THE OITA BANK,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥44.60B
• Net Income: ¥4.03B
• EPS: ¥291.11

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 top-line and profit growth in H1 FY2026 with slight margin expansion, but structurally low returns persist given a 2.0% ROE and a 1.0% NIM. Revenue rose to 446.01 (+14.8% YoY), ordinary income reached 66.40 (+24.2% YoY), and net income was 44.31 (+19.3% YoY). Net margin improved to 9.9%, from an estimated 9.5% a year ago, implying roughly +38 bps of expansion. EPS (basic) printed at 291.11 yen, with diluted at 289.09 yen, indicating limited dilution. The effective tax rate was 32.6%, broadly in line with domestic norms. Balance sheet scale remains large (total assets 44,810.88) versus equity of 2,254.84, reflecting typical bank leverage. The DuPont breakdown yields net margin 9.9%, asset turnover 0.010x, and financial leverage 19.87x, combining to ROE of 2.0%—confirming capital efficiency remains subdued. Banking KPIs are mixed: a very efficient Cost-to-Income Ratio (CIR) at 32.0% contrasts with a weak Net Interest Margin (NIM) at 1.0%. The Loan-to-Deposit Ratio (LDR) at 68.7% signals conservative funding/liquidity but also underutilized balance sheet, potentially capping earnings. Ordinary income growth outpaced revenue growth, suggesting positive operating leverage and/or a better revenue mix, though detailed drivers (fees, credit costs, securities) were not disclosed. Earnings quality cannot be validated as operating cash flow data are unreported. The reported payout ratio of 39.0% looks manageable against current earnings, but capital adequacy metrics (e.g., CET1) are not provided, limiting dividend sustainability assessment. Comprehensive income was a high 186.41, likely reflecting valuation gains captured in OCI, which can be volatile with rate moves. Forward-looking, profitability sensitivity to interest rates and securities valuations remains the key swing factor, while low LDR provides room to deploy liquidity if credit demand improves. Overall, results demonstrate disciplined cost control and profit growth, but structural headwinds in NIM keep ROE well below cost of equity, making sustained improvement contingent on mix shift, loan growth, and rate environment.

Profitability Analysis

ROE decomposition: ROE (2.0%) = Net Profit Margin (9.9%) × Asset Turnover (0.010x) × Financial Leverage (19.87x). The biggest contributor to the YoY change appears to be margin: net margin increased from 9.55% to 9.9% (+38 bps), while asset turnover (~0.010x given revenue 446.01 and assets 44,810.88) likely changed little; leverage (assets/equity ~19.87x) appears stable for a regional bank. Business drivers behind margin improvement likely include operating leverage (ordinary income +24.2% vs revenue +14.8%) supported by a very low CIR (32.0%), and possibly benign credit costs/securities results, though details are undisclosed. The sustainability of margin gains is moderate: cost discipline can persist, but NIM at 1.0% is structurally weak, and gains from market-related income (if any) may be non-recurring. Operating leverage risk: with such a low LDR (68.7%), incremental revenue growth may require either loan growth (credit risk) or greater reliance on securities/fees (market/fee risk). Concerning trend flags: while not directly visible, the combination of low NIM and conservative LDR suggests limited core spread earnings; continued reliance on non-spread income would raise earnings volatility if it increases.

Growth Assessment

Revenue growth of +14.8% YoY and ordinary income growth of +24.2% YoY reflect positive operating leverage in H1. Net income rose +19.3% YoY to 44.31, with net margin improving to 9.9% from ~9.6% a year ago. The uptick likely stems from strong cost control (CIR 32.0%), and potentially stable credit costs and/or securities-related gains (undisclosed). Sustainability hinges on loan growth and pricing power; with NIM at 1.0% and LDR 68.7%, core spread expansion looks constrained absent rate or mix tailwinds. Fee income and market-related income can supplement growth but carry higher volatility. The wide positive comprehensive income (186.41) indicates meaningful valuation gains flowing through OCI, which are rate-sensitive and non-cash; this inflates total return optics but may reverse with yield changes. Without segment or product detail, the quality of growth skews toward cost-driven efficiency rather than core spread expansion. Outlook: base-case steady but modest earnings trajectory, with upside if loan demand recovers or if asset re-pricing lifts NIM, and downside if rates move adversely or credit costs normalize upward.

