The Bank of Toyama (8365) FY2026 Q3 Earnings Report

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Executive Summary

The third quarter resulted in higher revenue and higher profit, with growth in lending and interest income, primarily in the banking business, driving performance. Revenue (ordinary revenue) was ¥94.9B (up +29.0% YoY), ordinary income was ¥11.6B (up +37.2%), net income (consolidated) was ¥7.6B (up +24.9%), and net income attributable to owners of the parent was ¥7.5B (up +27.5%). The primary drivers of revenue growth were the increase in loans and expansion of interest income in the banking business. As the increase in ordinary income exceeded the increase in revenue, profitability improved from the previous year.

Factors Affecting Performance

【Revenue】Revenue (ordinary revenue) increased to ¥94.9B, up +29.0% YoY. By segment, the banking business led growth at ¥81.4B (85.7% of total, YoY +33.1%), while the leasing business posted ¥13.4B (14.1% of total, YoY +9.4%), representing moderate growth. Growth in the banking business was primarily attributable to interest on loans (InterestOnLoansBNK), which increased to ¥32.2B from ¥27.3B in the previous year, as well as an overall increase in funds income, including interest on securities.

【Profit and Loss】Ordinary income increased to ¥11.6B (YoY +37.2%), with the rate of profit growth exceeding the rate of revenue growth, indicating improved profitability. By segment, the banking business posted a substantial increase in profit to ¥11.4B (YoY +43.4%, profit margin 14.0%), while the leasing business recorded ¥0.1B (YoY -61.8%, profit margin 1.0%), a decline in profit. In the banking business, the expansion of ordinary revenue exceeded the increase in operating expenses (general and administrative expenses of ¥42.2B versus ¥40.2B in the previous year), driving profitability improvement. Net income was ¥7.6B (YoY +24.9%), slightly below the growth rate of ordinary income, due to the increase in the effective tax rate (income taxes of ¥3.9B). An impairment loss of ¥0.1B was recorded as an extraordinary loss and represents a temporary factor, but its amount was small and its impact on performance was limited. Overall, the results represent higher revenue and higher profit.

Segment Analysis

The banking business segment led the Group overall, with revenue of ¥81.4B (85.7% of total, YoY +33.1%) and segment profit of ¥11.4B (YoY +43.4%, profit margin 14.0%). The leasing business recorded higher revenue of ¥13.4B (14.1% of total, YoY +9.4%), but segment profit declined substantially to ¥0.1B (YoY -61.8%, profit margin 1.0%), apparently due to increased costs such as provision for loan losses, which pressured profit. Other businesses (guarantee services) remain small in scale, with revenue of ¥0.2B, but maintained a high profit margin of 78.9%. Overall, the Group’s performance is structurally supported primarily by growth in the banking business, while declining profitability in the leasing business is a key point for future monitoring.

Key Financial Indicators

【Profitability】The net profit margin (net income / revenue) was 8.0%, slightly down from 8.2% (606/7353) in the same period of the previous year. Meanwhile, the ordinary income margin improved to 12.2% from 11.5% in the same period of the previous year, indicating improved profitability at the ordinary income level.【Cash Flow Quality】Comprehensive income was ¥30.1B, substantially exceeding net income of ¥7.6B, primarily due to valuation differences on securities of ¥22.8B. This divergence reflects temporary market valuation factors and should be considered separately from ordinary income and net income, which indicate the earning power of the core business.【Investment Efficiency】ROE was 2.4%, while the equity ratio (BIS standard) was 5.3% (5.1% in the previous year), indicating slight improvement. Total asset turnover was low at 0.016, and due to the characteristics of the banking business, profit-generation efficiency relative to the asset base is limited.【Financial Soundness】Total assets were ¥5,799.7B (¥5,484.2B in the previous year), and net assets were ¥321.0B (¥293.5B in the previous year), with both assets and capital expanding. Deposits increased to ¥5,284.7B (¥5,020.5B in the previous year), while loans of ¥386.9B also grew, indicating continued expansion in the scale of the banking business.

