THE OITA BANK (8392) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of FY2026, the Company secured higher revenue and higher profit, primarily driven by revenue growth in the Banking Business segment; however, the profit margin declined due to a sharp increase in funding costs. Ordinary revenue was ¥694.7B (+18.1% YoY), ordinary income was ¥111.4B (+13.5%), and net income attributable to owners of the parent was ¥74.9B (+10.1%). The ordinary income margin was 16.0%, down approximately 65bp from 16.7% in the same period of the previous year, mainly because funding costs of ¥97.96B (+135.8%) exceeded the growth in interest and dividend income (+23.6%).

Factors Affecting Performance

【Revenue】Ordinary revenue of ¥694.7B (+18.1% YoY) was driven by higher revenue in the Banking Business. Ordinary revenue from external customers in the Banking Business was ¥598.4B (+20.7%), accounting for 86.1% of the total. Growth in interest on loans and bills of ¥233.6B (+22.9%) and interest and dividends on securities of ¥203.2B (+18.2%) contributed to the increase. Revenue from the Leasing Business was ¥74.0B (+3.9%), while that from Other Businesses was ¥22.6B (-0.7%), indicating limited growth.

【Profit and Loss】Ordinary income was ¥111.4B (+13.5%), securing higher profit; however, the increase in funding costs (+¥56.4B) was relatively large compared with the increase in interest and dividend income (+¥88.8B), putting pressure on the profit margin. Banking Business segment profit was ¥101.3B (+17.8%), accounting for approximately 90.8% of total profit and supporting performance. Meanwhile, the Leasing Business recorded ¥2.8B (-12.4%), and Other Businesses recorded ¥7.4B (-17.4%), both representing declines in profit. Operating expenses remained at ¥209.4B (+4.4%), below revenue growth, indicating that cost discipline has been maintained. In conclusion, the Company achieved higher revenue and higher profit.

Segment Analysis

The Banking Business recorded ordinary revenue of ¥598.4B (+20.7% YoY) and segment profit of ¥101.3B (+17.8%), with a profit margin of 16.9%, making it the largest contributor to earnings among all segments. The Leasing Business generated higher revenue of ¥74.0B (+3.9%), but segment profit declined to ¥2.8B (-12.4%), resulting in a profit margin of only 3.8%; revenue growth has not translated into profit growth. Other Businesses, including credit card operations, recorded ordinary revenue of ¥22.6B (-0.7%) and segment profit of ¥7.4B (-17.4%), representing declines in both revenue and profit. Overall, the Company has a high degree of dependence on the Banking Business, while improving the profitability of the Leasing Business remains an issue.

Key Financial Indicators

【Profitability】The ordinary income margin of 16.0% (16.7% in the same period of the previous year) and net profit margin of 10.8% (11.6%) both declined slightly. Annualized ROE was 4.2%, reflecting the situation in which higher funding costs are putting pressure on the profit margin. 【Cash Quality】Comprehensive income was ¥302.3B, substantially exceeding net income of ¥74.7B, primarily due to a ¥197.6B improvement in valuation difference on securities. This divergence is heavily dependent on market fluctuations and should be distinguished from recurring earnings power. 【Investment Efficiency】Loans and bills expanded to ¥2,4219.0B (+6.6% YoY), and the loan-to-deposit ratio increased to 69.3% (65.0% in the same period of the previous year), although this did not result in excessive lending relative to the deposit base. 【Financial Soundness】The equity ratio improved to 5.2% (4.6% in the same period of the previous year), but remains below the generally accepted soundness benchmark of 8%. Equity increased to ¥2,354.4B (+13.1%), supported by growth in accumulated other comprehensive income.

Cash Flow Analysis

As the financial statements do not disclose a cash flow statement, fund flows are analyzed based on balance sheet trends. Loans and bills were ¥2,4219.0B, an increase of ¥1,506.3B from the same period of the previous year, indicating continued expansion of earning assets. Meanwhile, deposits were ¥3,4945.2B and remained largely flat (+0.1%), suggesting that funding for loan growth was partly supplemented through a reduction in borrowings (-12.5%) and an increase in proceeds from acceptance of bills sold under repurchase agreements, a form of market-based funding (+61.3%). Cash and due from banks were ¥6,774.7B, equivalent to 19.4% of deposits, maintaining a certain liquidity buffer. Overall, earning assets are being expanded amid slowing deposit growth, and a rising dependence on market-based funding can be observed as a change in the funding structure.