Financial Health

Leverage is high in appearance (D/E 18.87x) but is structurally normal for banks; equity is 2,254.84 against assets of 44,810.88. Liquidity positioning is conservative: LDR at 68.7% implies ample deposit funding versus loans, lowering liquidity risk but capping yield. CIR at 32.0% underscores strong cost efficiency, supporting resilience under margin pressure. Current ratio and quick ratio are not meaningful for banks and are unreported; no warning triggered. There is no explicit data on short-term borrowings or wholesale funding reliance; deposits total 34,319.81. Maturity mismatch risk cannot be fully assessed without asset-liability tenor detail, but low LDR generally mitigates near-term funding stress. Off-balance sheet obligations (guarantees, commitments, derivatives) are not disclosed here; lack of disclosure is a limitation.

Cash Flow Quality

Operating cash flow and free cash flow are unreported, so OCF/Net Income and FCF coverage cannot be assessed. Earnings quality signals from accruals/working capital cannot be evaluated due to missing data. The large positive comprehensive income versus net income suggests meaningful unrealized gains (likely AFS securities) in OCI, which can reverse; while not an earnings quality issue per se, it highlights valuation sensitivity. With CIR of 32.0%, profit conversion from revenue appears efficient, but cash validation is unavailable. No signs of working capital manipulation can be inferred given banking business model and lack of disclosure.

Dividend Sustainability

The calculated payout ratio is 39.0%, comfortably below the 60% guideline and appears sustainable against current earnings capacity. Dividend per share data are unreported, and cash flow data are unavailable, so FCF coverage cannot be verified. Capital adequacy (e.g., CET1, total capital ratio) is not provided; hence, we cannot confirm buffer strength for distributions under stress. Given ROE at 2.0% and low NIM, excess capital accretion may be modest; however, conservative balance sheet (LDR 68.7%) supports stability. Policy outlook likely favors stable/dividend-maintenance bias typical of regional banks, contingent on capital ratios and earnings durability.

Risk Assessment

Business Risks:

• Persistently low NIM at 1.0% compresses core earnings power.
• Loan growth softness implied by low LDR (68.7%) may limit revenue scalability.
• Potential reliance on market-related income or securities gains to bridge earnings, increasing volatility.
• Regional economic concentration risk in primary operating area (Oita prefecture) affecting credit demand and asset quality.

Financial Risks:

• Interest rate risk: OCI and earnings sensitive to JGB/yen rate moves as suggested by large comprehensive income.
• Credit cost normalization risk if macro weakens; current level undisclosed.
• Valuation risk on investment securities given rate volatility; unrealized gains could reverse.
• High headline leverage (industry-normal) magnifies small ROA changes into material ROE swings.

Key Concerns:

• Structural return gap: ROE 2.0% well below typical cost of equity.
• Data gaps: no cash flow, no capital adequacy ratios (CET1), no credit quality metrics (NPL, coverage), limiting risk visibility.
• Dividend sustainability dependent on undisclosed capital buffers amid potential OCI volatility.

Investment Implications

Key Takeaways:

• H1 delivered solid profit growth: ordinary income +24.2% YoY and net income +19.3% YoY.
• Net margin expanded by ~38 bps to 9.9%, aided by a very low CIR (32.0%).
• ROE remains low at 2.0% due to a 1.0% NIM and modest asset turnover (~0.010x).
• Balance sheet is conservatively deployed: LDR 68.7% supports liquidity but weighs on yields.
• Comprehensive income is high (186.41), pointing to rate-sensitive OCI gains.
• Dividend payout is moderate at ~39%, likely sustainable absent capital ratio pressures.
• Upside requires either NIM improvement, higher loan deployment, or stable securities income; downside tied to rate/OCI reversals and credit costs.

Metrics to Watch:

• Net Interest Margin (NIM) trajectory and asset re-pricing sensitivity.
• Loan growth and LDR movement (credit deployment without undue risk).
• Cost-to-Income Ratio sustainability as revenue mix evolves.
• Credit quality indicators (NPL ratio, charge-offs, coverage) once disclosed.
• Capital adequacy (CET1/Total capital ratios) and unrealized gain/loss position (OCI).
• Fee income contribution and stability (trust, settlement, asset management) if disclosed.

Relative Positioning: Within Japanese regional banks, Oita Bank exhibits excellent cost efficiency (CIR ~32%) and conservative funding (LDR ~69%), but faces structurally weak NIM and low ROE, placing it as a defensively run franchise with below-peer profitability potential unless rate/loan growth tailwinds emerge.

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