THE OITA BANK (8392) FY2026 FY Earnings Report

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Executive Summary

Revenue and earnings increased, primarily due to the expansion of interest income, and profitability improved from the previous year. Ordinary revenue was ¥99.43B (+27.6% YoY), Ordinary Income was ¥14.71B (+32.7%), and Net Income was ¥10.58B (+46.0%). The Banking Business segment drove ordinary revenue and profit, with the increase in investment income exceeding the increase in funding costs, forming the core of profit growth. Meanwhile, compared with the company's full-year forecast, ordinary revenue exceeded expectations, but the progress rates for Ordinary Income and Net Income remained in the 80% range.

Factors Affecting Performance

【Revenue】Ordinary revenue increased 27.6% YoY to ¥99.43B. The Banking Business led the increase, generating ¥86.35B (+31.6%) and accounting for 86.8% of total revenue. Growth in investment income (loan interest +24.0%; interest and dividends on securities +32.9%) contributed to the increase. The Leasing Business generated ¥10.09B (+6.4%), while Other Businesses generated ¥3.01B (+3.8%); both achieved only modest revenue growth.

【Profit and Loss】Ordinary Income increased 32.7% YoY to ¥14.71B, while Net Income increased 46.0% to ¥10.58B, with the increase in earnings exceeding the revenue growth rate. Although funding costs surged 122.0% compared with a 30.4% increase in investment income, indicating rising funding costs, the expansion of investment income absorbed the increase during the period. SG&A expenses were ¥27.53B, up only 2.6% YoY, indicating favorable cost efficiency during the revenue expansion phase. Extraordinary items resulted in a net loss of ¥0.16B, including an impairment loss of ¥0.12B, and had a limited impact on Profit Before Tax. Accordingly, the current period can be concluded to have delivered both revenue and earnings growth.

Segment Analysis

The Banking Business led overall performance, generating ordinary revenue of ¥86.35B (+31.6% YoY) and segment profit of ¥13.34B (+37.2%), with a profit margin of 15.4%, improved from 14.8% in the previous year. The Leasing Business generated ordinary revenue of ¥10.09B (+6.4%) and profit of ¥0.46B (+36.4%), contributing to earnings growth despite its small scale, with a profit margin of 4.5%. Other Businesses, including credit card operations, generated ordinary revenue of ¥3.01B (+3.8%), while profit declined 10.5% to ¥0.96B. Although its profit margin was the highest at 32.1%, profitability declined during the period and warrants monitoring. Segment profit is based on Ordinary Income and is defined differently from consolidated Operating Income.

Key Financial Indicators

【Profitability】The Ordinary Income margin was 14.8%, improving by +56bp from 14.2% in the previous year, while the Net Income margin was 10.6%, improved from 9.7% in the previous year. Net interest income in the Banking Business increased 17.5% YoY to ¥51.47B, supported by both lending and securities investment.【Cash Flow Quality】Operating Cash Flow (OCF) was negative ¥217.84B and diverged significantly from Net Income; however, this reflects the banking sector's unique cash flow structure, including changes in deposits, loans, and market-based funding, and is not readily comparable with profit-quality assessments for general operating companies. The accrual ratio was 5.1%, which is not an extreme level.【Investment Efficiency】ROE improved to 4.3% from 3.5% in the previous year, but remains low by the standards of general operating companies. ROIC was 4.4%, below 5%.【Financial Soundness】The Equity Ratio was 5.5%. The loan-to-deposit ratio was 69.7%, calculated as loans of ¥2.4606T divided by deposits of ¥3.5322T. The debt-to-equity ratio was 17.3x, reflecting the business characteristics of a bank, whose primary liabilities are deposits.

Cash Flow Analysis

Operating Cash Flow (OCF) was negative ¥217.84B, Investing Cash Flow was positive ¥58.73B, and Financing Cash Flow was negative ¥2.98B. Free Cash Flow was negative ¥159.12B, while cash and cash equivalents decreased by ¥162.10B to ¥616.33B. The substantial OCF outflow corresponds to an increase of ¥189.35B in loans and a decrease of ¥162.15B in cash and due from banks. It reflects the bank-specific allocation of funds, including deposits, loans, and securities transactions, and should not be interpreted in the same manner as a deterioration in working capital at a general operating company. The positive Investing Cash Flow primarily reflects the recovery of funds from a decrease in securities balances of ¥48.77B. Capital expenditures were ¥2.22B, exceeding depreciation and amortization of ¥1.51B, indicating continued reinvestment centered on software investment. Financing Cash Flow was negative, mainly due to share repurchases of ¥1.01B and dividend payments, indicating continued capital returns.

