The Ogaki Kyoritsu Bank,Ltd. FY2026 FY Earnings Report

Financial Highlights

• Net Sales: ¥176.58B
• Net Income: ¥18.70B
• EPS: ¥466.06

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Verdict: Solid topline growth and stronger bottom-line, but profitability quality and capital adequacy warrant caution. Revenue rose 34.4% YoY to ¥1,765.76 (100M JPY), while ordinary income increased 6.4% to ¥221.32 and net income attributable to owners climbed 31.6% to ¥193.82. Operating margin was 12.5% this year versus 15.8% last year, implying a 329 bps compression despite higher income. Net margin was 11.0% versus 11.2% a year ago, a modest 24 bps compression. Ordinary income benefited from a steep rise in interest-related revenues and fees, partly offset by higher interest expense and a sharp increase in other ordinary expenses. Extraordinary income of ¥56.13 and losses of ¥11.28 produced a net positive of ¥44.85, materially lifting profit before tax. Comprehensive income surged to ¥540.32 from a loss last year, driven mainly by valuation gains on securities and hedges flowing through OCI. ROE stands at 5.3% with leverage of 18.5x and asset turnover of 0.026, indicating returns are modest and geared by a bank-typical balance sheet. On core banking efficiency, the cost-to-income ratio is a lean ~24.9%, and the loan-to-deposit ratio is 78.6%, both supportive of stable funding and operating discipline. However, NIM is around 1.20%, below the 1.5% warning threshold, highlighting persistent margin pressure. Operating cash flow was ¥107.32 against net income of ¥193.82 (OCF/NI 0.55x), and cash conversion (OCF/EBITDA) was 0.41x, pointing to weak cash realization in the period. Free cash flow was robust at ¥700.01, more than covering dividends and buybacks. Capital adequacy ratio is reported at 5.4%, below the 8% minimum benchmark, and should remain a top monitoring item. The dividend payout ratio is about 31.9%, including a commemorative year-end component, and FCF coverage is ample at 11.3x. Looking ahead, FY2027 guidance implies modest earnings growth from this higher base and a normalized DPS post stock split, but sustaining profits will depend on asset yield management, credit cost discipline, and market volatility in the securities portfolio.

Profitability Analysis

ROE decomposition (DuPont 3-factor): Net Profit Margin 11.0% × Asset Turnover 0.026 × Financial Leverage 18.48x = ~5.3% ROE (matches reported). The most notable change YoY is margin compression (operating margin down ~329 bps, net margin down ~24 bps) despite higher revenue, indicating rising interest costs and a jump in other ordinary expenses diluted operating leverage. Business drivers: interest income (+¥20.26 in securities dividends/interest and +¥10.70 in loan interest) outpaced fee growth, but interest expense rose sharply (+¥9.87 overall; deposit interest +¥7.94) as the rate environment shifted, while other ordinary expenses surged (+¥30.00). Sustainability: NIM of ~1.20% suggests margin headwinds could persist; cost discipline (CIR ~24.9%) is a structural strength likely to endure, while extraordinary gains that lifted PBT are one-time. Concerning trends: growth in general and administrative expenses (+¥2.00) is controlled relative to revenue growth, but the spike in other ordinary expenses outpacing revenue growth bears close monitoring.

Growth Assessment

Revenue expanded 34.4% YoY to ¥1,765.76, with broad-based growth in interest income and fees. Ordinary income rose 6.4% to ¥221.32, and net income attributable to owners increased 31.6% to ¥193.82. Profit before tax was ¥266.16, supported by net extraordinary gains of ¥44.85. The fee franchise grew to ¥23.90 in income against ¥7.50 in fee expenses, contributing to diversification. The earnings mix still leans heavily on net interest, which is facing rate-driven spread pressure. Comprehensive income rebounded to ¥540.32, reflecting strong mark-to-market gains in AOCI components. Outlook hinges on stabilizing NIM, maintaining operating efficiency, and controlling other ordinary expenses. Credit cost normalization is a potential swing factor in a rising rate environment.

