THE AKITA BANK (8343) FY2026 Q3 Earnings Report

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Executive Summary

Revenue and profit increased substantially, driven by the expansion of net interest income and the containment of expense growth. Ordinary income was ¥434.6B (+8.6% YoY), Ordinary Income was ¥91.4B (+61.7%), and net income attributable to owners of the parent was ¥62.3B (+88.5%). The primary driver of profit growth was the increase in interest on loans and interest and dividends on securities, which expanded net interest income. Revenue growth substantially exceeding the expense growth rate (+3.1%) lifted the profit margin.

Factors Affecting Financial Results

【Revenue】Ordinary revenue was ¥434.6B, up +8.6% YoY. Banking operations accounted for the majority at ¥388.6B (89.2% of total, YoY +10.3%), while leasing operations generated ¥39.7B (-3.5%) and other operations generated ¥7.2B (+10.0%). Interest on loans increased to ¥183.7B (+31.7%), and interest and dividends on securities increased to ¥88.9B (+58.1%), expanding investment income. Meanwhile, net fees and commissions income was ¥35.6B, down -10.5% from ¥39.8B in the previous year, indicating weakness in non-interest income.

【Profit and Loss】Ordinary Income was ¥91.4B (+61.7%), and net income was ¥62.3B (+88.5%). Although funding costs increased by +182.6%, compared with growth of +39.1% in investment income, the absolute amount of funding costs (¥52.5B) was insufficient to offset the increase in investment income, allowing net interest income of ¥243.1B (+25.3%) to be secured. Expenses remained at ¥162.7B (+3.1%), below the rate of revenue growth, resulting in positive operating leverage. Extraordinary losses of ¥4.5B, including impairment losses of ¥4.3B related to asset impairment in banking operations, were a temporary factor weighing on Ordinary Income. However, the transition from profit before tax of ¥86.8B to net income of ¥62.3B reflected an effective tax rate of 28.2%, within the normal range. In conclusion, both revenue and profit increased.

Segment Analysis

Banking operations led consolidated performance, generating Ordinary Revenue of ¥388.6B (YoY +10.3%), segment profit of ¥9.2B (+53.9%), and a profit margin of 23.7%. Leasing operations generated Ordinary Revenue of ¥39.7B (-3.5%), segment profit of ¥1.4B (+37.1%), and a profit margin of 3.6%, reflecting a substantial profitability gap compared with banking operations. Other operations generated Ordinary Revenue of ¥7.2B (+10.0%), while segment profit declined to ¥1.8B (-21.2%), with a profit margin of 25.1%; however, the trend is deteriorating. The structure in which revenue and profit are concentrated in banking operations continues to determine consolidated performance.

Key Financial Indicators

【Profitability】The Ordinary Income margin improved substantially to 21.0% from 14.1% in the previous year, while the net profit margin rose to 14.3% from 8.2%. 【Cash Quality】Other comprehensive income was ¥184.4B, primarily due to valuation differences on securities of +¥154.6B. Comprehensive income of ¥246.7B substantially exceeded net income of ¥62.3B, indicating an element of uplift from unrealized valuation gains. 【Investment Efficiency】ROE was 3.5%. The low total asset turnover and financial leverage of approximately 20.2x reflect the high-leverage structure characteristic of banks, offsetting the improvement in the profit margin. 【Financial Soundness】The equity ratio improved slightly to 4.9% from 4.5% in the previous year, but remained below the generally accepted soundness benchmark of 8%, necessitating monitoring of capital headroom. The loan-to-deposit ratio was calculated at 67.8% based on loans of ¥2,130.1B and deposits of ¥3,140.7B, indicating substantial funding capacity supported by deposits.

Cash Flow Analysis

As no statement of cash flows was disclosed for this financial period, cash flows are analyzed based on funding trends in the balance sheet. Cash and due from banks amounted to ¥402.79B, while deposits were ¥3,140.70B, essentially flat at +0.4% YoY and maintaining a stable funding base. Meanwhile, borrowings increased substantially to ¥155.97B (+79.0%), and negotiable certificates of deposit rose to ¥100.62B (+70.2%), indicating a significant increase in market-based funding. Using this expanded funding as a source, securities increased to ¥959.62B (+10.1%) and loans increased to ¥2,130.15B (+3.5%), expanding the balance sheet on both the asset and liability sides. Although the increase in earning assets contributed to the expansion of investment income, reliance on non-deposit funding sources such as borrowings and negotiable certificates of deposit has risen. Managing funding costs and maturity structures amid rising interest rates will therefore be a key focus going forward.

