Quick View
| Metric | Current Period | Previous Year Period | YoY |
|---|---|---|---|
| Revenue | ¥258.1B | ¥195.3B | +32.1% |
| Operating Income | - | - | - |
| Ordinary Income | ¥25.8B | ¥45.8B | −43.8% |
| Net Income | ¥57.9B | ¥30.1B | +92.5% |
| ROE | 3.6% | 2.0% | - |
Executive Summary
During the quarter, ordinary revenues (Revenue) increased substantially, while Ordinary Income, an indicator of core earnings, declined significantly. Net income attributable to owners of the parent surged due to tax effects and extraordinary income, resulting in earnings with varying quality. Revenue (ordinary revenues) was ¥258.14B, up +32.1% year on year, while Ordinary Income was ¥25.75B, down -43.8%. Net income attributable to owners of the parent increased significantly by +92.6% year on year to ¥57.84B; however, this was primarily attributable to a decline in the effective tax rate to -80.0% due to the reversal of deferred taxes and other factors, as well as the recording of ¥6.70B in extraordinary income, and was not accompanied by an improvement in ordinary earnings.
Factors Affecting Performance
【Revenue】Ordinary revenues (Revenue) amounted to ¥258.14B, an increase of +32.1% year on year. Although segment-level details are not disclosed because the Group operates as a single segment (integrated financial services business), interest on loans, a core component of funds investment income, increased significantly to ¥90.55B (¥73.24B in the previous year, +23.6%), while interest and dividends on securities rose to ¥43.54B (¥22.27B in the previous year, +95.5%), driving the increase in revenue. The balance of loans increased by +3.5% year on year to ¥2,527.49B, while the balance of securities decreased by -3.6% to ¥943.34B, indicating a gradual shift in earning assets from securities to loans.
【Profit and Loss】Ordinary Income decreased by -43.8% year on year to ¥25.75B. Interest expenses increased to ¥31.07B (¥16.46B in the previous year, +88.8%), outpacing the growth in funds investment income, while other ordinary income (loss) deteriorated to ▲¥44.13B (▲¥7.72B in the previous year), with market-related earnings and losses weighing on revenue. General and administrative expenses also increased to ¥117.66B (¥83.35B in the previous year), and the expense ratio (general and administrative expenses / total funds investment income, fees and commissions income, and other income) rose to 70.5% (61.1% in the previous year), indicating lower cost efficiency. Profit before tax was limited to ¥32.19B (-30.0%), but income taxes were ▲¥25.74B (effective tax rate -80.0%). Tax effects, including the reversal of deferred taxes, and extraordinary income of ¥6.70B (¥0.24B in the previous year) contributed to a sharp increase in net income attributable to owners of the parent to ¥57.84B (+92.6%). In conclusion, the Company experienced higher revenue but lower Ordinary Income, while Net Income was lifted by tax effects and extraordinary income.
Segment Analysis
The Group operates as a single segment, the integrated financial services business, and does not disclose segment-level performance details.
Key Financial Indicators
【Profitability】While the Ordinary Income margin declined to 10.0% (23.5% in the previous year), the Net Income margin (based on income attributable to owners of the parent) increased to 22.4% (15.4% in the previous year). However, this increase was a temporary uplift dependent on tax effects reflected in the effective tax rate of -80.0%, and ROE remained at 3.6%. 【Cash Quality】The deterioration in other ordinary income (loss) (▲¥44.13B) and the contribution from extraordinary income (¥6.70B) were significant, and earnings growth was not accompanied by growth in core earnings at the ordinary income level. 【Investment Efficiency】The balance of loans was ¥2,527.49B (+3.5%), while the balance of securities was ¥943.34B (-3.6%), indicating a gradual shift in the composition of earning assets from securities to loans. 【Financial Soundness】The Equity Ratio was 3.7% (approximately 3.6% in the previous year), and the loan-to-deposit ratio was 74.3% (73.3% in the previous year). Both remained stable without significant changes.