Cash Flow Analysis

Although no cash flow statement has been disclosed, the flow of funds can be assessed from balance sheet trends. Deposits increased by 264B to ¥5,284.7B (¥5,020.5B in the previous year), while loans increased only modestly by 3.8B to ¥386.9B (¥383.1B in the previous year). Cash and deposits increased substantially to ¥496.6B (¥306.7B in the previous year), indicating that part of the increase in deposits was not directed toward loan growth but was accumulated as liquid assets. Securities increased to ¥1,322.2B (¥1,230.1B in the previous year), suggesting that securities investments may have been used as an allocation for the increase in deposits. Overall, the structure involves funding procurement (increased deposits) being allocated to asset investment (loans, securities, and cash), with no significant concerns regarding liquidity management.

Quality of Earnings

Net income was ¥7.6B versus ordinary income of ¥11.6B, reflecting the deduction of ¥3.9B in income taxes; the effective tax rate rose to approximately 33.9% from 28.6% in the same period of the previous year. The only extraordinary loss was an impairment loss of ¥0.1B, and the difference between ordinary income and pretax income (¥11.5B) was extremely small, indicating a limited impact from temporary factors. Meanwhile, comprehensive income was ¥30.1B, substantially exceeding net income, with the difference almost entirely explained by valuation differences on securities of ¥22.8B. This valuation gain is a temporary factor associated with fluctuations in market prices and should be evaluated separately from ordinary income and net income, which reflect the earning power of the core business. Overall, the current period’s profit growth was of high quality, driven by the expansion of funds income from the core business, while the increase in comprehensive income should be viewed as attributable to a separate factor.

Earnings Forecast and Guidance

The full-year ordinary income forecast remains unchanged at ¥10.0B, representing an expected decline of -22.5% YoY. Ordinary income had already reached ¥11.6B on a cumulative basis through Q3, exceeding the full-year forecast, suggesting that a reversal of temporary revenue factors or an increase in credit-related expenses may be anticipated in the second half. The EPS forecast is ¥139.32, and the dividend forecast is ¥50.00 (annual); no revisions have been made to either the earnings forecast or the dividend forecast. The fact that cumulative results have exceeded the full-year forecast is a factor warranting close attention to performance trends in the second half.

Shareholder Returns

The dividend is ¥25 for the interim period, with the full-year forecast set at ¥50 annually (including an equivalent year-end dividend of ¥25), representing a planned increase from the previous year’s annual dividend (based on an interim dividend of ¥25). Based on total full-year forecast dividends of approximately ¥2.67B (¥50 × average shares outstanding during the period of 5,332 thousand shares) against cumulative net income of ¥7.6B, the payout ratio is approximately 35.6% when the full-year net income forecast of ¥7.5B is used. No revision has been made to the dividend forecast, and the dividend plan based on the current profit level has been maintained. No information regarding share repurchases has been disclosed.

Risk Factors

1. Net interest margin compression risk: Although the profit margin of the banking business segment improved to 14.0%, the net interest margin calculated from the difference between interest on loans (¥32.2B) and interest on deposits (¥7.2B) remains limited, and changes in the interest rate environment could pressure earnings.

2. Segment profitability concentration risk: Segment profit in the leasing business declined sharply by YoY -61.8%, with the profit margin falling to 1.0%. The decline is apparently attributable to increased costs such as provision for loan losses, resulting in a further increase in dependence on the banking business.

3. Monitoring considerations regarding capital efficiency and leverage: The equity ratio was 5.3% (5.1% in the previous year) and ROE was 2.4%, both within generally accepted levels for the banking business. However, the net assets-to-total assets ratio is low at 5.5%, and the accumulation of capital relative to asset growth requires continuous monitoring.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The company’s net profit margin of 8.0% is confirmed as an individual figure, as relative comparison data within the industry is limited.

Growth and Capital Efficiency

The company’s revenue growth rate of 29.0% is high, but industry median data is limited, and the relative assessment remains for reference purposes only.

Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Expansion of interest income in the banking business segment led the Company-wide increase in revenue and profit, with scale growth through the expansion of both loans and deposits representing the central feature of performance.

2. While the growth rate of ordinary income (+37.2%) exceeded the growth rate of revenue (+29.0%), the growth rate of net income (+24.9%) was lower, with the increase in the effective tax rate offsetting part of the profit growth effect.

