Tsukuba Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥23.95B
• Net Income: ¥3.73B
• EPS: ¥45.98

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: Strong Q2 with sharp profit rebound and improved efficiency, albeit on a still-low structural profitability base for a regional bank. Revenue rose 17.9% YoY to 239.47, while ordinary income surged 84.5% to 41.28 and net income jumped 94.6% to 37.88. Net profit margin improved to 15.8% from approximately 9.6% a year ago, a 621 bps expansion driven by revenue growth outpacing cost growth and benign credit/tax items. Ordinary income margin similarly expanded to 17.2% from about 11.0%, a ~622 bps improvement. The cost-to-income ratio printed at 49.2%, an efficiency level at the favorable end of domestic peers (<50% benchmark). The effective tax rate was unusually low at 6.9%, boosting bottom line versus operating trends and raising one-off/sustainability questions. Total comprehensive income was 113.56, far exceeding net income and pointing to sizable valuation gains in the securities portfolio (OCI), likely benefitting from rate/market moves. Balance sheet scale remains sizable at total assets of 28,703.60 and equity of 1,027.01, implying reported ROE of 3.7% despite the profit surge. Banking spreads remain structurally thin: NIM is 0.6% (well below the >2% benchmark), underscoring reliance on volume, fees, and securities income. Funding/liquidity appears sound with deposits of 25,988.72 and loans of 21,746.98, producing an LDR of 83.7% within the 70–90% comfort range. Leverage is high with D/E of 26.95x, consistent with banking models but constraining flexibility if OCI reverses. Reported ROIC/ROE at 3.7% is below a typical cost of equity, highlighting the need for sustained efficiency gains and fee income expansion. Cash flow was not disclosed; thus earnings quality cannot be cross-checked against operating cash flow this quarter. Forward-looking, earnings trajectory will hinge on NIM stabilization, credit cost discipline, and the durability of securities-related gains that drove the outsized OCI. In sum, the quarter showcased strong operating leverage and margin expansion, but sustainability depends on core spread resilience and maintaining low credit costs amid interest-rate and market volatility.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.7% = Net Profit Margin 15.8% × Asset Turnover 0.008 × Financial Leverage 27.95x. The dominant change driver this quarter is margin improvement: net income +94.6% vs revenue +17.9% implies the net margin expanded by roughly 621 bps YoY (from ~9.6% to 15.8%). Business rationale: better income mix (ordinary income +84.5%), solid cost discipline (CIR 49.2%), and a very low 6.9% effective tax rate amplified bottom line. Asset turnover (0.008) and financial leverage (27.95x) are broadly stable structural features for a regional bank; the leverage effect on ROE remains large but typical for the business model. Sustainability: margin gains stemming from lower taxes and securities/market tailwinds are less repeatable; efficiency improvements (CIR near 49%) are more sustainable if maintained, while NIM at 0.6% remains a structural headwind. Watch for any reversal in OCI-related gains filtering into earnings via realized gains/losses or valuation effects. Concerning trend flags: NIM well below benchmark indicates limited ability to price for risk; any SG&A commentary is unavailable (unreported), but the positive operating leverage suggests costs did not outpace revenue.

Growth Assessment

Top-line growth of 17.9% to 239.47 appears supported by higher ordinary income (+84.5%) and likely favorable securities/fee components given the OCI strength. Profit quality is mixed: the net profit surge (+94.6%) reflects real operating leverage and low taxes, but the extraordinarily high total comprehensive income (113.56) versus net income (37.88) indicates a meaningful contribution from valuation gains that may not be recurring. Revenue sustainability depends on stabilizing NIM (currently 0.6%) and maintaining fee/securities income; absent spread recovery, growth will be constrained. Outlook hinges on three pillars: credit cost normalization (unreported but implied benign), interest-rate path affecting bond portfolio and margins, and continued cost control (CIR around 49%). Near-term momentum is positive, but mid-term growth visibility is moderate given macro and rate sensitivity.

