8410.T

• Domestic ATM Business Updates • Rakuten Bank joined the "Smartphone ATM" service this quarter, meaning nearly all major digital banks are now supported, aligning with the growing trend of cardless, mobile-only banking and securing future growth potential for the ATM business. • The "ATM Counter" service under the +Connect platform won the Minister for Internal Affairs and Communications Award, which recognizes unique, high-potential innovative services. Currently, 24 companies have adopted the ATM Counter service, and partner numbers for the core "ATM Notification" service under +Connect are growing steadily, with strong positive feedback from partner financial institutions and corporates. Management will focus on expanding user awareness and growing transaction volume to build profitable scale in this segment.

• Domestic Retail Business Updates • A winter promotional campaign for 3-month and 1-year term deposits with relatively high interest rates successfully grew term deposit balances sharply through end-December. The key next challenge is to retain these newly deposited funds, and management will work to maintain deposit balances at high levels.

• Credit Card Business Impairment Context • While credit card application volumes continued to increase October through December, performance missed the very high growth targets management set for the period after the first half, leading to the decision to record impairment losses this quarter.

• Full-year 2026 March fiscal year consolidated ordinary revenue guidance is maintained at the initial 216 billion yen. Consolidated ordinary expense guidance is revised down from 191.5 billion yen to 189 billion yen, driven by a 17 billion yen reduction in expected expenses for Seven Card Service (since application and issuance volumes are below plan, related expenses are lower than initially budgeted) plus additional cost cuts from efficiency improvements in the overseas business, for a total 25 billion yen reduction in expenses.
  • Full-year ordinary profit guidance is upward revised to 27 billion yen, after accounting for the lower expense base. This upward revision comes even after recording a 6.3 billion yen special impairment loss on the credit card business in the third quarter plus a 0.5 billion yen regular special loss related to ATM infrastructure.
  • After accounting for the special losses and expected taxes, full-year net profit attributable to parent shareholders is forecast at 11 billion yen, a downward revision from prior guidance due to the impairment charges.
  • An additional special loss related to the credit card business is expected in the fourth quarter, with the amount still under review. The impairment is largely tied to system assets for the new credit card scheduled to launch in summer 2026, which are still under development and have not completed acceptance testing, so the full amount cannot yet be finalized.
  • An additional special loss is also expected in FY2026, with the amount currently under review, currently expected to fall in the 3.5 billion to 4 billion yen range.
  • Full-year annual dividend guidance is maintained at 11 yen per share. Even with the downward revision to net profit, management states the impairment is a temporary, non-cash expense, so the planned dividend will be maintained as originally guided.
  • Management reaffirmed its commitment to stable dividend amounts and maintaining target payout ratios going forward, and will prioritize delivering steady dividends even after the impairment charges.

1. Consolidated: Total ordinary revenue of 162.8 billion yen; ordinary profit of 21.8 billion yen; net profit of 8.7 billion yen, which represents a 41% year-over-year decrease in net profit due to the special loss from the credit card business. 2. Seven Bank Standalone: Ordinary revenue of 107.5 billion yen, ordinary profit of 21.2 billion yen, net profit of 14.6 billion yen. Revenue grew on the back of solid performance from the ATM business and expansion of personal loans, while profit decreased due to higher depreciation from ATM replacement and increased funding costs from rising interest rates. 3. Domestic ATM Business: Cumulative usage through the third quarter was 849 million transactions, up 25 million year-over-year. Average usage per ATM reached 109.9 transactions (111 transactions for the third quarter alone, the first time it hit the 111 level in a single quarter), up more than 1 transaction year-over-year. Cumulative average transaction fee per ATM is 105.5 yen, which has been slightly above management expectations since October. Total ATM units at quarter-end are 28,383, up 535 year-over-year (211 added inside 7-Eleven locations, 324 added outside 7-Eleven, with growth centered outside the group). Third-party entrusted ATMs from other financial institutions now total 508 units across 40 companies, continuing steady growth. 4. Domestic Retail Business: As of end-December, personal accounts total 3,473,000 (up 200,000 year-over-year, slightly behind plan) and deposit balances reached 670.7 billion yen (above plan, driven by a winter time deposit campaign). Personal loan balances hit 74.6 billion yen, up 20 billion yen year-over-year, on track to hit the full-year target of 80 billion yen. Postpaid service cumulative transactions through the third quarter are 4,714,000 (up 1 million year-over-year), with transaction volume of 76.7 billion yen (up over 20 billion yen year-over-year), well above initial plan, on track to hit 100 billion yen full-year transaction volume if current momentum continues. Seven Card Service (credit card business): 3.09 million members, 574.5 billion yen transaction volume, 45.2 billion yen financial product balance, all below year-ago levels, as growth has missed the significantly raised plan targets set after the first half, even though application volumes are still above year-ago levels. Electronic money transaction volume is also below year-ago levels due to declining active members. 5. Overseas ATM Business: Cumulative usage through the third quarter is 390 million transactions, up 9 million year-over-year, but third quarter standalone transactions were 129 million, down from 137 million year-over-year, with sequential declines also seen in the second quarter, driven by weak performance in Indonesia and the Philippines. - United States: Average usage per ATM hit 50.2 transactions in the third quarter, up from a bottom of 47.2 transactions in Q4 FY2024, marking the first time average usage exceeded 50 transactions in some time. Unit count reached 9,567 units by end-December, with ordinary revenue and profit growing steadily. Installation at Speedway locations hit ~1,250 units by end-December, with further growth planned for FY2026. - Indonesia: Average usage per ATM was 44.5 transactions in the third quarter, down slightly from 44.8 in the second quarter, but management expects usage has nearly hit bottom. Unit count reached 9,073 by end-December. Cardless transactions are growing and starting to contribute to higher usage. Management will focus on improving average usage rather than aggressively expanding unit count to return to growth in FY2026. - Philippines: Average usage per ATM fell to 157 transactions from the second quarter, impacted by a major partner moving to charge customer fees. Unit count exceeded 4,000 by end-December. Management is growing new transactions such as e-wallet withdrawals, and targets clear improvement in metrics by the second half of 2026 at the latest. - Malaysia: Business is in early stages, with 98 units by end-December. Usage has grown steadily, meeting 2025 volume targets, so management plans to expand unit count and grow the overall business in FY2026.

