The Toho Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥44.57B
• Net Income: ¥6.60B
• Earnings per Unit (EPU): ¥25.10

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: FY2026 Q2 was a solid quarter for The Toho Bank, with double‑digit top- and bottom-line growth and improved efficiency, albeit against a backdrop of structurally thin margins and high leverage typical of regional banks. Revenue rose 36.1% YoY to 445.69, outpacing ordinary income growth of 33.7% and net income growth of 37.1% to 62.71. The bank’s cost efficiency was strong with a Cost-to-Income Ratio (CIR) at 42.3%, well below the 50% benchmark. Net profit margin stood at 14.1%, indicating resilient earnings relative to revenue. Net interest margin (NIM) remains very thin at 0.5%, a structural headwind versus global peers but in line with domestic regional-bank norms. Loan-to-deposit ratio (LDR) of 73.8% suggests ample on-balance-sheet liquidity and conservative deployment. Ordinary income was 91.31 and profit before tax was 90.91, implying limited non-operating distortions this quarter based on available data. Effective tax rate was 31.0%, consistent with a normalized tax profile. Equity expanded to 2,089.28 with retained earnings at 1,692.95, supporting capital build, while total assets were 66,437.96 and deposits reached 56,039.54. DuPont-derived ROE was 3.0%, constrained by a very low asset turnover of 0.007 despite high financial leverage of 31.80x. Given net income growth slightly outpacing revenue growth, net margin likely improved modestly YoY, though exact basis point change is not calculable from disclosures. Operating margin and gross margin were not disclosed, limiting detailed margin bridge analysis. Cash flow data (OCF/FCF) were not reported, preventing an earnings quality cross-check versus cash. Dividend payout ratio is a moderate 36.2%, suggesting scope to maintain distributions if earnings hold, though FCF coverage cannot be assessed. Forward-looking, maintaining this earnings trajectory will depend on stabilizing NIM, disciplined costs, credit cost containment, and securities portfolio management amid rate volatility. Overall, performance momentum is positive, but structurally low NIM and high leverage keep returns subdued and sensitive to credit and market rate shifts.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.0% = Net Profit Margin (14.1%) × Asset Turnover (0.007) × Financial Leverage (31.80x). The binding constraint on ROE is the extremely low asset turnover typical for banks, reflecting a large balance sheet relative to revenue. Net margin at 14.1% is decent given a strong CIR of 42.3%, but NIM at 0.5% highlights very thin spread income. Financial leverage is high (31.80x), which is normal for banking models but still magnifies earnings volatility. Change driver: With net income growth (+37.1%) slightly ahead of revenue (+36.1%), the margin component likely improved marginally YoY; we cannot quantify bps due to absent prior-period margin. Business reason: revenue likely benefited from higher interest income (reported interest income 294.71 vs interest expense 80.54), broader balance-sheet growth, and efficiency gains (low CIR), though detailed fee/securities contributions are undisclosed. Sustainability: cost discipline (CIR < 50%) looks sustainable short term, but margin durability depends on funding costs, loan pricing power, and securities valuation—areas sensitive to rate moves. Concerning trends to monitor: structurally low NIM (0.5%); inability to verify SG&A growth versus revenue due to non-disclosure; and reliance on balance-sheet leverage for ROE amid low asset turnover.

Growth Assessment

Top line rose 36.1% YoY to 445.69, indicating strong momentum relative to typical regional bank growth. Ordinary income grew 33.7% to 91.31 and net income grew 37.1% to 62.71, implying modest operating leverage and improved margin mix. Interest income of 294.71 versus interest expense of 80.54 indicates positive net interest contribution, but NIM at 0.5% underscores limited pricing power. With operating and non-operating breakdowns undisclosed, we cannot attribute growth among net interest income, fees, or market/securities gains. Cost efficiency is a positive differentiator (CIR 42.3%), supporting ongoing earnings if maintained. Asset growth appears healthy with deposits at 56,039.54 and loans at 41,337.93; LDR at 73.8% is conservative and allows selective loan growth. Outlook: Sustained earnings growth will require balancing loan growth with credit quality, protecting deposit costs, and prudent securities duration/hedging. Any uptick in credit costs or rapid deposit repricing could erode the current margin advantages. Given the low starting NIM, even small basis-point swings in yields can materially affect profitability.

