Nishi-Nippon Financial Holdings,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Operating Income: ¥8.53B
• Net Income: ¥8.21B
• EPS: ¥152.49

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

Nishi-Nippon Financial Holdings (consolidated, JGAAP, FY2026 Q2 cumulative) reported ordinary income of ¥30.9bn and net income of ¥21.24bn, with net income rising 29.3% YoY despite a 39.7% YoY decline in operating income to ¥8.53bn. This divergence implies material positive non-operating contributions (e.g., securities-related gains, funding cost tailwinds, equity-method income, or credit cost normalization), which more than offset weaker core operating profit. Total assets stood at ¥13,464.6bn and total equity at ¥593.1bn, implying financial leverage (assets/equity) of roughly 22.7x and an equity ratio of about 4.4% (computed), both typical for regional bank holding companies. The reported debt-to-equity of 21.96x (liabilities/equity) corroborates the high leverage intrinsic to the banking model and highlights the importance of capital adequacy and risk-weighted asset (RWA) efficiency. EPS was ¥152.49 for the half, indicating healthy per-share profitability even as operating income softened. The effective tax rate, inferred from income tax of ¥6.77bn on pre-tax income of roughly ¥28.01bn, was about 24.2%, consistent with a normalized tax environment. Using end-period equity as a proxy, half-year ROE is approximately 3.6%; annualized, this implies around 7.2%, contingent on H2 performance and absent large one-offs. Cash flow statement line items were not disclosed in this dataset (zeros denote missing data), limiting a direct assessment of operating cash flow or free cash flow; for banks, accrual earnings and capital metrics are generally more informative than traditional FCF. Dividend data were not disclosed (DPS and payout show as zero placeholders), typical for interim periods or absent XBRL mapping; dividend sustainability therefore cannot be quantified from this extract. Liquidity ratios such as current and quick ratio are not meaningful for banks and are not disclosed here. Margin metrics like gross margin and EBITDA are also non-applicable for financial institutions under JGAAP bank format, explaining their absence. The key story this quarter is resilient bottom-line performance driven by non-operating/recurring financial items, against softer operating income, within a balance sheet that remains highly leveraged as expected for a bank. Without disclosure of credit costs, net interest income (NII), fee income, and securities gains/losses, the durability of earnings is difficult to judge; however, the YoY net income growth hints at supportive market or credit conditions in H1. Capital remains a central focus given a computed equity ratio of ~4.4%; regulatory capital (CET1/Tier 1) is not provided here but will be critical for risk and growth capacity. Overall, the company delivered a stronger net result despite operating pressure, but the quality and repeatability of earnings require a closer look at underlying drivers that are not available in this dataset.

Profitability Analysis

• ROE decomposition (approximate): With net income of ¥21.24bn for H1 and equity of ¥593.1bn, half-year ROE is ~3.6%; annualized ~7.2%. Asset turnover and net margin from the standard DuPont set are not meaningful for banks using this report format, and the provided DuPont zeros reflect non-disclosure rather than actual values.
• Margin quality: Operating income fell 39.7% YoY to ¥8.53bn, while ordinary income reached ¥30.91bn and net income rose 29.3% YoY, signaling that non-operating components (e.g., securities-related gains, interest/dividend income dynamics, credit cost swings) supported profitability. The effective tax rate approximates 24.2%, consistent with normalized taxation.
• Operating leverage: The decline in operating income suggests either weaker core spreads/fees or higher operating expenses in H1. Positive non-operating items masked that pressure at the bottom line. Without revenue, NII, fee income, or OHR disclosure, we cannot quantify operating leverage; qualitative read implies lower core profitability elasticity and higher reliance on financial/non-operating drivers in the period.

Growth Assessment

• Revenue sustainability: Revenue lines are not disclosed in this dataset; for banks, net interest income, fees/commissions, and trading/securities income would normally indicate sustainability. The drop in operating income suggests softer core momentum.
• Profit quality: Net income growth of +29.3% YoY against lower operating income points to non-operating drivers. Absent detail on credit costs, trading gains, and valuation gains/losses, repeatability is uncertain.
• Outlook: Annualizing H1 net income implies a run-rate ROE around low- to mid-7%, assuming H2 conditions hold. Key swing factors are NIM trajectory amid BoJ policy normalization, loan growth in Kyushu/western Japan, fee income from asset management/settlement, securities portfolio gains/losses amid rate volatility, and credit costs given SME exposure.