• The credit card business continues to miss aggressive growth targets, requiring incremental impairment charges on system assets through FY2026. If the business does not achieve profitability going forward, additional investments may need to be expensed rather than capitalized, leading to further potential losses.
  • The domestic ATM network unit count is slightly below plan due to the slower store opening pace of 7-Eleven, and full-year end unit count is also expected to come in slightly below plan.
  • It is still too early to confirm if the recent stabilization of ATM transaction fee per unit is a lasting trend or just a temporary 3-month fluctuation, so management will need to monitor this closely.
  • Personal account growth is running slightly behind plan, requiring continued efforts to accelerate growth.
  • Southeast Asian (Indonesia and Philippines) ATM usage has seen sequential declines over the past two quarters, creating performance headwinds for the overseas segment.

Q: Regarding the impairment of the credit card business, can we expect no further impairment after next year? Additionally, next year profit levels will be lower than normal, which is expected to keep payout ratios elevated. What is the dividend policy going forward for next year and beyond, to the extent you can share?

A: The amount of special loss for FY2026 is still under review and not finalized, but at present we expect an additional special loss of around 3.5 billion yen to 4 billion yen. The full top-line plan is not yet finalized, so the overall impact on profit is still uncertain at this stage. For dividends, we will continue our existing policy of stabilizing the absolute dividend amount and maintaining our target payout ratio. While there is currently a large gap between our target payout ratio and actual results, we will prioritize maintaining stable dividend amounts as much as possible, and will continue to operate with a core policy of delivering steady dividends.

Q: Can you give us an update on the capital and business alliance with Itochu Corporation?

A: Regarding collaboration with Itochu, the key project is ATM installation at FamilyMart locations. This requires coordination with many stakeholders, which is taking more time, but we aim to start installation by summer. We are also progressing discussions on various other areas of collaboration including the credit card business, but we are not at a stage where we can announce finalized decisions at this point. You can assume we are moving forward with collaboration across a number of areas, and we will make announcements as soon as decisions are finalized, so we appreciate your patience.

Q: Is it correct to understand that all major impairment for the credit card business will be completed by next year, with no further impairment after that? Also, what is your current outlook for when Seven Card Service will reach profitability, given the many moving parts in this business?

A: The impairment we have recorded this time is primarily for system assets related to the new credit card, and we expect the 3.5 billion to 4 billion yen impairment planned for FY2026 will be the end of major impairment charges. However, if the entire credit card business does not reach profitability, it will be difficult to amortize any future capitalized investments, so any additional new investment could be expensed immediately rather than capitalized. We cannot say how much additional development will be done or how much cost that would generate at this point, so it remains uncertain. To summarize, we expect major impairment to be completed in FY2026, but you should note that any additional investment could be expensed rather than amortized going forward. Regarding profitability, the timeline depends heavily on how we structure promotional activity going forward and our projections for application and issuance volumes, so we cannot give a definitive timeline at present. We are continuing efforts to grow membership, build a sustainable stock business, and prioritize achieving profitability as a key goal. We will thoroughly discuss this balance in the FY2026 planning process and finalize our plan, so we will share a clearer outlook as part of that process next year.

Q: There has been discussion about exploring collaboration with Itochu's Pocket Card business. Do you see collaboration with Itochu driving a fundamental improvement in the profitability of your card business? What areas of Itochu's financial business do you see potential for collaboration at this stage?

A: As you noted, Itochu has a range of financial businesses including credit cards. We are working with Itochu to evaluate whether there is room for significant growth or efficiency gains from collaboration. We are proceeding with discussions based on a stance of actively pursuing any collaboration that delivers positive synergies, where working together delivers better outcomes than operating independently, or where partnering with Itochu creates better results. No decisions have been finalized at this stage, so you can understand that we are progressing discussions across multiple potential areas.

Q: Is there a risk of additional impairment losses similar to the credit card business in Southeast Asia or other segments? Also, could you comment on the possibility of segment restructuring including divestments or withdrawals in the next medium-term plan or beyond, to the extent you can share?

A: We recognize that we have seen stagnant usage growth in Southeast Asia recently, which has created concern, but at this stage there are no indicators of impairment. Additionally, we do not have any planned divestments or withdrawals of any other business segments at this time.

Q: Are there any notable risks or impacts we should watch for related to the capital alliance with Itochu? Specifically, does this quarter's downward revision to earnings have any impact on the ongoing collaboration discussions related to Pocket Card that you're having with Itochu?

A: Both our company and Itochu are progressing discussions about future collaboration based on evaluating whether the partnership delivers long-term benefits and efficiency gains. Discussions about future business opportunities are proceeding regardless of near-term earnings fluctuations, so we do not expect the events this quarter to have any material impact on the collaboration process.