THE AKITA BANK (8343) FY2026 FY Earnings Report

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Executive Summary

This was a results period of higher revenue and earnings, primarily driven by the expansion of funds investment income, with ordinary income, ordinary income, and net income all increasing by double digits. Ordinary income was ¥610.6B (+16.9% YoY), ordinary income was ¥112.5B (+23.2%), and net income was ¥77.1B (+29.8%). The increase in interest on loans drove the expansion in earnings, while the growth in ordinary income substantially exceeded the increase in general and administrative expenses (+4.0%), improving the ordinary income margin to 18.4% from 17.5% in the previous period.

Factors Affecting Performance

【Revenue】Ordinary income was ¥610.6B, up +16.9% YoY. Banking operations accounted for 89.7% (¥549.0B) of ordinary income from external customers and expanded primarily due to a 44.6% increase in funds investment income. Leasing operations generated ¥53.2B, while other businesses generated ¥9.6B; both were small in scale compared with banking operations. Loans increased +3.3% YoY, while interest on loans rose +30.8%, with both growth in loan assets and improved yields contributing to performance. Meanwhile, interest on deposits surged +213.0% YoY, creating upward pressure on funding costs.

【Profit and Loss】Ordinary income was ¥112.5B (+23.2% YoY), and net income was ¥77.1B (+29.8%). The banking operations segment profit margin of 20.6% was substantially higher than the 3.5% margin for leasing operations, indicating a high level of dependence of consolidated profitability on banking operations. Extraordinary losses of ¥5.5B, including impairment losses of ¥4.3B, reduced profit before tax; however, this was a temporary factor, and the conversion from profit before tax of ¥107.0B to net income of ¥77.1B was stable, with an effective tax rate of 27.9%. Both revenue and earnings increased.

Segment Analysis

Banking operations are the core business, generating ordinary income of ¥549.0B, segment profit of ¥112.8B, and a profit margin of 20.6%. Leasing operations generated ordinary income of ¥53.2B, segment profit of ¥1.9B, and a profit margin of 3.5%. Other businesses—including consulting, regional trading companies, fund management, guarantees, and credit cards—generated ordinary income of ¥9.6B, segment profit of ¥1.9B, and a relatively high profit margin of 19.3%. The profit margin for banking operations exceeded that of leasing operations by 17.1 points, and consolidated performance is structurally highly dependent on the expansion of net interest income from banking operations. Year-on-year segment data has not been disclosed.

Key Financial Indicators

【Profitability】The ordinary income margin was 18.4%, improving by approximately 95bp from 17.5% in the previous period, while the net income margin was 12.6%, improving by approximately 176bp from 10.8% in the previous period. The expense ratio, calculated as general and administrative expenses ÷ ordinary income, was 35.9%, indicating improved efficiency as the expansion of net interest income exceeded the increase in expenses.【Cash Flow Quality】Operating Cash Flow (OCF) was an outflow of ¥633.97B, or negative 8.24 times net income of ¥77.1B. However, for banks, changes in assets and liabilities related to deposits, loans, and securities are directly reflected in OCF, making it inappropriate to apply the standards used for general operating companies without adjustment.【Investment Efficiency】ROE was 4.3%, improving from approximately 3.4% in the previous period, and the equity ratio was 5.0%. Capital expenditures of ¥6.1B were below depreciation and amortization expense of ¥12.3B, resulting in an investment-to-depreciation ratio of 0.50x, warranting attention to the level of digital and systems investment.【Financial Soundness】The loan-to-deposit ratio, calculated by dividing loans of ¥2,125.5B by deposits of ¥3,156.1B, was 67.3%, indicating funding capacity from excess deposits. The consolidated equity ratio was 4.9%; if 8% is used as a benchmark level, the shortfall is subject to monitoring.

