Seven Bank,Ltd. Q2 FY2026 earnings call

Core Domestic ATM Business Enhancement

• The +Connect value-added ATM service has moved from launch to growth/expansion phase, with over 30 companies already adopting the existing "ATM Counter" and "ATM Notification" services, with growing transaction volumes.
• A new "ATM Direct Debit Registration" service launched in October 2025 to digitize the currently paper-heavy direct debit registration process, with initial rollout to partners including JCB, Mizuho Factor and Mitsubishi UFJ Factor, targeting top-line revenue impact starting next fiscal year. +Connect targets a total addressable market of ~4 trillion yen, with new services like direct debit registration and certificate opening up additional new market opportunities.

Overseas Business Diversification

• Management is pursuing a "finance × retail" service provider model in overseas markets, following the Japanese diversification blueprint. The firm is prioritizing early partnerships with wallet services to capture first-mover advantage amid the global shift of salary/receipt payments from bank accounts to digital wallets, e.g. GrabPay in the Philippines, to advance financial inclusion and grow transaction volumes. Additional retail-aligned services including in-ATM advertising and store sales deposit services will also be expanded.

Retail Deposit and Loan Growth

• Amid intensifying deposit competition driven by rising rates, the firm combines interest rate campaigns with Seven Bank-specific reward programs leveraging physical retail store access to grow deposits, to fund the cash required for ATM expansion including FamilyMart deployments. The firm aims to finalize a deposit growth strategy direction in the second half.
• Personal card loan growth is solid, driven by improved UI/UX and targeted advertising leveraging purchase data from 7-Eleven and the firm's app; the full-year 80 billion yen ending balance target is on track to be met.

Preparing for Future Growth:

• The firm is executing multiple initiatives to grow Seven Card membership ahead of the launch of a new credit card in FY2026, including Apple Pay integration and targeted marketing, to hit the aggressive second half membership target.
• Seven Bank has signed a capital and business alliance with Itochu Corporation, to combine Seven Bank's ATM and retail financial expertise with Itochu's business base, initially targeting ATM expansion into FamilyMart stores starting next fiscal year, with future overseas ATM expansion also under consideration. The alliance is also exploring opportunities to combine with Itochu group entities like Pocket Card for broader integrated financial services beyond ATMs, targeting synergies greater than 1+1, with details to be released once finalized.
• The firm will roll out a new passbook-free ATM outsourcing model for Saikyo Bank starting spring 2026, where Saikyo Bank leverages its existing in-branch passbook issuance machines to resolve the historic lack of passbook entry functionality for outsourced ATMs, opening a new market for ATM outsourcing.
• The firm is investing in workforce development to enable self-driven digital transformation, including upskilling for data utilization and no-code development to empower existing operations staff to drive incremental innovation.

1. Consolidated Results: Second quarter (first half) consolidated ordinary revenue is 107.5 billion yen, up 1.2% year-over-year (the highest first half revenue on record). Consolidated ordinary profit is 14.8 billion yen, down 11.3% year-over-year. 2. Seven Bank Standalone: Standalone ordinary revenue is 70.9 billion yen, up 2.9% year-over-year, driven by growth in domestic retail financial services and solid ATM business performance. Standalone ordinary profit is 13.9 billion yen, down 18.7% year-over-year due to higher depreciation from ATM replacements and rising costs such as guarantee fees for growing financial services. 3. Domestic ATM Business: First half total transaction volume is 560 million transactions, up 18 million year-over-year, 1.5 transactions above plan at 109.2 average transactions per ATM. ATM transaction fee per unit is 105.2 yen, in line with plan. End-of-period total ATMs are 28,236 units, up 534 year-over-year, slightly below plan due to slower 7-Eleven store expansion; 505 co-operated ATMs with financial institutions as of the half. 4. Domestic Retail Business: Personal deposit accounts reach 3.443 million accounts (+268,000 YoY) with total deposits of 620.7 billion yen (+14.2 billion YoY), slightly below plan. Personal loan ending balance is 70.3 billion yen, slightly above the plan pace toward the full-year target of 80 billion yen. Postpaid service processing volume is 3.12 million transactions (+720,000 YoY) with processing value of 49.4 billion yen (+14.1 billion YoY), reaching 115% of plan for transactions and 120% for processing value. Seven Card Service: Credit card member count is 3.08 million (-320,000 YoY), but monthly applications have exceeded plan for four consecutive months since June 2025, with issuance also above plan, on track to return to net positive member growth if second half plan is met. 5. Overseas ATM Business: First half total transaction volume is 261.8 million transactions (+8.7 million YoY). US: Average transactions per ATM rose to 48.6, ending units increased to 8,603 (up from prior period), the business is very strong, adding 2.7 billion yen in profit year-over-year; Speedway ATM deployment is on track to reach over 1,200 units by end-December 2025, with full-year ending target of 9,563 units. Indonesia: Average transactions per ATM declined to 46.1, total units decreased as scrap-and-build is underway, full-year ending unit target of 9,383 will likely be missed as the firm prioritizes profitable growth, with a focus on growing per-unit usage via cardless transaction additions. Philippines: Units hit 3,731, on track to exceed 4,000 in the second half, but average transactions (178.1) fell due to fee changes at a major partner bank. Malaysia: The newly launched business hit 97 units out of the 100 unit full-year plan, with 208 average transactions per ATM, performing solidly.

