Seven Bank Group Integrated Report 2026 Message from the Officer in charge of Financial Strategy

In FY2025, consolidated ordinary income reached a record high of 220.0 billion yen, securing increased income. On the other hand, consolidated ordinary profit decreased to 30.1 billion yen, and net income decreased significantly to 13.4 billion yen due to factors such as the recording of impairment losses of 8.4 billion yen related to the credit card business. As a result, ROE (return on equity) fell to 4.8%, and all of the financial goals set in the previous Medium-Term Management Plan—consolidated ordinary income of 250.0 billion yen, consolidated ordinary profit of 45.0 billion yen, and ROE of 8% or more—were not met.

I believe there are three main reasons why we did not meet our goals.The first is the credit card business. When we made Seven Card Service a consolidated subsidiary in 2023, we planned to expand the membership base, primarily centered on Seven-Eleven customers, but we were unable to achieve the expansion we had anticipated. The second reason is the overseas business. In the United States, plans to diversify services in areas such as the loan business did not progress as expected, and in Indonesia and the Philippines, significant changes in the environment, including the emergence of competitors, led to sluggish performance. The third reason is the insufficient inclusion of the risk of fluctuations in macro variables. The plan assumed a deflationary environment and did not adequately factor in increased funding costs caused by rising interest rates or increased operating expenses caused by inflation. We take very seriously the fact that we failed to meet our medium-term targets due to these factors. By addressing the root causes based on an analysis of the contributing factors, we will work to ensure a steady shift toward a profit-generating structure going forward.

On the other hand, there are also achievements that we have steadily built up over the past five years. Our core domestic ATM business reached a record high of 28,536 installed ATMs and 1.12 billion total transactions as of the end of FY2025
Furthermore, the “+Connect” service, which launched in 2023, has been adopted by over 50 companies, with particularly strong adoption by regional banks. Recently, our service that allows people to receive local government benefits at ATMs has been performing well, with the number of local governments introducing the service expanded rapidly in the past year. Furthermore, steady progress was made in diversifying the business portfolio. Deposit balance in the retail business was 652.4 billion yen, with the number of accounts reaching 3.50 million and the personal loan balance reaching 79.2 billion yen. Although we did not meet our goals in the overseas business, consolidated ordinary income achieved a five-year compound annual growth rate (CAGR) of 9.9%, and in FY2025, we achieved profitability in all four countries: the United States, Indonesia, the Philippines, and Malaysia.

In conjunction with the announcement of our financial results for the fiscal year ended March 31, 2026, we also announced a “three-year outlook” outlining our goal for FY2028. In this outlook, we have set the following targets for FY2028: consolidated ordinary income of 280.0 billion yen, consolidated ordinary profit of 40.0 billion yen, and ROE of 8% or more. The reason we’ve opted for a “three-year outlook” rather than a “Medium-Term Management Plan” is because the macro environment and technological trends are changing very rapidly, and even if we were to formulate a detailed business plan, there is a high risk that its underlying assumptions could change in a short period of time. Based on the understanding that we must respond to environmental changes by quickly and flexibly adapting our strategies, we have deliberately refrained from going into detail. Instead, we believe that strongly committing to “quantitative targets that absolutely must be achieved to enhance corporate value” is essential to regaining the trust of our investors. These targets do not rely on an optimistic outlook, but rather are based on a strong balance sheet that has completed impairment accounting for unprofitable businesses, and they incorporate solid growth factors. In the first year, FY2026, we are still in the midst of structural reforms, and have projected increased income but decreased profits, with ordinary income of 235.5 billion yen and ordinary profit 29.5 billion yen. However, from FY2027 onward, we will return to a strong growth trajectory that will continuously and reliably achieve increased income and profits.

Corporate value (stock price) moves in close correlation with the equity spread, which is the difference between cost of equity and ROE. Accordingly, to increase corporate value, it is important to widen the positive equity spread. Due to rising interest rates, the Bank’s cost of equity based on the capital asset pricing model (CAPM) has risen to the mid-6% range, and may rise further depending on future interest rate trends. On the other hand, ROE in FY2025 was only 4.8%, and the equity spread fell into negative territory, leading to disappointing results. The Bank’s goal to achieve ROE of 8.0% or more by FY2028 has been set to sustainably widen the positive equity spread that consistently exceeds cost of equity, and thereby enhance our valuation in the capital markets. To this end, a fundamental improvement in ROE, which is the source of increased corporate value over the medium to long term, is necessary.

To improve ROE, it is necessary to break it down into “net profit margin,” “total asset turnover ratio,” and “financial leverage,” and then implement strategies accordingly. In the current fiscal year, “financial leverage” was 5.51 times and the “total asset turnover ratio” was 0.14 times, indicating that our asset efficiency and financial structure have remained stable over the past few years. On the other hand, the “net profit margin” for the current fiscal year was 6.1%, a significant deterioration from 8.4% in the previous fiscal year. As such, it is clear that the key to raising ROE to “8.0% or more” is to improve profit margins in each business. Therefore, in order to fundamentally improve our profit margins, we will be implementing the following initiatives over the next three years.