Cash Flow Analysis

OCF was an outflow of ¥633.97B, investing cash flow was an outflow of ¥314.02B, and financing cash flow was an outflow of ¥23.3B, resulting in free cash flow of ¥947.99B in outflows. The OCF outflow reflects the movement of funds associated with the management of assets and liabilities, including deposits, loans, and marketable assets, and for banks does not directly indicate the cash collection capacity of earnings. Of the ¥314.02B investing cash flow outflow, capital expenditures amounted to only ¥6.1B, with the majority believed to represent cash movements related to the management of financial assets such as securities. Cash and cash equivalents decreased by ¥971.31B, resulting in a period-end balance of ¥3,667.18B. The financing cash flow outflow was primarily attributable to share repurchases of ¥1.2B and dividend payments of ¥24.3B. Changes in the funding position should be monitored in relation to future asset and liability management.

Earnings Quality

Profit before tax was ¥107.0B versus ordinary income of ¥112.5B, with the ¥5.5B difference attributable to extraordinary losses—impairment losses of ¥4.3B and losses on disposal of fixed assets of ¥1.2B—which were temporary factors. As extraordinary gains were virtually nonexistent, there was no uplift from one-time gains. The effective tax rate was 27.9%, and the conversion from profit before tax to net income was stable. Comprehensive income of ¥244.8B substantially exceeded net income of ¥77.1B. Improvements in valuation differences on securities—from negative ¥124.6B in the previous period to negative ¥37.4B in the current period—as well as improvements in deferred hedge gains and losses contributed to the increase in net assets. A notable feature is the significant fluctuation in market valuation factors underlying current-period earnings. OCF below net income reflects bank-specific changes in assets and liabilities, while recurring earnings power is supported by the growth in net interest income (+31.3% YoY).

Earnings Forecasts and Guidance

The full-year forecast calls for ordinary income of ¥131.0B and net income of ¥85.0B. Current-period actual results reached 85.8% and 90.5%, respectively, of the full-year forecasts, indicating solid progress. As the current-period earnings growth rates (+23.2% and +29.8%, respectively) exceeded the planned year-on-year increases (ordinary income +16.4%, net income +8.4%), there may be upside potential to the plan depending on trends in funding costs, credit costs, and gains and losses related to securities during the second half of the fiscal year.

Shareholder Returns

The annual dividend consists of an interim dividend of ¥75 and a year-end dividend of ¥100, for a total of ¥175, an increase from ¥45 in the previous period. The payout ratio against net income attributable to owners of the parent of ¥7.692B was 40.4%, remaining within the range of current-period earnings. Including share repurchases of ¥1.2B, the total return ratio was approximately 42.5%. The company forecast calls for an annual dividend of ¥200 and forecast EPS of ¥478.48, implying a forecast payout ratio of approximately 41.8%, consistent with the current shareholder return policy.

Risk Factors

1. Margin pressure from rising deposit costs: Interest on deposits surged +213.0% YoY, and the loan-deposit spread could come under pressure depending on the interest rate environment. Both the likelihood of occurrence and potential impact are high.

2. Equity ratio level: The consolidated equity ratio was 4.9%, indicating a limited buffer against a benchmark of 8%. The impact on capital accumulation and the shareholder return policy needs to be monitored.

3. Concentration in the regional economy: Banking operations account for 89.7% of ordinary income, indicating a high degree of dependence on trends in funding demand from the regional economy and local companies. Net fees and commissions also declined -7.5% YoY, and sluggish growth in non-interest income has continued.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Takeaways from the Results

1. The expansion of net interest income (+31.3% YoY) drove increases in ordinary income (+23.2%) and net income (+29.8%), while control of general and administrative expenses (+4.0%) supported earnings improvement. This was a key highlight of the results.

2. Comprehensive income of ¥244.8B, including the improvement in valuation differences on securities, substantially exceeded net income of ¥77.1B, and market-driven changes in net assets contributed to the improvement in the financial position during the current period.

3. The investment-to-depreciation ratio of 0.50x, with capital expenditures below depreciation and amortization expense, and the equity ratio of 4.9% are items that should be monitored continuously in terms of future investment capacity and the progression of the capital buffer.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional adviser as necessary.

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