THE SHIMIZU BANK,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.16B
• Net Income: ¥1.69B
• Earnings per Unit (EPU): ¥133.91

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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

Verdict: Solid topline and profit growth with margin expansion, but structurally thin NIM keeps profitability and ROE subdued for FY2026 Q2. Revenue rose 10.6% YoY to 161.57 (100M JPY), and ordinary income increased 35.8% YoY to 19.87, signaling strong operating leverage. Net income improved 21.6% YoY to 15.08, lifting net profit margin to 9.3%. Ordinary income margin rose to 12.3%, indicating positive cost and income dynamics. Based on the growth differential, net margin expanded by roughly 85 bps YoY (from ~8.5% to 9.3%). Ordinary income margin expanded by about 229 bps YoY (from ~10.0% to 12.3%). EPS (basic) printed at 133.91 yen, supported by better profit conversion. Comprehensive income was 60.53, far above net income, suggesting sizeable unrealized gains (likely AFS securities valuation gains) flowing through OCI. The cost base appears disciplined with a Cost-to-Income Ratio of 46.5% (<50% benchmark), reinforcing margin expansion. However, the Net Interest Margin remains very thin at about 0.6% (warning: <1.5%), highlighting structural earnings pressure for a regional bank in Japan. Balance sheet growth looks funded primarily by deposits (15,809.04) with a healthy Loan-to-Deposit Ratio of 79.8% (within 70–90% benchmark). Leverage is high (D/E 21.63x), typical for banks, but it still elevates sensitivity to asset quality and rate shocks. ROE is 1.9%, low relative to peers and below an assumed cost of equity, reflecting limited capital efficiency. Dividend payout ratio is 46.3%, within a sustainable range if earnings remain stable. Operating cash flow data are unreported, so earnings quality from a cash conversion perspective cannot be verified this quarter. Looking ahead, sustaining profit growth will depend on maintaining cost discipline, fee income expansion, and careful interest rate risk management as domestic rates normalize.

Profitability Analysis

ROE decomposition (DuPont): ROE 1.9% = Net Profit Margin (9.3%) × Asset Turnover (0.009x) × Financial Leverage (22.63x). The most impactful change versus last year is inferred to be net margin expansion, given revenue grew 10.6% YoY while net income grew 21.6% YoY, implying better profit conversion. Business drivers likely include a better cost-to-income ratio (46.5%) and possibly lower credit costs and/or improved fee and market-related income; NIM remains thin at ~0.6%, so margin gains do not appear to be driven by core spread expansion. Asset turnover is structurally low for banks and likely unchanged materially; financial leverage remains high and typical for the sector, not the main driver of the YoY improvement. Sustainability: cost discipline may be repeatable, but reliance on market-related gains (suggested by large OCI) is less dependable; absent a structural NIM uplift, sustaining elevated profit growth may be challenging. Watch for adverse trends where SG&A/operating expenses grow faster than revenue; this quarter, the CIR at 46.5% suggests positive operating leverage rather than a cost overrun.

Growth Assessment

Revenue growth of 10.6% YoY to 161.57 is healthy for a regional bank, indicating either higher fee income, trading/market income, or improved loan volumes and spreads. Ordinary income rose 35.8% YoY to 19.87, substantially outpacing revenue growth and pointing to strong operating leverage and/or favorable non-interest income. Net income increased 21.6% YoY to 15.08, aided by margin expansion; net margin rose to ~9.3% (+~85 bps YoY). Given NIM remains very low at ~0.6%, the growth appears more cost- and fee/market-income-driven than spread-driven. Total comprehensive income of 60.53 far exceeding net income signals sizable unrealized gains (likely from securities valuation), which are non-cash and volatile. Outlook will hinge on rate path (which can swing securities valuations and NIM), credit cost normalization, and continued cost discipline. Near-term, growth looks positive but with a notable market-sensitivity component.