Financial Health

Total assets were ¥67,370.53, liabilities ¥63,725.71, and equity ¥3,644.82, yielding a D/E of 17.48x typical for banks but flagged as high on a non-bank scale. Capital adequacy ratio is 5.4%, below the 8% benchmark, warranting caution and close supervision. Funding profile is stable with deposits of ¥58,400.98 and a loan-to-deposit ratio of 78.6%, indicating no maturity mismatch stress from over-lending. Borrowed money declined by ~¥5,814 (100M JPY) YoY, reducing wholesale funding reliance. Payables under securities lending increased, suggesting active balance sheet and liquidity management via secured funding. No off-balance sheet obligations were highlighted beyond standard acceptances/guarantees. Treasury stock increased (more negative) from -¥3.85 to -¥10.33, reflecting buybacks and slightly reducing equity.

Notable B/S Changes

Deposits: +1,433.96 (100M JPY) (+2.5%) - Stable funding growth supporting balance sheet expansion. Loans and bills discounted: +1,191.53 (100M JPY) (+2.7%) - Credit growth in line with deposits keeps LDR optimal. Borrowed money: -5,814.2 (100M JPY) (-22.3%) - Reduced wholesale funding reliance lowers liquidity risk. Deferred gains/losses on hedges: +829.6 (100M JPY) (to gain position) - Hedge valuation gains bolster OCI and equity buffers. Treasury stock: -3.85 → -10.33 (100M JPY) (-168.3%) - Share repurchases modestly reduced equity.

Cash Flow Quality

OCF was ¥107.32 versus net income of ¥193.82 (OCF/NI 0.55x), signaling weak cash realization in the period. OCF/EBITDA was 0.41x, also soft for quality benchmarks. FCF was ¥700.01, comfortably covering cash dividends and buybacks combined (~11.3x coverage of dividends; ~7.1x coverage of total shareholder returns). CapEx was ¥16.79 versus depreciation of ¥39.85 (CapEx/Depreciation 0.42x), indicating a light reinvestment pace. Working capital movements and accruals were benign by the 0.1% accruals ratio, while increases in accrued expenses supported OCF; however, volatility in banking cash flows tied to securities and interbank activities can obfuscate underlying earnings cash conversion.

Dividend Sustainability

Annual DPS totaled ¥150 (including a ¥10 commemorative), implying a payout ratio of ~31.9% on FY2026 earnings. Total return ratio (dividends + buybacks) is roughly 43% of net income, conservative. FCF coverage of dividends is strong at 11.3x, and coverage of total shareholder returns is robust. For FY2027, management guides year-end DPS of ¥75 after a 1:5 stock split (equivalent to ¥150 pre-split on an annualized basis), implying continuity of policy with normalized special elements removed. Given modest ROE (5.3%) and a sub-8% capital adequacy ratio, maintaining prudent payout levels remains appropriate.

Risk Assessment

Business risks include Sustained NIM compression at ~1.20% limits earnings scalability, Revenue sensitivity to market rates and securities valuations, as seen in large OCI swings, Elevated other ordinary expenses increase earnings volatility.

Financial risks include Capital adequacy ratio at 5.4% is below the 8% benchmark, High leverage (bank-typical) at D/E 17.48x amplifies shocks to equity, Weak cash conversion (OCF/NI 0.55x; OCF/EBITDA 0.41x) in the period.

Key concerns include Extraordinary gains materially lifted PBT, not a recurring driver, Underinvestment signal (CapEx/Depreciation 0.42x) could pressure medium-term productivity if prolonged, Potential credit cost uptick in a higher-rate environment affecting borrowers.

Investment Implications

Key takeaways include Strong topline and net profit growth with modest ROE at 5.3%, Cost discipline is a competitive strength (CIR ~24.9%), but NIM at ~1.20% caps profitability, Capital adequacy at 5.4% is the primary constraint to growth and distributions, Cash conversion metrics are weak this year despite high reported FCF, Shareholder returns are prudent (payout ~32%; total return ~43%) with room conditional on capital.

Metrics to watch include NIM trajectory and loan-deposit spread, Capital adequacy ratio progress relative to regulatory thresholds, Credit cost ratio and NPL trends, Other ordinary expenses normalization, OCI sensitivity from securities and hedge valuations.

Regarding relative positioning, Among regional banks, the franchise demonstrates strong operating efficiency and balanced lending relative to deposits, but sits on the weaker end for capital adequacy and NIM, which together temper its return profile.