Japan's 73 listed regional banks and banking groups posted a strong start to fiscal 2026, with combined net income for the April-June quarter rising 36.9% from a year earlier to ¥597.9 billion. Results released by August 14 showed 61 banks, or about 80% of the total, recorded year-on-year profit growth, while 9 reported declines and 3 fell into the red. The improvement reflects a more favorable earnings backdrop as Bank of Japan rate hikes fed through to lending income, a core revenue source for banks that use deposits to make loans to companies and households. Bank of The Ryukyus illustrated that trend, reporting consolidated net profit of ¥2.9 billion for the quarter, up 16% year on year, as lending interest income rose and securities interest and dividend income also increased. On a non-consolidated basis, its net interest income climbed 17% to ¥9.5 billion and core business profit rose 47% to ¥3.2 billion, while loan balances grew 5% to ¥2.11 trillion. Corporate lending was particularly firm, including demand tied to wage increases, and the bank said it is expanding syndicated loans outside Okinawa Prefecture to diversify revenue. Across the sector, the benefits of higher rates were partly offset at some lenders by credit costs linked to Zentoshin, a credit card payment processor in Chuo Ward, Osaka City, whose bankruptcy proceedings prompted additional provisions at three banks. After the BOJ's additional rate hike in June, the earnings impact is expected to become clearer from the July-September quarter onward, with further upside possible if more hikes are implemented by the end of March 2027. At the same time, differences in loan repricing, securities portfolio management and credit quality could widen performance gaps among regional banks.