Shizuoka Financial Group,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥192.07B
• Net Income: ¥46.51B
• Earnings per Unit (EPU): ¥85.77

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: A solid Q2 with double‑digit top‑line and profit growth, margin expansion, and exceptionally low cost-to-income, offset by structurally thin NIM and high balance‑sheet leverage typical of banks. Revenue rose 18.4% YoY to 1,920.71, while ordinary income (operating proxy under JGAAP for banks) increased 32.2% YoY to 659.48, indicating positive operating leverage. Net income advanced 33.6% YoY to 465.10, pushing the net margin to 24.2%, up approximately 277 bps by our estimate. We estimate the ordinary/operating margin improved from about 30.7% to 34.3% (circa +363 bps), as profit growth outpaced revenue. Cost discipline was outstanding with a Cost-to-Income Ratio of 27.4%, well below the sub‑50% best‑practice threshold. However, the structural Net Interest Margin of 0.7% remains a key profitability headwind versus global peers (benchmark >2%). ROE was 3.7% based on DuPont (Net Margin 24.2% × Asset Turnover 0.012 × Leverage 12.66x), indicating modest capital efficiency for the leverage employed. Total comprehensive income of 989.04 materially exceeded net income, implying sizable unrealized valuation gains (likely from securities/OCI), which are non‑cash and can reverse with rate moves. With operating cash flow unreported, we cannot reconcile earnings quality via OCF/NI, a notable limitation. The loan‑to‑deposit ratio at 91.7% is near the top of the comfort band, suggesting tighter on‑balance liquidity management but still below the >100% risk threshold. Effective tax rate was 28.7%, broadly normal. Dividend payout ratio is high at 74.8%, potentially stretching coverage absent strong recurring cash flows, though capital buffers are not disclosed here. Balance-sheet leverage is high (D/E 11.66x), expected for a bank, but increases sensitivity to credit costs and securities valuation. Overall, Q2’s beat appears driven by revenue growth and tight costs, yet sustainability depends on NIM stabilization, credit cost discipline, and avoiding OCI reversals amid BOJ policy normalization.

Profitability Analysis

ROE decomposition: 3.7% = Net Profit Margin (24.2%) × Asset Turnover (0.012) × Financial Leverage (12.66x). The most notable change appears to be margin-driven: ordinary income grew +32.2% vs revenue +18.4%, implying improved operating/ordinary margin by ~363 bps; net margin rose ~277 bps YoY by our estimate. Business rationale: revenue tailwinds (likely higher market-related gains/fees and better gross business profit) combined with stringent cost control (CIR 27.4%) expanded margins. Sustainability: margin gains attributable to structural cost discipline are more sustainable; components tied to market/securities gains are one-time or cyclical. Operating leverage is positive (profit growth > revenue growth), but structurally low NIM (0.7%) caps longer-term ROE unless asset mix/pricing shifts. No SG&A detail is disclosed; however, given CIR improvement, we infer cost growth lagged revenue growth (benign trend).

Growth Assessment

Revenue growth of +18.4% YoY to 1,920.71 is strong for a regional bank, suggesting broad-based strength (net interest and non-interest). Ordinary income +32.2% and net income +33.6% indicate positive operating leverage. NIM at 0.7% remains a structural drag; growth likely benefited from fee/market-related income and tight costs rather than spread expansion. The LDR at 91.7% suggests limited room to outgrow via balance-sheet expansion without pricing adjustments or attracting deposits. Total comprehensive income (989.04) far above NI implies valuation gains (likely AFS/OCI); these support capital but are not recurring drivers of earnings. Outlook hinges on BOJ normalization impacts on securities valuation and deposit beta; rate hikes could pressure OCI while modestly aiding loan yields. Absent disclosed credit costs, we assume benign credit environment in Q2; normalization could temper earnings growth ahead.

