Hachijuni Nagano Bank (8359) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of FY2026, revenue and profit increased, driven primarily by the expansion of net interest income and income from fees and commissions. Ordinary income was ¥2,089.4B (+18.7% YoY), ordinary income was ¥675.6B (+52.3% YoY), and net income attributable to owners of the parent was ¥477.1B (+49.9% YoY). The primary drivers of profit growth were a 21.1% increase in ordinary income in the Banking Business segment and the containment of expense growth, resulting in operating leverage as the growth rate of ordinary income exceeded that of ordinary expenses. Basic EPS rose significantly to ¥104.11 from ¥66.55 in the same period of the previous year.

Factors Affecting Performance

【Revenue】Ordinary income increased 18.7% YoY to ¥2,089.4B. Ordinary income from external customers in the Banking Business was ¥1,775.0B (+21.1% YoY), driving the overall result. Net interest income of ¥936.2B (+17.3%), which absorbed loan interest income of ¥635.9B (+17.7%) and the sharp increase in deposit interest expense (+129.7%), was the primary contributor. Income from fees and commissions also grew to ¥159.0B (+19.7%), indicating an expansion in non-interest income. The Leasing Business and Other Businesses posted complementary growth of ¥292.2B (+6.6%) and ¥22.1B (+15.8%), respectively.

【Profit and Loss】Ordinary income increased 52.3% YoY to ¥675.6B, while net income increased 49.9% YoY to ¥477.1B. The primary driver of profit growth was the 18.7% increase in ordinary income, which exceeded the growth in ordinary expenses (general and administrative expenses +6.0%). The difference between ordinary income of ¥675.6B and net income of ¥477.1B was mainly attributable to income taxes and other taxes of ¥195.8B. Extraordinary income and losses were minor at a net △¥1.5B, indicating that profit growth was based on recurring income expansion. In conclusion, both revenue and profit increased.

Segment Analysis

The Banking Business generated ordinary income of ¥1,775.0B (+21.1% YoY) and segment profit of ¥652.9B (+53.1% YoY), with a profit margin of 36.8%, making it the core business and accounting for 96.6% of consolidated segment profit. The Leasing Business generated ordinary income of ¥292.2B (+6.6% YoY) and segment profit of ¥19.6B (+10.3% YoY), with a profit margin of 6.7%, substantially below that of the Banking Business. Other Businesses, including the Securities Business and Venture Capital Business, generated ordinary income of ¥22.1B (+15.8% YoY) and segment profit of ¥3.1B, turning profitable from a loss of ¥0.99B in the same period of the previous year. The gap in profit margins between the Banking Business and the Leasing Business reached approximately 30pt, indicating that consolidated profitability is strongly determined by trends in interest income and fee income in the Banking Business.

Key Financial Indicators

【Profitability】The ordinary income margin was 32.3%, improving from 25.2% in the same period of the previous year, while the net income margin rose to 22.8% from 18.1%. The Banking Business segment profit margin improved to 36.8% from 29.1% in the same period of the previous year.【Cash Flow Quality】The difference between ordinary income and net income was primarily attributable to income taxes and other taxes of ¥195.8B. The impact of extraordinary income and losses was minor at a net △¥1.5B, and earnings were supported by the expansion of recurring Banking Business income.【Investment Efficiency】Annualized ROE was 6.0%, reflecting the structure of the banking model, in which the low total asset turnover is offset by high leverage, alongside a net income margin of 22.8%.【Financial Soundness】The equity ratio was 7.7%, improving from 7.1% in the same period of the previous year, but remaining below the 8% benchmark for financial soundness. The loan-to-deposit ratio was approximately 70.0%, while the debt-to-equity ratio was 11.80x, indicating the structurally high leverage of a banking business that relies primarily on deposits as its funding source.

Cash Flow Analysis

As this financial statement does not provide detailed disclosure of the cash flow statement, cash flows are analyzed based on balance sheet trends. Cash and due from banks decreased 4.5% YoY to ¥2,889.40B, but the bank continued to maintain a high level of liquid assets. Borrowings decreased 17.8% YoY to ¥1,299.79B, while call money increased 25.6% YoY to ¥745.64B, indicating a shift in the funding mix from long-term borrowings to short-term market-based funding. Loans increased 3.0% YoY to ¥6,657.34B, while deposits were nearly flat at ¥9,508.37B, down 0.4% YoY, resulting in a loan-to-deposit ratio of approximately 70.0%. Net assets increased 9.7% from ¥967.66B to ¥1,061.98B, owing to the accumulation of net income and an improvement in the valuation difference on securities.

