Rakuten Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Income: ¥33.63B
• EPS: ¥194.89

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Rakuten Bank Co., Ltd. (TSE: 5838) reported FY2026 Q2 (cumulative) consolidated results under JGAAP with operating income of ¥48.288 billion and net income of ¥34.007 billion, up 53.5% YoY. The strong bottom-line growth despite flat operating income YoY suggests improved credit costs, better cost discipline, or favorable below-the-line items relative to the prior year. Ordinary income matches operating income at ¥48.288 billion, indicating minimal contribution from non-operating activities this period. Income tax expense was ¥9.630 billion, implying an indicative tax burden around 20% if referenced to ordinary income; however, the gap between post-tax earnings (¥38.658 billion) and reported net income (¥34.007 billion) suggests other adjustments (e.g., minority interests or extraordinary items). Total assets stood at ¥15,710.355 billion, total liabilities at ¥14,429.522 billion, and total equity at ¥356.095 billion, implying an assets-to-equity leverage of roughly 44.1x and an equity-to-assets ratio of about 2.3%. On a simple point-in-time basis, half-year net income to period-end equity suggests a non-annualized ROE of around 9.6%; annualized, this implies a high-teens ROE run-rate, subject to seasonality and capital changes. EPS was ¥194.89; shares outstanding were not disclosed in the provided extract. The bank reported DPS of ¥0.00, indicating continued earnings retention, likely to support balance-sheet expansion and regulatory capital buffers. Liquidity and current ratio metrics are not meaningful for banks and were not disclosed; funding structure detail (deposits, LDR, LCR/NSFR) is absent, limiting a granular solvency and liquidity assessment. Cash flow statements were not provided; for banks, reported OCF can be structurally volatile and less useful for earnings quality than credit cost trends and cost-to-income metrics, which are also not disclosed here. The flat operating income YoY with sharply higher net income signals positive operating leverage or lower credit losses relative to the comparison period. The high balance-sheet leverage is typical for banks but heightens sensitivity to credit and interest-rate risk management; regulatory capital ratios (e.g., CET1) are necessary to contextualize solvency but are not available here. Overall, momentum in profitability looks favorable on a run-rate basis, but the absence of revenue, fee/interest breakdowns, credit cost data, and capital ratios constrains depth of analysis. We focus on inferred drivers: stable core income, better cost/credit discipline, and balance-sheet growth requiring continued capital prudence.

Profitability Analysis

ROE_decomposition: Using a bank-adapted DuPont, approximate ROE can be inferred as (Net income / Equity). With NI = ¥34.007bn and equity = ¥356.095bn, half-year ROE ≈ 9.6% (34.007 / 356.095). Annualized, this implies ~19.1%, subject to seasonality and average-equity effects. Net profit margin and asset turnover are not meaningful given revenue is undisclosed (0). Financial leverage is high with Assets/Equity ≈ 44.1x (15,710.355 / 356.095), consistent with banking models. margin_quality: Ordinary income equals operating income (both ¥48.288bn), indicating limited non-operating distortion. Tax expense of ¥9.630bn vs ordinary income implies an indicative 19.9% rate (9.630 / 48.288), but the ¥4.651bn delta between post-tax ordinary income and net income signals other below-the-line items; margin quality appears improved YoY given NI rose 53.5% despite flat operating income. operating_leverage: Positive operating leverage is implied by stronger net income vs flat operating income, likely reflecting lower credit costs and/or tighter opex control. Without cost-to-income and credit cost disclosures, the magnitude cannot be quantified, but mix and efficiency appear favorable in the period.

Growth Assessment

revenue_sustainability: Top-line detail (net interest income, fees) is not disclosed; operating income stability suggests a steady core franchise in H1 FY2026. Sustainability will depend on deposit growth, loan volumes, and net interest margin resilience amid rate dynamics. profit_quality: NI up 53.5% YoY with unchanged operating income implies improved mix (lower provisions/expenses) rather than one-off gains, as ordinary = operating. The gap between ordinary income net of tax and reported net income indicates some below-the-line headwinds, but overall profit trajectory is stronger. outlook: If H1 performance is annualized, ROE could track in the high teens; continuation depends on credit cost normalization, stable NIM, and controlled opex. Balance-sheet growth will necessitate capital discipline; absent CET1 disclosure, we assume retained earnings support expansion near-term.