Cash Flow Analysis
As the cash flow statement is not disclosed, fund movements are assessed based on changes in the balance sheet. Loans increased to ¥2,527.49B (up ¥849.75B year on year, +3.5%), indicating an expansion of funds investment centered on lending. Meanwhile, securities decreased to ¥943.34B (down ¥351.24B, -3.6%), suggesting that part of the portfolio was sold or redeemed. On the funding side, deposits increased to ¥3,403.75B (up ¥723.84B, +2.2%), while liabilities related to securities lending transactions also expanded to ¥314.33B (up ¥130.25B, +4.3%), indicating the use of short-term market funding. Net assets increased to ¥1,622.32B (up ¥92.60B, +6.1%), supported by the accumulation of retained earnings and an improvement of +¥54.00B in the valuation difference on available-for-sale securities.
Earnings Quality
The quarter’s earnings were supported by tax effects and extraordinary income offsetting weakness at the ordinary income level, indicating a high qualitative dependence on temporary factors. Against Ordinary Income of ¥25.75B, profit before tax was ¥32.19B, with extraordinary income of ¥6.70B (a substantial increase from ¥0.24B in the previous year) contributing to the uplift. In addition, income taxes resulted in an excess tax refund of ▲¥25.74B, bringing the effective tax rate to -80.0%. A considerable portion of net income attributable to owners of the parent of ¥57.84B is therefore considered to have resulted from accounting factors such as the reversal of deferred taxes. Comprehensive income was ¥110.44B (¥110.35B attributable to owners of the parent), and the difference of ¥52.51B from net income of ¥57.84B was primarily attributable to an increase in the valuation difference on available-for-sale securities (¥54.00B, compared with ¥39.67B in the previous year). The expansion of unrealized gains on securities held lifted comprehensive income. Accordingly, this represents earnings growth without an improvement in recurring earning power, and earnings quality warrants monitoring.
Earnings Forecast and Guidance
Progress in Q1 against the full-year Company forecast was 25.3% for Ordinary Income (¥25.75B/¥102.0B) and 64.3% for EPS (¥244.52/¥380.45, also approximately 64.3% based on net income attributable to owners of the parent). Progress rates therefore differed across indicators. While progress in Ordinary Income remained around a simple one-quarter of the annual plan, Net Income and EPS were ahead of schedule. Attention is required because temporary factors arising during the quarter, such as tax effects and extraordinary income, boosted progress against the full-year plan. The Company has not revised either its earnings forecast or dividend forecast.
Shareholder Returns
The Company’s full-year dividend forecast is ¥150 per share, implying a Payout Ratio of approximately 39.4% (¥150/¥380.45) based on forecast EPS of ¥380.45. As of the current quarter, the dividend forecast has not been revised. Although a dividend of ¥29 is recorded for the previous year period, a simple comparison between dividends paid during the period (such as interim dividends) and the full-year forecast is not comparable in nature; therefore, an assessment of the year-on-year change on an annual basis is withheld.
Risk Factors
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Pressure on net interest margins from rising funding costs: Interest expenses increased significantly to ¥31.07B from ¥16.46B in the previous year, or +88.8%, expanding at a faster pace than funds investment income (+39.7%). If higher funding costs persist, maintaining net interest margins may become a challenge.
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Volatility in market-related earnings and losses (other ordinary income and loss): Other ordinary income (loss) was ▲¥44.13B, with the deterioration widening from ▲¥7.72B in the previous year. The structure remains such that fluctuations in earnings and losses related to market-based assets, including gains and losses on securities sales, significantly affect Ordinary Income.
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Deterioration in cost efficiency: General and administrative expenses increased to ¥117.66B (¥83.35B in the previous year, +41.2%), and the expense ratio rose to 70.5% (61.1% in the previous year). Expenses are increasing at a faster pace than revenue, and management of the cost structure may become a challenge.
Industry Benchmark (Reference; Compiled by the Company)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Income Margin | 22.4% | – | – |
The Net Income margin of 22.4% includes the effects of tax benefits and extraordinary income; caution is therefore required when making simple comparisons of relative performance within the industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 32.1% | – | – |
The Revenue growth rate of 32.1% reflects growth in ordinary revenues, but core earnings (Ordinary Income) declined; caution is therefore required when evaluating the growth rate in isolation.
※Source: Compiled by the Company
Key Points from the Earnings Results
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Coexistence of higher revenue and lower Ordinary Income: While ordinary revenues increased significantly by +32.1%, Ordinary Income declined by -43.8%. The fact that top-line expansion did not directly lead to an improvement in core earnings is an important point in understanding the earnings structure.