Financial Health

Total assets are 17,884.93 with total equity of 790.33 (D/E 21.63x). While this leverage level triggers a generic warning (>2.0), it is structurally normal for banks whose primary funding is deposits. Deposits of 15,809.04 comfortably fund loans of 12,612.97, yielding an LDR of 79.8% within the optimal 70–90% range, limiting maturity mismatch risk. Current ratio and quick ratio are not applicable/meaningful for banks and are unreported. No off-balance sheet obligations are disclosed in the dataset; contingent risks (e.g., guarantees, derivatives) cannot be assessed from the provided information. Capital adequacy ratios (e.g., CET1) are unreported; thus, we cannot gauge loss-absorption capacity beyond book equity. Given the reliance on securities (implied by large OCI swing), interest rate risk to capital should be monitored closely.

Cash Flow Quality

Operating cash flow and free cash flow are unreported, so OCF/Net Income and FCF coverage cannot be assessed this quarter. In lieu of cash-flow verification, the quality proxy comes from earnings composition: strong YoY profit growth amid a very low NIM and a large positive OCI suggests a portion of performance may be market-dependent rather than purely recurring spread income. Working capital metrics for banks are not directly comparable; deposit stability and LDR (79.8%) suggest adequate core funding. Without OCF, we cannot confirm cash conversion; therefore, no definitive flag on OCF/NI can be made.

Dividend Sustainability

Payout ratio is 46.3%, below the 60% caution threshold, indicating current distributions are likely sustainable on reported earnings. FCF coverage cannot be calculated due to unreported cash flows. With ROE at 1.9% and NIM at ~0.6%, dividend sustainability depends on maintaining current earnings, cost discipline (CIR 46.5%), and benign credit costs. If OCI-driven gains reverse, headline capital could be volatile, though accounting flows through OCI rather than P&L; still, adverse market moves can pressure capital buffers and future payout flexibility. No explicit dividend policy or DPS was disclosed in the provided data.

Risk Assessment

Business Risks:

• Structural margin pressure: NIM ~0.6% (<1.5% warning threshold).
• Earnings sensitivity to market conditions: large OCI gains indicate securities valuation reliance.
• Credit cost normalization risk amid economic slowdown or regional SME stress.
• Regional concentration and demographic headwinds typical of local banks.

Financial Risks:

• High leverage (D/E 21.63x), inherent to banking, amplifies asset-quality and rate risks.
• Interest rate risk on AFS/HTM securities affecting OCI and capital.
• Liquidity risk from potential deposit outflows, partly mitigated by LDR at 79.8%.
• Unreported capital adequacy (e.g., CET1) obscures buffer assessment.

Key Concerns:

• Low ROE at 1.9% and ROIC at 1.9%, below typical cost of equity.
• Profit growth partly non-recurring if driven by market-related gains.
• Data gaps (cash flows, credit costs, capital ratios) limit full risk visibility.

Investment Implications

Key Takeaways:

• Revenue +10.6% YoY and ordinary income +35.8% YoY indicate strong operating leverage.
• Net income +21.6% YoY with net margin expansion of ~85 bps to ~9.3%.
• CIR at 46.5% reflects good cost discipline; however, NIM is structurally thin (~0.6%).
• Comprehensive income (60.53) far exceeds net income (15.08), implying significant OCI gains and market sensitivity.
• ROE at 1.9% remains low, highlighting weak capital efficiency versus peers.
• Funding profile is sound with LDR at 79.8% and deposit base exceeding loans.
• Dividend payout ratio ~46% appears manageable if earnings stability is maintained.

Metrics to Watch:

• Net interest margin trajectory and loan/deposit repricing gap.
• Cost-to-income ratio and expense growth versus revenue.
• Credit costs (NPL ratio, net charge-offs) and SME exposure quality.
• Unrealized gains/losses on securities and duration gap.
• Capital ratios (CET1, total capital) and buffer to regulatory minima.
• Fee and commission income growth to diversify away from spread income.
• Loan-to-deposit ratio and deposit mix stability.

Relative Positioning: Within Japanese regional banks, cost efficiency (CIR <50%) is a relative strength, but NIM (~0.6%) and ROE (1.9%) are weak versus many peers targeting mid-single-digit ROE; reliance on securities-related OCI introduces additional volatility risk.

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