The Toho Bank (8346) FY2026 FY Earnings Report

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Executive Summary

The Company delivered a high-quality earnings performance characterized by increases in both revenue and profit, with the profit growth rate exceeding the revenue growth rate, primarily due to the expansion of interest income. Ordinary revenue was ¥92.465B (+31.3% YoY), Ordinary Income was ¥17.090B (+52.6% YoY), and Net Income attributable to owners of the parent was ¥12.353B (+65.9% YoY). The 45.5% increase in interest income exceeded the 224.5% increase in interest expenses, improving the Ordinary Income margin to 18.5% from 15.9% in the previous year.

Factors Affecting Business Performance

【Revenue】Ordinary revenue increased 31.3% YoY to ¥92.465B. The Banking Business accounted for ¥81.013B, or 87.5% of the total, and drove overall performance. Interest income increased 45.5% to ¥62.359B, reflecting increases in loans and securities as well as improved investment yields. The Leasing Business, Credit Guarantee Business, and Other Businesses generated ¥8.925B, ¥0.982B, and ¥1.7B, respectively, and served as supplementary contributors.

【Profit and Loss】Ordinary Income increased 52.6% YoY to ¥17.090B, while Net Income attributable to owners of the parent increased 65.9% YoY to ¥12.353B. Interest expenses increased 224.5% YoY to ¥16.986B, reflecting the impact of higher deposit interest rates; however, the growth in interest income exceeded this increase, expanding net interest income by 20.6% to ¥45.373B. General and administrative expenses increased 10.3% YoY to ¥39.674B, below the revenue growth rate, indicating positive operating leverage. Non-recurring items were small, with extraordinary income of ¥0.018B versus extraordinary losses of ¥0.191B, including impairment losses of ¥0.035B; therefore, the earnings growth was not dependent on temporary factors. In conclusion, the Company achieved increases in both revenue and profit.

Segment Analysis

Segment profit, measured on an Ordinary Income basis, was led by the Banking Business at ¥16.137B, with a profit margin of 19.9%. The Banking Business accounted for 87.5% of Ordinary revenue and 85.9% of total segment profit. Although the Credit Guarantee Business had an exceptionally high profit margin of 155.9%, its revenue scale was small at ¥0.982B, and its profit margin may fluctuate significantly due to changes in guarantee performance and other factors. The Leasing Business had a relatively low profit margin of 7.6%, while Other Businesses, including newly consolidated subsidiaries engaged in IT-related businesses, had a profit margin of 25.7%. The high concentration of revenue in the Banking Business indicates a structure in which changes in the regional economy and interest rate environment can directly affect consolidated performance.

Key Financial Indicators

【Profitability】The Net Income margin improved to 13.4% from 10.6% in the previous year, while the Ordinary Income margin improved to 18.5% from 15.9%. ROE increased to 5.7% from 3.7%, but remained below the general capital efficiency benchmark of 8%. NIM was 1.07%, below the 1.5% level considered a warning threshold for the banking industry.【Cash Flow Quality】The accrual ratio was 1.5%, remaining below 5%, indicating limited signs of a divergence between earnings and cash generation. Operating Cash Flow (OCF) was negative ¥90.295B; however, this reflects the distinctive nature of banking operations, in which changes in deposits, loans, and securities have a significant impact on cash flow.【Investment Efficiency】Capital expenditures were ¥2.520B, compared with depreciation and amortization of ¥4.622B, resulting in a capital expenditures-to-depreciation ratio of 0.55x.【Financial Soundness】The Equity Ratio was 3.2%, up from 2.9% in the previous year, while the loan-to-deposit ratio was 73.6%, within an appropriate range. Net assets increased 10.4% YoY to ¥217.747B.