• Full-year (FY2026 March term) guidance is maintained at the originally announced levels: consolidated ordinary revenue of 216 billion yen, consolidated ordinary profit of 24.5 billion yen, net income attributable to parent shareholders of 16 billion yen. The annual dividend forecast is maintained at 11 yen per share.
• Domestic ATM: Full-year ending ATM count is expected to come in slightly below the 28,627 unit plan at ~28,500 units, within expected ranges. Total and average transaction volume are expected to slightly exceed plan based on current momentum.
• Domestic Retail: Personal deposit accounts and total deposits are expected to come in slightly below the full-year plan of 3.616 million accounts and 650.7 billion yen. Personal loan is on track to meet the full-year 80 billion yen ending balance target. Postpaid service is expected to exceed the full-year plan, with full-year processing volume expected to exceed 100 billion yen.
• Overseas: US ATM business is expected to result in full-year profit slightly above plan, with Speedway deployment on track to hit the 9,563 unit full-year ending target. Indonesia's full-year ending ATM count is expected to come in below plan as the firm prioritizes profitable expansion. Philippines is on track to exceed 4,000 ending units, with efforts underway to return average transaction growth to positive territory in the second half.

• Intensifying competition for retail deposits has pushed up industry funding costs, creating pressure to meet deposit growth targets for ATM network cash requirements.
• Indonesia's average ATM transaction volume has been declining, and cost-focused scrap-and-build efforts will likely result in missed full-year unit count targets; the impact of corrective actions to grow per-unit usage is not expected to appear in near-term results.
• Philippines average transaction volume has declined due to fee changes at a major partner bank, requiring new initiatives to reverse the trend.
• Seven Card Service has required continued investment to grow membership, with profitability still limited by the need for scale. The aggressive second half membership growth target carries execution risk.
• Postpaid service has grown faster than plan in terms of volume, but profits remain limited due to required bad debt provisioning, with profitability improvement still a key outstanding challenge.
• The FamilyMart ATM rollout is expected to be cost-led in the short term, with near-term potential for slight negative profit impact from upfront investment. Cannibalization of existing 7-Eleven ATM transactions is possible, though management expects overall network transaction growth to offset this.
• Uncertainty remains around customer adoption and growth of the +Connect new ATM services, as well as the pace of customer awareness growth for FamilyMart ATMs, which impacts utilization and profitability.

Q: What is the planned rollout pace for ATMs at FamilyMart, and what is the near-term profit impact of upfront investment? / A: Management plans to deploy ~1,000 units in the first year starting next spring, followed by 5,000-6,000 units per year after that, with full rollout completed over 4-5 years. Depreciation is planned over 5 years, and the business model is structured to deliver incremental profit contribution starting from the first units deployed. The firm will start with 1,000 units, build up operating track record, and adjust rollout pace over time to control near-term cost impact.

Q: Could Itochu alliance collaboration expand beyond ATMs into other finance areas, including with Pocket Card? What is the target utilization per FamilyMart ATM, and is cannibalization of 7-Eleven ATMs a concern? / A: Management is discussing integrated collaboration that includes credit cards, QR payments and bank accounts in addition to ATMs, including potential equity partnerships, but only will move forward with combinations that deliver synergies greater than 1+1, with details to be announced when finalized. Current average utilization is ~45 transactions per day, with the firm modeling 50-65 transactions as the level for sustainable profitability, with upside potential from adding +Connect transactions long term. Minor cannibalization is possible, but management prioritizes network expansion to grow total transactions, and is working on new service initiatives to offset any small overlap impact.

Q: Beyond adding Speedway ATMs, what is driving the strong performance of the US ATM business? / A: The main driver is the surcharge-free network model, where banks pay a fixed fee to let their customers use all ATMs in the network for no additional charge. While this lowers per-transaction margin, it drives a large increase in transaction volume, which is the main source of the top-line growth. As Seven Bank has built market position, improved negotiation outcomes for pricing have further improved profit margins, so higher transaction volumes directly translate to higher profitability, which the firm will continue to leverage alongside 7-Eleven US store expansion.

Q: What is the outlook for US business profit in the second half, and when will Speedway deployment be completed? / A: The strong performance momentum from the first half is expected to continue largely unchanged in the second half, so full-year profit will likely come in slightly above the original plan. Deployment will exceed 1,200 units by end-December 2025, and will continue at the same pace in the next fiscal year, with full deployment expected to be completed by the end of next fiscal year, or a few months after, which is in line with expectations.

Q: What is the priority of deposit acquisition relative to other funding sources, given competition and recent corporate bond issuance? / A: Deposit remains the core low-cost funding source for Seven Bank, and the firm will continue to actively pursue deposit growth as the primary funding channel. However, given intense industry competition for deposits, corporate bonds have been obtained at attractive terms, so the firm will build a stable funding base via corporate bonds while continuing to actively pursue deposit growth.

Q: What does the 50-65 transactions per day "profitable" target for FamilyMart ATMs mean, specifically is that above break-even? / A: The 50-65 target is above the break-even point, and hits the internal required return target for ongoing operations. Early utilization forecasts are deliberately conservative because customer awareness of the new ATMs is still building. After the first 1,000 units are deployed, the firm will have clearer data on the customer adoption growth curve, and will adjust targets accordingly as the rollout expands.