Aozora Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Income: ¥12.92B
• EPS: ¥98.37

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

Aozora Bank (83040) reported FY2026 Q2 consolidated results under JGAAP with net income of ¥13.613 billion, up 14.2% YoY, indicating improved bottom-line performance despite limited disclosure of revenue-level details. Operating income and ordinary income were both ¥15.38 billion, suggesting minimal contribution from non-operating items in the quarter. The reported income tax expense was ¥1.927 billion, implying an effective tax rate of roughly 12.5% based on ordinary income, which is relatively low versus typical statutory rates and may reflect tax credits, reversals, or geographic mix. Total assets stood at ¥8,165.6 billion, liabilities at ¥7,302.7 billion, and equity at ¥473.3 billion, implying an equity ratio of approximately 5.8% (calculated), which is consistent with a leveraged bank balance sheet. The DuPont leverage factor provided is 17.25x, broadly aligned with the calculated balance sheet leverage (liabilities/equity of roughly 15.4x), highlighting the structurally high leverage inherent in banking. Using period-end equity, ROE approximates 2.9% for the reported period and roughly 5.8% if simply annualized, though this assumes Q2 represents a half-year cumulative period and stable run-rate. On an asset basis, ROA is approximately 0.17% for the period (about 0.33% annualized), consistent with a traditional commercial bank earnings profile. Operating income was reported flat YoY (+0.0%), limiting inference on core expansion; however, the net income growth suggests improved cost discipline, lower credit costs, favorable tax items, or mix effects. Cash flow statements were not disclosed (zeros reflect non-reporting), constraining assessment of earnings-to-cash conversion and funding dynamics. Dividend and share data were largely undisclosed (DPS, outstanding shares, and book value per share reported as zero), so payout assessments rely on earnings rather than cash distributions. For a bank, conventional manufacturing metrics such as gross margin, current ratio, and inventory are not economically meaningful; the key lenses are net interest margin, credit costs, fee income, operating expenses, securities portfolio marks, and regulatory capital ratios—most of which are not provided here. The equity base of ¥473.3 billion relative to assets implies a thin capital buffer typical of banks, underscoring the importance of CET1 and risk-weighted capital, which are not disclosed. Given the limited data, results appear stable to modestly improving at the bottom line, with prudent interpretation required due to absent revenue detail, credit cost disclosure, interest rate sensitivity, and capital adequacy metrics. The low effective tax rate warrants monitoring for sustainability, as normalization could temper net income growth. Overall, the period shows resilient profitability despite constrained visibility on the drivers, and emphasizes the need to track net interest income trends, credit cost normalization, and mark-to-market impacts on the securities portfolio in subsequent quarters.

Profitability Analysis

ROE decomposition: Using net income of ¥13.613b and period-end equity of ¥473.322b, period ROE is ~2.9% (annualized ~5.8% if Q2 is a half-year cumulative period). DuPont leverage is 17.25x (provided), broadly consistent with liabilities/equity of ~15.43x; net profit margin and asset turnover were not disclosed in a bank-appropriate format, so reported zeros should be treated as unavailable. ROA approximates 0.17% for the period (¥13.613b / ¥8,165.591b). Margin quality: Ordinary income equaled operating income (both ¥15.38b), implying limited non-operating noise in the quarter; the low effective tax rate (~12.5%) boosted net margins. Operating leverage: With operating income flat YoY and net income up 14.2% YoY, improvement likely reflects below-the-line items (tax/credit costs) or cost containment rather than strong revenue expansion; explicit cost/income dynamics were not disclosed.

Growth Assessment

Revenue sustainability cannot be assessed due to non-disclosure of revenue/NII and fee income. Profit growth: Net income rose 14.2% YoY to ¥13.613b, while operating income was flat at ¥15.38b, suggesting growth driven by improved efficiency, lower provisions, or tax effects. Outlook: If the effective tax rate normalizes upward, net income growth could moderate absent stronger core income. Given the rate environment, earnings sensitivity to net interest margin, loan growth, and securities valuation is material but not quantifiable here. Without credit cost disclosure, the durability of earnings uplift cannot be confirmed. Absent fee income granularity, diversification benefits are unknown. Overall, growth appears modest and quality depends on sustainability of credit costs and taxes.