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Tax effects and extraordinary income were the primary drivers of the sharp increase in Net Income: Net income attributable to owners of the parent increased by +92.6%, but this was primarily attributable to the decline in the effective tax rate to -80.0% and the recording of ¥6.70B in extraordinary income. Its nature therefore differs from growth in recurring earning power.
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Overall financial condition remained stable: The Equity Ratio of 3.7% and the loan-to-deposit ratio of 74.3% showed no significant changes from the previous year. The increase in comprehensive income was largely attributable to the expansion of the valuation difference on securities held (+¥54.00B).
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any particular security. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.
AI Financial Analysis
Executive Summary
Fukui Bank’s FY2027 Q1 result was mixed: core ordinary profitability weakened sharply, while reported net income surged on a substantial tax benefit and extraordinary gains. Revenue increased 32.1% year on year to ¥25.8bn. Ordinary income declined 43.8% to ¥2.6bn, indicating that higher income did not translate into comparable recurring-profit growth. The ordinary-income margin compressed to 10.0% from 23.5% in the prior-year quarter, a decline of approximately 1,350bp. Net income attributable to owners rose 92.6% to ¥5.8bn. The net margin consequently expanded to 22.4% from 15.4%, or roughly 700bp. This net-margin expansion was not reflective of underlying operating momentum. Profit before tax fell 30.0% to ¥3.2bn, while income tax was a ¥2.6bn benefit, producing a tax burden of 179.7% and an effective tax rate of negative 80.0%. Net extraordinary income was ¥0.6bn, consisting primarily of ¥0.7bn of extraordinary income against ¥0.03bn of extraordinary losses. Net interest income increased 31.0% to ¥12.0bn, supported by interest income growth to ¥15.1bn. However, general and administrative expenses increased 41.2% to ¥11.8bn, exceeding revenue growth and weighing on ordinary profitability. The reported annualized ROE was 14.3%, placing it in the good range, but it was materially supported by the tax benefit. Deposits increased 2.2% year on year to ¥34.0tn and loans rose 3.5% to ¥25.3tn, supporting the franchise’s balance-sheet growth. The calculated loan-to-deposit ratio of 74.3% remains within the 70-90% banking-industry reference range. Management retained its full-year forecast, and Q1 ordinary-income progress was 25.2%, broadly aligned with the standard 25% first-quarter pace. In contrast, Q1 net-income progress was 64.3% of the full-year target, a front-loaded outcome that is unlikely to represent the run-rate given the non-recurring tax benefit. The FY2027 dividend forecast of ¥150 per share implies a prospective dividend payout ratio of 39.4% based on forecast EPS of ¥380.45, leaving a reasonable earnings-retention buffer.
Profitability Analysis
The reported annualized ROE of 14.3% is decomposed into a 22.4% net profit margin, 0.024x annualized asset turnover, and 27.03x financial leverage. The quarter’s high ROE is primarily the result of the elevated net margin and structural banking leverage rather than asset turnover. The largest year-on-year movement was in margin quality: the ordinary-income margin fell by approximately 1,350bp to 10.0%, while the net margin expanded by roughly 700bp to 22.4%. The divergence reflects a ¥2.6bn income-tax benefit and ¥0.6bn of net extraordinary income, despite profit before tax declining 30.0% year on year. Net interest income rose from ¥9.2bn to ¥12.0bn, with interest income increasing ¥4.3bn and interest expense increasing ¥1.5bn. Net fees and commissions improved modestly to ¥2.0bn from ¥1.9bn. However, general and administrative expenses grew to ¥11.8bn from ¥8.3bn, a 41.2% increase that exceeded the 32.1% revenue increase and reduced operating leverage. The supplied NIM of 0.48% remains below the 1.5% warning threshold, underscoring that the bank’s interest-margin base remains thin despite the improvement in net interest income. The 179.7% tax burden is not a normalized profitability indicator because net income exceeded pre-tax income through tax benefits. Accordingly, the 14.3% annualized ROE should not be extrapolated directly as a sustainable full-year return measure.
