The Gunma Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥131.62B
• Net Income: ¥25.79B
• EPS: ¥72.98

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 topline and profit growth with exceptional cost efficiency, but profitability quality is constrained by a very low net interest margin and structurally high leverage inherent to banking. Revenue rose 18.8% year over year to 1,316.22 (100M JPY), with ordinary income up 25.8% to 405.82 and net income up 21.5% to 278.54. The net profit margin stands at 21.2%, supported by a best-in-class cost-to-income ratio (CIR) of 21.3%. Net interest margin (NIM) is just 0.7%, highlighting reliance on volume, cost control, and non-interest sources to sustain earnings. The loan-to-deposit ratio (LDR) of 81.6% indicates ample funding headroom and a conservative liquidity stance. Financial leverage is 17.81x and the reported D/E is 16.81x, which is high but typical for banks; equity adequacy specifics (CET1/Tier1) are not disclosed here. ROE is 4.7%, in line with the DuPont calculation and broadly consistent with regional bank norms, but below a typical cost of equity. Total comprehensive income of 515.21 materially exceeds net income (278.54), implying sizable valuation gains in OCI (likely from securities), which adds volatility risk if rates move adversely. Basis point comparison of margins versus last year is not calculable due to missing prior-period margin details, though net income growth outpacing revenue suggests some margin expansion. Earnings quality cannot be verified as operating cash flow is unreported. With deposits at 85,228.99 and loans at 69,551.28, funding stability looks sound, and liquidity risks from over-lending are limited. The effective tax rate is 30.3%, consistent with domestic norms. Payout ratio is 64.0%, slightly above our sustainability benchmark of 60%, warranting monitoring given a sub-5% ROE. Forward-looking, the bank’s ability to defend CIR and improve NIM (or grow fee income) will determine whether ROE can lift toward mid-single digits. Securities valuation swings (reflected in OCI) are a material driver of comprehensive earnings and capital, implying sensitivity to rate and market moves. Overall, execution on efficiency is strong, but structural yield pressure and securities volatility are key watchpoints.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.7% = Net Profit Margin (21.2%) × Asset Turnover (0.012) × Financial Leverage (17.81x). The dominant driver of ROE is high financial leverage, which is structural for banks, while asset turnover is inherently low due to the large balance sheet relative to revenue. Net margin is respectable at 21.2% given the very low NIM, implying strong non-interest contributions and/or tight expense control (CIR 21.3%). Among the components, the weakest is asset turnover, consistent with a balance-sheet-intensive model; leverage has the largest numerical effect on ROE. Business reason: low domestic rate environment compresses NIM (0.7%), so profitability leans on scale and cost discipline. Sustainability: cost efficiency appears strong and likely repeatable; however, margin support from securities or one-off gains (suggested by large OCI) may be volatile. Concerning trends: none evident on SG&A versus revenue due to lack of disclosure, but NIM at 0.7% is a structural profitability headwind. Operating leverage likely benefited ordinary income growth outpacing revenue (+25.8% vs +18.8%), but exact margin expansion in bps cannot be quantified with available data.

Growth Assessment

Topline grew 18.8% YoY to 1,316.22, with ordinary income up 25.8% and net income up 21.5%, indicating healthy operating leverage. Revenue growth sustainability hinges on loan growth (loans 69,551.28) and fee income, given NIM is only 0.7%. Profit quality is mixed: core efficiency is excellent (CIR 21.3%), but the large gap between total comprehensive income (515.21) and net income (278.54) suggests non-core valuation effects, adding volatility to reported equity and book value. With LDR at 81.6%, there is room to deploy deposits into loans selectively; however, regional demographics could constrain volume growth. Without OCF and segment/fee breakdowns, we cannot fully assess recurring vs one-off drivers. Outlook: absent rate tailwinds, incremental ROE improvement will likely come from fee income expansion, disciplined credit cost management, and sustained cost control; downside risks stem from securities valuation swings and any uptick in credit costs.

