The Awa Bank (8388) FY2026 Q3 Earnings Report

Quick View

Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, revenue and profit increased, primarily due to expanded interest income and improved operating leverage resulting from expense control. Ordinary revenue was ¥70.29B (+20.6% YoY), Ordinary Income was ¥16.96B (+24.5%), and Net Income was ¥12.18B (+22.0%). Ordinary Income growth exceeded Ordinary Revenue growth because the increase in general and administrative expenses (+2.5%) was significantly below the growth rate of Ordinary Revenue. EPS was ¥310.91 (¥249.89 in the same period of the previous year, +24.4%).

Factors Affecting Performance

【Revenue】Ordinary revenue was ¥70.29B (+20.6% YoY). The Banking Business accounted for ¥56.90B (+23.7%), representing 81.0% of the total, driven by increases in interest on loans (¥23.796B, +17.5%) and interest and dividends on securities (¥16.193B, +21.1%). The Leasing Business remained at ¥13.39B (+9.0%), and its profit margin of 4.4% was substantially below the Banking Business's 28.8%, limiting its contribution to consolidated performance.

【Profit and Loss】Ordinary Income was ¥16.96B (+24.5%), and Net Income was ¥12.18B (+22.0%). While funds investment income expanded to ¥41.34B (+20.8%), funds procurement expenses surged to ¥7.74B (+47.8%) due to higher deposit interest rates; however, net interest income increased to ¥33.60B (+16.0%). General and administrative expenses were contained at ¥24.09B (+2.5%), and the increased absorption of expenses against revenue growth was the primary driver of higher profit. Extraordinary losses amounted to ¥0.07B, including impairment losses of ¥0.05B, resulting in a minor impact on Net Income. Overall, the results can be characterized as higher revenue and higher profit.

Segment Analysis

The Banking Business is the core business, with Ordinary Revenue of ¥56.90B (+23.7% YoY), segment profit of ¥16.37B (+23.0%), and a profit margin of 28.8%, accounting for 96.6% of consolidated profit. The Leasing Business posted Ordinary Revenue of ¥13.39B (+9.0%) and segment profit of ¥0.58B (+92.7%), representing substantial profit growth; however, its profit margin remained at 4.4%, and the company continues to depend on the Banking Business in terms of both scale and profitability.

Key Financial Metrics

【Profitability】The Ordinary Income margin improved to 24.1% from 23.4% in the same period of the previous year, while the Net Income margin also increased modestly to 17.3% from 17.1%. ROE was 3.2%; given the balance-sheet characteristics of the banking business, the low total asset turnover ratio is a limiting factor.【Cash Quality】Comprehensive income was ¥55.52B, substantially exceeding Net Income of ¥12.18B. This difference was attributable to market valuation changes, including ¥37.53B in valuation difference on securities, and should be assessed separately from recurring earnings capacity.【Investment Efficiency】Estimated NIM was 1.35%, below the 1.5% level considered a warning threshold for bank profitability. The loan-to-deposit ratio was 76.0%, calculated as loans of ¥2,493.61B divided by deposits of ¥3,282.31B, which is within the standard range.【Financial Soundness】The Equity Ratio was 9.2%, improving by 90bp from 8.3% in the same period of the previous year and exceeding the regulatory minimum guideline of 8%, but remaining below the 12% level generally regarded as an indicator of financial soundness.

Cash Flow Analysis

As cash flow statement data were not disclosed, funding trends are analyzed based on changes in the balance sheet. Loans increased to ¥2,493.61B (+1.4% YoY), and securities increased to ¥1,136.57B (+9.8%), indicating an expansion in asset deployment. Meanwhile, deposits grew slowly to ¥3,282.31B (+0.4%), and supplementary funding through negotiable certificates of deposit (+19.0%) and borrowings (+9.9%) progressed. Cash and due from banks amounted to ¥396.70B, declining from ¥427.65B in the previous year, suggesting a shift of funds toward operating assets. Net assets increased to ¥383.86B, up +14.9% YoY, supported by the accumulation of retained earnings as well as an increase in valuation difference on securities.

