The Hachijuni Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥136.17B
• Net Income: ¥27.87B
• EPS: ¥64.75

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

FY2026 Q2 was a strong earnings quarter for The Hachijuni Bank (8359), highlighted by double-digit top-line growth and outsized profit expansion. Revenue rose 18.3% YoY to 1,361.73 (100M JPY), while ordinary income surged 57.0% YoY to 419.46 and net income jumped 52.5% YoY to 297.62. The ordinary income margin expanded to 30.8% (419.46/1,361.73), up approximately 755 bps from an estimated 23.3% in the prior-year quarter. Net profit margin improved to 21.9%, an estimated expansion of roughly 494 bps versus about 17.0% a year ago, indicating meaningful operating leverage. Effective tax rate was 28.8%, broadly consistent with statutory norms and not a driver of the YoY upswing. On the banking fundamentals, net interest income was approximately 585.61 (interest income 846.31 minus interest expense 260.70), equating to about 43% of reported revenue; however, NIM at 0.9% remains below the 1.5% threshold and underscores a structurally low-yield environment. Cost efficiency was a standout positive with a cost-to-income ratio (CIR) of 26.5%, comfortably better than the sub-50% benchmark and signaling tight cost control. Balance sheet growth remains conservative: deposits were 94,996.35 and loans 65,065.68, implying a low LDR of 68.5% and ample liquidity, albeit with earnings drag from under-deployed deposits. ROE calculated via DuPont was 2.9%, still modest despite the margin lift, due to low asset turnover (0.010) and typical banking leverage (12.98x). Total comprehensive income of 929.50 far exceeded net income, implying large unrealized OCI gains (likely securities valuation), which are volatile and reversible with rate moves. Earnings quality cannot be fully assessed as operating cash flow was unreported; however, the large OCI swing suggests headline comprehensive earnings are not purely cash-driven. Capital structure shows a high D/E of 11.98x, typical for banks but a reminder of sensitivity to asset quality and market valuation swings. Dividend payout ratio is estimated at 69.7%, above the 60% benchmark, suggesting growing reliance on sustained profit momentum or capital buffers to maintain distributions. Forward-looking, revenue growth and margin expansion appear supported by improved spreads and strong cost discipline, but the very low NIM, conservative LDR, and valuation-sensitive OCI gains temper sustainability. Key watchpoints are BOJ policy normalization effects on deposit betas, securities portfolio valuation, and credit costs as the cycle matures.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (21.9%) × Asset Turnover (0.010) × Financial Leverage (12.98x) = ROE 2.9%. The largest contributor to the YoY improvement is the margin component: net margin increased an estimated ~494 bps (from ~17.0% to 21.9%), and ordinary margin expanded ~755 bps to 30.8%. Business drivers likely include higher net interest income (interest income 846.31 vs expense 260.70) and exceptional cost discipline (CIR 26.5%), with possible market-related gains also supporting profits (given the outsized comprehensive income). Asset turnover remains structurally low for a bank (0.010), and leverage is high but typical (12.98x), so margin improvements are the primary engine for ROE. Sustainability: cost efficiency appears structural, but margin gains are vulnerable to NIM pressure (currently 0.9%) and any reversal of market valuation gains. Watch for any instance where expense growth outpaces revenue; for now, revenue growth (+18.3%) appears to exceed any implied cost growth given the CIR outcome.

Growth Assessment

Top-line growth of 18.3% YoY and profit growth of 52.5–57.0% YoY indicate strong operating leverage. Core banking indicators are mixed: NIM of 0.9% is low, suggesting growth may be partially driven by volume, fee income, mix, or market-related gains rather than spread expansion alone. LDR of 68.5% implies capacity to grow loans without funding strain, but also indicates earnings drag if liquidity remains underutilized. The CIR at 26.5% suggests sustainable efficiency benefits, supporting medium-term profitability if revenue momentum persists. Total comprehensive income far above net income points to supportive market conditions for the securities book; this is inherently volatile and not a reliable growth engine. Outlook hinges on BOJ normalization: asset yields could rise, but deposit betas may increase, compressing NIM; prudent loan growth and fee income diversification will be key.

