The Musashino Bank (8336) FY2026 Q3 Earnings Report

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Executive Summary

Revenue and earnings increased, primarily driven by the expansion of interest income. The Company achieved high-quality earnings growth, with the rate of increase in ordinary income exceeding that of ordinary revenue. Ordinary revenue (equivalent to revenue) was ¥75.95B (+22.3% YoY), ordinary income was ¥18.29B (+30.7%), and net income was ¥12.81B (+25.6%). The increase in interest on loans drove revenue growth, while the 6.5% increase in expenses remained below revenue growth, generating positive operating leverage. Meanwhile, interest on deposits surged by +252.3% YoY, making the trend in funding cost increases a key focus going forward.

Factors Affecting Performance

【Revenue】Of ordinary revenue of ¥75.95B (+22.3% YoY), the banking business accounted for ¥65.21B (85.7% of total revenue, +25.9% YoY), driving overall performance. Funds investment income was ¥47.98B (+23.5%), of which interest on loans was ¥36.56B (+24.6%) and represented the largest contributor to revenue growth. Fees and commissions income remained limited at ¥11.81B (+0.7%), indicating modest growth in non-interest income. The leasing business (¥8.72B, +7.6%) and the credit guarantee business (¥0.70B, -34.8%) were both small in scale, although the decline in revenue from the credit guarantee business was notable.

【Profit and Loss】Ordinary income of ¥18.29B (+30.7% YoY) exceeded the growth in ordinary revenue, supported by the containment of expenses at ¥28.39B (+6.5%). While banking business segment profit of ¥17.71B (+31.6%, 27.2% margin) drove overall profit, the leasing business reported a decline in profit to ¥0.25B (-4.9%), and the credit guarantee business also reported lower profit of ¥0.89B (-11.7%). The non-banking segments are being pressured by funding costs and profit margins. Net income of ¥12.81B (+25.6%) grew more slowly than ordinary income, but extraordinary gains and losses were essentially zero, with no temporary factors involved; the primary reason was the burden of income taxes and other taxes (effective tax rate of approximately 30.0%). In conclusion, the Company achieved revenue and earnings growth, with the quality of earnings growth supported by the expansion in ordinary revenue.

Segment Analysis

The banking business accounted for ¥65.21B in ordinary revenue (+25.9% YoY) and ¥17.71B in ordinary income (+31.6%), representing the core of Company-wide profit. Its profit margin was also high at 27.2%. The credit guarantee business experienced a substantial revenue decline, with ordinary revenue of ¥0.70B (-34.8%), while its profit margin remained high at 126.8% (profit of ¥0.89B, -11.7%). The leasing business increased ordinary revenue to ¥8.72B (+7.6%), but profit declined to ¥0.25B (-4.9%), resulting in a lower profit margin of 2.9%. Other businesses (¥1.46B, +7.6%) achieved higher profit of ¥0.34B (+13.7%), indicating variability in profitability outside the banking business.

Key Financial Indicators

【Profitability】The ordinary income margin was 24.1%, expanding 155bp from 22.5% in the same period of the previous year, while the net income margin improved by 44bp to 16.9%. Annualized ROE was approximately 6.3% (4.6% based on the simple Q3 cumulative presentation), led by the improvement in the net income margin. From the perspectives of net assets and the interest spread, the ¥7.34B increase in interest on loans exceeded the ¥5.08B increase in interest on deposits, indicating that the expansion in interest income absorbed the increase in funding costs.【Cash Quality】Extraordinary gains and losses were zero, and the conversion of ordinary revenue into net income was generally derived from the core business. Comprehensive income of ¥15.07B exceeded net income of ¥12.81B, reflecting the offsetting effects of deterioration in the valuation difference on other securities (-¥5.34B) and improvement in deferred hedge gains and losses (+¥7.98B).【Investment Efficiency】Annualized ROA is estimated at approximately 0.31%, indicating that, as a bank, the Company’s profit margin structure depends on high leverage due to its large asset base.【Financial Soundness】The equity ratio was 4.9%, below the generally applicable regulatory benchmark of 8%. The loan-to-deposit ratio was 82.4%, within the 70–90% guideline range, indicating that the Company maintained a structure in which lending was funded within the scope of deposits.

