The Bank of Toyama,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.14B
• Net Income: ¥627M
• EPS: ¥118.16

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

FY2026 Q2 was a solid but mixed quarter for Toyama Bank, with revenue and profits up YoY but profitability ratios still subdued for a bank. Revenue rose 35.0% YoY to 61.37 (100M JPY), indicating strong top-line momentum. Ordinary income increased 28.2% YoY to 9.87, and net income rose 17.1% YoY to 6.29, demonstrating positive operating leverage but at a lower rate than revenue growth. Net profit margin printed at 10.2%, and our back-solve suggests YoY margin compression of roughly 150–160 bps as profit growth lagged revenue growth. Operating income margin of about 16.1% also appears to have compressed by roughly 80–90 bps YoY on our estimates. Earnings quality visibility is limited as operating cash flow is unreported; we cannot reconcile OCF to net income or assess working-capital dynamics this quarter. Balance sheet leverage is structurally high for a bank (D/E 17.35x; equity ratio ~5.5%), but liquidity metrics are healthy, with an LDR of 72.8% indicating ample deposit funding versus loans. Profitability remains a key challenge: NIM is very low at 0.7% (below the 1.5% warning threshold), which caps structural earnings power absent fee growth or credit cost normalization. Cost discipline looks sound with a CIR of 45.0% (better than the <50% benchmark), supporting operating efficiency despite the low-rate environment. ROE calculated at 2.0% is weak relative to typical cost of equity, reflecting low margin and high balance sheet intensity. Comprehensive income of 21.26 far exceeded net income, implying large OCI gains (likely from securities), highlighting valuation sensitivity and earnings volatility outside the P&L. Tax burden remains significant with an effective tax rate of 35.1%. Dividend affordability appears reasonable with a 43.3% payout ratio based on earnings, but cash coverage cannot be validated without OCF data. Forward-looking, sustaining revenue growth with a 0.7% NIM will require fee income expansion, selective asset mix shifts, or further cost control. With leverage typical for banks but NIM at the low end, the bank’s path to higher ROE hinges on asset yield improvement, disciplined credit, and stable funding costs. Overall, directionally positive on growth and efficiency, but structurally constrained by margin pressure and low capital returns.

Profitability Analysis

ROE decomposition: ROE ≈ Net Profit Margin (10.2%) × Asset Turnover (0.011) × Financial Leverage (18.35x) ≈ 2.0%. The largest headwind is the very low asset turnover typical for banks under this accounting presentation, while the main YoY change appears to be margin compression (net income +17.1% vs revenue +35.0%). Business drivers likely include pressure from a very low NIM (0.7%) as funding costs have risen relative to asset yields, partially offset by good cost control (CIR 45%). Equity multiplier is high (≈18.4x), consistent with banking models, and likely stable YoY; thus it was not the driver of ROE change. The margin compression looks cyclical/structural rather than one-off, tied to rate structure and asset-liability mix; sustainability depends on the bank’s ability to reprice loans, shift asset mix, and grow fees. Watch for any concerning cost trends; at present, CIR at 45% indicates SG&A growth is contained relative to revenue growth, supporting operating leverage despite margin headwinds.

Growth Assessment

Top-line growth was robust at +35.0% YoY to 61.37, while ordinary income rose +28.2% and net income +17.1%, indicating positive but moderating flow-through to the bottom line. Our back-calculation implies net margin declined from roughly 11.8% to 10.2%, suggesting mix or pricing effects (low NIM) diluted profitability. Banking metrics show a healthy LDR of 72.8%, supporting loan growth capacity without stressing liquidity. However, the 0.7% NIM is a structural constraint; absent re-pricing, incremental growth may not translate efficiently into profit. Efficiency remains a relative strength with CIR at 45%, which can cushion low NIM. Total comprehensive income substantially exceeded net income (21.26 vs 6.29), implying valuation gains—these are less recurring and add volatility to headline growth. Outlook: near-term growth sustainability will hinge on asset yield uplift, fee income initiatives, and stable credit costs; low NIM and high tax rate limit earnings scalability.