Earnings Quality

In terms of earnings quality, net interest income increased by +9.7% YoY and fees and commissions income, net increased by +6.7%, with both expanding as recurring earnings generated by the core business. Meanwhile, extraordinary items were small, consisting of extraordinary gains of ¥0.1B and extraordinary losses of ¥0.9B, including impairment losses of ¥0.5B. The divergence between ordinary income and net income was primarily attributable to income taxes and other taxes (¥35.8B, equivalent to an effective tax rate of 32.4%), and the impact of temporary factors was limited. There was a significant divergence between comprehensive income of ¥302.3B and net income of ¥74.7B. This difference was attributable to market fluctuations reflected in the improvement in valuation difference on securities and does not indicate recurring earnings power. This point should be considered when evaluating the quality of equity.

Earnings Forecasts and Guidance

The progress rates against the full-year forecasts were 79.7% for ordinary revenue of ¥872.0B, 81.3% for ordinary income of ¥137.0B, and 81.4% for net income attributable to owners of the parent of ¥92.0B. All exceeded the standard Q3 progress benchmark of 75%. However, this does not represent a significant upside, and the full-year forecasts remain generally within reach. The full-year ordinary income forecast calls for growth of +23.5% YoY, whereas the cumulative Q3 profit growth rate was +13.5%; therefore, a certain acceleration in the profit growth pace will be required in Q4 to achieve the full-year target. No revisions were made to the earnings forecasts or dividend forecasts during the quarter.

Shareholder Returns

The Q2 dividend was ¥85.00 per share, and the full-year dividend forecast is ¥170.00 per share. The forecast payout ratio against forecast EPS of ¥606.13 is approximately 28.0%, representing a conservative level of shareholder returns relative to the profit level. Treasury stock increased from negative ¥16.24B in the same period of the previous year to negative ¥24.09B, indicating that a certain level of treasury stock holdings continues as part of the capital policy. Retained earnings accumulated to ¥1,660.9B (¥1,608.4B in the same period of the previous year), indicating continued accumulation of funds available for dividends.

Risk Factors

1. Interest Rate and Funding Cost Increase Risk: Funding costs increased by +135.8% YoY, substantially exceeding the growth in interest and dividend income (+23.6%). If deposit interest rates rise faster than the improvement in asset yields, net interest income and the profit margin may come under further pressure.

2. Capital Adequacy Monitoring Item: Although the equity ratio of 5.2% improved from 4.6% in the same period of the previous year, it remains below the generally accepted soundness benchmark of 8%. The increase in equity depends to a certain extent on items subject to market fluctuations, such as valuation differences on securities, and the stability of capital requires ongoing monitoring.

3. Declining Profitability in the Leasing Business: While ordinary revenue in the Leasing Business increased by +3.9%, segment profit declined by -12.4%, leaving the profit margin at 3.8%. Revenue growth has not translated into profit growth, making progress in improving profitability a key focus.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

Comparative data for the Company’s net profit margin within the industry is limited, making it difficult to determine a clear relative advantage or disadvantage.

Growth and Capital Efficiency

Similarly, industry comparative data for the revenue growth rate is limited; in absolute terms, the Company is demonstrating a high growth rate.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The Company maintained higher revenue and higher profit, with ordinary revenue up +18.1%, ordinary income up +13.5%, and net income up +10.1%. However, the ordinary income margin declined by approximately 65bp, making the trade-off between revenue expansion and profit margin an important observation in evaluating the quality of the financial results.

2. Comprehensive income of ¥302.3B substantially exceeded net income of ¥74.7B, and the improvement in valuation difference on securities boosted equity. As this difference resulted from market fluctuations, it should be evaluated separately from recurring earnings power.

3. The full-year progress rates exceeded standard progress levels, with ordinary income at 81.3% and net income at 81.4%. However, against the full-year plan for profit growth of +23.5% YoY, the cumulative Q3 profit growth rate was only +13.5%; the accumulation of profit in Q4 will therefore be a key point for monitoring going forward.

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

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