Seven Bank,Ltd. Q1 FY2026 earnings call

Overall Financial Results

• Both consolidated and standalone results achieved year-over-year revenue growth, with lower profit, aligned with the full-year guidance of increased revenue and reduced profit from strategic investments. Both revenue and profit came in slightly above internal quarterly plans. Consolidated ordinary revenue hit 53.3 billion yen, up 3.6% (+1.9 billion yen) year-over-year, a new all-time high. Consolidated ordinary profit hit 6.6 billion yen, down 7% (-0.6 billion yen) year-over-year, as elevated investment costs have not yet delivered full profit gains. Standalone Seven Bank ordinary revenue was 35.2 billion yen (+6.6% YoY, +2.15 billion yen), with ordinary profit of 6.5 billion yen (-12.1% YoY, -0.8 billion yen), impacted by higher depreciation and increased marketing costs for credit cards.

Operational New Initiatives

• Domestic ATM: Planned to launch paperless ATM direct debit registration service in FY2025. Basic agreements have been reached with large partner firms, targeting the 160 million annual paper-based direct debit registration market. Management expects meaningful revenue contribution if adoption progresses as planned.
• Domestic Retail: Launched a promotional 0.711% interest rate campaign for 1-year time deposits starting in July 2025 to boost deposit growth. The campaign delivered a tens of billions of yen increase in time deposits through end-July, but management notes it will not be sufficient alone to hit full-year deposit targets, and additional promotional measures are under consideration.
• Strategy Focus: Management identifies improving profit margin as a core corporate priority, as the benefits of ongoing strategic investments have not yet been fully reflected in financial results. The firm is currently executing multiple initiatives to drive margin improvement over time.

1. Domestic ATM Business: Total transaction volume reached 278 million transactions, up 10 million from the prior year. Average monthly transactions per ATM hit 109.3, +1.7 year-over-year. End-of-period total ATM count was 28,082 units, a net increase of 478 units year-over-year (152 units within Seven & I Group, 326 units outside the Group, with 4,467 total off-group units growing steadily). Revenue contribution from higher transaction volumes offset a continued decline in average ATM fee per transaction, which fell to 105.8 yen and remains on a downward trend.
2. Domestic Retail Business: As of end-June, individual deposit accounts reached 3.43 million (up 300,000 year-over-year), with total deposit balances of 611.2 billion yen (up 4 billion yen year-over-year). Personal loan balance hit 66 billion yen, up 18 billion yen year-over-year. Seven Bank post-paid service grew 1.51 million transactions (23.6 billion yen transaction volume) year-over-year, running well ahead of full-year plans. Seven Card Services: credit card membership stood at 3.12 million, shopping transaction volume at 193.3 billion yen, and financial product balances at 45.5 billion yen, all tracking in line with full-year plans. Nanaco e-money has 83.68 million members with 381.9 billion yen transaction volume, though active members are declining due to competition from new payment methods.
3. Overseas Business: Total combined ATM transactions across four markets reached 134 million, up ~12 million year-over-year. By market:

• U.S.: Revenue declined (driven by prior unprofitable store rationalization) but profitability improved; ATM count bottomed out and rose to 8,603 units by end-June, with average transactions stabilizing at 47.7; deployment to Speedway locations reached over 200 units by end-Q1.
• Indonesia: Revenue grew (remaining on an expansion trajectory) and profitability declined, but the business remains solidly profitable; ATM count fell to 8,933 units as the company prioritizes scrapping unprofitable locations to improve average utilization, which fell to 47.6. The company will resume growth from Q3 2025 after completing this restructuring.
• Philippines: Revenue grew and profitability declined, but the business remains solidly profitable; ATM count grew steadily to 3,731 units, though average transactions fell to 193.4, partially due to seasonal Q4 effects but also showing underlying weakening growth; the company is evaluating options to boost usage, with 100 new units deployed to local supermarket chain Alfamart.
• Malaysia: Deployment expanded from 56 units to ~100 units by end-June, with average initial utilization reaching 222.6 transactions, a strong start.

• No changes to the previously published full-year FY2026 consolidated guidance: 216 billion yen ordinary revenue, 24.5 billion yen ordinary profit, and 16 billion yen net income. Management remains committed to achieving these targets.
• Domestic ATM full-year end-of-period total count is projected to exceed 28,600 units, and current expansion is on track to meet this target.
• Domestic retail full-year targets: 3.61 million total individual accounts, 650 billion yen total deposit balances, 80 billion yen personal loan balance, 5.57 million post-paid transactions (85.1 billion yen transaction volume), 3.2 million credit card members, 814.7 billion yen annual credit card shopping volume, and over 4.6 billion yen credit card financial product balances. All major metrics are currently tracking in line with or ahead of these full-year targets, with the exception of deposit balances which are slightly below plan.

• Domestic ATM: Average fee per transaction has continued its downward trend, with no halt to the decline observed in Q1, putting pressure on segment margins despite growing transaction volumes.
• Domestic retail: Intense deposit rate competition from other Japanese banks has slowed deposit balance growth, which is currently below management's full-year projection.
• Domestic e-money: Active nanaco e-money members are on a declining trajectory due to competition from newer alternative payment methods, pressuring segment performance.
• Overseas business: The Southeast Asian markets that previously drove overall overseas growth are currently showing weaker-than-expected transaction growth. In Indonesia, average transactions per ATM have continued a downward trend, requiring costly restructuring of the ATM network. In the Philippines, average transaction growth has stalled even as the ATM network expands, requiring new strategies to drive usage.
• Overall: Ongoing strategic investments have pushed up costs, and profit improvements from these investments have not yet materialized, leaving current ordinary profit at only 60-70% of the prior all-time high level.

Q: What is the planned handling of the 194 million treasury shares acquired from the large majority shareholder on June 20? / A: The provided transcript cuts off this exchange before a full response is given. The question only addresses planned capital policy for the newly acquired treasury stake, with no answer published in the available transcript.

Q: What is the outlook for the domestic ATM business, particularly regarding price increase negotiations for ATM fee per transaction? / A: Management confirmed that the downward trend in ATM unit fees has not reversed, and the company is actively negotiating fee increases with partner financial institutions to halt the decline. No updated timeline for successful negotiations was provided, but the company continues to prioritize this initiative to improve segment margins.

Q: What is the current progress toward full-year consolidated profit targets, and is a full-year update needed? / A: Q1 profit progress is in line with the original full-year profit guidance profile, given that the company planned for reduced full-year profit due to increased investment costs. No changes to the full-year profit target are required at this stage, as current quarterly progress matches management's planned trajectory.

Q: What is the strategic direction for the medium-term business plan, particularly around growth priorities? / A: Management confirmed that improving profit margin remains the top medium-term priority, as current elevated investment costs have not yet delivered full profit returns. The company will continue expanding high-growth segments including retail lending, post-paid services, and overseas ATM networks while restructuring underperforming assets to drive overall margin improvement over the medium term.