3. The divergence between comprehensive income (¥30.1B) and net income (¥7.6B) was attributable to valuation differences on securities, highlighting the structural feature that recurring earning power must be considered separately from market valuation factors.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, and after consulting a professional advisor as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q3 earnings were strong versus the prior-year period, with ordinary income and profit attributable to owners already meeting or exceeding full-year guidance. Consolidated ordinary revenue rose 29.0% year on year to ¥9.49bn, while ordinary income increased 37.2% to ¥1.16bn. Profit attributable to owners of parent rose 27.5% to ¥0.75bn, equivalent to EPS of ¥140.80. The ordinary-income margin improved by 70bp to 12.2% from 11.5% in the prior-year nine-month period. The net-profit margin was 7.9%, remaining within the positive 5–10% range despite a 34.1% effective tax rate. The earnings increase was led by the banking segment, whose external ordinary revenue increased 33.1% to ¥8.14bn and segment profit rose 43.4% to ¥1.14bn. Leasing revenue grew 9.4% to ¥1.34bn, but segment profit declined 61.8% to ¥0.13bn. Interest income increased 14.9% to ¥4.87bn, supported by a 18.0% increase in loan interest to ¥3.22bn. However, interest expense surged to ¥0.78bn from ¥0.19bn, primarily reflecting a sharp rise in deposit interest expense to ¥0.72bn from ¥0.17bn. Consequently, the implied net interest income increase was limited to 0.9%, and the reported 1.06% NIM remains below the 1.5% warning threshold. Fee and commission income declined 12.7% to ¥0.90bn, while fee and commission expense increased 4.1% to ¥0.28bn. General and administrative expenses increased 4.8% to ¥4.22bn, substantially below ordinary revenue growth and indicating favorable operating leverage. Other ordinary expenses increased sharply to ¥2.96bn from ¥1.22bn, partly offsetting the revenue expansion. Net income was modestly reduced by an ¥11m impairment loss associated with a change in use of banking assets, but this charge was immaterial to consolidated profit. Comprehensive income was ¥3.01bn, substantially above net income, driven principally by a ¥2.28bn positive valuation difference on securities versus a ¥2.02bn negative movement a year earlier. This securities-related OCI recovery strengthened reported equity but is market-value sensitive and should not be equated with recurring earnings. Full-year ordinary-income guidance is ¥1.00bn and owner-attributable profit guidance is ¥0.75bn; Q3 cumulative results represent 116.2% and 100.0% of these respective targets, versus a standard 75% progress point. The absence of a forecast revision despite this overachievement implies either expected Q4 seasonality, conservative guidance, or caution around funding costs and securities-market volatility. Capital adequacy is a principal monitoring issue: the disclosed capital adequacy ratio is 5.3%, below the generic 8% Basel III benchmark, although applicable requirements can differ for domestic Japanese banks. The key forward issue is whether higher loan yields and securities income can continue to offset rising deposit funding costs while preserving capital and credit discipline.

Profitability Analysis

The reported three-factor DuPont ROE is 3.1%, comprising a 7.9% net profit margin, 0.022x asset turnover, and 18.07x financial leverage. The low asset turnover is structurally consistent with a bank balance sheet, where deposits, loans, securities and liquidity assets produce relatively low reported revenue relative to total assets. Financial leverage is the largest numerical driver of the reported ROE, reflecting the deposit-funded banking model rather than conventional corporate borrowing alone. Nevertheless, the reported D/E ratio of 17.07x is above the 2.0x general corporate warning level and highlights the importance of depositor confidence, asset quality, and regulatory capital. The five-factor analysis shows a 0.990 interest burden, indicating that pre-tax earnings are only modestly below the stated EBIT proxy, while the 0.652 tax burden reflects the 34.1% effective tax rate. Ordinary-income margin expanded 70bp year on year to 12.2%, as ordinary revenue growth of 29.0% exceeded the 4.8% rise in general and administrative expenses. Banking is the core business, contributing ¥1.14bn of segment profit, or approximately 97.8% of consolidated segment profit before eliminations, with segment profit margin improving to 13.9% from 13.0%. Leasing generated a lower 1.0% segment-profit margin, down from 2.8% a year earlier, and therefore diluted the improvement in bank profitability. Net interest income was broadly flat because interest expense rose much faster than interest income, making the 1.06% NIM warning a material limitation on the sustainability of margin expansion. The quality alert for ROIC of 3.2%, below 5%, indicates that balance-sheet capital is still generating a modest economic return despite improved accounting earnings. The favorable operating leverage is constructive, but future profitability depends more on deposit repricing, loan pricing and securities returns than on further cost containment alone.