Financial Health

Leverage: Debt-to-equity is 30.80x (warning threshold > 2.0), which is structurally normal for banks but still elevates sensitivity to asset quality and market valuation swings. Liquidity: LDR at 73.8% suggests adequate liquidity; deposits (56,039.54) comfortably fund loans (41,337.93). Maturity mismatch: Not directly assessable without breakdowns of term deposits, wholesale funding, or securities duration; however, the conservative LDR mitigates near-term mismatch risk. Capital: Total equity of 2,089.28 with retained earnings at 1,692.95 indicates ongoing capital accumulation; regulatory capital ratios (e.g., CET1) were not disclosed and remain a key blind spot. Current and quick ratios are not applicable for banks; no red flags can be derived from unavailable current assets/liabilities. Off-balance sheet: Not disclosed; typical banking contingent liabilities (guarantees, commitments) may be present but unquantified.

Cash Flow Quality

Operating, investing, and financing cash flows were not reported; OCF/Net Income and FCF cannot be calculated. As such, we cannot validate accrual quality, working capital dynamics, or the cash coverage of earnings. No evidence—positive or negative—of working capital manipulation can be inferred from the disclosures. Given banking business models, cash flow analysis is less instructive than capital and liquidity metrics; however, the absence of cash data prevents cross-checking earnings persistence.

Dividend Sustainability

Calculated payout ratio is 36.2%, which is comfortably below the 60% benchmark and appears sustainable against current earnings. DPS and total dividends paid were undisclosed, and FCF coverage cannot be assessed due to missing cash flow data. With ROE at 3.0% and NIM at 0.5%, dividend growth headroom depends on maintaining low CIR and stable credit costs. Capital adequacy ratios are not disclosed; if regulatory capital buffers are strong, the bank likely has room to maintain the payout. Any adverse shift in credit costs or securities valuation could constrain future distributions. Policy outlook: Expect a conservative dividend stance aligned with stable earnings rather than aggressive hikes until returns improve.

Risk Assessment

Business Risks:

• Structural margin pressure with NIM at 0.5%, limiting spread income growth.
• Regional concentration risk typical of Japanese regional banks (economic/demographic headwinds in the home market).
• Revenue mix opacity due to undisclosed fee and securities components.

Financial Risks:

• High leverage (D/E 30.80x) increases sensitivity to asset quality and market shocks.
• Interest rate risk and duration risk in the securities book (valuation swings amid rate volatility).
• Potential deposit repricing risk if funding costs rise faster than asset yields.
• Credit cost risk if macro conditions weaken; NPL metrics not disclosed.
• Capital adequacy uncertainty due to undisclosed regulatory ratios.

Key Concerns:

• Earnings dependence on maintaining very low CIR (42.3%); any cost drift would compress profits.
• Thin NIM leaves limited buffer against credit losses or market valuation hits.
• Data limitations (cash flows, margin details, capital ratios) hinder full risk evaluation.

Investment Implications

Key Takeaways:

• Strong YoY growth: revenue +36.1%, ordinary income +33.7%, net income +37.1%.
• Efficiency is a bright spot with CIR at 42.3%, supporting profitability.
• ROE at 3.0% remains constrained by very low asset turnover and thin NIM.
• Liquidity is conservative (LDR 73.8%) with deposits comfortably funding loans.
• Leverage is high (D/E 30.80x) as per banking norms, elevating sensitivity to shocks.

Metrics to Watch:

• Net interest margin (currently ~0.5%) and deposit beta trends.
• Credit costs and NPL ratio (not disclosed).
• Fee income and securities gains/losses contribution to revenue (undisclosed granularity).
• Cost-to-Income Ratio to ensure efficiency is sustained (<50% target).
• Regulatory capital ratios (CET1, total capital) and unrealized gains in AFS/HTM portfolios.
• Loan growth vs. deposit growth and LDR trajectory.

Relative Positioning: Operationally efficient with a low CIR and conservative LDR relative to many regional peers, but profitability remains structurally constrained by a very low NIM and low ROE; overall positioned as a disciplined, liquidity-conservative regional bank with modest return metrics.

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