THE TOTTORI BANK,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.71B
• Net Income: ¥779M
• EPS: ¥84.33

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

Verdict: Solid earnings growth despite a difficult rate environment, with ordinary income and bottom line up high-single to low-double digits, but profitability remains structurally low given a 0.6% NIM and ROE of 1.6%. Revenue rose 0.8% YoY to 87.13, indicating modest top-line momentum in a low-yield setting. Ordinary income increased 9.4% YoY to 11.41, showing positive operating leverage versus revenue growth. Net income climbed 10.6% YoY to 7.89, outpacing revenue, aided by better income structure and controlled costs (CIR at 59.1%). The net profit margin stands at 9.1%, consistent with subdued margin dynamics in regional banking. Basis point comparison of margins vs prior year is not possible due to unreported prior-period margin details. NIM of 0.6% underscores ongoing pressure on core lending profitability; any rate normalization tailwinds are not yet reflected. Loan-to-deposit ratio is healthy at 86.4%, indicating balanced growth without liquidity strain. Cost efficiency is marginally above the sector comfort zone with a 59.1% CIR (warning threshold 60%), suggesting limited room for cost slippage. ROE is 1.6%, constrained by very low asset turnover (0.008) in a balance-sheet-heavy model. Effective tax rate is 30.5%, broadly in line with statutory norms. Earnings quality cannot be verified due to missing operating cash flow; no OCF/NI comparison is possible. Capital adequacy detail is not disclosed; given D/E of 21.41x (normal for banks), internal capital generation at current ROE is modest and dividend policy (61% payout) may slow capital build. Deposits of 10,268.92 and loans of 8,868.56 reflect stable franchise scale with prudent liquidity buffers. Forward-looking, sustained cost discipline and fee income expansion will be key to offset ultra-low NIM, while any BoJ policy normalization would provide asymmetric upside to spreads. Overall, Q2 shows steady execution with stronger profits, but structural profitability and capital accretion remain the main constraints.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 9.1% × 0.008 × 22.41x ≈ 1.6%. The largest drag is the extremely low asset turnover (0.008), typical for Japanese regional banks operating large balance sheets against modest income. Net margin at 9.1% is reasonable for a bank’s income statement definition but limited by a 0.6% NIM and a CIR of 59.1%. Financial leverage is high at 22.41x, also typical for banks, but given low margins and turnover, leverage does not translate into high ROE. Business drivers: subdued NIM reflects a prolonged low-rate environment and intense regional competition; costs are controlled but not low enough to offset margin pressure. Sustainability: margin structure is likely persistent absent meaningful rate normalization or a mix shift to higher-yielding assets/fees; cost initiatives can help at the margin. Watch for adverse trends where expenses grow faster than income; current data suggest positive operating leverage (ordinary income +9.4% vs revenue +0.8%).

Growth Assessment

Top-line growth of +0.8% YoY indicates a stable but slow environment; core income likely supported by stable loan volumes and controlled funding costs. Ordinary income +9.4% YoY and net income +10.6% YoY show improving profitability despite flat revenue, implying better non-interest contributions and/or cost control. With NIM at 0.6%, core lending growth alone will not meaningfully lift profits; fee income and securities-related gains (not disclosed) could be incremental levers. Outlook: absent rate hikes, expect low single-digit revenue growth; earnings growth relies on cost discipline and mix optimization. Data gaps on non-interest items and securities valuation gains limit the ability to judge recurring vs one-off components.

Financial Health

Total assets are 11,161.35 vs equity of 498.14, yielding D/E of 21.41x, which is high by industrial standards but typical for banks; we flag it per framework but contextualize as sector-normal. Liquidity appears adequate with LDR at 86.4% (within 70–90% benchmark), suggesting loans are well-funded by deposits. Current ratio and quick ratio are not meaningful for banks and are unreported. Maturity mismatch risk cannot be fully assessed without the breakdown of deposit duration and securities, but deposit funding dominance reduces near-term refinancing risk. No off-balance-sheet obligations are disclosed in the provided data; contingent risks (guarantees, off-BS exposures) may exist but are unreported. Capital adequacy (CET1/RWA) is not provided; with ROE 1.6% and payout 61%, internal capital generation is modest, which may limit growth or buffer build if credit costs rise.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed; thus we cannot validate accrual vs cash earnings quality. Free cash flow coverage for dividends and capex is not calculable due to missing data. Working capital indicators for banks are not directly applicable; deposit and loan balances suggest stable funding. No evidence of working capital manipulation is inferable from the provided dataset. Given low NIM, reliance on non-interest income or securities gains (if any) would raise quality questions, but the absence of detail prevents firm conclusions.

Dividend Sustainability

Payout ratio is 61.0%, slightly above the <60% benchmark for comfort. With ROE at 1.6%, retained earnings growth is limited, implying slower capital accretion. FCF coverage cannot be assessed due to missing OCF and capex data. In banking, sustainability also hinges on regulatory capital; CET1 is not disclosed here. If earnings growth remains high single-digit and credit costs stay benign, current payout appears maintainable; however, in a stress or if profits normalize downward, the buffer is thin. Policy likely targets steady dividends, but room for raises looks constrained without an uptick in ROE or rates.

Risk Assessment

Business Risks:

• Persistent margin compression with NIM at 0.6%, limiting core profitability
• Dependence on regional economic conditions affecting loan demand and credit costs
• Potential volatility in securities income due to market rate movements (details unreported)

Financial Risks:

• High leverage (D/E 21.41x is sector-typical but leaves little room for shocks)
• Capital build constrained by low ROE (1.6%) and payout of 61%
• Interest rate risk from asset-liability duration gaps (no disclosure of duration profile)
• Liquidity risk mitigated but not eliminated; LDR 86.4% is healthy but deposit stickiness can change in stress

Key Concerns:

• Cost efficiency hovering near the warning threshold (CIR 59.1%)
• Data limitations on credit costs, NPLs, and capital adequacy ratios obscure downside risk
• Earnings quality cannot be verified without OCF; potential reliance on non-interest items cannot be assessed

Investment Implications

Key Takeaways:

• Earnings up: ordinary income +9.4% YoY, net income +10.6% YoY on modest revenue growth (+0.8%)
• Profitability remains structurally low: ROE 1.6%, NIM 0.6%
• Efficiency is decent but tight: CIR 59.1% (near the 60% warning threshold)
• Balance sheet funding sound: LDR 86.4%, deposits 10,268.92 vs loans 8,868.56
• Dividend payout 61% offers yield support but constrains capital accumulation

Metrics to Watch:

• NIM trajectory and loan yield vs deposit cost spread
• CIR progression and identifiable cost-cut measures
• Credit cost/NPL ratio disclosures and coverage ratios
• Capital adequacy (CET1/RWA) and internal capital generation
• Fee and non-interest income mix to gauge recurring profitability

Relative Positioning: Within Japanese regional banks, Tottori Bank shows stable funding and improving earnings, but profitability metrics (NIM, ROE) are at the low end of peers; efficiency is middling with limited headroom.

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