Performance Trend 1. Overview of performance for FY3/2024 Consolidated performance for FY3/2024 of G-7 Holdings <7508> was 192,992 million yen in increased operating income of 9.1% over the previous year, and increased ordinary income of 7.4% to 7,318 million yen, and attributed to the parent company's net income of 5,175 million yen, an increase of 35.3% over the previous year. Sales were driven by the Business Supermarket Business and the Meat Business, and continued to set a new record high, exceeding the company's plan by 4.3%. However, in terms of profits, the automobile-related business was affected by a decrease in profits due to poor sales of winter tires due to a warm winter, and could not reach the company's plan, it turned to a profit increase for the second time due to the growth of other businesses centered on the Business Supermarket business. The sales cost ratio has increased by 0.8 points over the previous year due to changes in the sales composition ratio; however, the selling, general and administrative expense ratio decreased by 0.7 points due to the effect of increased earnings, and the operating margin decreased by 0.1 points to 3.6%. The main reasons for the increase/decrease of selling, general and administrative expenses were a decrease of 600 million yen in energy costs due to subsidies from rising electricity prices, and an increase of 1 billion yen in labor costs due to improvements in employee treatment and increased education costs. In addition to this, depreciation expenses increased by nearly 600 million yen due to rising construction material costs and rising costs of opening stores etc. The EBITDA margin has increased by 0.1 points from the previous year. Also, the reason for the large increase in the net income of the parent company's shareholders attributable to the current period is due to the elimination of 500 million yen in retirement benefits paid to executives that were recorded as special losses in the previous year, a decrease of 455 million yen in impairment losses, and a gain of 127 million yen on the sale of investment securities in FY3/2024.

(2) Korean and Mongolian Financial Business

For the second quarter of the fiscal year ending in December 2024, J Trust recorded operating revenue of 23,494 million yen (an increase of 2.7% compared to the same period last year) and an operating loss of 1,256 million yen (compared to a loss of 1,196 million yen in the same period last year). The increase in operating revenue was due to the increase in interest income resulting from the rise in new loan interest rates, despite a decrease in lending due to savings bank operations. However, the operating profit was impacted by the worsening economy and the deterioration of credit, leading to an increase in the provision for bad debts and losses from debt sales. However, J Trust's performance improved at a pace exceeding the plan, with an operating loss of 1.2 billion yen against the planned 1.3 billion yen in the first quarter, and an operating profit of 0 billion yen against the planned operating loss of 0.1 billion yen in the second quarter.

The outstanding loans of JT Dear Savings Bank decreased to 244.5 billion yen as of June 2024 due to strategic suppression of retail lending to comply with the increase in non-performing loans and BIS regulations. While the average deposit interest rate has been decreasing due to the maturity of one-year time deposits collected at high interest rates in the autumn of 2022, the average loan period is 5 years, resulting in a gradual increase in the average loan interest rate. As a result, the loan-to-deposit spread improved from 6.48% in March 2023 to 7.51% in June 2024. We will continue to manage appropriately and aim to expand the loan-to-deposit spread. In addition, although the non-performing loan ratio increased to 10.18% as of June 2024 due to the decrease in outstanding loans, the net non-performing loan ratio, excluding the provision for bad debts, remained at a low level of 3.06%. We will continue to focus on recovery and monitoring in order to reduce the non-performing loan ratio.

The outstanding loans of JT Savings Bank remained nearly unchanged at 228.3 billion yen as of June 2024. This is the result of emphasizing the improvement in the quality of credit and controlling the outstanding loans. Similar to JT Dear Savings Bank, while the average deposit interest rate is decreasing, the average loan interest rate is increasing, and the loan-to-deposit spread improved from 5.21% in March 2023 to 7.28% in June 2024. Although the non-performing loan ratio increased to 8.61% as of June 2024, the net non-performing loan ratio, excluding the provision for bad debts, remained at 7.28%. While the net non-performing loan ratio is higher compared to JT Dear Savings Bank, JT Savings Bank has a higher proportion of corporate lending, most of which is collateralized, so there is no issue. We will continue to strengthen recovery and monitoring efforts and focus on suppressing non-performing loans.

(Written by FISCO guest analyst Nozomi Kokushige).