Financial Health

liquidity: Traditional liquidity ratios (current/quick) are not applicable to banks and were unreported. Liquidity assessment requires LCR/NSFR and deposit mix, which are not provided. We assume deposit-funded operations with adequate liquidity management typical for major Japanese online banks, but this remains unverified here. solvency: Total equity of ¥356.095bn vs assets of ¥15,710.355bn implies an equity ratio of ~2.3%. Liabilities/Equity ≈ 40.5x and Assets/Equity ≈ 44.1x are high but consistent with banking leverage. Regulatory capital ratios (CET1, total capital) are essential but not disclosed; solvency views are therefore provisional. capital_structure: The balance sheet is predominantly liabilities (likely deposits). Debt-to-equity is ~40.5x (14,429.522 / 356.095). Earnings retention (DPS = ¥0) supports capital build, which is prudent given balance-sheet scale.

Cash Flow Quality

earnings_quality: Operating and ordinary income alignment reduces non-operating noise; tax expense is proportionate. The 53.5% YoY NI increase, independent of operating income growth, points to improved cost or credit dynamics, which is a higher-quality driver than one-offs. FCF_analysis: Cash flow data are not disclosed. For banks, FCF concepts are less informative; focus should be on core earnings vs credit costs and capital generation (net income minus dividends). With ¥34.007bn NI and zero dividends, internal capital generation is positive. working_capital: Traditional working capital metrics are not applicable. Key banking analogs (loan growth, deposit trends, LDR) are not disclosed; changes here would be the main drivers of cash movements.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 and payout ratio is 0.0%, consistent with capital accumulation priorities. Based on EPS of ¥194.89 and no dividends, full earnings are retained. FCF_coverage: Not assessable due to lack of cash flow disclosure; however, with no dividend, coverage is de facto sufficient. policy_outlook: Given high leverage (assets/equity ~44x) and growth needs, retaining earnings appears prudent. Future dividends will likely hinge on regulatory capital headroom (CET1) and earnings durability; no change is inferred from the provided data.

Risk Assessment

Business Risks:

• Interest-rate risk affecting net interest margin and deposit beta
• Credit risk from consumer and SME lending portfolios
• Competition from mega-banks and fintechs compressing fees and spreads
• Customer concentration and ecosystem dependence within the Rakuten Group
• Regulatory and compliance changes impacting capital and liquidity requirements
• Technology and cybersecurity risk given digital-first model

Financial Risks:

• High balance-sheet leverage (Assets/Equity ~44x) typical of banks increases sensitivity to shocks
• Potential credit cost normalization after a benign period could pressure earnings
• Capital adequacy uncertainty due to absent CET1/total capital disclosures
• Funding stability and liquidity risks in stressed scenarios (LCR/NSFR not disclosed)
• Rate-cycle volatility impacting valuation of securities and funding costs

Key Concerns:

• Lack of disclosure on net interest margin, credit costs, and fee income splits limits analytical precision
• Absence of regulatory capital ratios constrains solvency assessment
• Net income uplift vs flat operating income could reverse if credit costs re-normalize

Investment Implications

Key Takeaways:

• Net income grew 53.5% YoY to ¥34.007bn, while operating income was flat at ¥48.288bn, implying improved cost/credit dynamics
• Leverage is high but in line with banking models: Assets/Equity ≈ 44.1x; Equity/Assets ≈ 2.3%
• Indicative annualized ROE could be in the high teens if H1 trends persist
• Earnings are being fully retained (DPS = ¥0), supporting capital build amid balance-sheet expansion
• Limited disclosure on core banking KPIs (NIM, credit costs, CET1, LCR/NSFR) is a key limitation

Metrics to Watch:

• Net interest margin and deposit beta
• Credit cost ratio and NPL ratio
• Cost-to-income ratio and operating expense trajectory
• CET1 ratio and leverage ratio (equity/assets)
• Loan and deposit growth, loan-to-deposit ratio
• Sensitivity to rate changes (ALM gap) and securities portfolio duration

Relative Positioning: As a leading Japanese digital bank, Rakuten Bank appears to be delivering solid profit momentum with efficient operations, but it operates with a thinner capital base relative to assets and faces strong competitive and regulatory pressures compared with mega-banks. Clear disclosure of capital and core banking KPIs would help benchmark it more precisely against domestic peers.

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