Quality of Earnings

The increase in Ordinary Income to ¥91.4B was primarily driven by the recurring factor of expanded net interest income, while extraordinary losses of ¥4.5B, including impairment losses of ¥4.3B, should be distinguished as a temporary factor. Investment income, corresponding to non-operating income, increased significantly by +39.1% YoY; however, funding costs also surged by +182.6%. Accordingly, the quality of earnings is strongly affected by fluctuations in interest margins amid a rising interest-rate environment. Net fees and commissions income declined by -10.5% YoY, indicating a decline in non-interest income and leaving challenges from the perspective of revenue-source diversification. In addition, comprehensive income of ¥246.7B substantially exceeded net income of ¥62.3B. Most of the difference was attributable to valuation differences on securities of +¥154.6B, meaning that an unrealized-gain-like component dependent on market price fluctuations created a divergence from net income.

Earnings Forecast and Guidance

The progress rate through Q3 against the full-year Ordinary Income forecast of ¥98.0B was 93.2%, while the progress rate against the full-year net income forecast of ¥65.0B was 95.6%, both at high levels. The amount of profit required during the remaining quarter was only ¥6.6B for Ordinary Income and ¥2.9B for net income, and neither the earnings forecast nor the dividend forecast was revised. The high progress rates indicate a high probability of achieving the forecasts. However, funding costs, credit costs, and fluctuations in securities-related gains and losses in Q4 could affect the final results.

Shareholder Returns

The full-year dividend forecast is ¥150.00 per share, including the Q2 dividend of ¥75.00, which has already been paid. Based on the full-year net income forecast of ¥65.0B and the average number of shares outstanding during the period of 17.754M shares, the forecast total dividend amount is approximately ¥2.66B, resulting in an estimated payout ratio of approximately 41.0%. Even when Q3 cumulative net income of ¥62.3B is used as the denominator, the dividend burden ratio remains approximately 42.9%, indicating that the dividend is within a reasonable range given the current earnings level and forecast. No disclosure regarding share repurchases has been made, and shareholder returns currently consist solely of dividends.

Risk Factors

1. Interest Rate and Net Interest Margin Risk: Funding costs increased by +182.6% YoY, outpacing the +39.1% growth in investment income. If deposit rates continue to rise, growth in net interest income may slow.

2. Capital Adequacy Risk: The equity ratio improved to 4.9% from 4.5% in the previous year, but remains below the generally accepted soundness benchmark of 8%. Monitoring of capital resilience against fluctuations in valuation differences on securities and other items is therefore necessary.

3. Revenue Concentration and Declining Non-Interest Income Risk: Banking operations account for 89.2% of Ordinary Revenue, resulting in a high degree of dependence on the regional economy and loan demand. In addition, net fees and commissions income declined by -10.5% YoY, indicating a relative increase in dependence on interest income.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Return

The company’s net profit margin of 14.3% should be regarded only as reference information on an absolute basis, as sufficient industry median data is unavailable.

Growth and Capital Efficiency

The company’s revenue growth rate of 8.6% should be regarded only as reference information on an absolute basis, as sufficient industry median data is unavailable.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Progress rates for both Ordinary Income and net income against the full-year forecasts reached the high 90% range. Positive operating leverage resulting from the expansion of net interest income and expense control was observed as a key feature of the earnings results.

2. A substantial gap exists between comprehensive income of ¥246.7B and net income of ¥62.3B, primarily due to valuation differences on securities. The inclusion of an element dependent on valuation gains warrants attention when assessing the quality of earnings.

3. The equity ratio of 4.9% and loan-to-deposit ratio of 67.8% indicate contrasting characteristics: room for improvement in terms of capital, and ample liquidity supported by the deposit base.

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings release 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 a professional adviser as necessary.

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