Daishi Hokuetsu Financial Group,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.47B
• Operating Income: ¥6.75B
• Net Income: ¥6.84B
• EPS: ¥87.06

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: Strong FY2026 Q2 results with broad-based profit growth, but underlying profitability remains modest for a bank given a sub-1% NIM and ROE of 4.3%, while dividend sustainability looks stretched on reported payout. Revenue rose 48.2% YoY to 74.70, and operating income nearly doubled (+97.3% YoY) to 67.53, signaling strong operating leverage. Ordinary income (core banking KPI) increased 56.8% YoY to 320.27, and net income climbed 55.6% to 228.10, confirming momentum at the pre-tax and bottom-line levels. Operating margin (vs reported revenue) expanded sharply to about 90.4%, implying sizeable margin expansion in the period, though revenue definitions for banks limit comparability. Cost discipline remains a standout: the Cost-to-Income Ratio is 22.5%, well below the <50% benchmark, supporting earnings resilience. However, Net Interest Margin is only 0.8%, well under the healthy >2% benchmark for commercial banks, indicating structural earnings pressure. ROE is 4.3% (DuPont-consistent), reflecting a combination of thin margins, very low asset turnover (banking balance sheet) and high financial leverage intrinsic to the model. Total comprehensive income of 555.69 significantly exceeds net income (228.10), suggesting large unrealized OCI gains (likely securities valuation), which can be volatile and non-cash. The balance sheet is sizable at 106,851.49 in assets, with deposits of 83,624.99 and loans of 56,927.86 (LDR 68.1%), indicating ample liquidity but potentially subdued earning-asset utilization. Leverage is high (D/E 19.23x), typical for banks, but still a risk factor as required by the framework. Reported payout ratio is 226%, raising immediate questions about dividend sustainability against current-period earnings. The equity base is solid at 5,282.40, with BVPS of about 2,014.55 yen, offering a cushion against market valuation swings in securities. Forward-looking, profit durability hinges on NIM trajectory amid BOJ policy normalization, credit cost trends, and management’s ability to grow fee/commission income to offset structural NIM constraints. Overall, operational execution and cost control were strong this quarter, but profitability quality remains constrained by low NIM and the dividend signal looks aggressive versus earnings.

Profitability Analysis

DuPont decomposition (ROE = Net Profit Margin × Asset Turnover × Financial Leverage): ROE reported/calculated is 4.3%, based on Net Profit Margin 305.4%, Asset Turnover 0.001, and Financial Leverage 20.23x. The component changing the most versus typical bank norms is the extremely low Asset Turnover, which reflects the large balance sheet of a bank relative to reported revenue measures (and the mismatch between IFRS/JGAAP revenue presentation and banking income). Net Profit Margin appears mathematically high due to the revenue definition used here (not a clean proxy for gross banking income), so we treat it as a presentation artifact rather than genuine margin expansion. Financial leverage is structurally high (D/E 19.23x), consistent with deposit-funded banking models. Business drivers: profit growth was primarily supported by higher ordinary income (+56.8% YoY) and robust cost control (CIR 22.5%), not by a structural improvement in NIM (still 0.8%). Sustainability: cost efficiency looks sustainable near-term, but the very low NIM limits sustainable ROE improvements unless asset yields reprice or fee income grows materially. Watch for any SG&A growth outrunning income; for now, SG&A was 6.07 and income growth outpaced expenses substantially, indicating positive operating leverage.

Growth Assessment

Top-line momentum is strong on reported metrics: revenue +48.2% YoY and ordinary income +56.8% YoY, pointing to strong core earnings. Net income +55.6% YoY confirms operating leverage and benign credit costs in the period. However, NIM at 0.8% underscores that structural revenue per unit of assets is weak; hence growth likely came from volume, spreads in select books, securities-related gains, and tight costs. Total comprehensive income (555.69) far exceeded net income due to OCI gains, which are non-recurring by nature and can reverse with rate moves; hence not a stable growth driver. LDR at 68.1% suggests room to deploy deposits into loans, but doing so at low NIM may not lift ROE meaningfully. Outlook: near-term profit should remain supported by costs and stable credit, but medium-term earnings growth depends on loan repricing as BOJ normalization proceeds and on expanding non-interest income.