Growth Assessment

Revenue growth was broad but concentrated in the core banking business. Banking external ordinary revenue increased ¥2.02bn year on year to ¥8.14bn, while leasing added ¥0.12bn to ¥1.34bn and guarantee-related other revenue was ¥0.19bn. Loan interest increased ¥0.49bn, but this was substantially absorbed by a ¥0.56bn increase in deposit interest expense. Interest and dividends on securities increased 3.3% to ¥1.49bn, providing an additional, but market-sensitive, earnings source. Fees and commissions weakened, with income falling ¥0.13bn, indicating that non-interest revenue did not participate in the overall revenue acceleration. Banking segment profit increased ¥0.34bn, whereas leasing segment profit decreased ¥0.21bn; the group’s earnings momentum is therefore reliant on the bank rather than diversified across segments. Loan balances increased 1.0% year on year to ¥386.95bn, while deposits grew 5.3% to ¥528.47bn, supporting funding growth but also raising the importance of deposit-cost control. Securities rose 7.5% to ¥132.22bn, and their unrealized valuation gain was a major contributor to the increase in comprehensive income. Full-year guidance appears conservative relative to reported Q3 cumulative earnings: ordinary income is already 116.2% of target and owner-attributable net income is 100.0% of target. No guidance revision has been announced. Sustainability of the current growth rate should therefore be assessed against Q4 funding costs, securities valuation movements and the pace of loan-yield repricing rather than extrapolating the nine-month revenue increase.

Financial Health

Total assets increased ¥31.55bn, or 5.8% year on year, to ¥579.97bn. Deposits increased ¥26.42bn to ¥528.47bn and remain the dominant funding source. Loans increased ¥3.81bn to ¥386.95bn, while securities increased ¥9.21bn to ¥132.22bn. Cash and due from banks increased ¥18.99bn to ¥49.66bn, adding liquidity flexibility. Total equity increased ¥2.75bn, or 9.4%, to ¥32.10bn, supported by retained earnings growth and a ¥2.24bn increase in accumulated other comprehensive income. Owners' equity was ¥31.18bn, while non-controlling interests were ¥0.92bn. The D/E ratio of 17.07x requires an explicit warning under general corporate solvency conventions because it exceeds 2.0x by a wide margin. For a bank, however, this measure includes deposit and other customer funding liabilities and must be interpreted alongside capital adequacy, liquidity and credit quality rather than as direct evidence of corporate-style debt distress. The reported capital adequacy ratio of 5.3% is below the generic 8% Basel III benchmark and is the most significant disclosed balance-sheet risk metric. Borrowed money was limited at ¥1.61bn, while call money was ¥13.30bn, suggesting that the liability structure is principally deposit-funded rather than dependent on conventional term borrowings. Acceptances and guarantees were ¥1.11bn, representing an off-balance-sheet credit exposure that remains small relative to total assets. Intangible assets were only 0.1% of total assets, limiting acquisition-related intangible and goodwill impairment risk.

Notable B/S Changes

Cash and due from banks: +¥18.99bn (+61.9%) to ¥49.66bn — materially higher liquidity holdings provide flexibility but may dilute asset yields if retained at low returns. Securities: +¥9.21bn (+7.5%) to ¥132.22bn — absolute increase exceeds ¥5.0bn and increases sensitivity of equity and earnings to interest-rate and market-price movements. Deposits: +¥26.42bn (+5.3%) to ¥528.47bn — enlarged stable funding base, although the associated deposit-rate increase is already pressuring NIM. Total liabilities: +¥28.80bn (+5.5%) to ¥547.86bn — balance-sheet expansion was largely liability-funded and reinforces the importance of capital adequacy. Accumulated other comprehensive income: +¥2.24bn to ¥3.31bn — recovery was principally driven by securities valuation gains and is potentially reversible. Total equity: +¥2.75bn (+9.4%) to ¥32.10bn — improved capitalization in accounting terms, though the disclosed 5.3% capital adequacy ratio remains a key regulatory-capital consideration.

