THE FIRST BANK OF TOYAMA,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥24.92B
• Net Income: ¥7.09B
• EPS: ¥115.55

Income Statement

Balance Sheet

Cash Flow Statement

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

Verdict: FY2026 Q2 was a weaker profitability quarter for The First Bank of Toyama, with double-digit profit declines and low NIM, partially offset by strong cost efficiency and healthy loan-to-deposit liquidity. Revenue fell 14.8% YoY to 249.2, indicating top-line pressure likely from lower gains on securities and subdued core spreads. Ordinary income declined 32.1% YoY to 101.0, and net income fell 30.5% YoY to 73.0, pointing to broad profit contraction. DuPont-calculated ROE was 4.2% (NPM 29.3% × Asset Turnover 0.015 × Leverage 9.33x), below typical cost of equity, signaling subpar capital efficiency. Banking margin quality remains a concern: reported NIM is 1.1% (warning threshold <1.5%), suggesting persistent yield compression on the loan and securities book. Cost control is a bright spot with a Cost-to-Income Ratio of 26.6%, well below the sector efficiency benchmark (<50%). Liquidity appears ample with deposits at 14,022 and loans at 10,177 (LDR 72.6%), indicating capacity to fund growth without aggressive wholesale funding. Comprehensive income surged to 253.7, far exceeding net income, implying material unrealized valuation gains (likely from securities), which are non-cash and reversible. Operating cash flow was -5.8, resulting in an OCF/Net Income ratio of -0.08x, a headline earnings quality flag (though OCF for banks is structurally volatile with balance-sheet flows). Leverage remains structurally high (D/E 8.33x), consistent with banking, but still warrants capital buffer scrutiny in a rate-volatile environment. Effective tax rate was 27.7%, broadly in line with statutory levels, indicating limited tax noise. EBITDA margin (42.8%) is less meaningful for banks but corroborates the low CIR and strong cost discipline. With ROIC at 4.2% (<5% warning), capital productivity trails management targets typical for financials. Forward-looking, a modest BoJ normalization path could lift NIM but poses OCI and securities valuation risks that could reverse this quarter’s large comprehensive gains. Overall, core banking profitability needs NIM stabilization and fee growth, while risk management around the securities portfolio and capital buffers is crucial.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.2% = Net Profit Margin 29.3% × Asset Turnover 0.015 × Financial Leverage 9.33x. Change drivers: YoY ordinary income (-32.1%) and net income (-30.5%) fell faster than revenue (-14.8%), implying net margin likely contracted the most, while asset turnover probably also softened; leverage appears stable for a bank. Business reason: lower NIM (1.1%) and likely lower securities gains/market-related income reduced margins; limited top-line growth from loans/fees constrained asset turnover. Sustainability: margin pressure from low NIM is ongoing until rates rise or asset mix reprices; any securities-related gains are inherently volatile and non-recurring. Flags: Revenue decline alongside profit contraction suggests negative operating leverage; absent SG&A disclosure, CIR at 26.6% signals strong cost control, but profit contraction indicates revenue-side weakness dominates.

Growth Assessment

Top line contracted 14.8% YoY, indicating pressure on interest-related income and/or reduced market gains. Ordinary income (-32.1%) and net income (-30.5%) fell materially, pointing to broad-based earnings pressure. Interest income was 131.4 against interest expense of 16.4, but the resulting NIM at 1.1% is below healthy levels, constraining growth. Balance-sheet growth appears conservative: LDR of 72.6% suggests capacity to expand loans without stressing liquidity but no evidence of demand-driven growth this quarter. Comprehensive income (253.7) indicates large valuation tailwinds (likely lower yields boosting AFS/OCI), which are not a sustainable earnings driver. EBITDA and operating margin constructs are less meaningful for banks; the key growth path rests on NIM normalization, fee income expansion, and disciplined credit costs (credit costs not disclosed). Outlook: near-term earnings trajectory hinges on rate environment (asset re-pricing pace vs funding costs), securities portfolio duration management, and non-interest income initiatives.