Financial Health

Leverage: D/E is 17.35x (warning threshold exceeded), though this is standard for banks; equity ratio is ~5.45% (313.57 / 5,754.40). Liquidity: LDR at 72.8% is within the healthy 70–90% range, indicating ample deposit funding versus loan book. We cannot compute current or quick ratios for a bank context due to unreported details and limited relevance to banks. Maturity mismatch risk cannot be fully assessed without disclosures on the term structure of deposits/loans and securities durations; deposits (5,230.09) exceed loans (3,807.19), which is supportive of liquidity. No off-balance sheet obligations were reported in the provided data. Capital adequacy ratios (e.g., CET1) are not disclosed here; thus solvency under regulatory lenses cannot be assessed. Explicit warning: D/E > 2.0, but contextually normal for a regional bank.

Cash Flow Quality

OCF is unreported, so OCF/Net Income and free cash flow cannot be assessed—this is a key limitation. Earnings quality flags: none definitive, but the large gap between total comprehensive income (21.26) and net income (6.29) suggests significant OCI contributions, likely from securities valuation, which are volatile and non-cash in-period. Working capital movements and credit cost cash impacts cannot be evaluated. Dividend and capex coverage by FCF cannot be confirmed due to absent cash flow data. Absent evidence of aggressive working capital tactics, no manipulation is flagged, but we lack the data to affirm cash conversion.

Dividend Sustainability

The calculated payout ratio is 43.3%, which is within a generally sustainable range (<60%). With EPS at 118.16 JPY, this implies a ballpark annual DPS in the low-50 JPY range if the payout rate holds, though DPS is unreported. Cash coverage (FCF) cannot be evaluated due to missing OCF and capex data. Regulatory capital buffer (not disclosed) is also a determinant for bank dividends; lacking CET1/Tier1 data limits assessment. Near term, earnings-based coverage looks adequate, but sustainability hinges on stabilizing core profitability (NIM) and avoiding credit cost spikes.

Risk Assessment

Business Risks:

• Sustained low NIM at 0.7% compresses structural profitability.
• Profit sensitivity to securities valuation (OCI volatility) as seen in large comprehensive income swing.
• Regional economic exposure may constrain loan growth and fee opportunities.
• Potential credit cost normalization if macro weakens, impacting bottom line.

Financial Risks:

• High reported leverage (D/E 17.35x), albeit typical for banks.
• ALM/interest-rate risk: funding cost increases outpacing asset yield repricing.
• Liquidity and maturity mismatch risk cannot be fully assessed due to incomplete disclosures.
• Capital adequacy (CET1/Tier1) not disclosed; unknown buffer against stress.

Key Concerns:

• ROE at 2.0% is well below typical cost of equity.
• YoY margin compression (~150–160 bps on net margin by our estimate).
• Dependence on non-P&L gains (OCI) to bolster comprehensive income.
• Data gaps (cash flow, regulatory capital) obscure true resilience.

Investment Implications

Key Takeaways:

• Revenue and profit growth are positive, but profitability ratios remain subdued.
• NIM at 0.7% is the primary structural headwind to ROE improvement.
• Cost efficiency is a relative strength with CIR at 45%.
• Balance sheet funding is stable with LDR at 72.8%, but leverage is high by design.
• Large OCI-driven comprehensive income highlights valuation sensitivity of the securities book.

Metrics to Watch:

• Net interest margin (trajectory and drivers: asset repricing vs deposit beta).
• Cost-to-income ratio and expense discipline as growth scales.
• Credit costs and NPL formation rates (not disclosed here).
• Unrealized gains/losses in OCI and securities duration profile.
• Regulatory capital ratios (CET1/Tier1) and dividend policy alignment.
• OCF/Net income once cash flows are disclosed.

Relative Positioning: Versus regional bank peers, Toyama Bank shows robust cost efficiency (CIR <50%) and a healthy LDR, but operates with a very low NIM and correspondingly low ROE. Profitability is below average, while liquidity funding is sound; earnings volatility from securities valuations appears elevated.

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