THE FIRST BANK OF TOYAMA (7184) FY2026 FY Earnings Report

Quick View

Executive Summary

Revenue and profit increased, primarily due to the expansion of income from fund investment amid rising interest rates. Ordinary revenue was ¥53.15B (+9.6% YoY), ordinary income was ¥20.99B (+10.7%), and net income attributable to owners of the parent was ¥15.06B (+12.7%). Although increases in interest on loans and interest and dividends on securities drove revenue, funding costs, mainly deposit interest expenses, also surged by 199.1%. Profit growth was achieved because the improvement in asset yields exceeded the increase in funding costs.

Factors Driving Earnings Changes

【Revenue】Ordinary revenue was ¥53.15B, up +9.6% YoY. The banking business accounted for ¥45.41B (85.4% of the total, +8.3% YoY), making it the core source of revenue. By service, revenue from securities investment operations was ¥30.17B (56.8% of ordinary revenue), exceeding revenue from lending operations of ¥12.65B and representing the largest revenue source. The leasing business generated ¥6.05B (+6.4%), while other businesses generated ¥1.69B (+84.7%); both remained relatively small in scale. Deposits totaled ¥1,427.72B (+3.7%), while loans totaled ¥1,033.02B (+2.8%), indicating continued expansion in both deposits and lending.

【Profit and Loss】Ordinary income was ¥20.99B (+10.7%), while net income was ¥15.06B (+12.7%). Funding investment income increased by +16.7% YoY, whereas funding costs surged by +199.1% due to higher deposit interest rates, making it important to monitor trends in the interest spread. By segment, the banking business led performance with a profit margin of 44.8% (+5.8% profit growth), while the leasing business deteriorated to a profit margin of 1.8% (-82.8%). Extraordinary gains and losses were immaterial, and the impact of temporary factors was limited, resulting in higher revenue and higher profit.

Segment Analysis

The banking business formed the earnings pillar, with ordinary revenue of ¥45.41B, segment profit of ¥20.36B, and a profit margin of 44.8%; YoY, revenue increased by +8.3% and profit by +5.8%. The leasing business generated ordinary revenue of ¥6.05B (+6.4%), while segment profit deteriorated significantly to ¥0.11B (-82.8%), lowering its profit margin to 1.8%. Other businesses, including credit card operations, generated ordinary revenue of ¥1.69B (+84.7%) and segment profit of ¥1.00B (+33.2%), maintaining high profitability with a profit margin of 59.5%. Revenue and profit are highly concentrated in the banking business, while deteriorating profitability in the non-banking businesses, particularly leasing, is a concern for the Group’s earnings structure.

Key Financial Indicators

【Profitability】The net profit margin improved to 28.3% from 27.5% in the previous year, while the ordinary income margin also increased to 39.5% from 39.1%. The general and administrative expense ratio declined to 25.1% from 26.9%, indicating improved operating leverage.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥17.74B, representing 1.18x net income, while the accrual ratio was also low at negative 0.2%, indicating strong cash support for reported profit.【Investment Efficiency】ROE was 7.6%, below the 10% benchmark for high-quality general operating companies, but reflects the capital structure characteristic of the banking industry, with total asset turnover of 0.031x and financial leverage of 8.57x.【Financial Soundness】The equity ratio was 11.7%, exceeding the minimum regulatory level of 8%, but falling slightly short of the 12% benchmark for financial soundness. The loan-to-deposit ratio was 72.4%, within an appropriate range, with deposits and loans increasing in parallel.

Cash Flow Analysis

Operating Cash Flow was ¥17.74B, a substantial increase from ¥3,353 million in the previous year, providing coverage of 1.18x net income of ¥15.06B. Investing Cash Flow was an outflow of ¥13.41B, of which capital expenditures were limited to ¥0.33B; the ratio to depreciation and amortization expense of ¥1.13B was low at 0.29x. Free Cash Flow, calculated as Operating Cash Flow less Investing Cash Flow, was positive at ¥4.33B. Financing Cash Flow was an outflow of ¥3.97B, mainly due to dividend payments of ¥2.97B and share repurchases of ¥1.00B. Cash and cash equivalents totaled ¥8.022B at period-end, an increase of ¥0.35B during the period. Although cash generated from operating activities is the primary source of funding for investment and shareholder returns, the low level of capital expenditures warrants continued monitoring of the capacity for system upgrades and digital investment.