Financial Health

Total assets were 135,125.92, liabilities 124,714.69, and total equity 10,411.23 (100M JPY). Debt-to-equity is 11.98x, high by industrial standards but typical for banks; nonetheless, we explicitly flag it as high leverage. Liquidity: Deposits of 94,996.35 vs loans of 65,065.68 yield an LDR of 68.5%, indicating conservative funding and low near-term liquidity risk. Current and quick ratios are not meaningful for banks and were unreported. Maturity mismatch risk appears moderate given low LDR, but interest rate risk on the securities portfolio is noteworthy (large OCI swing). No off-balance-sheet obligations were disclosed in the provided data; capital adequacy ratios (e.g., CET1) were not provided and thus cannot be assessed.

Cash Flow Quality

Operating cash flow was unreported, so OCF/Net Income and FCF cannot be calculated. As such, we cannot test OCF/NI < 0.8 for quality. The large difference between total comprehensive income (929.50) and net income (297.62) suggests significant unrealized gains in OCI, which are valuation-driven and non-cash; earnings quality is therefore exposed to market movements. Working capital manipulation signs cannot be assessed for a bank from the provided data. Dividend and capex coverage by FCF is unassessable due to missing cash flow data.

Dividend Sustainability

The calculated payout ratio is 69.7%, above the <60% benchmark, implying a tighter buffer for cyclical or market-driven earnings volatility. FCF coverage is not assessable due to missing OCF/FCF data. Sustainability therefore relies on stable core earnings (NIM, fee income) and capital headroom rather than cash flow proof. Given NIM at 0.9% and OCI-driven volatility, maintaining this payout demands continued cost control and careful balance sheet management. Any rise in credit costs or reversal of securities gains could pressure distribution capacity.

Risk Assessment

Business Risks:

• Persistently low NIM at 0.9% constraining core profitability.
• Loan growth headwinds in regional markets (demographics, competition) limiting asset turnover.
• Revenue sensitivity to market-related gains as implied by large OCI swings.
• Fee income mix and sustainability not disclosed, creating uncertainty about recurring revenue drivers.

Financial Risks:

• High leverage (D/E 11.98x) typical for banks but amplifies shocks to capital via credit or valuation losses.
• Interest rate risk on the securities portfolio; large OCI suggests duration exposure and valuation volatility.
• Potential deposit beta increases under BOJ normalization could compress spreads.
• Credit cycle normalization risk: higher provisions could erode margins and ROE.

Key Concerns:

• NIM below 1.5% benchmark despite strong profit growth indicates reliance on efficiency and non-spread factors.
• Dividend payout ratio at ~70% leaves limited buffer against earnings volatility.
• Dependence on market conditions (OCI) may exaggerate earnings in benign periods and reverse quickly.
• Data gaps (no OCF, no capital ratios, no NPL/coverage) limit visibility into resilience under stress.

Investment Implications

Key Takeaways:

• Earnings momentum is strong: revenue +18.3% YoY, ordinary income +57.0%, net income +52.5%.
• Material margin expansion: ordinary margin +~755 bps to 30.8%; net margin +~494 bps to 21.9%.
• Operational efficiency standout with CIR 26.5%, supporting profitability even with low NIM.
• Core profitability headwind persists with NIM at 0.9% and conservative LDR at 68.5%.
• ROE at 2.9% remains modest; margin improvements are offset by structural factors (low turnover, banking leverage).
• Large positive OCI inflates comprehensive income; this is not a stable earnings driver.
• Dividend payout near 70% may be challenging to sustain if core earnings or markets weaken.

Metrics to Watch:

• NIM trajectory and deposit beta under changing BOJ policy.
• Credit costs/NPL ratio and coverage (not provided here).
• CET1 and capital buffers vs unrealized securities gains/losses (not provided).
• Fee and commission income growth mix vs net interest income.
• CIR sustainability and expense trends.
• LDR evolution and loan growth in core regions.
• OCI volatility and duration profile of the securities book.

Relative Positioning: Within Japanese regional banks, Hachijuni shows excellent cost efficiency and strong YoY profit momentum but operates with a very low NIM and modest ROE. Balance sheet funding is conservative (low LDR), reducing liquidity risk but tempering earnings. Overall profitability quality is solid operationally but exposed to rate and valuation dynamics.

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