The Musashino Bank (8336) FY2026 FY Earnings Report

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Executive Summary

Both ordinary revenue and ordinary income posted double-digit growth, primarily driven by the expansion of fund investment income amid rising interest rates. However, the increase in net income was slower than that at the ordinary income level due to a rise in the effective tax rate. Ordinary revenue was ¥1,056.8B (+25.6% YoY), ordinary income was ¥228.1B (+25.9%), and net income was ¥154.2B (+16.3%). The expansion of fund investment income in the Banking Business was the largest growth driver, while the 6.5% increase in general and administrative expenses was substantially below revenue growth, resulting in positive operating leverage.

Factors Affecting Performance

【Revenue】Ordinary revenue increased 25.6% YoY to ¥1,056.8B. The Banking Business accounted for ¥912.5B (86.2% of total revenue, +29.8% YoY), driving consolidated growth, with revenue from lending operations (+25.3%) and securities investment operations (+66.4%) contributing to the increase. The Leasing Business generated ¥116.9B (+5.0%), and Other Businesses generated ¥20.1B (+7.2%), both representing stable growth, while the Credit Guarantee Business declined 6.7% to ¥9.1B.

【Profit and Loss】Ordinary income increased 25.9% YoY to ¥228.1B. The ¥131.6B increase in fund investment income exceeded the ¥65.4B increase in fund procurement costs, contributing to the expansion of net interest income. Meanwhile, net income was limited to ¥154.2B (+16.3%), as the increase in the effective tax rate to 32.4% caused the net profit margin to decline from 15.6% in the previous year to 14.6%. Extraordinary income and losses were negligible, consisting only of ¥0.1B in extraordinary losses, and the impact of temporary factors was limited. Both revenue and profit increased.

Segment Analysis

The Banking Business accounted for the majority of consolidated profit, with ordinary revenue of ¥912.5B (+29.8%), segment profit of ¥216.4B (+26.4%), and a profit margin of 23.7%. The Leasing Business generated ordinary revenue of ¥116.9B (+5.0%), profit of ¥4.2B (+6.5%), and a profit margin of 3.6%, indicating lower profitability than the Banking Business. The Credit Guarantee Business generated ordinary revenue of ¥9.1B (-6.7%) and profit of ¥11.7B (-3.2%), but its profit margin was 128.5%, making it a highly profitable business in which costs are extremely small relative to guarantee fee revenue. Other Businesses generated ordinary revenue of ¥20.1B (+7.2%) and profit of ¥4.8B (+14.0%), with a profit margin of 23.9%, representing growth. The company has a high dependence on the Banking Business, and fluctuations in the regional financial environment therefore affect consolidated performance.

Key Financial Metrics

【Profitability】The ordinary income margin was 21.6% (slightly improved from 21.5% in the previous year), while the net profit margin was 14.6% (down from 15.6% in the previous year), with the increase in the effective tax rate being the primary cause of the decline in the net profit margin. ROE was 5.5%, a level supported by high financial leverage based on deposits.【Cash Flow Quality】Operating Cash Flow (OCF) was negative ¥139.0B, representing a significant divergence from net income of ¥154.2B, and OCF/net income was negative 0.90x. However, in the Banking Business, fund movements involving deposits, loans, and securities directly affect OCF; therefore, it is not appropriate to apply the same benchmark criteria used for general operating companies without adjustment.【Investment Efficiency】Capital expenditures were ¥9.1B against depreciation and amortization of ¥40.7B, resulting in a low capital expenditures/depreciation and amortization ratio of 0.22x, indicating that investment in the renewal of tangible assets was limited.【Financial Soundness】The equity ratio was 5.0% (the BIS capital ratio disclosed by the company was 4.9%), while the loan-to-deposit ratio was 83.2% (loans ¥4,308.9B ÷ deposits ¥5,177.0B), within the generally appropriate range.

Cash Flow Analysis

OCF was negative ¥139.0B. Although this represented an improvement from negative ¥283.0B in the previous year, cash backing for net income of ¥154.2B was not secured. Investing Cash Flow was an inflow of ¥753.2B, consistent with the ¥897.2B YoY decline in the securities balance, suggesting that portfolio contraction and replacement were the primary sources of the cash inflow. Capital expenditures were limited to ¥9.1B, and the inflow from Investing Cash Flow was attributable not to business investment but to securities transactions. Financing Cash Flow was negative ¥54.3B, with dividend payments and share repurchases of ¥6.3B being the primary sources of cash outflow. Free Cash Flow, calculated as the sum of OCF and Investing Cash Flow, was ¥614.1B. However, as this includes temporary effects from the sale, purchase, and redemption of securities, caution is required when evaluating it as a measure of recurring cash-generation capacity.

Earnings Quality

The difference between pretax income of ¥227.98B and ordinary income of ¥228.06B was essentially limited to ¥0.07B in extraordinary losses, and no earnings boost from one-time extraordinary gains was identified. Income taxes were ¥73.8B, resulting in an effective tax rate of 32.4%. The heavier tax burden compared with the previous year was the primary factor causing net income growth to lag ordinary income growth. Comprehensive income was ¥179.6B, representing a divergence of approximately ¥25B from net income attributable to owners of the parent of ¥154.1B. Other securities valuation difference was significantly worse at negative ¥113.9B, while deferred hedge gains and losses of positive ¥96.2B and adjustments related to retirement benefits of positive ¥43.0B offset this decline. The fact that OCF did not provide net support for earnings requires monitoring from an earnings quality perspective, even after taking into account the fund movement characteristics of the Banking Business.

Earnings Forecast and Guidance

The full-year company forecast calls for ordinary revenue of ¥1,150.0B, ordinary income of ¥287.0B (+25.8% versus the previous fiscal year’s actual results), and net income of ¥190.0B (+27.9%). Progress against the company’s forecast based on current-period actual results reached approximately 91.9% for ordinary revenue, approximately 79.5% for ordinary income, and approximately 79.0% for net income (an indicative progress measure based on the previous fiscal year’s actual results). The plan for the following fiscal year assumes increased revenue and profit, incorporating the continued tailwind from the interest-rate environment and sustained expansion in fund investment income.

Shareholder Returns

Actual dividends for the current period were ¥80 per share for the interim dividend and ¥90 per share for the year-end dividend, for an annual total of ¥170, based on figures before the three-for-one stock split effective April 1, 2026. The payout ratio was 36.4% based on company disclosures, and cash dividend payments totaled ¥48.1B. Including share repurchases of ¥6.3B, the total return ratio was approximately 35.3%, which is not excessive at present. The forecast dividend for the following fiscal year is ¥82 per share based on the post-stock-split basis. The payout ratio against forecast EPS of ¥204.63 is approximately 40.1%, representing a modest increase from the actual 36.4%. Because the impact of the stock split is included, dividend amounts should not be compared mechanically before and after the split; evaluation should instead be based on the payout ratio disclosed by the company.

Risk Factors

1. Low NIM and rising funding costs: Fund procurement costs increased sharply by 90.9% YoY. Fund profit expanded during the current period because the ¥131.6B increase in fund investment income exceeded the ¥65.4B increase in funding costs. However, if funding costs rise faster than asset yields improve in a continuing rate-hike environment, fund profit could come under pressure.

2. Capital adequacy: The disclosed equity ratio was 5.0% (4.9% under BIS standards), below the generally cited minimum guideline of 8%. Other securities valuation difference deteriorated from the previous year to negative ¥113.9B, making it necessary to continue monitoring the impact of fluctuations in securities market values on the capital buffer.

3. Business concentration risk: The Banking Business accounts for 86.2% of consolidated ordinary revenue, while more than 90% of revenue is generated domestically, resulting in high sensitivity to regional economic conditions and the domestic interest-rate environment. The securities balance declined by ¥897.2B YoY, and fluctuations in income and valuation gains and losses associated with the replacement of the investment portfolio also warrant close monitoring.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The net profit margin is slightly above the industry median, but compared with the upper quartile of the IQR at 35.4%, the company is positioned around the middle of the industry.

Growth and Capital Efficiency

The revenue growth rate is substantially above the industry median, and the revenue increase amid the current period of rising interest rates was at a high level within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Against the backdrop of rising interest rates, ordinary revenue (+25.6%) and ordinary income (+25.9%) showed high growth in core operating revenue even within the industry. However, due to the increase in the effective tax rate, net income growth was limited to +16.3%, creating a difference between growth at the ordinary income level and after-tax growth.

2. General and administrative expenses increased by 6.5%, substantially below revenue growth. Positive operating leverage was evident during the current period, while OCF was negative ¥139.0B and showed a significant divergence from net income, requiring continued monitoring from the perspective of earnings conversion into cash.

3. The equity ratio was 4.9%–5.0%, below the generally cited guideline of 8%. Given the concurrent deterioration in the valuation difference on securities, the trend in capital adequacy should be a key focus in future financial results.

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This report is an earnings analysis document automatically generated by AI based on XBRL financial results data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results data. Investment decisions should be made at your own responsibility and, where necessary, after consulting with a professional advisor.

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