Cash Flow Analysis

As cash flow statement data have not been disclosed, funding trends are analyzed based on balance sheet movements. Cash and due from banks increased by ¥9.065B (+56.1%), substantially increasing liquid assets, while securities declined by ¥9.664B (-9.2%), suggesting that asset allocation shifted from securities toward cash and loans. Loans increased by ¥10.183B (+2.5%), expanding at a faster pace than the ¥5.208B increase in deposits, indicating that loan growth may have been supported by reductions in cash and deposits and securities. Overall, funds were allocated both to loan expansion and liquidity maintenance. From a funding perspective, the fact that deposit growth has somewhat lagged loan growth is a point requiring attention in cash management.

Quality of Earnings

Both extraordinary gains and extraordinary losses were zero, and ordinary income of ¥18.29B was essentially identical to pretax income of ¥18.29B. Accordingly, current-period profit consisted of earnings derived from the core business without temporary factors. Fees and commissions income, an operating income component outside interest income, remained limited at ¥8.73B (a modest increase from ¥8.63B in the previous year), and profit growth continued to depend primarily on the expansion of funds investment income. Comprehensive income was ¥15.07B, exceeding net income of ¥12.81B. This difference resulted from market-related factors, namely deterioration in the valuation difference on other securities (-¥5.34B) and improvement in deferred hedge gains and losses (+¥7.98B), and does not impair the accrual-based quality of the core business. The banking business segment recorded an impairment loss of ¥11M in the same period of the previous year, whereas no such item was recorded in the cumulative Q3 period, indicating that earnings quality is also more stable than in the previous year.

Earnings Forecast and Guidance

The cumulative Q3 progress rates against the full-year forecasts (ordinary income of ¥22.00B and net income of ¥15.00B) were 83.1% for ordinary income and 85.4% for net income, exceeding the standard 75% level. Against the full-year forecast ordinary income growth rate of 21.5%, cumulative actual ordinary income growth of +30.7% is tracking above plan, indicating a certain degree of headroom in progress. Neither the earnings forecast nor the dividend forecast has been revised. Ordinary income of ¥3.71B and net income of ¥2.196B are required in the remaining Q4, representing relatively low hurdles compared with the results of previous quarters. However, if the upward trend in interest on deposits continues, higher funding costs may constrain profit growth in Q4.

Shareholder Returns

The Q2 dividend was ¥80.00 per share, and the full-year forecast dividend remains unchanged at ¥160.00. Based on forecast full-year net income of ¥15.00B and forecast total dividends (¥160 per share × 33.064M average shares outstanding during the period, approximately ¥5.29B), the forecast payout ratio is approximately 35.3%, below the general sustainability benchmark of 60%. Retained earnings were substantial at ¥180.54B, and no constraint was apparent on the source of dividend funding itself. However, for banks, the effective constraint on dividend capacity also depends on the equity ratio. The current equity ratio of 4.9% is below the generally applicable regulatory benchmark of 8%, and future dividend policy must be assessed together with capital adequacy.

Risk Factors

1. Business concentration risk: The banking business accounts for 85.7% of ordinary revenue and approximately 92.3% of segment profit. Changes in loan demand, the regional economy, and the interest rate environment directly affect consolidated performance.

2. Interest spread and funding cost risk: Interest on deposits surged by +252.3% YoY (¥7.09B), and the difference from the ¥7.34B increase in interest on loans is narrowing. If deposit rates rise faster than the growth in net interest income, this could pressure profitability.

3. Capital level risk: The equity ratio was 4.9%, below the generally applicable regulatory benchmark of 8%. The Company must continuously monitor the balance among loss-absorption capacity, dividends, and loan growth.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Return

The Company’s net income margin of 16.9% is assessed on an absolute basis because sufficient comparative data against the industry median are unavailable.

Growth and Capital Efficiency

The Company’s revenue growth rate of 22.3% is assessed on an absolute basis because sufficient comparative data against the industry median are unavailable.

Source: Compiled by the Company

Key Points from the Financial Results

1. Ordinary income increased by +30.7% YoY and net income increased by +25.6%, confirming positive operating leverage as revenue growth substantially exceeded the 6.5% increase in expenses. The ordinary income margin improved by 155bp, indicating a qualitative improvement in the earnings structure.

2. Progress rates against the full-year forecasts were 83.1% for ordinary income and 85.4% for net income, exceeding the standard 75% level, and neither the earnings forecast nor the dividend forecast was revised. Meanwhile, the sharp increase in interest on deposits (+252.3%) indicates higher funding costs, making trends in the interest spread from Q4 onward a key point to monitor.

3. The equity ratio of 4.9% was below the generally applicable regulatory benchmark of 8%, while the loan-to-deposit ratio of 82.4% was within an appropriate range. Both capital levels and the funding structure are structural monitoring items that will determine future growth capacity and shareholder return capacity.

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

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