Cash Flow Quality

Dividend Sustainability

The indicated annual dividend is ¥50.00 per share, comprising the ¥25.00 interim dividend and an implied ¥25.00 year-end dividend under the full-year plan. Based on full-year forecast EPS of ¥139.32, the prospective dividend payout ratio is approximately 35.9%, which is moderate and below the 60% sustainability benchmark. The stated Q2 payout calculation of 18.1% uses the ¥25.00 interim dividend against nine-month earnings and should not be interpreted as the full-year dividend payout ratio. Forecast owner-attributable profit of ¥0.75bn is equal to the Q3 cumulative result, so dividend capacity in Q4 depends on management preserving at least the current earnings base. Retained earnings increased ¥0.48bn year on year to ¥15.08bn, providing an internal capital buffer. Given the 5.3% disclosed capital adequacy ratio, the balance between shareholder distributions and capital retention is more important than the headline payout ratio alone. No dividend revision has been announced.

Risk Assessment

Business risks include Net interest margin risk: the reported NIM of 1.06% is below the 1.5% warning threshold. Deposit interest expense increased to ¥0.72bn from ¥0.17bn, materially faster than loan-interest growth, demonstrating sensitivity to deposit repricing., Regional-bank lending risk: loans increased only 1.0% year on year, so sustained earnings growth depends on pricing improvement and disciplined credit expansion in a potentially limited regional loan market., Fee-income risk: fee and commission income declined 12.7% year on year to ¥0.90bn, leaving earnings more dependent on spread income and securities-related revenue., Securities-market risk: securities increased to ¥132.22bn and positive securities valuation differences contributed ¥2.28bn to OCI; future interest-rate or market-price moves could reverse part of the equity uplift., Leasing execution risk: leasing segment profit fell 61.8% year on year despite revenue growth, indicating pressure on profitability outside the core banking operation..

Financial risks include High leverage alert: D/E of 17.07x exceeds the general 2.0x warning benchmark. While high leverage is structurally normal for a deposit-funded bank, it raises sensitivity to funding stability, asset losses and capital erosion., Capital adequacy risk: the disclosed capital adequacy ratio of 5.3% is below the generic 8% Basel III benchmark. This constrains the tolerance for credit losses, OCI reversals and shareholder distributions, subject to the bank's applicable Japanese regulatory framework., Funding-cost risk: total deposits increased to ¥528.47bn, but the cost of those deposits is rising sharply; a further rise in deposit rates without equivalent asset repricing would pressure earnings., Contingent exposure: acceptances and guarantees of ¥1.11bn create credit exposure beyond funded loans..

Key concerns include The quality alert for ROIC of 3.2%, below 5%, indicates that improved nine-month earnings have not yet translated into a strong return on invested capital., Ordinary income already exceeds full-year guidance while no forecast revision has been announced, making Q4 expectations and management's rationale for retaining guidance important., The positive swing in comprehensive income is primarily valuation-related rather than recurring operating profit, so reported equity remains exposed to securities-market movements., The ¥11m banking-asset impairment is immaterial currently, but it confirms that branch and property-use optimization can produce recurring small restructuring charges..

Investment Implications

Key takeaways include Core banking earnings improved materially: segment profit rose 43.4% year on year to ¥1.14bn and segment margin expanded to 13.9%., Reported Q3 ordinary income of ¥1.16bn is 116.2% of the ¥1.00bn full-year forecast, while owner-attributable profit of ¥0.75bn has reached the full-year forecast., Operating leverage was favorable, as general and administrative expenses rose 4.8% against 29.0% ordinary-revenue growth., NIM of 1.06%, rising deposit costs and 3.2% ROIC remain the principal constraints on earnings quality and capital efficiency., The ¥2.24bn year-on-year improvement in accumulated OCI supports equity but is sensitive to securities valuations..

Metrics to watch include NIM and the spread between loan yields and deposit rates, Deposit interest expense relative to loan-interest income, Capital adequacy ratio and the composition of regulatory capital, Loan growth, credit costs, non-performing loan trends and allowance coverage, Securities valuation differences and the size and duration risk of the securities portfolio, Leasing segment profit recovery, Any revision to FY2026 ordinary-income, net-income or dividend guidance.

Regarding relative positioning, Toyama Bank exhibits improving core-bank profit momentum and favorable expense discipline, but its reported NIM is below the banking warning threshold and its disclosed 5.3% capital adequacy ratio is below the generic Basel benchmark. Relative positioning is therefore characterized by stronger near-term earnings delivery than the unchanged forecast suggests, offset by lower capital-efficiency and margin resilience than would be expected of a stronger regional-bank profile.