Hokuhoku Financial Group, Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Operating Income: ¥7.74B
• Net Income: ¥7.71B
• EPS: ¥249.46

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Hokuhoku Financial Group (8377) reported FY2026 Q2 consolidated results under JGAAP with net income of ¥30.385 billion, up 63.3% YoY, indicating a strong improvement in bottom-line profitability. Operating income was ¥7.735 billion (+4.2% YoY), while ordinary income reached ¥41.769 billion, implying that non-operating items (typical for banks: net gains/losses on securities, funding differentials, and credit cost movements) contributed materially to earnings. EPS was ¥249.46 for the half, suggesting solid per-share profitability given the earnings trajectory. Total assets were ¥16.883 trillion and total equity ¥687.334 billion, implying an equity-to-asset ratio of approximately 4.1% despite the reported 0.0% equity ratio (the latter is clearly an unreported placeholder). Based on these figures, half-year ROE approximates 4.4% (¥30.385b/¥687.334b), or roughly 8.8% annualized, which is healthy for a regional banking group. Half-year ROA is about 0.18% (annualized ~0.36%), consistent with sector norms in Japan’s low-rate environment. Financial leverage of 24.56x (assets/equity) is typical for banks and aligns with the computed ROA to ROE relationship. Operating cash flow was ¥55.776 billion, resulting in an OCF-to-net-income ratio of 1.84x, indicating strong cash conversion this period, albeit cash flow volatility is common for financial institutions. Financing cash flow was an outflow of ¥9.391 billion, suggesting net capital return or funding mix changes, though granular details are not provided. Several line items (revenue, interest expense, liquidity ratios, DPS, and cash balance) are shown as zeros due to non-disclosure or different account taxonomy and should not be interpreted as actual zero values. Given the limited disclosure of typical banking metrics (net interest income, fee income, credit costs, OCI/securities valuation effects, and regulatory capital ratios), conclusions must be framed with caution. The spread between operating income and ordinary income suggests a meaningful contribution from market-related or credit cost items; sustainability into the second half is a key watch point. The equity base increased to ¥687.3 billion against ¥16.9 trillion assets, offering moderate loss-absorbing capacity but leaving earnings sensitive to credit costs and securities valuation swings. The absence of DPS in the data precludes a direct payout analysis; however, the current earnings power appears sufficient to support a conventional regional bank dividend, assuming stable credit costs and no outsized valuation losses. Overall, the first half indicates robust net profit momentum driven beyond pure core operations, with cash conversion supportive; sustainability depends on core net business profit trends, credit cost normalization, and market conditions.

Profitability Analysis

DuPont perspective (bank-adapted): ROE ≈ ROA × leverage. Using available data, half-year ROA ≈ 0.18% (¥30.385b/¥16.883t) and leverage ≈ 24.56x, yielding half-year ROE ≈ 4.4% (annualized ~8.8%). The reported DuPont “margin” and “turnover” are not meaningful because revenue is unreported. Margin quality: net income rose 63.3% YoY to ¥30.385b, while operating income rose only 4.2% YoY to ¥7.735b; the gap implies material contributions from non-operating items (e.g., securities-related gains or lower credit costs). Ordinary income of ¥41.769b sits well above operating income, highlighting reliance on market-sensitive or funding-related earnings components this period. Operating leverage: with modest operating income growth against presumably stable cost bases (not disclosed), incremental profits likely came from non-core drivers; structural operating leverage cannot be confirmed without fee/expenses data. Tax: income tax was ¥6.499b; an effective tax rate cannot be reliably computed due to incomplete pre-tax detail, but the tax burden appears modest versus ordinary income. EBITDA (¥11.36b) and margin statistics are not relevant for a bank. Overall, profitability is solid at the bottom line, but quality skews toward ordinary/non-operating contributions rather than purely core operations.

Growth Assessment

Revenue is unreported; therefore, core income growth must be inferred from profit lines. Operating income increased 4.2% YoY, indicating limited growth in core business profit. Net income surged 63.3% YoY to ¥30.385b, pointing to strong tailwinds from non-operating items such as securities valuations, funding spreads, or lower credit costs. Sustainability: the wide differential between ordinary and operating income suggests earnings are partially market-driven and may normalize if securities gains reverse or credit costs rise. Profit quality: the OCF-to-net-income ratio of 1.84x supports the quality of earnings this period, though for banks OCF is inherently volatile due to balance sheet flows. Outlook considerations: second-half seasonality, credit cost trajectory amid macro uncertainty, and interest rate dynamics (domestic yield curve shifts) will drive the run-rate. Absent visibility on net interest income and fees, we assume stable to slightly positive core profit trends, with overall FY performance dependent on maintaining ordinary income contributions. Annualized ROE of ~8.8% is attainable if first-half conditions persist; however, a normalization in securities-related items could trim the full-year pace. Management guidance (not provided) and credit cost disclosures will be critical to refine growth expectations.

