San ju San Financial Group,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.85B
• Operating Income: ¥1.66B
• Net Income: ¥1.66B
• EPS: ¥217.88

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

Verdict: Solid top-line and profit growth with improving efficiency, but profitability remains structurally constrained by an ultra-low NIM and bank-typical high leverage. Revenue rose 24.0% YoY to 18.53 and operating income increased 70.9% YoY to 16.59, indicating strong cost discipline and/or non-interest income support. Ordinary income grew 10.5% YoY to 77.68 and net income rose 16.2% YoY to 56.74, demonstrating resilient bottom-line momentum. Operating margin is 89.5% (16.59/18.53), and net margin stands at 306.2% (56.74/18.53), both inflated by banking revenue definitions but indicative of robust profitability on the reported base. We cannot quantify margin expansion/compression in basis points due to missing prior-period margin data, but current efficiency is underscored by a 43.0% cost-to-income ratio, better than the <50% benchmark. The effective tax rate is 25.6% (19.50/76.24), in a normal range. ROE is 2.6% despite high financial leverage (assets/equity 20.55x), highlighting thin economic returns given a NIM of 0.7%. Total comprehensive income was 174.25, far exceeding net income (56.74), implying sizable OCI gains—likely from available-for-sale securities valuation—boosting capital but adding volatility risk if rates move adversely. Loan-to-deposit ratio is 79.8%, within the optimal 70–90% range, supporting liquidity resilience. The payout ratio is 46.1%, suggesting dividends are currently covered by earnings, though cash flow coverage cannot be assessed due to unreported OCF. Given NIM at 0.7% (below the 1.5% warning threshold), earnings remain sensitive to rate dynamics and deposit beta behavior as domestic rates normalize. Operating leverage appears positive (revenue +24% vs operating income +70.9%), but we lack SG&A detail to confirm sustainability. With high statutory leverage (D/E 19.55x, bank-typical) and limited disclosed cash flows, balance sheet strength hinges on deposit stickiness and securities portfolio risk management. Forward-looking, management’s ability to protect NIM, maintain low credit costs, and sustain fee growth will determine whether ROE can move closer to peer targets. Data gaps around cash flows, credit costs, and capital adequacy (e.g., CET1) restrict deeper quality assessment, so monitoring upcoming disclosures is key.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.6% = Net Profit Margin (306.2%) × Asset Turnover (not calculable) × Financial Leverage (20.55x). The extraordinarily high net margin is an artefact of banking revenue presentation (small denominator) rather than true economic margin, while leverage is structurally high for banks. The component most clearly influencing ROE is net profit margin via earnings growth (+16.2% YoY) relative to equity base growth, while leverage is largely stable given the business model. Business drivers: NIM at 0.7% depresses true profitability; however, a strong CIR (43.0%) and ordinary income growth (+10.5% YoY) indicate expense discipline and possibly fee/non-interest support offsetting NIM pressure. Sustainability: Efficiency gains (CIR) tend to be more sustainable than market-driven gains; however, the large total comprehensive income suggests valuation tailwinds that are not guaranteed to persist as interest rates fluctuate. Concerning trends: The NIM is below warning threshold (<1.5%), structurally limiting ROE. We cannot verify whether SG&A (or equivalent bank opex) growth is below revenue growth due to missing detail, but operating income outpacing revenue suggests positive operating leverage this period.

Growth Assessment

Top-line grew 24.0% YoY and net income rose 16.2% YoY, signaling broad-based improvement despite rate headwinds. Ordinary income (+10.5% YoY) confirms core earnings resilience beyond one-time items. Net interest income is 208.80 (252.46 interest income minus 43.66 interest expense), but the NIM of 0.7% underscores that volume growth and mix, rather than pricing, likely drove gains. The strong CIR (43.0%) implies cost containment contributed meaningfully to operating income growth (+70.9% YoY). Total comprehensive income (174.25) far exceeding net income indicates sizable unrealized gains (likely AFS securities), which are non-cash and volatile; growth linked to these gains is not durable. With LDR at 79.8%, there is capacity to support loan growth without aggressive funding, supporting medium-term revenue sustainability if credit demand holds. However, sustainability depends on NIM stabilization and fee growth; if deposit betas rise with rate normalization, margin pressure could re-emerge. Outlook: Expect moderate earnings trajectory hinging on loan growth, fee income, and credit cost containment; comprehensive income is likely to normalize with rates, introducing volatility. Data limitations on credit costs, fee income mix, and segment drivers constrain precision on growth sustainability.