In our core ATM platform business, we will restore the profitability per ATM to an appropriate level. We are currently negotiating revisions to ATM-related fee income from partner financial institutions, and through this, we aim to halt the decline in fee levels, expand the number of companies adopting the “+Connect” service, increase the number of transactions, and increase the marginal profit per ATM. In addition, we will promote low-cost core deposit funding through the use of AI to reduce cash in ATMs and the acquisition of retail accounts, while appropriately controlling the risk of rising interest rates by issuing bonds at long-term fixed interest rates and acquiring time deposits, thereby ensuring appropriate profits even as funding costs and prices rise. Moreover, we began installing ATMs in FamilyMart stores as of June this year. This large-scale investment, involving the installation of approximately 16,000 units over approximately four years, should be a powerful driving force in boosting the Bank’s top line and leading to solid profit growth.

The top priority in the credit card business, which recorded impairment losses of approximately 8.0 billion yen this fiscal year, is to become profitable within the next three years. With the planned renewal of the “nanaco credit card” in August of this year, we aim to return to a trend of net growth in the number of members. At the same time, we will improve our high-cost structure by optimizing advertising expenses, and achieve both profitability and soundness by efficiently accumulating our financial products balance.

In the overseas business, our U.S. subsidiary exceeded its targets in FY2025, entering a phase of strong profit contribution. On the other hand, performance in Indonesia and the Philippines has been sluggish due to factors such as increased competition. Going forward, we will meticulously assess return on investment in each country and implement rigorous business operations focused on capital efficiency, such as the swift removal and relocation of unprofitable ATMs. At the same time, we will strengthen our collaboration with local partners, develop new services that take the unique business environment and needs of each country into account, and explore the possibilities of new business models such as “Beyond ATM” in order to raise the overall profit level of the segment.

Furthermore, our domestic group companies, namely ACSiON, which handles fraud detection and phishing countermeasures, and Bank Business Factory, which holds a funds transfer transaction analysis service license and handles Anti Money Laundering (AML) compliance and back-office support, will expand their fee-based businesses in response to strong needs from financial institutions amidst the increasing severity of financial crime and the sophistication of cybercrime. In this way, they will contribute to improved consolidated profitability.

Our deconsolidation from Seven & i Holdings Co., Ltd., the capital and business alliance with ITOCHU Corporation, the recording of impairment losses in the credit card business, and the installation of ATMs in FamilyMart stores starting in June 2026 are all steps that will lay the groundwork for the Bank to achieve discontinuous growth going forward.

Our top priority at the moment is to improve the profitability of existing businesses, but if there are opportunities for significant growth that leverage the Bank’s strengths going forward, we will pursue all possibilities. Our consolidated capital adequacy ratio is 29.91%, which is significantly higher than the Japanese standard. However, in order to explore all possibilities for growth, we need to maintain a solid financial foundation even in the face of rapid environmental changes and secure options to flexibly raise risk money for growth. Therefore, at the Ordinary General Meeting of Shareholders held in 2026, we amended our Articles of Incorporation to establish a framework for issuing preferred stock as a new capital-raising option. This is a strategic framework that enables flexible capital raising when it is deemed necessary to expand equity due to large-scale investments, changes in the regulatory environment, or other factors, while controlling the risk of excessive dilution of the value of existing shareholders’ shares and earnings per share (EPS) through the issuance of new common stock. This forms the foundation that supports our optimal capital allocation, which balances the promotion of growth investments with the protection of shareholder value.

FY2026 is a “fresh start towards returning to a growth trajectory.” To enhance corporate value, it is important to generate returns that significantly exceed the cost of equity through thorough reforms of the revenue structure, and to sustainably widen the positive equity spread. To achieve this, it is essential to ensure an optimal balance between growth investments and shareholder returns.

Our top priority for growth investments is to invest in our domestic ATM platform business, which centers on the installation of approximately 16,000 ATMs in FamilyMart stores to discontinuously raise the top line. Furthermore, we will continue to invest in software, including the expansion of the “+Connect” platform, which is the source of our competitive advantage. These advance investments will ultimately lead to the creation of a strong income base for the future.

On the other hand, regarding returns to shareholders, we will stably and continuously maintain our basic policy of a consolidated payout ratio of “40% or more,” while paying due consideration to the actual annual dividend amount, without being affected by temporary fluctuations in profits. Although EPS decreased in the current fiscal year due to factors such as the recording of impairment losses, the actual level of shareholder returns was maintained. We plan to maintain the annual dividend at 11.00 yen (expected payout ratio of 75.5%) for the next fiscal year as well. We have no concerns regarding our ability to return profits to shareholders, thanks to our strong cash flow from operating activities and accumulated retained earnings.

We will continue to engage in sincere and transparent dialogue (engagement) with shareholders and investors. I sincerely ask for your continued support and expectations as Seven Bank takes on new challenges toward further growth.