THE AKITA BANK,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥29.38B
• Net Income: ¥4.17B
• EPS: ¥220.16

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: A solid YoY earnings rebound for Akita Bank in FY2026 Q2, driven by ordinary profit growth and lower cost base, but core profitability (NIM) remains structurally weak and ROE is low. Revenue rose 11.4% YoY to 293.84, while ordinary income reached 55.97 (+50.5% YoY), underscoring strong operating leverage. Net income doubled to 39.06 (+103.1% YoY), lifting the net profit margin to 13.3%. Based on revenue growth and net income doubling, we estimate net margin expanded by roughly 600 bps YoY (from ~7.3% to 13.3%). Cost efficiency looks strong with a cost-to-income ratio of 37.2%, well below the 50% benchmark. Despite the income improvement, profitability on capital remains modest with ROE at 2.2% and ROIC at 2.3%, both below typical regional bank targets. NIM is only 0.7%, well under the 1.5% warning threshold, signaling weak core spread earnings. Total comprehensive income surged to 186.49, indicating large unrealized valuation gains (likely on securities) that materially boosted equity in the period. Financial leverage is high at 19.45x (typical for banks but above generic thresholds), and asset turnover is 0.008, consistent with a balance sheet-heavy model. Liquidity appears conservative with an LDR of 67.7% versus the 70–90% optimal range, implying ample deposit funding cushion. The effective tax rate is 26.7%, broadly in line with statutory norms. Dividend payout ratio is 48.6%, which appears broadly sustainable against current earnings but free cash flow coverage cannot be assessed due to missing cash flow data. Earnings quality cannot be confirmed because operating cash flow data is not disclosed. Forward-looking, results are sensitive to interest rate and valuation dynamics: a modest rate rise could help NIM but may pressure securities OCI; a decline in yields would support OCI but compress NIM further. Overall, Q2 shows marked YoY improvement and strong cost discipline, but structurally low NIM and subdued ROE keep return metrics below desired levels.

Profitability Analysis

ROE decomposition: Net Profit Margin 13.3% × Asset Turnover 0.008 × Financial Leverage 20.45x = ROE 2.2% (matches reported). The largest driver of YoY improvement appears to be the margin component: net income rose 103% on 11% revenue growth, implying a sizable net margin expansion (~+600 bps). Asset turnover is fairly stable for banks given slow-moving balance sheets, and leverage (assets/equity at 20.45x) is within a typical regional bank range; therefore, margin expansion is the main change. Business drivers likely include improved non-interest income and/or securities-related gains, controlled costs (CIR 37.2%), and benign credit costs; these offset weak NIM (0.7%). Sustainability is mixed: cost discipline can persist, but gains from securities and low credit costs can be cyclical; with NIM at 0.7%, recurring spread income remains thin. Concerning trends: structurally low NIM constrains core earnings power; we cannot verify SG&A or credit cost trends due to unreported line items, but the very low NIM raises sensitivity to rate and credit shocks.

Growth Assessment

Top-line growth of 11.4% YoY is healthy for a regional bank, suggesting either improved interest income (reported at 189.91) and/or fee income, though fee mix is not disclosed. Profit growth outpaced revenue (ordinary income +50.5%, net income +103.1%), implying strong operating leverage and/or lower credit costs and valuation gains. Margin expansion roughly +600 bps YoY indicates improved profitability, but with NIM at 0.7% the sustainability relies on costs, fees, and securities outcomes rather than core spreads. Absent segment or fee detail, we cannot confirm how much is recurring versus market-driven. Outlook hinges on the rate environment: gradual rate normalization would help asset yields and NIM, but rising rates could translate into OCI losses on bond portfolios; conversely, falling rates bolster OCI but compress NIM. Loan growth versus deposits (LDR 67.7%) suggests capacity to lend, but local demographics could limit volume growth. Overall, near-term earnings trajectory is positive but inherently sensitive to market and credit conditions.