Financial Health

Liquidity: Reported current ratio of 766.7% is not meaningful for banks given classification, but deposit base (83,624.99) vs loans (56,927.86) and LDR 68.1% indicate strong liquidity and a low maturity mismatch risk. Solvency: D/E is 19.23x (explicit warning per framework), typical for a bank but still denotes sensitivity to asset quality and securities valuation swings. Capital: Total equity 5,282.40 provides a buffer; ROE 4.3% suggests limited capital accretion from earnings unless profitability improves. Maturity mismatch: With loans below deposits and ample liquidity, immediate rollover risk appears low. Off-balance sheet: None reported in the provided data; contingent liabilities, guarantees, and derivatives exposures are not disclosed here, representing a data limitation.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and FCF cannot be assessed. Earnings quality therefore cannot be corroborated by cash conversion in this dataset. The substantial gap between comprehensive income (555.69) and net income (228.10) implies a large OCI contribution, likely from securities revaluation, which is non-cash and volatile. Working capital signals are not meaningful for banks from the limited current/noncurrent breakdown provided. Without OCF and capex data, FCF coverage of dividends cannot be validated; proceed assuming higher risk until proven by full cash flow disclosures.

Dividend Sustainability

Reported payout ratio is 226.0%, which is above the <60% sustainable benchmark and implies dividends exceed current-period earnings. This may reflect period mismatch (e.g., interim EPS vs full-year DPS) or bank-specific payout policies, but based on the provided figure, sustainability is questionable without stronger earnings or capital buffers. FCF coverage cannot be assessed due to absent cash flow data. Policy outlook likely aims for stable or gradually increasing dividends, but future payouts will need to align with ROE trajectory and capital requirements under regulatory frameworks.

Risk Assessment

Business Risks:

• Structural low NIM at 0.8% constraining core profitability.
• Revenue definition issues for banks make margin metrics volatile vs reported revenue.
• Dependence on securities-related valuation (OCI) which can reverse with rate changes.
• Regional economic demographics in core markets potentially limiting loan growth and fee income.

Financial Risks:

• High leverage (D/E 19.23x) increases sensitivity to credit losses and market valuation swings.
• Interest rate risk in the securities portfolio; OCI volatility evident from comprehensive income.
• Credit cost normalization risk if macro weakens; not disclosed here.
• Liquidity deployment risk: LDR 68.1% suggests underutilized deposits; raising LDR at low NIM could pressure ROE.

Key Concerns:

• Dividend sustainability flagged by a 226% payout ratio based on current data.
• Earnings quality unconfirmed due to missing OCF and cash flow information.
• Profitability relies heavily on cost discipline (CIR 22.5%); any cost drift could materially impact earnings at a 0.8% NIM.

Investment Implications

Key Takeaways:

• Profit growth is strong across operating, ordinary, and net income lines (+56–97% YoY), demonstrating solid execution and cost control.
• Core profitability remains modest with ROE at 4.3% and NIM at 0.8%; structural uplift needed for higher returns.
• Comprehensive income outpaced net income materially, highlighting securities valuation tailwinds and associated volatility.
• Balance sheet liquidity is ample (LDR 68.1%), but monetizing it at acceptable spreads is the challenge.
• Dividend appears aggressive relative to earnings (226% payout per provided data).

Metrics to Watch:

• NIM trajectory and loan yield repricing as BOJ policy normalizes.
• Credit costs/non-performing loans ratio and coverage (not provided here).
• Fee and commission income growth to supplement interest income.
• Securities portfolio duration, unrealized gains/losses, and OCI sensitivity.
• Cost-to-Income Ratio sustainability and SG&A trends.
• Capital adequacy metrics (CET1/Tier1) once disclosed.

Relative Positioning: Within Japanese regional banks, cost efficiency (CIR 22.5%) is a relative strength, liquidity is conservative (LDR 68.1%), but profitability is constrained by a very low NIM and a mid-single-digit ROE; dividend signalling appears on the aggressive side versus current earnings.

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