Quality of Earnings

The primary drivers of the increase in profit for the current period were the expansion of recurring net interest income and expense control. Since the impact of extraordinary gains and losses—a net loss of ¥0.05B—was minor, the quality of earnings is generally stable. However, funds procurement expenses increased +47.8% YoY, exceeding the +20.8% growth in funds investment income; going forward, liability-side repricing will determine earnings sustainability. The gap between comprehensive income of ¥55.52B and Net Income of ¥12.18B was primarily attributable to valuation difference on securities (+¥37.53B) and deferred hedge gains and losses (+¥5.82B), with market valuation factors accounting for the majority. Although these factors contribute to capital strength, they should be distinguished from indicators of recurring earnings capacity.

Earnings Forecast and Guidance

The Q3 progress rates against the full-year company forecasts were 79.6% for Ordinary Income (¥16.96B/¥21.30B) and 81.2% for Net Income (¥12.18B/¥15.00B), both exceeding the standard progress rate of 75%. The progress rate for Ordinary Revenue was 74.6% (¥70.29B/¥94.20B), approximately in line with the standard level. The earnings forecast was revised during the current quarter, and full-year Ordinary Income is expected to increase +19.2% YoY. Continued improvement in investment yields amid rising interest rates would support achievement of the forecast, while the pace of increase in funds procurement expenses could cause fluctuations in future progress.

Shareholder Returns

The Q2 dividend was ¥60 per share, and the full-year dividend forecast is ¥130 (regular dividend of ¥60; year-end dividend of ¥70, including a ¥10 commemorative dividend marking the 130th anniversary of the company's founding). No revision has been made to the dividend forecast. Based on forecast full-year Net Income of ¥15.00B and estimated total dividends of approximately ¥5.08B calculated from the number of shares issued, the Payout Ratio is approximately 33.8%. The book-value deduction for treasury shares increased by ¥1.499B YoY, and the scale of capital returns in addition to dividends requires ongoing monitoring. The ¥10 commemorative dividend is a temporary factor and should be evaluated separately from the regular dividend when making comparisons from the following fiscal year onward.

Risk Factors

1. Net Interest Margin Compression Risk: Funds procurement expenses increased +47.8% YoY, exceeding the +20.8% growth in funds investment income, and net interest margins may be compressed in an environment where deposit interest rates rise ahead of lending rates. Estimated NIM of 1.35% is below the 1.5% warning threshold.

2. Business Concentration Risk: The Banking Business accounts for 81.0% of consolidated Ordinary Revenue and 96.6% of segment profit. The Leasing Business makes only a limited contribution to profit, resulting in a structure with high sensitivity to the interest-rate environment and regional loan demand affecting the core Banking Business.

3. Securities Valuation Volatility Risk: Securities totaled ¥1,136.57B, accounting for 27.4% of total assets. Accumulated other comprehensive income, including valuation difference on securities, accounts for 33.9% of net assets, and fluctuations in interest rates and equity markets may affect the level of net assets.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The company's Net Income margin was 17.3%, a high level in absolute terms, although industry comparison data are limited.

Growth and Capital Efficiency

The company's Ordinary Revenue growth rate showed strong growth of +20.6%, although comparison data with the industry median are limited.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Ordinary Income increased +24.5% YoY, while Net Income increased +22.0%. The low growth rate in general and administrative expenses (+2.5%) and the expansion of funds investment income supported the increase in profit. Progress against the full-year forecast also exceeded the standard level, at 79.6% for Ordinary Income and 81.2% for Net Income.

2. Estimated NIM of 1.35% was below the warning threshold for bank profitability, and the fact that the growth in funds procurement expenses (+47.8%) exceeded the growth in funds investment income (+20.8%) represents a structural constraint coexisting with the upward profit trend.

3. The Equity Ratio improved by 90bp YoY to 9.2%; however, part of the improvement depended on market valuation factors, namely the increase in valuation difference on securities. The fact that accumulated other comprehensive income accounts for 33.9% of net assets is an observation point in assessing the quality of capital.

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional adviser as necessary.

---End of Report---