Financial Health

Leverage is high (D/E 19.55x) and triggers a warning by benchmark, though this is structurally normal for banks. Assets are 45,550.28 and equity is 2,216.14 (equity ratio implied ~4.9%), consistent with a leveraged balance sheet but not necessarily indicative of weak regulatory capital; CET1/total capital ratios are not disclosed here. Liquidity: Deposits are 38,415.06 and loans 30,650.41, yielding an LDR of 79.8%, within the healthy 70–90% band, suggesting no evident funding stress. Maturity mismatch: We lack current assets/liabilities detail, but typical bank practice relies on a stable retail deposit base and high-quality liquid assets; sensitivity remains to rapid deposit outflows or rate shocks affecting securities. No off-balance sheet obligations are disclosed in the provided data; contingent liabilities (guarantees, derivatives) may exist but are unreported. Explicit warning: D/E > 2.0 (19.55x). Current ratio cannot be assessed (bank metrics not applicable), and interest coverage is unreported.

Cash Flow Quality

OCF/Net income is not calculable due to unreported OCF, so earnings quality cannot be validated via cash conversion. Free cash flow and capex are not meaningful for banks in the traditional sense; cash flow quality hinges on credit cost realism, accruals discipline, and securities valuation impacts—all undisclosed here. Dividend coverage from earnings appears adequate (payout 46.1%), but FCF coverage cannot be assessed. Working capital manipulation signs cannot be evaluated without detail; banking analogs would be shifts in loans/deposits and securities reclassifications, which are not provided. The large gap between total comprehensive income (174.25) and net income (56.74) points to OCI-driven volatility rather than core cash profitability.

Dividend Sustainability

The payout ratio is 46.1%, below the 60% benchmark, implying room to sustain dividends if earnings remain stable. Cash coverage (FCF) is not assessable due to missing cash flow data, but for banks, dividend capacity also depends on regulatory capital buffers and stress test outcomes; capital metrics (e.g., CET1) are not provided. Earnings growth (+16.2% YoY) and a favorable CIR (43.0%) support near-term dividend stability, although an ultra-low NIM (0.7%) caps headroom. The significant OCI contribution to comprehensive income should not be relied upon for distributions. Policy outlook: Expect a conservative, earnings-linked dividend framework typical of regional banks; upward flexibility hinges on ROE improvement via NIM stabilization, fee growth, and benign credit costs.

Risk Assessment

Business Risks:

• Ultra-low NIM (0.7%) compresses core profitability and ROE.
• Rate risk on securities portfolio; OCI gains could reverse if yield curves shift.
• Credit cost normalization risk as macro conditions evolve (details unreported).
• Regional concentration risk typical of regional banks (limited geographic diversification).
• Fee income dependence unknown; lack of diversification data increases uncertainty.

Financial Risks:

• High leverage (D/E 19.55x) inherent to banking magnifies shocks.
• Funding/maturity mismatch risk if deposit outflows occur; current LDR 79.8% mitigates but does not eliminate.
• Capital adequacy opacity (no CET1/TSR disclosed) limits loss-absorption assessment.
• Valuation volatility in AFS/HTM securities impacting OCI and capital.
• Interest rate repricing risk (deposit beta rising faster than asset yields).

Key Concerns:

• Sustained NIM below 1.5% benchmark may keep ROE around low single digits.
• Earnings quality cannot be validated (OCF/NI unreported).
• Performance sensitivity to market valuations evidenced by comprehensive income far above net income.
• ROIC reported at 0.6% highlights weak capital efficiency versus benchmarks.

Investment Implications

Key Takeaways:

• Earnings growth is solid: revenue +24.0% YoY, net income +16.2% YoY.
• Operational efficiency is strong with CIR at 43.0%.
• Core profitability remains constrained by a 0.7% NIM and ROE at 2.6%.
• Balance sheet leverage is high (bank-typical), with LDR 79.8% supporting liquidity.
• Large OCI-driven comprehensive income (174.25) signals valuation tailwinds and potential volatility.

Metrics to Watch:

• NIM trajectory and deposit beta behavior as rates evolve.
• Credit costs/NPL ratio and coverage (not disclosed here).
• CET1 ratio and OCI sensitivity to interest rates (DV01).
• Fee income ratio and recurring non-interest income growth.
• Cost-to-income ratio sustainability and operating leverage.
• Loan growth by segment and loan yield trends.
• Liquidity metrics beyond LDR (liquidity coverage, if disclosed).

Relative Positioning: Within Japanese regional banks, efficiency (CIR 43%) appears favorable and LDR sits comfortably within the optimal band, but profitability is weaker with NIM at 0.7% and ROE at 2.6%, implying the group may trail peers on capital efficiency unless margins or fee income improve.

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