THE SHIMIZU BANK (8364) FY2026 FY Earnings Report

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Executive Summary

Shimizu Bank recorded increases in both revenue and profit for the current period; however, growth in net income fell below growth in ordinary income due to the increased tax burden. Ordinary revenue was ¥33.67B (+15.5% YoY), while ordinary income was ¥3.13B (+36.2% YoY), resulting in an ordinary income margin of 9.3%, up from 7.9% in the previous year. Meanwhile, net income attributable to owners of the parent was limited to ¥2.00B (+7.5% YoY), with the effective tax rate of 33.6% restraining growth in final profit. The primary drivers of profit growth were the expansion of interest income and the containment of general and administrative expenses, indicating an improving earnings structure.

Factors Affecting Performance

【Revenue】Ordinary revenue increased 15.5% YoY to ¥33.67B. Banking accounted for ¥26.82B (79.7% of the total) and was the core business, while interest income increased substantially to ¥20.52B (+29.5% from ¥15.84B in the previous year). Loans outstanding increased to ¥1,268.30B (+1.2% YoY), and in addition to loan balance growth, higher yields appear to have contributed to revenue expansion. The leasing and credit card businesses generated ¥6.38B (19.0% of the total), making them the second-largest source of revenue after banking.

【Profit and Loss】Ordinary income increased 36.2% YoY to ¥3.13B, supported by the containment of general and administrative expenses, which declined 3.4% YoY to ¥15.04B, resulting in positive operating leverage. Meanwhile, funding costs increased significantly by 187.5% YoY to ¥4.26B, and higher deposit interest rates are constraining NIM expansion through increased funding costs. Against pre-tax income of ¥3.12B, corporate income taxes and other taxes of ¥1.05B were recorded, resulting in an effective tax rate of 33.6%. Extraordinary losses were minimal at ¥0.01B (impairment losses of ¥0.01B), and the gap between ordinary income and pre-tax income was limited. In conclusion, although the current period saw increases in both revenue and profit, the growth rate of net income fell below that of ordinary income due to the increased tax burden.

Segment Analysis

Banking was the largest segment, accounting for 79.7% of consolidated ordinary revenue, with ordinary revenue of ¥26.82B, segment profit of ¥2.98B, and the highest profitability at 11.1%. The leasing and credit card businesses generated ordinary revenue of ¥6.38B, segment profit of ¥0.28B, and a profit margin of 4.4%, which was 6.7pt lower than that of banking. Other businesses, including credit guarantee operations, generated ordinary revenue of ¥0.47B and achieved a high profit margin of 17.9%, although they accounted for only 1.4% of the total. Segment profit is calculated on an ordinary income basis and therefore differs in definition from operating income in the consolidated income statement. The high concentration of earnings in banking indicates a structure in which changes in regional funding demand, the interest-rate environment, and credit costs directly affect consolidated performance.

Key Financial Indicators

【Profitability】The ordinary income margin was 9.3%, improving by approximately 1.4pt from 7.9% in the previous year, while the net profit margin declined by approximately 0.5pt to 5.9% from 6.4% in the previous year. ROE was 2.6% and ROA was approximately 0.19%, both low levels, indicating room for improvement in capital efficiency.【Cash Flow Quality】Operating Cash Flow (OCF) was -¥10.21B, resulting in a negative ratio to net income attributable to owners of the parent of ¥2.00B, representing a significant reversal from OCF of +¥73.85B in the previous year. Meanwhile, the difference between ordinary income and pre-tax income was small at ¥0.016B, and the accrual ratio was also low, not at a level indicating distortion in accrual-basis earnings.【Investment Efficiency】Capital expenditures were ¥1.02B compared with depreciation and amortization of ¥1.56B; capital expenditures were only 0.65 times depreciation and amortization, suggesting a trend toward restrained investment.【Financial Soundness】The equity ratio was 4.4%, improving from 4.0% in the previous year, while the loan-to-deposit ratio was 77.7%, indicating no excessive loan expansion relative to the deposit base. Net assets increased 10.6% YoY to ¥81.01B, supported by an increase in comprehensive income.