Earnings Quality

Pre-tax income of ¥20.99B and ordinary income of ¥20.99B were virtually identical, indicating that current-period profit was based on recurring earning power rather than extraordinary gains and losses. Extraordinary income was limited to a gain on the disposal of fixed assets of ¥0.001B, and no extraordinary losses were recorded; consequently, there was no profit uplift from temporary factors. Income taxes were ¥5.94B, representing an effective tax rate of 28.3%, within the normal range, with no significant distortion in the transition from pre-tax income to net income. Operating Cash Flow was 1.18x net income, and the accrual ratio was low at negative 0.2%, indicating that current-period profit was of high quality and accompanied by cash generation. Comprehensive income was ¥50.00B, substantially exceeding net income, primarily due to a ¥34.47B increase in valuation differences on available-for-sale securities. Accordingly, attention should be paid to fluctuations in equity resulting from changes in market prices.

Earnings Forecast and Guidance

The full-year forecast called for ordinary income of ¥18.00B, net income of ¥13.00B, and an annual dividend of ¥75, whereas actual results were ordinary income of ¥20.99B (116.6% of forecast), net income of ¥15.06B (115.8% of forecast), and an annual dividend of ¥84 (+¥9 versus forecast). Actual results exceeded forecasts across the board. While the forecast anticipated double-digit YoY declines in both ordinary income and net income, actual results increased, suggesting that the expansion of income from fund investment exceeded the conservative assumptions underlying the forecast.

Shareholder Returns

The annual dividend totaled ¥84, comprising an interim dividend of ¥28 and a year-end dividend of ¥56. The payout ratio (total dividends of ¥5.28B ÷ net income of ¥15.06B) was 35.2%. The payout ratio based solely on dividends increased substantially from 16.3% in the previous year, reflecting progress in dividend growth. Including share repurchases of ¥1.00B, the Total Return Ratio was approximately 41.7%; neither the payout ratio nor the Total Return Ratio was excessive. Annual total dividends covered approximately 0.80x Free Cash Flow of ¥4.33B. Dividends for the period were sufficiently covered by accounting profit, but the headroom was limited based solely on Free Cash Flow.

Risk Factors

1. Interest Margin Compression Risk: Funding costs increased by +199.1% YoY, while deposit interest expenses surged by +205.8%, substantially exceeding the +16.7% increase in income from fund investment. If deposit rate increases outpace improvements in asset yields, this could become a factor compressing the ordinary income margin.

2. Dependence on Securities and Market Prices: Revenue from securities investment operations was ¥30.17B, accounting for 56.8% of ordinary revenue, while the securities balance was ¥55.60B, representing 32.7% of total assets. The ¥34.47B increase in valuation differences on available-for-sale securities was the primary driver of the increase in comprehensive income and net assets, creating a risk of an adverse reversal in OCI when interest rates or stock prices fluctuate.

3. Deteriorating Leasing Profitability and Business Concentration: Segment profit in the leasing business declined by -82.8% YoY, with its profit margin falling to 1.8%. Meanwhile, the banking business accounted for 85.4% of ordinary revenue, making declining earnings contributions from the non-banking businesses and concentration of revenue in the banking business structural characteristics of the Group.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The net profit margin substantially exceeded the industry median, ranking among the higher levels within the industry.

Growth and Capital Efficiency

The revenue growth rate was approximately in line with the industry median and fell within the IQR.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Both ordinary income and net income increased by double digits YoY and finished well above the full-year forecast; notably, the forecast itself had anticipated lower profit YoY. The pace of increase in funding costs will determine future profit trends.

2. Operating Cash Flow was 1.18x net income, and the accrual ratio was also low at negative 0.2%, indicating strong cash support for current-period profit. Meanwhile, the capital expenditure-to-depreciation ratio was low at 0.29x, requiring continued monitoring of the level of investment activity.

3. Comprehensive income of ¥50.00B substantially exceeded net income, with the increase in valuation differences on available-for-sale securities driving the increase in net assets. The significant contribution of market price fluctuations to the expansion of equity is an important factor to consider when assessing the quality of the financial results.

---

This report is an automatically generated earnings analysis document produced by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

---End of Report---