Financial Health

Total assets are 35,749.97 and total equity is 1,747.79, implying leverage of 20.45x; D/E of 19.45x triggers a leverage warning by generic standards, though this is typical for banks. Liquidity appears conservative: deposits are 31,069.44 and loans are 21,034.09, yielding an LDR of 67.7% (below the 70–90% optimal band but supportive of liquidity). Current and quick ratios are not meaningful for banks and are unreported. Maturity mismatch risk cannot be fully assessed without disclosure of the securities duration and funding mix, but the low LDR provides a buffer. Capital adequacy metrics (CET1 ratio, total capital ratio) are not disclosed; given large OCI swings (total comprehensive income 186.49), capital is exposed to valuation volatility. No off-balance sheet obligations are disclosed in the provided data. Intangible assets are minimal at 8.22, indicating low balance-sheet intangibility risk.

Cash Flow Quality

OCF and FCF are unreported, so OCF/Net Income and free cash flow sustainability cannot be evaluated. For banks, accounting cash flow metrics are less indicative than earnings and credit cost trends; however, the lack of data prevents quality validation. The sharp increase in total comprehensive income versus net income highlights material OCI contributions (likely AFS securities valuation), which do not translate into cash until realized. Working capital manipulation signs are not applicable in the usual sense for banks; instead, we would monitor credit cost provisions, securities gains/losses, and realized versus unrealized components. Dividend coverage by FCF cannot be assessed.

Dividend Sustainability

The payout ratio is 48.6%, below the 60% prudence threshold and broadly consistent with regional bank norms. With net income at 39.06, dividends appear covered by earnings, but cash flow coverage is unknown due to missing OCF/FCF. Capital requirements and OCI volatility are key: a rise in rates could pressure OCI and capital buffers, potentially constraining distributions despite current earnings coverage. Policy direction is not disclosed; absent guidance, we assume a stable-to-modestly progressive policy conditioned on earnings and capital. Without capital adequacy ratios (e.g., CET1), headroom for higher payouts cannot be verified.

Risk Assessment

Business Risks:

• Structural NIM weakness at 0.7% limits core earnings resilience.
• Demographic headwinds in Akita Prefecture could suppress loan demand and fee growth.
• High reliance on securities portfolios exposes earnings and capital to market valuations (OCI volatility).
• Potential tightening of competition for deposits may raise funding costs (deposit beta risk).
• Credit cost normalization risk after a strong quarter could reduce margins.

Financial Risks:

• High reported leverage (D/E 19.45x), typical for banks but amplifies shocks.
• Interest rate risk: rising yields could reduce OCI and regulatory capital; falling yields compress NIM.
• Liquidity risk moderate but present if loan growth accelerates faster than deposits (current LDR 67.7% provides buffer).
• Capital adequacy unknown (no CET1/Tier1 disclosure); sensitivity to valuation changes is elevated.
• Concentration risk potential in regional borrower base (data not disclosed).

Key Concerns:

• ROE at 2.2% and ROIC at 2.3% are below cost of equity/target levels.
• Earnings quality cannot be validated due to missing OCF/FCF and lack of credit cost details.
• Large gap between net income (39.06) and total comprehensive income (186.49) indicates material unrealized gains exposure.
• NIM far below benchmark suggests dependence on non-spread income and cost control.

Investment Implications

Key Takeaways:

• Earnings rebounded strongly: revenue +11.4%, ordinary income +50.5%, net income +103.1%.
• Net margin improved by ~600 bps to 13.3%, aided by strong cost discipline (CIR 37.2%).
• Core profitability remains weak with NIM at 0.7%, keeping ROE at 2.2%.
• Balance sheet liquidity is conservative (LDR 67.7%), but capital sensitivity to OCI is high.
• Dividend payout at 48.6% appears covered by earnings, but FCF and capital headroom are unverified.

Metrics to Watch:

• NIM trajectory and asset yield repricing vs deposit beta.
• Credit cost ratio and NPL trends (not disclosed here).
• Securities portfolio duration, unrealized gains/losses, and OCI sensitivity.
• CET1/Tier1 capital ratios and interest rate risk in the banking book (IRRBB).
• Fee income contribution and cost-to-income ratio sustainability.
• Loan growth vs deposit growth to keep LDR in a prudent range.

Relative Positioning: Within Japanese regional banks, Akita Bank shows strong current-period cost efficiency and earnings rebound but remains constrained by a very low NIM and low ROE; liquidity stance is conservative, yet capital visibility is limited without regulatory ratios.

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