Cash Flow Analysis

Operating CF was negative ¥90.295B, investing CF was negative ¥194.932B, and financing CF was negative ¥2.952B. Free CF was negative ¥285.227B, while cash and cash equivalents decreased by ¥288.179B to ¥946.209B at period-end. In the banking industry, changes in deposits, loans, and securities significantly affect operating CF and investing CF; therefore, comparisons between operating CF and net income used for general operating companies have limited significance. In fact, loans increased 4.5% from the end of the previous year, while securities increased 15.6%, indicating an expansion of earning assets. The greater negative investing CF can therefore be interpreted as reflecting active asset management. Capital expenditures were ¥2.520B, below depreciation and amortization of ¥4.622B, and the capital expenditures-to-depreciation ratio of 0.55x warrants confirmation regarding the level of IT and systems investment.

Earnings Quality

The earnings growth for the current period was supported by the recurring factor of increased interest income. Non-recurring items were small, with extraordinary income of ¥0.018B and extraordinary losses of ¥0.191B, indicating limited reliance on temporary factors. Equity-method investment gain outside operating activities was only ¥0.092B, making its contribution to profit growth immaterial. Meanwhile, comprehensive income was ¥23.450B, exceeding net income of ¥12.353B by ¥11.097B. This was because the increases in deferred hedge gains and losses of ¥12.719B and adjustments related to retirement benefits of ¥3.014B exceeded the ¥4.636B deterioration in the valuation difference on other securities. The increase in comprehensive income was significantly dependent on items arising from market fluctuations and therefore differs in nature from a sustainable improvement in net income.

Earnings Forecast and Guidance

Progress against the full-year forecast was 88.7% for Ordinary revenue, 87.2% for Ordinary Income, and 95.0% for Net Income. While net income had nearly reached the forecast level, Ordinary revenue and Ordinary Income were calculated to be more than 10% below their respective forecasts. The full-year forecasts are Ordinary revenue of ¥104.200B, Ordinary Income of ¥19.600B (+14.7% YoY), and Net Income of ¥13.000B (+8.1% YoY), representing a conservative outlook substantially below the current-period growth rates of +52.6% for Ordinary Income and +65.9% for Net Income.

Shareholder Returns

The annual dividend was ¥17 per share, comprising an interim dividend of ¥7 and a year-end dividend of ¥10, representing an increase from ¥4 per share in the previous year. The Payout Ratio was 34.3%; based on the benchmark of below 60%, sustainability concerns are limited. No share repurchases were conducted during the current period, and the Total Return Ratio was 34.3%, the same as the Payout Ratio. The full-year dividend forecast is ¥21 per share, implying an expected Payout Ratio of approximately 40.4% against forecast EPS of ¥52.03.

Risk Factors

1. Low NIM: NIM was 1.07%, below the 1.5% level considered a warning threshold for the banking industry. If increases in deposit and market funding rates exceed improvements in investment yields, there is a risk that growth in net interest income will slow.

2. Concentration of Revenue Sources: The Banking Business accounts for 87.5% of consolidated Ordinary revenue, creating a structure in which changes in regional funding demand and the interest rate environment can directly affect consolidated performance.

3. Low Equity Ratio: The disclosed Equity Ratio was 3.2%, below the 8% benchmark. Although net assets increased 10.4% YoY, the capital level requires ongoing monitoring.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The Net Income margin is slightly above the industry median.

Growth and Capital Efficiency

The Revenue growth rate is significantly above the industry median and represents a high level of growth within the industry.

※Source: Compiled by the Company

Key Earnings Highlights

1. Ordinary Income increased +52.6% and Net Income increased +65.9%, while profit margins improved to an Ordinary Income margin of 18.5% from 15.9% in the previous year and a Net Income margin of 13.4% from 10.6%. The earnings growth was supported by the recurring factor of increased interest income.

2. While net interest income increased +20.6%, interest expenses increased +224.5%. The low NIM of 1.07% represents a structural constraint that will affect the sustainability of future earnings growth.

3. The Payout Ratio of 34.3% is conservative, and even after factoring in the increase to the forecast dividend of ¥21 per share, the expected Payout Ratio remains approximately 40.4%.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment 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, after consulting with professionals as necessary.

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