Financial Health

Liquidity: Current and quick ratios are not meaningful for banks; no cash flow data disclosed. Funding stability and liquidity buffers (LCR/NSFR) were not provided. Solvency/capital: Equity of ¥473.3b against assets of ¥8,165.6b implies an equity ratio of ~5.8% (calculated). Debt-to-equity of ~15.43x aligns with typical bank leverage. Regulatory capital metrics (CET1, total capital ratio) are not disclosed; thus capital adequacy cannot be assessed. Asset quality metrics (NPL ratio, coverage) are absent. Overall, balance sheet leverage is high as expected for a bank; solvency assessment is limited by missing regulatory ratios and credit quality data.

Cash Flow Quality

Earnings quality cannot be triangulated due to non-disclosure of operating, investing, and financing cash flows. Free cash flow is also not assessable for a bank using manufacturing-style FCF; bank cash flow quality is better evaluated via NII, credit costs, and funding mix, none of which are provided. Working capital metrics (current assets/liabilities, inventories) are not relevant for banks and were not disclosed. As a result, we cannot comment on OCF/NI conversion or cash generation durability for this period.

Dividend Sustainability

Dividend data (DPS, payout ratio, FCF coverage) were not disclosed. With EPS of ¥98.37 for the period, payout capacity exists in principle, but sustainability depends on core profitability, credit costs, and capital requirements. Without regulatory capital ratios (e.g., CET1) and distribution policy guidance, we cannot evaluate headroom for dividends or buybacks. If the effective tax rate rises from ~12.5% toward a more normalized level, distributable earnings growth may be lower than the current YoY net income increase suggests.

Risk Assessment

Business Risks:

• Net interest margin compression due to yield curve shifts and deposit repricing
• Credit cost normalization from low levels; potential uptick in NPLs
• Securities portfolio valuation volatility amid rate moves
• Fee income softness if market activity or customer flows weaken
• Competition for deposits and loans impacting spreads

Financial Risks:

• High leverage inherent to banking (equity ratio ~5.8%)
• Unknown regulatory capital headroom (CET1 not disclosed)
• Concentration risk in loan book or securities not disclosed
• Interest rate risk and duration mismatch in the banking book
• Potential normalization of a low effective tax rate (~12.5%)

Key Concerns:

• Limited disclosure on NII, fee income, and credit costs restricts visibility into core drivers
• Absence of capital adequacy metrics (CET1, leverage ratio)
• Unclear sustainability of YoY net income growth given flat operating income

Investment Implications

Key Takeaways:

• Net income improved 14.2% YoY to ¥13.613b despite flat operating income at ¥15.38b
• Period ROE ~2.9% (annualized ~5.8%) on equity of ¥473.3b; ROA ~0.17%
• Calculated equity ratio ~5.8% and D/E ~15.4x reflect typical bank leverage
• Low implied effective tax rate (~12.5%) supported bottom line; sustainability uncertain
• Limited transparency on NII, credit costs, and securities marks constrains analysis

Metrics to Watch:

• Net interest income and net interest margin (NIM)
• Credit costs (provisions, NPL ratio, coverage ratio)
• Fee and commission income trajectory
• Operating expense trend and cost-to-income ratio
• Regulatory capital (CET1 ratio, leverage ratio) and dividend policy updates
• Securities portfolio duration/OCI sensitivity and unrealized gains/losses

Relative Positioning: Within Japanese banks, the reported profitability appears modest but stable with leverage consistent with peers; however, lack of disclosure on core revenue drivers, credit quality, and capital ratios limits comparability and narrows visibility relative to fully disclosed peers.

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