Financial Health

• Liquidity: Traditional current/quick ratios are not applicable to banks; liquidity should be judged via LCR/NSFR and HQLA composition, which are not disclosed here.
• Solvency/capital: Computed equity ratio is ~4.4% (¥593.1bn equity / ¥13,464.6bn assets). Financial leverage is 22.7x; liabilities/equity is 21.96x. Regulatory capital ratios (CET1/Tier 1 total) are not provided; these are essential to assess buffers against credit and market risk.
• Balance sheet structure: Total assets of ¥13.46tn indicate a sizable securities and loan book typical of a regional banking group. Without duration, RWA mix, or deposits/wholesale funding split, we cannot quantify interest-rate or funding risks. Nonetheless, leverage levels are consistent with peers, placing emphasis on prudent risk management and capital conservation.

Cash Flow Quality

• Earnings quality: Cash flow statement items are undisclosed here (zeros indicate missing). For banks, accrual earnings quality is assessed via credit costs, NIM, and realized/unrealized securities results; these drivers are not provided. The divergence between operating and net income suggests reliance on non-operating items, which may be less durable.
• Free cash flow: FCF metrics are not meaningful for banks in the same way as industrials; lending/securities flows dominate OCF/ICF. With no disclosed OCF/FCF, we cannot compute coverage metrics.
• Working capital: Not applicable in the conventional sense for banks; asset-liability management (ALM), liquidity buffers, and deposit stability are the relevant constructs, which are not disclosed in this dataset.

Dividend Sustainability

• Payout ratio: DPS and payout ratios are shown as zero due to non-disclosure; thus, we cannot assess payout against earnings from this data alone. Historically, Japanese regional banks target stable or progressive dividends; confirmation requires management guidance.
• FCF coverage: Not applicable for banks in the conventional sense, and cash flow data are not provided.
• Policy outlook: With H1 EPS of ¥152.49 and annualized ROE near ~7% (assumption-based), the capacity for a stable dividend appears plausible in principle, but actual payout depends on regulatory capital ratios, credit cost expectations, and securities valuation risk—all undisclosed here.

Risk Assessment

Business Risks:

• Net interest margin compression or volatility amid BoJ policy normalization and yield-curve movements
• Credit cost normalization from historically low levels, particularly in SME/real estate exposures in western Japan
• Securities portfolio valuation and realized gains/losses risk due to rate and spread movements
• Fee income sensitivity to market activity and customer risk appetite
• Regional concentration risk within Kyushu/West Japan economic cycle

Financial Risks:

• High structural leverage (assets/equity ~22.7x) inherent in banking
• Potential capital ratio pressure if RWA grow faster than retained earnings
• Funding mix risk if dependence on wholesale funding increases (deposit stability not disclosed here)
• ALM risk from duration mismatch between assets and liabilities
• Earnings volatility from non-operating items that lifted H1 net income despite weaker operating income

Key Concerns:

• Operating income fell 39.7% YoY, indicating weaker core profitability
• Net income growth relies on non-operating factors of unclear repeatability
• Lack of disclosure on credit costs, NIM, fee income, and securities gains limits visibility
• Regulatory capital ratios (CET1/Tier 1) not provided, constraining solvency assessment

Investment Implications

Key Takeaways:

• Bottom-line strength (+29.3% YoY net income) contrasts with a sharp drop in operating income (-39.7% YoY), implying non-operating support
• Leverage and equity ratio (~4.4%) are in line with banking norms, making capital metrics pivotal
• Tax rate around 24.2% appears normal; no evident tax one-off
• H1 EPS ¥152.49 suggests a solid earnings run-rate if conditions persist
• Data gaps on core banking drivers constrain assessment of earnings durability

Metrics to Watch:

• Net interest margin and loan/deposit growth by segment
• Credit costs (NPL formation, coverage ratio) and sectoral exposures
• Securities portfolio duration, OCI sensitivity, and realized gains/losses
• Cost-to-income ratio and efficiency initiatives
• Regulatory capital (CET1/Tier 1), leverage ratio, and dividend guidance

Relative Positioning: Within Japanese regional banks, the group shows typical leverage and balance-sheet scale with H1 profitability that appears aided by non-operating drivers; absent detailed NIM/credit/securities disclosure, we tentatively place earnings quality as mixed relative to peers pending clarity on core income and capital ratios.

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