Growth Assessment
Revenue growth of 32.1% was underpinned by higher interest income, which increased 39.8% to ¥15.1bn. Interest on loans increased 23.6% to ¥9.1bn, while interest and dividends on securities nearly doubled to ¥4.4bn. Deposit interest expense also increased 73.0% to ¥2.4bn, illustrating the sensitivity of funding costs to the rate environment. Loans expanded ¥85.0bn year on year and deposits increased ¥72.5bn, providing a larger base for recurring banking income. The calculated loan-to-deposit ratio remained stable at 74.3%, indicating that loan growth was funded within a balanced deposit base. Nevertheless, ordinary income declined 43.8% because expense growth and other ordinary expenses more than offset revenue expansion. Other ordinary expenses increased to ¥7.1bn from ¥3.3bn, contributing materially to the decline in recurring profitability. Full-year ordinary-income guidance of ¥10.2bn implies 25.2% Q1 progress, consistent with a normal quarterly profile. Full-year net-income guidance of ¥9.0bn implies 64.3% Q1 progress, suggesting that the first-quarter tax benefit should reverse or normalize in subsequent quarters. The central earnings issue is therefore the conversion of stronger gross revenue and net interest income into sustainable ordinary income after expenses and credit-related or market-related charges.
Financial Health
Total assets increased ¥70.0bn year on year to ¥4.38tn, while total equity increased ¥9.3bn to ¥162.2bn. Equity growth was supported by retained earnings rising ¥4.0bn and accumulated other comprehensive income increasing ¥5.3bn. Deposits of ¥3.40tn remain the principal funding source, while borrowings were broadly stable at ¥375.4bn. The calculated loan-to-deposit ratio of 74.3% indicates that lending is funded conservatively relative to the deposit franchise. Cash and due from banks increased ¥20.1bn to ¥820.4bn, supporting liquidity flexibility. Securities declined ¥35.1bn to ¥943.3bn, while loans increased ¥85.0bn, indicating a moderate shift in asset mix toward customer lending. The reported debt-to-equity ratio of 26.03x exceeds the general 2.0x warning threshold and is explicitly a quality alert. Its root cause is the bank business model, under which deposits and other funding liabilities are structurally large relative to book equity; it should not be interpreted in the same way as leverage at a non-financial company. Even so, the high leverage means relatively modest losses in loan assets or securities valuations can have a meaningful effect on equity. The reported capital adequacy ratio was 3.6%, below the 8% general Basel III benchmark and only modestly higher than 3.5% in the prior-year quarter. This reported ratio requires close attention because capital strength is the core loss-absorption buffer for a bank. Valuation differences on securities increased ¥54.0bn to ¥165.6bn, and accumulated other comprehensive income rose to ¥222.2bn, increasing equity’s sensitivity to market-price movements. Net defined benefit liabilities were ¥4.9bn, representing an additional long-term obligation to monitor.
Notable B/S Changes
Loans and bills discounted: +¥85.0bn (+3.5%) to ¥2.53tn - loan growth exceeded deposit growth in absolute terms but remained supported by a 74.3% loan-to-deposit ratio. Deposits: +¥72.5bn (+2.2%) to ¥3.40tn - continued deposit growth supports stable core funding. Cash and due from banks: +¥20.1bn (+2.5%) to ¥820.4bn - strengthens immediate liquidity capacity. Securities: -¥35.1bn (-3.6%) to ¥943.3bn - indicates a partial portfolio reallocation toward lending and liquidity balances. Total equity: +¥9.3bn (+6.1%) to ¥162.2bn - supported by retained earnings and higher accumulated other comprehensive income. Accumulated other comprehensive income: +¥5.3bn (+31.0%) to ¥22.2bn - improved book equity but increases sensitivity to future market valuation changes. Valuation difference on securities: +¥54.0bn (+48.4%) to ¥165.6bn - a material unrealized valuation movement requiring monitoring for market-risk reversal.
Cash Flow Quality
Reported net income of ¥5.8bn was materially higher than ¥3.2bn of profit before tax because of a ¥2.6bn income-tax benefit. This creates a meaningful distinction between reported net income and recurring pre-tax earnings. Net extraordinary income added ¥0.6bn to profit before tax, led by ¥0.7bn of extraordinary income. Ordinary income, a more relevant measure of banking-period profitability, declined 43.8% to ¥2.6bn. The elevated tax benefit and extraordinary income indicate that Q1 net income is not a clean proxy for normalized earnings capacity. Balance-sheet expansion was principally accompanied by deposit growth of ¥72.5bn and loan growth of ¥85.0bn, while cash and due from banks increased ¥20.1bn. The reduction in securities of ¥35.1bn partly offset the increase in loans and cash balances. Earnings-quality assessment should therefore focus on whether subsequent quarters deliver ordinary-income recovery without reliance on tax benefits or extraordinary items.