Earnings Quality

Against ordinary income of ¥675.6B, extraordinary income was ¥0.6B and extraordinary losses were ¥2.2B, including impairment losses of ¥1.8B. Extraordinary income and losses therefore amounted to a net △¥1.5B, and the increase in profit was minimally dependent on one-time factors. The difference of ¥196.9B between ordinary income and net income was mainly attributable to income taxes and other taxes of ¥195.8B, representing a normal difference arising from the tax burden. Net interest income and income from fees and commissions, corresponding to non-operating income, both increased by double digits YoY, indicating that the earnings structure is supported by both interest income and non-interest income. Comprehensive income was ¥1,269.6B, substantially exceeding net income of ¥477.1B, primarily due to the reversal in the valuation difference on securities of ¥471.6B, which improved from △¥912.5B in the same period of the previous year. As this item is strongly affected by market price fluctuations, it should be evaluated separately from recurring earnings power.

Earnings Forecasts and Guidance

Cumulative Q3 ordinary income represented 88.9% of the full-year ordinary income forecast of ¥760.0B, exceeding the simple benchmark of 75%. Progress against the full-year net income forecast of ¥550.0B was 86.8% (using net income attributable to owners of the parent of ¥477.1B), also representing a high level. The Company has not revised either its earnings forecasts or dividend forecasts. Ordinary income of approximately ¥84.4B will be required in Q4 based on a reverse calculation. The high progress rate reflects growth in net interest income and fee income, as well as the containment of expense growth; however, the decision to maintain the full-year forecast may indicate that the Company is conservatively factoring in volatility in interest rates, the securities market, credit costs, and other variables.

Shareholder Returns

The interim dividend was ¥20.00 per share, while the full-year dividend forecast is ¥50.00, comprising an ordinary year-end dividend of ¥25.00 and a commemorative dividend of ¥5.00. The forecast payout ratio against forecast full-year EPS of ¥120.25 is approximately 41.6%, below the general benchmark of 60%. Treasury shares increased by ¥9.87B YoY; however, as the breakdown of acquisitions, cancellations, and other items has not been disclosed, the Total Return Ratio combining dividends and share buybacks has not been calculated. Based solely on the payout ratio, shareholder returns are not excessive relative to the earnings forecast. However, since the equity ratio of 7.7% is below the 8% benchmark, the capacity for future shareholder returns will also be affected by trends in capital adequacy.

Risk Factors

1. Net interest margin (NIM) compression risk: While deposit interest expense surged +129.7% YoY, the increase in loan interest income was limited to +17.7%. If the rise in deposit costs cannot be sufficiently passed through via improvements in loan and securities investment yields, growth in net interest income may slow.

2. Business concentration risk: The Banking Business segment accounts for 96.6% of consolidated segment profit, creating a structure in which changes in regional economic demand for funds and borrower creditworthiness directly affect consolidated performance.

3. Capital adequacy risk: Although the equity ratio improved 60bp YoY to 7.7%, it remains below the 8% benchmark. Accumulated other comprehensive income of ¥378.37B accounts for approximately 35.6% of net assets, and fluctuations in the valuation difference on securities could destabilize equity capital.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

Comparable data on net income margins within the industry is limited, but the Company’s 22.9% improved from 18.1% in the same period of the previous year.

Growth and Capital Efficiency

The revenue growth rate of 18.7% represents a faster pace than in the same period of the previous year and supported revenue growth during the current quarter.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Ordinary income increased 52.3% YoY and net income increased 49.9%, resulting in substantial profit growth. An increase in net interest income and income from fees and commissions, together with the containment of expense growth, was confirmed. The ordinary income progress rate of 88.9% is high relative to the full-year forecast.

2. Although the equity ratio of 7.7% improved 60bp YoY, it remains below the 8% benchmark. Accumulated other comprehensive income increased due to the improvement in the valuation difference on securities. The increased linkage between equity capital and market price fluctuations is a structural characteristic observable in the financial results data.

3. The increase in deposit interest expense (+129.7%) exceeded the increase in loan interest income (+17.7%), indicating that the rise in funding costs is beginning to outpace the growth in returns from fund deployment, as observed in the financial results data.

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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. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and, where necessary, after consulting with a professional.

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