Financial Health

Leverage is high (D/E 16.81x; financial leverage 17.81x), which is normal for banks but still increases sensitivity to asset valuation and credit cycles. Liquidity appears sound with deposits of 85,228.99 and loans of 69,551.28 (LDR 81.6%), implying a stable funding surplus and limited reliance on wholesale funding in this snapshot. Current ratio and quick ratio are not calculable for banks with the provided data and are less meaningful given the business model. Maturity mismatch risk exists structurally (short-term deposits funding longer-dated loans/securities), and with NIM at 0.7%, the asset-liability duration profile demands careful management; detailed ALM metrics are not disclosed. No off-balance sheet obligations are reported here; contingent exposures (guarantees, commitments) are unknown due to data limits. Equity base totals 5,990.10 against assets of 106,660.18 (~5.6% equity-to-asset ratio), consistent with regional bank peers but sensitive to OCI swings.

Cash Flow Quality

Operating cash flow is unreported; OCF/Net Income and FCF cannot be calculated, so earnings quality via cash conversion cannot be assessed. The large difference between total comprehensive income and net income indicates sizable unrealized valuation effects in OCI, which do not translate into cash and can reverse. Working capital indicators are not applicable in a conventional sense for banks; loan/deposit flows drive cash, and those details are not provided. Dividend and capex coverage by FCF cannot be evaluated without cash flow data; sustainability must be inferred from earnings and capital buffers.

Dividend Sustainability

The payout ratio is 64.0%, slightly above our <60% comfort threshold, and ROE is 4.7%, implying a modest margin of safety. Free cash flow coverage is not calculable. Retained earnings stand at 4,832.70, providing an earnings buffer, but comprehensive income volatility (OCI) can affect capital. With NIM at 0.7% and potential rate/market risks, sustaining or raising dividends likely depends on maintaining low CIR and stable credit costs. Policy outlook: absent a clear uplift in core earnings (NIM or fees), dividend growth may be measured; monitoring capital adequacy ratios (not disclosed) is essential for payout capacity.

Risk Assessment

Business Risks:

• Sustained NIM compression at 0.7% limits core profitability and ROE.
• Regional loan demand constraints given local demographics could cap volume-led growth.
• Fee income concentration or weakness (breakdown not disclosed) could impair diversified earnings.
• Credit cost normalization from very low levels would pressure margins and profits.

Financial Risks:

• High leverage (D/E 16.81x) amplifies sensitivity to asset valuation and credit losses.
• Securities portfolio valuation risk; large OCI contribution suggests duration/market risk to capital and comprehensive income.
• ALM duration mismatch risk with short-term deposits funding longer-dated assets amid rate volatility.
• Liquidity outflow risk in stress scenarios despite current LDR of 81.6% (wholesale reliance unknown).

Key Concerns:

• Very low NIM (0.7%) versus healthy benchmark (>2%) underscores structural earnings headwinds.
• Dependence on cost discipline (CIR 21.3%) to offset revenue yield weakness may face limits.
• Dividend payout (64%) slightly above comfort threshold given sub-5% ROE.
• Data gaps (OCF, capital ratios, credit costs, fee income) constrain full risk evaluation.

Investment Implications

Key Takeaways:

• Strong YoY growth in revenue (+18.8%) and net income (+21.5%) with exceptional efficiency (CIR 21.3%).
• ROE at 4.7% is leverage-driven and constrained by a 0.7% NIM.
• Liquidity stance is conservative (LDR 81.6%), supporting funding stability.
• Comprehensive income far exceeds net income, signaling securities valuation tailwinds and potential volatility.
• Dividend payout ratio at 64% warrants monitoring given earnings quality uncertainties and low ROE.

Metrics to Watch:

• NIM trajectory and loan yield versus deposit cost.
• CIR and progress on structural cost initiatives.
• Credit cost ratio / NPL trends and reserve coverage (not disclosed).
• Capital adequacy (CET1/Tier1) and OCI sensitivity to rates.
• Fee income contribution and diversification.
• LDR and wholesale funding dependence.

Relative Positioning: Versus Japanese regional bank peers, Gunma Bank displays superior operating efficiency (very low CIR) and a conservative LDR, but profitability is capped by a very low NIM and ROE around the sector average; earnings and capital remain more sensitive to securities valuation swings than banks with higher pure spread income.

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