Financial Health

Leverage is high with D/E 11.66x (industry-typical for banks but above generic thresholds), warranting caution under stress scenarios. Liquidity: LDR at 91.7% sits near the upper end of the optimal band (70–90%), indicating tighter on-balance funding buffer but still below the >100% risk line. Deposits (11,7715.93) exceed loans (10,7917.25), supporting funding stability; deposit stickiness and pricing will be key if rates rise. Current and quick ratios are not meaningful for banks and are unreported. No data on maturity buckets or off-balance sheet commitments; thus, we cannot fully assess maturity mismatch or contingent liabilities. Equity totals 12,475.88 against assets 157,930.72 (equity/asset ~7.9%), reasonable for a regional bank; however, absent CET1/Tier ratios, capital adequacy cannot be verified. Intangible assets are small (214.69), implying limited goodwill risk.

Cash Flow Quality

Operating cash flow is unreported; thus OCF/Net Income and FCF cannot be evaluated. Earnings quality flags: total comprehensive income is 2.1x net income, indicating sizeable unrealized securities gains driving OCI; such gains are volatile and may reverse with rate movements. Working capital analytics (for non-bank) are not applicable; banking cash dynamics hinge on funding mix and securities duration, both undisclosed. With no capex/dividend cash data, FCF coverage of dividends cannot be confirmed. No signs of manipulation can be inferred or ruled out due to data gaps.

Dividend Sustainability

Reported payout ratio is 74.8%, above the <60% comfort benchmark and high for a bank with 3.7% ROE. Without OCF/FCF disclosure, cash coverage of dividends is indeterminable. High payout amid modest ROE suggests limited organic capital accretion; this may constrain growth or buffer against shocks unless retained earnings improve. No DPS trajectory is disclosed; policy clarity (e.g., progressive vs. payout-based) is unknown. If OCI gains fade or credit costs normalize, sustaining a ~75% payout could become challenging without offsetting earnings momentum.

Risk Assessment

Business Risks:

• Structural NIM compression (0.7%) limits spread income and ROE potential
• Reliance on market/securities gains implied by high OCI vs NI, exposing earnings to valuation swings
• Regional concentration risk in core operating areas (economic downturns would pressure SME/retail credit demand)
• Potential slowdown in fee/market-related income if markets turn risk-off

Financial Risks:

• High leverage (D/E 11.66x) increases sensitivity to credit cycle and securities marks
• LDR at 91.7% reduces liquidity headroom versus peers with lower ratios
• Interest rate risk: higher yields could depress AFS/OCI, eroding capital buffers
• Credit cost normalization from cyclical lows could compress margins and profits

Key Concerns:

• Dividend payout ratio of 74.8% may be hard to sustain if earnings revert or OCI gains reverse
• Data gaps on capital adequacy (CET1/Tier ratios) and cash flows hinder full resilience assessment
• Absence of detailed non-interest income and credit cost disclosure obscures the durability of margin gains
• Total comprehensive income far above NI indicates non-recurring valuation tailwinds

Investment Implications

Key Takeaways:

• Strong Q2: revenue +18.4% YoY, ordinary income +32.2%, net income +33.6%
• Margin expansion: ordinary/operating margin up ~363 bps to ~34.3%; net margin up ~277 bps to 24.2%
• Exceptional efficiency with CIR at 27.4%, supporting positive operating leverage
• ROE at 3.7% remains modest despite 12.66x leverage due to low asset turnover/NIM
• NIM of 0.7% is the principal structural profitability constraint
• LDR 91.7% indicates tighter funding headroom but still below risk threshold
• Comprehensive income (989.04) >> NI, highlighting securities valuation gains and potential volatility
• High payout ratio (74.8%) raises sustainability questions absent stronger recurring cash flows

Metrics to Watch:

• Net Interest Margin (target stabilization or improvement from 0.7%)
• Credit costs/LLP and NPL ratios (not disclosed here)
• Fee and market-related income mix versus spread income
• Securities portfolio duration/AFS sensitivity and OCI volatility
• Loan-to-Deposit Ratio trend and deposit beta under BOJ policy shifts
• Capital adequacy (CET1/Tier1), not disclosed in this dataset
• Dividend policy guidance and payout target vs earnings trajectory
• OCF/NI once available to validate earnings quality

Relative Positioning: Operational efficiency (CIR 27.4%) appears best-in-class for a regional bank, but profitability is constrained by a very low NIM and modest ROE; balance sheet leverage and LDR are on the higher side, making the group more sensitive to rate and credit cycles than peers with richer margins or lower funding intensity.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis