The Musashino Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥48.90B
• Net Income: ¥8.20B
• EPS: ¥245.15

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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: A solid half-year with double-digit topline and ordinary income growth, but low NIM keeps ROE subdued despite excellent cost control. Revenue rose 19.3% YoY to 489.0, with ordinary income up 22.6% YoY to 117.0 and net income up 15.2% YoY to 81.1. Net interest income (interest income 307.6 minus interest expense 61.9) indicates stable core earnings, but the reported NIM remains very low at 0.6%. Cost efficiency is a standout: the cost-to-income ratio (CIR) is 38.9%, comfortably better than the <50% benchmark. Ordinary income margin expanded roughly 60 bps YoY to 23.9%, reflecting operating leverage from revenue growth outpacing costs. However, net margin compressed about 60 bps YoY to 16.6%, likely due to higher taxes (effective tax rate 30.7%) and/or other below-the-line items. ROE is 2.9%, constrained by a low asset turnover of 0.009 and a structurally low NIM environment. Comprehensive income was 153.0, significantly above net income, suggesting sizable unrealized gains flowing through OCI (likely from securities valuation), which supported equity in the period. Leverage is optically high (D/E 18.7x), normal for banks funded predominantly by deposits; liquidity appears sound with an 81.9% loan-to-deposit ratio. Reported equity of 2,809.97 supports a calculated BVPS of about JPY 8,503, providing a solid capital cushion though regulatory ratios (CET1, Total capital) are undisclosed here. Earnings quality cannot be fully assessed due to unreported operating cash flow, but the revenue/ordinary income progression and CIR offer comfort on core profitability. Dividend affordability looks acceptable with a 51.5% payout ratio, though sustainability ultimately hinges on core earnings and credit cost trends. Forward-looking, a gradual domestic rate normalization could lift NIM from a very low base, but will create mark-to-market volatility for securities and could pressure OCI and capital. Watch for credit cost normalization and regional loan demand as key swing factors into 2H.

Profitability Analysis

ROE decomposition and drivers: ROE (2.9%) = Net Profit Margin (16.6%) × Asset Turnover (0.009) × Financial Leverage (19.70x). The limiting factor remains extremely low asset turnover, inherent to the banking balance sheet, compounded by a very low NIM. YoY, ordinary income growth (+22.6%) outpaced revenue (+19.3%), expanding the ordinary income margin about +60 bps to 23.9%, indicating positive operating leverage and strong cost discipline (CIR 38.9%). Net margin slipped roughly -60 bps to 16.6%, implying higher tax drag or non-operating items offsetting operating leverage. The largest effective change versus value creation is margin dynamics (ordinary margin up, net margin down), while leverage is largely stable at a high level typical for banks. Business context: revenue growth likely reflects higher interest income in a rising-rate backdrop and steady fees, while expenses were tightly managed. Sustainability: cost discipline appears durable; NIM uplift is possible if BOJ normalization continues, but securities valuation swings could offset. Flags: despite topline strength, ROE remains modest; maintain vigilance if expense growth re-accelerates faster than revenue or if credit costs rise.

Growth Assessment

Topline growth of 19.3% YoY and ordinary income growth of 22.6% YoY suggest healthy momentum in core banking earnings. Net income grew 15.2% YoY, trailing ordinary income due to tax or below-the-line effects (effective tax 30.7%). The 0.6% NIM remains a structural headwind; any incremental rate pass-through would be a key upside lever. Fee and other non-interest income trends are not disclosed; hence, growth breadth cannot be confirmed. Comprehensive income (153.0) above net income (81.1) implies market tailwinds (e.g., bond/stock valuation gains) in the half; these are non-cash and reversible. Outlook: with an 81.9% LDR, there is room to expand loans without stressing liquidity, supporting measured growth. Risks to growth include credit cost normalization and regional demographic headwinds. Near-term, expect continued cost discipline to underpin ordinary income; net income trajectory will depend on tax/OCI volatility and credit costs.

Financial Health

Liquidity: LDR at 81.9% indicates ample deposit funding relative to loans; liquidity profile appears comfortable for a regional bank. Solvency: D/E at 18.70x triggers a formal leverage warning, but this is structurally normal for deposit-funded banks; regulatory capital ratios (CET1/Tier1/Total) are not provided, limiting solvency assessment. Maturity mismatch: without detailed maturity buckets, we infer manageable risk given LDR < 90% and strong CIR; however, sensitivity to deposit repricing and securities duration remains. No off-balance sheet obligations are disclosed in the provided data; guarantees/commitments typical for banks may exist but are unreported here. No current ratio/quick ratio is applicable for banks and is not disclosed.

Cash Flow Quality

OCF/Net Income is not calculable due to unreported cash flows; hence, formal earnings quality testing is limited. Free cash flow is not applicable in the conventional sense for banks, and capex/dividend cash coverage cannot be evaluated from the data. Qualitatively, ordinary income growth exceeding revenue growth and a low CIR point to solid core earnings; however, the large positive swing in comprehensive income versus net income indicates material OCI contributions that can reverse with market moves. No signs of working capital manipulation can be inferred in banking context from the disclosed items.

Dividend Sustainability

The calculated payout ratio is 51.5%, within a generally sustainable range (<60%) for regional banks when core earnings are stable. FCF coverage cannot be assessed due to absent cash flow data. Balance sheet strength (equity 2,809.97; BVPS ~JPY 8,503) provides some cushion, but sustainability ultimately depends on core net business profit and credit costs. With NIM at 0.6%, dividend headroom hinges on maintaining low CIR and benign credit costs; rising rates could support earnings, while securities valuation losses could pressure capital and future payout flexibility. No DPS figures were disclosed for the period.

Risk Assessment

Business Risks:

• Sustained low NIM (0.6%) limiting earnings power even with volume growth
• Regional demographic headwinds potentially muting loan growth and fee income
• Credit cost normalization from cyclical or idiosyncratic borrower stress

Financial Risks:

• High reported leverage (D/E 18.7x), structurally normal for banks but magnifies shocks
• Securities valuation risk affecting OCI and capital as rates/markets move
• Deposit repricing risk if funding costs rise faster than asset yields
• Potential liquidity pressure under stress despite current LDR of 81.9%

Key Concerns:

• ROE at 2.9% below cost of equity, requiring margin/fee/cost actions to improve
• Net margin compressed ~60 bps YoY despite strong ordinary income margin
• Data gaps (no cash flows, no capital adequacy ratios) constrain risk visibility

Investment Implications

Key Takeaways:

• Strong top-line (+19.3%) and ordinary income (+22.6%) growth with excellent cost control (CIR 38.9%)
• Net margin compressed ~60 bps; effective tax rate at 30.7% weighed on bottom line
• NIM at 0.6% remains the core profitability bottleneck; ROE stuck at 2.9%
• Comprehensive income significantly above net income, indicating supportive but volatile OCI
• Liquidity sound (LDR 81.9%); leverage optically high but typical for banks

Metrics to Watch:

• NIM trajectory and asset yield vs deposit cost gap
• Credit costs (NPL ratio, coverage) and loan growth by segment/region
• CIR/operating expense trends to preserve operating leverage
• Unrealized gains/losses on securities and duration positioning
• Capital ratios (CET1/Tier1) and dividend policy updates

Relative Positioning: Within Japanese regional banks, Musashino Bank exhibits strong cost efficiency (CIR ~39%) and balanced LDR, but profitability metrics (NIM 0.6%, ROE 2.9%) are subdued versus peers with higher fee income or rate sensitivity; earnings leverage to a gradual rate normalization is present but offset by securities valuation risk.

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