Dividend Sustainability
The full-year dividend forecast is ¥150 per share. Based on forecast EPS of ¥380.45, the implied dividend payout ratio is 39.4%, below the 60% sustainability reference level. The forecast dividend is substantially above the ¥29 per share reported for the prior-year first quarter, although quarterly and full-year dividend figures are not directly comparable. Q1 EPS was ¥244.52, and the full-year dividend forecast equals 61.3% of this first-quarter EPS. That apparent Q1 coverage should not be viewed as the appropriate payout measure because first-quarter EPS was lifted by the tax benefit. The retained full-year dividend forecast indicates management has not changed its shareholder-return policy following the Q1 result. Dividend capacity will depend primarily on delivery of the ¥9.0bn full-year net-income forecast and preservation of regulatory capital, particularly given the reported 3.6% capital adequacy ratio.
Risk Assessment
Business risks include Net interest margin risk: the supplied NIM of 0.48% is below the 1.5% warning level. Although net interest income increased in Q1, the narrow margin limits earnings resilience if deposit repricing accelerates or loan yields fail to rise further., Expense-control risk: general and administrative expenses rose 41.2%, faster than 32.1% revenue growth, and the ordinary-income margin contracted by approximately 1,350bp., Regional-bank credit-cycle risk: a deterioration in local corporate borrowers, particularly small and medium-sized enterprises in the Fukui regional economy, could increase provisioning needs and weaken ordinary income., Securities-market risk: accumulated other comprehensive income rose to ¥222.2bn and valuation differences on securities reached ¥165.6bn, leaving capital and comprehensive income exposed to interest-rate and market-price fluctuations..
Financial risks include High leverage alert: the reported D/E ratio of 26.03x reflects deposit-funded banking operations, but it also means that equity is a relatively small buffer against asset-quality or securities-valuation losses., Capital adequacy risk: the reported capital adequacy ratio of 3.6% is below the 8% general benchmark, making capital preservation and the interpretation of this regulatory metric important., Earnings normalization risk: Q1 net income included a ¥2.6bn tax benefit and ¥0.6bn net extraordinary income, whereas pre-tax profit fell 30.0% year on year., Funding-cost risk: interest expense increased 88.8% to ¥3.1bn, faster than interest income growth, which could pressure future spreads if deposit rates continue to reset upward..
Key concerns include Whether ordinary income can recover sufficiently to meet the ¥10.2bn full-year forecast after a 43.8% Q1 decline., Whether the low 0.48% NIM improves as loan yields reprice relative to deposit costs., Whether the reported capital adequacy ratio remains adequate after securities valuation movements and future credit costs., Whether the Q1 tax benefit remains isolated rather than masking weaker normalized profitability..
Investment Implications
Key takeaways include Q1 revenue and net interest income were strong, but ordinary income declined sharply as expenses and other ordinary expenses increased., Reported net income growth of 92.6% was driven by a ¥2.6bn tax benefit and is not equivalent to recurring earnings growth., The 14.3% annualized ROE is favorable on its face but is flattered by non-recurring tax effects and the bank’s high structural leverage., Loan and deposit growth, together with a 74.3% calculated loan-to-deposit ratio, indicate a balanced core funding and lending position., The retained ¥150 full-year dividend forecast implies a prospective 39.4% payout ratio based on management’s full-year EPS forecast..
Metrics to watch include Ordinary income versus the ¥10.2bn full-year forecast, NIM, currently supplied at 0.48%, Interest income growth relative to deposit and wholesale funding costs, General and administrative expense growth, Reported capital adequacy ratio, currently 3.6%, Securities valuation differences and accumulated other comprehensive income, Loan-loss allowance trends and credit-related charges.
Regarding relative positioning, Fukui Bank shows solid deposit-funded balance-sheet growth and a loan-to-deposit ratio within the normal regional-bank range, but its supplied 0.48% NIM is weak against banking benchmarks. Q1’s headline profit growth is less favorable than it appears because recurring ordinary income contracted, whereas tax benefits and extraordinary gains lifted reported net income.