Earnings Quality

Against Ordinary Income of ¥14.71B, Profit Before Tax was ¥14.55B, resulting in a difference of only ¥0.16B, or 1.1% of Ordinary Income; therefore, the impact of extraordinary items was limited. Of the ¥0.18B in extraordinary losses, impairment losses amounted to ¥0.12B, with a limited impact on Profit Before Tax. The difference between Net Income of ¥10.58B and Profit Before Tax was primarily attributable to income taxes of ¥3.98B, resulting in a stable effective tax rate of 27.3%. Comprehensive Income was ¥39.66B, substantially exceeding Net Income, with Other Comprehensive Income of ¥29.08B—primarily the ¥20.49B gain on valuation differences of other securities—accounting for most of the increase in net assets. This divergence reflects the expansion of valuation gains associated with market price movements and must be distinguished from realized earnings. Although OCF diverges significantly from Net Income, this is attributable to the bank-specific structure reflecting deposit and lending trends. As the accrual ratio was also 5.1%, which is not an extreme level, no significant concerns are apparent regarding the quality of accrual-based earnings itself.

Earnings Forecast and Guidance

Against the company's full-year forecast, ordinary revenue was ¥99.43B versus the forecast of ¥97.50B, representing a progress rate of 102.0%. Ordinary Income was ¥14.71B versus the forecast of ¥17.80B, for a progress rate of 82.6%. Net Income was ¥10.58B versus the forecast of ¥11.30B, for a progress rate of 93.6% (on a Net Income attributable to owners of the parent basis, ¥10.595B / ¥12.20B, or 86.8%). While revenue exceeded the forecast, the relatively low progress rate for earnings suggests that cost factors, including the 122.0% YoY surge in funding costs, may have exceeded the assumptions underlying the forecast.

Shareholder Returns

Dividends of ¥85 per share are indicated for both the interim and year-end payments, for an annual total of ¥170. Meanwhile, the Payout Ratio reported in XBRL is 24.3%, but a mechanical calculation based on the annual dividend of ¥170 and the average number of shares outstanding during the period produces a Payout Ratio exceeding 100%, which is inconsistent with the disclosed Payout Ratio and total dividends of ¥2.58B. This discrepancy may be attributable to differences in the dividend coverage period or record date, and the assumptions should be confirmed when evaluating the Payout Ratio. Share repurchases of ¥1.01B were conducted and should also be evaluated from the perspective of Total Return Ratio combined with dividends.

Risk Factors

1. Rising Funding Costs: Funding costs increased 122.0% YoY, substantially exceeding the 30.4% growth in investment income. If the higher interest-rate environment persists, it could lead to a slowdown in the growth of net interest income.

2. Equity Ratio: The Equity Ratio is 5.5%, below the generally cited soundness benchmark of 8%. The level of the capital buffer is an important monitoring item when assessing the company's capacity for future shareholder returns.

3. Concentration of Earnings in the Banking Business: The Banking Business accounts for 86.8% of ordinary revenue and 90.4% of segment profit, creating a structure in which regional economic conditions and funding demand from local companies directly affect consolidated performance. Profit from Other Businesses, including credit card operations, declined 10.5% YoY.

Industry Benchmark (Reference; Compiled by Our Company)

Industry Benchmark (bank)

Profitability and Return

The Net Income margin is slightly below the industry median.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median and represents a high level of growth within the industry.

※Source: Compiled by our company

Key Points from the Earnings Results

1. With ordinary revenue up 27.6%, Ordinary Income up 32.7%, and Net Income up 46.0%, the current period's revenue and earnings growth momentum is strong even within the industry. The 17.5% increase in net interest income in the Banking Business is the core driver of the improvement in performance.

2. The 122.0% increase in funding costs exceeded the growth in investment income and could become a margin compression factor depending on future interest-rate conditions. Together with the Equity Ratio of 5.5%, the evolution of the capital base will be a key point of focus.

3. Although ROE improved to 4.3%, capital efficiency remains low within the industry. The increase in net assets is heavily dependent on the expansion of valuation differences on other securities, and attention should also be paid to the sensitivity of capital to market fluctuations.

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not recommend investment in any specific securities. The industry benchmarks are reference information compiled by our company based on publicly available earnings data. Investment decisions should be made at your own responsibility, consulting professionals as necessary.

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