Financial Health

Liquidity appears adequate with deposits of 25,988.72 and loans of 21,746.98, yielding an LDR of 83.7% within the 70–90% benchmark range; this suggests limited reliance on wholesale funding. Current ratio and quick ratio are not applicable/unreported for a bank. Solvency/Leverage: D/E is 26.95x (explicit warning threshold >2.0), but such leverage is structurally normal for banks; still, it amplifies sensitivity to asset quality and OCI swings. Maturity mismatch risk cannot be fully assessed without detailed securities duration and funding tenor, but deposit-based funding reduces immediate refinancing risk. No off-balance sheet obligations were disclosed in the dataset; contingent liabilities and guarantees, if any, are not available here. Capital adequacy (e.g., CET1 ratio) is unreported; thus cushion against market and credit shocks cannot be evaluated from this data.

Cash Flow Quality

Operating cash flow is unreported; OCF/Net Income cannot be calculated, so earnings-to-cash alignment cannot be evaluated this quarter. Free cash flow and capex are not meaningful primary metrics for banks, and both are unreported. Dividend and buyback cash outflows are unreported. Working capital manipulation signs cannot be assessed due to lack of detail; however, the large gap between total comprehensive income and net income indicates material OCI effects (securities valuation), which do not translate into operating cash flow and can reverse with markets.

Dividend Sustainability

The calculated payout ratio is 10.9%, implying conservative shareholder returns relative to earnings. With strong ordinary income this quarter and no reported deterioration in credit costs, earnings coverage of dividends appears ample. FCF coverage is not calculable for a bank from the provided data. Policy outlook likely remains stable to modestly progressive, contingent on sustaining core earnings and avoiding OCI-driven capital volatility; absence of capital ratio data limits assessment of buffer for higher payouts. Key sensitivities include NIM trends, credit costs, and unrealized securities valuation swings that could constrain distributable capacity if adverse.

Risk Assessment

Business Risks:

• Structural low-margin environment with NIM at 0.6%, pressuring core profitability
• Dependence on securities-related income/valuations, as evidenced by large OCI vs NI
• Regional concentration risk typical for a regional bank (local SME and consumer exposure)
• Competitive pressure from megabanks and fintech in deposits and payments
• Fee income scalability uncertainty amid slow economic growth

Financial Risks:

• High leverage inherent to banking (D/E 26.95x) increases sensitivity to shocks
• Interest-rate risk on the bond portfolio; OCI gains could reverse if yields rise
• Potential credit cost normalization from low levels could compress margins and profits
• Liquidity/funding concentration in deposits; tenor mismatch details unreported
• Capital adequacy (CET1) unreported, limiting visibility on loss-absorption capacity

Key Concerns:

• ROE of 3.7% below typical cost of equity, requiring sustained efficiency and mix improvements
• Unusually low effective tax rate (6.9%) boosted earnings; may not recur
• Earnings quality assessment constrained by unreported cash flow data
• Profit outperformance partly tied to market conditions (OCI), increasing volatility risk

Investment Implications

Key Takeaways:

• Strong profit rebound: ordinary income +84.5% YoY to 41.28; net income +94.6% to 37.88
• Margin expansion significant: net margin up ~621 bps to 15.8%; CIR at an efficient 49.2%
• Balance sheet robust in scale (assets 28,703.60), funding sound (LDR 83.7%)
• Structural profitability still modest: ROE 3.7%, NIM 0.6%
• Large positive OCI (total comprehensive income 113.56) highlights market tailwinds and potential volatility

Metrics to Watch:

• Net interest margin (NIM) and asset yield vs deposit cost trajectory
• Cost-to-income ratio (CIR) sustainability around 50%
• Credit costs/NPAs and coverage (unreported here)
• Unrealized gains/losses and duration on AFS/HTM securities; OCI sensitivity
• Capital ratios (CET1/Total capital) and RWA trends
• Fee and other non-interest income mix
• Effective tax rate normalization vs one-offs
• Loan-to-deposit ratio and funding mix

Relative Positioning: Within Japanese regional banks, Tsukuba Bank shows solid cost efficiency (CIR ~49%) and a healthy LDR (~84%), but core spread profitability is very low (NIM 0.6%) and ROE at 3.7% trails peers targeting mid-to-high single digits; current performance is augmented by market-driven OCI gains that may not be durable.

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
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