Cash Flow Analysis

Operating Cash Flow (OCF) was -¥10.21B, a significant reversal from +¥73.85B in the same period of the previous year. At banks, OCF can fluctuate significantly due to changes in the balances of deposits, loans, securities, and other items; therefore, this cannot unequivocally be characterized as a deterioration in earnings quality. However, the scale of cash outflows during the current period warrants careful monitoring. Investing CF was -¥7.02B, including capital expenditures of -¥1.02B, while financing CF was -¥0.59B, resulting in free cash flow of -¥17.23B. Cash and cash equivalents declined from ¥242.48B at the end of the previous year to ¥224.66B, reflecting changes in the composition of fund investment and funding during the period. Borrowings declined substantially by ¥40.86B YoY, indicating a shift toward a funding structure centered on deposits.

Earnings Quality

Pre-tax income was ¥3.12B compared with ordinary income of ¥3.13B, leaving only a ¥0.016B difference, while the impact of extraordinary losses, including impairment losses of ¥0.01B, was also minimal. Net income attributable to owners of the parent was ¥2.00B, substantially below ordinary income, primarily due to corporate income taxes and other taxes of ¥1.05B, corresponding to an effective tax rate of 33.6%, rather than temporary extraordinary gains or losses. Other ordinary revenue, corresponding to non-operating income, was ¥0.05B, accounting for less than 1% of ordinary revenue, indicating limited dependence on non-recurring revenue. Meanwhile, the fact that OCF was substantially below net income indicates a divergence between accrual-basis earnings and cash-generation capacity, requiring monitoring of operating cash flow trends, including funding and investment items. Comprehensive income was ¥8.34B, substantially exceeding net income of ¥2.07B, as improvements in other comprehensive income, including valuation differences on securities and adjustments related to retirement benefits, increased net assets.

Earnings Forecast and Guidance

The company forecasts ordinary revenue of ¥37.80B, ordinary income of ¥3.80B, net income of ¥2.50B, and an annual dividend of ¥60. Actual progress rates were 89.1% for ordinary revenue, 82.5% for ordinary income, and 80.0% for net income, indicating generally steady progress against the full-year plan. To achieve the remaining forecast targets, additional amounts of ¥4.13B in ordinary revenue, ¥0.67B in ordinary income, and ¥0.50B in net income are required. Since progress in net income is slightly below progress in ordinary income, future tax burdens, credit costs, and gains or losses related to securities will be variable factors affecting achievement of the forecast.

Shareholder Returns

The annual dividend was ¥60 per share, doubling from ¥30 in the previous year, while the payout ratio declined to 33.9% from 36.8% in the previous year. Total dividends were approximately ¥0.69B, and the buffer relative to retained earnings of ¥65.24B is substantial, leaving room to sustain dividends based on accounting earnings. However, current-period free cash flow was -¥17.23B, and dividends were not covered by current-period cash flow alone. Assuming the company’s forecast EPS of ¥220.87, the forecast payout ratio is approximately 27.2%. The company did not conduct share repurchases during the current period; as returns were provided solely through dividends, the payout ratio is the appropriate metric.

Risk Factors

1. Earnings concentration risk: Banking accounts for 79.7% of consolidated ordinary revenue, creating a structure in which changes in the regional economy, loan demand, and credit costs directly affect consolidated performance.

2. Net interest margin pressure risk: Funding costs increased sharply by 187.5% YoY (from ¥1.48B to ¥4.26B), and if the increase in funding costs exceeds the growth in interest income (+29.5%), net interest income may come under pressure.

3. Operating cash flow volatility: OCF was -¥10.21B, a significant reversal from +¥73.85B in the previous year. Even taking into account bank-specific changes in assets and liabilities, the sustainability of cash outflows requires confirmation.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The net profit margin is below the industry median, with the high effective tax rate and increased funding costs acting as factors depressing profitability relative to peers within the industry.

Growth and Capital Efficiency

The revenue growth rate exceeds the industry median, and the company continues to maintain a high pace of revenue growth relative to industry peers.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Ordinary revenue increased 15.5% YoY and ordinary income increased 36.2% YoY, indicating improved profitability. However, the effective tax rate of 33.6% restrained net income growth (+7.5%–+15.8%), creating a structure in which trends in the tax burden will determine future profit growth.

2. Funding costs increased sharply by 187.5% YoY, and the balance between this increase and growth in interest income will be a key focus in assessing future trends in the net interest margin.

3. OCF underwent a significant reversal from +¥73.85B in the previous year to -¥10.21B. Free cash flow was also negative. Although the payout ratio of 33.9% is conservative from an earnings perspective, cash flow support is weak, making monitoring of funding trends a useful area of observation.

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This report is an earnings analysis document automatically generated by AI based on XBRL financial results release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available financial results data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

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