• Growth acceleration: The bank has targeted ROE 8% as a key goal, originally publicly planned for achievement within 10 years, but management now believes this timeline is too slow and aims to achieve the target much earlier given the current high interest rate environment and rising cost of capital.
• Regional strategic positioning: Sanin will remain the core deposit procurement base, Sanyo and Kansai will be actively developed for both deposit procurement and lending, and Tokyo will act as a liquidity adjustment valve. The bank will continue focusing on building sticky core retail deposits rather than chasing hot money.
• Reskilling and human capital: The bank will continue pursuing ongoing capability development for reskilled employees, with no current end to this initiative.
• Regional development initiatives: The bank is actively expanding local initiatives including agricultural support, inbound tourism promotion, open innovation with Tokyo startups, and leading decarbonization projects in Sanin via its energy subsidiary.
• Digital banking: DanDanBANK, the bank's digital second brand launched in October 2024 to prevent deposit outflow from Sanin via inheritance, will continue to be prioritized for development over the next two years to build its deposit base.

• Balance sheet sensitivity: A higher proportion of the bank's loans are currently fixed rate compared to peers, meaning loan yields do not fully track rising market and policy rates quickly, which creates pressure on net interest income. The bank identifies shifting the fixed/floating mix as a key priority to improve interest sensitivity.
• Securities valuation losses: Adjusted core capital ratio falls to 9.3% when accounting for unrealized valuation losses on securities, down from 11.5%. The bank plans to gradually reduce exposure to securities over the long term to 2030 rather than realize losses in a single lump sum, and has already slowed new securities investment. The bank notes this does not currently restrict growth of core risk assets.
• Industry competition: Local interest rate competition for deposits has intensified in the transition to a high interest rate environment. The bank aims to avoid pure price competition and focus on building sticky core deposits instead.
• Demographic and regional headwinds: The bank's core Sanin market faces severe population decline, which is a long-term structural headwind for both loan demand and deposit growth.
• Interest rate risk: A 1% policy rate increase would create negative carry on existing Japanese government bonds, which management recognizes as a key risk to monitor.

Q: What are the key success factors for the bank's reskilling program, and what remaining challenges exist? / A: The reskilling program centers on shifting female staff previously in back-office and teller roles to frontline profit-center roles, building on an initial reskilling effort 12 years ago that created the foundation for the current program. Management explicitly communicated the need for the shift and the potential opportunities for staff via store visits and interviews, and streamlined back-office work to be handled by non-regular staff. Staff motivation to adapt has been a core driver of success. The key remaining challenge is continuing to upgrade the capabilities of reskilled staff, so talent development remains an ongoing priority.

Q: What is the bank's strategy for deposit growth in the Sanyo and Kansai regions? / A: The bank will leverage its 20-year base of corporate relationships in the region to approach executive management and capture their personal deposits, and will pursue comprehensive relationship banking including corporate deposits to become the main bank for local corporations. Rather than relying purely on digital marketing, the bank uses relationship managers and branch managers to conduct in-person outreach to promote the DanDanBANK digital brand, gradually building deposit balances with this targeted, high-effort approach. The bank plans to continue prioritizing this strategy over the next two years to achieve market penetration.

Q: What is the bank's stance on regional financial institution consolidation? / A: Management is closely watching the recent announced consolidation between Gunma Bank and Dai-Ichi Hokuriku Financial Group, and recognizes that the bank cannot be entirely disconnected from industry consolidation trends. Currently, there are no specific consolidation plans, and the bank's priority is to strengthen its own organic growth and capability to retain strategic optionality. If consolidation becomes necessary in the future, the bank aims to maintain initiative to protect the interests of its home region.

Q: How will the bank respond to rising policy rates and deposit rate competition? / A: The bank does not expect the deposit beta (rate pass-through) to change dramatically, but will monitor market conditions and competitor actions closely. DanDanBANK currently offers 0.85% on 1-year time deposits, rising to a maximum 1.2% for customers with additional relationship ties (payroll/pension), so the bank avoids pure price competition for short-term hot money and remains focused on building long-term sticky core deposits. The bank is actively shifting its loan mix from fixed to floating/rate-sensitive products to improve net interest margin sensitivity to rising rates.