Financial Health

Liquidity metrics like current and quick ratios are not applicable for banks; zeros shown are non-disclosures. Balance sheet scale is large (assets ¥16.883t) with equity of ¥687.334b, implying an equity ratio of ~4.1% and liabilities/equity of ~23x. Leverage of 24.56x is within sector norms for Japanese regional groups. Solvency: regulatory capital (CET1, total capital) is not disclosed here; thus, we cannot gauge buffers versus Basel requirements—this is a key data gap. Funding structure (deposits vs. market funding) is also undisclosed; stability cannot be assessed directly. Interest expense is unreported; thus, interest coverage ratios are not meaningful. The large gap between operating and ordinary income suggests market-risk sensitivity via securities portfolios; capital adequacy should be monitored against potential OCI swings. Overall, capitalization appears adequate for a regional bank by book ratio, but a definitive view requires CET1 and risk-weighted assets.

Cash Flow Quality

Operating cash flow of ¥55.776b vs. net income of ¥30.385b yields an OCF/NI ratio of 1.84x, indicating strong cash generation relative to earnings in H1. Free cash flow is shown as zero due to missing/irrelevant investing CF for banks; traditional FCF is not a meaningful measure for financial institutions because investing CF includes loans and securities flows. Earnings quality is supported by cash conversion this period, but bank OCF is volatile and can reverse with balance sheet movements (loan growth, deposit mix, securities purchases/sales). Working capital metrics are not applicable in a banking context; the reported zeros reflect non-disclosure, not actual values. We would cross-check for credit cost cash impacts and securities realization gains if detailed notes were available.

Dividend Sustainability

DPS and payout ratio are unreported (zeros are placeholders). With EPS at ¥249.46 for the half, internal coverage capacity for a standard regional bank dividend appears ample, assuming normalized credit costs and absent large valuation losses. FCF coverage metrics are not meaningful for banks. Policy outlook cannot be inferred from this dataset; historically, regional banks in Japan target stable or progressive dividends, but confirmation requires management guidance. Key sensitivities for dividend capacity include credit cost normalization in H2, securities valuation volatility, and regulatory capital headroom.

Risk Assessment

Business Risks:

• Compression or volatility in net interest margins due to interest rate shifts and deposit beta dynamics
• Securities portfolio valuation risk (JGBs, equities, and funds), impacting ordinary income and OCI
• Credit cost normalization or spikes amid macro slowdown or regional economic stress
• Fee income softness if market activity or bancassurance/asset management flows weaken
• Regional concentration risk in core operating areas (Hokuriku), including demographic headwinds

Financial Risks:

• Capital adequacy uncertainty due to lack of disclosed CET1/total capital ratios
• High balance sheet leverage inherent to banking; equity buffer ~4.1% of assets
• Liquidity and funding mix risk if deposit outflows or wholesale reliance increase (data not disclosed)
• Interest rate risk from duration mismatch between assets and liabilities
• Event risk from natural disasters (e.g., earthquake-related impacts) affecting borrowers and collateral

Key Concerns:

• Earnings reliance on non-operating items implied by the large gap between operating and ordinary income
• Absence of detailed disclosure on net interest income, fees, credit costs, and securities gains
• Potential normalization of securities-related or one-off gains in H2
• Limited visibility on dividend policy and capital return without DPS and capital ratio data

Investment Implications

Key Takeaways:

• Net income rose 63.3% YoY to ¥30.385b, materially outpacing operating income growth (+4.2% YoY)
• Half-year ROE ~4.4% (annualized ~8.8%) and ROA ~0.18% (annualized ~0.36%), consistent with sector norms
• Strong cash conversion with OCF/NI at 1.84x, though volatility is typical for banks
• Equity-to-asset ratio ~4.1% indicates moderate capital, with leverage of 24.56x
• Earnings composition tilted toward ordinary (market/credit) items; sustainability is the main swing factor for H2

Metrics to Watch:

• Core net business profit (net interest income and fees) vs. expense trend (OHR)
• Credit costs (net) and NPL formation/coverage
• Securities-related gains/losses and OCI sensitivity to rate moves
• Net interest margin and loan/deposit growth/mix
• Regulatory capital ratios (CET1, total capital) and capital policy (dividends/buybacks)

Relative Positioning: Within Japanese regional banking peers, Hokuhoku’s H1 profitability appears solid on a headline basis with annualized ROE near the high-single digits, but quality leans on non-core contributors; capital appears adequate by book leverage, yet clarity on CET1 and core profit trajectory is needed to benchmark resilience versus top-tier regionals.

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