Financial Health

Leverage: D/E is 8.33x (explicit warning >2.0), typical for banks but heightens sensitivity to asset quality and OCI swings. Liquidity: Deposits 14,022 vs Loans 10,177 produce an LDR of 72.6% (optimal 70–90%), implying a solid liquidity cushion and limited reliance on wholesale funding. Maturity mismatch: Not disclosed by term buckets; however, the low LDR suggests manageable short-term funding risk; detailed gap analysis unavailable (data limitation). Capital: Total equity is 1,757; regulatory capital ratios (CET1/Tier 1) unreported, preventing a robust solvency assessment. Off-balance sheet: No disclosure on guarantees, derivatives, or securitizations; contingent risk unknown. Intangibles are minimal (16.3), indicating low goodwill risk.

Cash Flow Quality

OCF/Net Income is -0.08x (<0.8 flag), signaling weak cash conversion; for banks, OCF is influenced by loan/deposit flows and securities, so this is less diagnostic than for non-financials but still a caution. Free cash flow not calculable given missing investing CF; capex modest at -1.33, implying limited hard-investment burden. Earnings vs cash divergence plus outsized comprehensive income suggests a material contribution from non-cash valuation effects (OCI), increasing earnings volatility risk. No clear signs of working-capital manipulation (not applicable for banks), but changes in securities and loans could drive OCF volatility; detailed breakdown not provided.

Dividend Sustainability

Payout ratio (calculated) is 29.9%, implying dividends are covered by current earnings despite profit declines. OCF is negative, but for banks dividend sustainability is better gauged against earnings and regulatory capital, not OCF; capital ratios are unreported, a key limitation. With ROE at 4.2% and profit down ~30% YoY, maintaining dividends likely hinges on stabilizing NIM and managing credit costs and OCI volatility. FCF coverage and total dividends paid are unreported; policy outlook not disclosed.

Risk Assessment

Business Risks:

• NIM compression at 1.1% limits core profitability and sensitivity to rate path is high
• Regional concentration risk in Toyama Prefecture and surrounding areas exposes the bank to local economic/demographic headwinds
• Potential decline in loan demand amid slow regional growth
• Fee income and market-related income volatility (non-interest income granularity unreported)

Financial Risks:

• High leverage (D/E 8.33x) inherent to banking magnifies asset quality and market valuation shocks
• Large gap between comprehensive income (253.7) and net income (73.0) implies securities valuation exposure that could reverse with rate moves
• Low NIM heightens sensitivity to funding cost increases upon BoJ normalization
• Unknown capital adequacy ratios and credit cost levels create uncertainty around loss-absorption capacity
• Negative OCF vs positive earnings raises headline earnings quality concerns (bank-structural but still noteworthy)

Key Concerns:

• Earnings down sharply YoY with no evidence of offsetting growth drivers in fees or volumes
• Sustainability of low CIR may be tested if revenues continue to fall
• Potential OCI drawdown risk if yields back up, which could pressure capital and limit shareholder returns
• Data gaps on NPLs, credit costs, duration/ALM, and regulatory capital may hide additional risks

Investment Implications

Key Takeaways:

• Profitability weakened: ordinary income -32.1% YoY, net income -30.5% YoY
• Core margin under pressure: NIM 1.1% below healthy threshold
• Cost discipline strong: CIR 26.6% supports resilience
• Liquidity ample: LDR 72.6% provides funding flexibility
• Capital efficiency modest: ROE 4.2% and ROIC 4.2% below targets
• Earnings quality mixed: OCF/NI -0.08x and comprehensive gains far exceed net income

Metrics to Watch:

• NIM trajectory and asset re-pricing vs deposit beta
• Credit costs and NPL ratio (not disclosed)
• Securities portfolio duration/OCI sensitivity and realized gains/losses
• Fee and commission income growth to diversify from spread income
• Regulatory capital ratios (CET1/Tier 1) and buffer evolution
• Loan growth versus deposit trends (LDR stability)

Relative Positioning: Among regional banks, The First Bank of Toyama shows excellent cost efficiency and solid liquidity but lags on core profitability due to low NIM and subpar ROE; earnings are more sensitive to securities valuation swings given the large OCI contribution this quarter.

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
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