The Miyazaki Bank (8393) FY2026 FY Earnings Report

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Executive Summary

This was a financial period in which substantial profit growth significantly outpaced revenue growth, driven by the expansion of interest income and expense controls. Ordinary revenue amounted to ¥901.6B (up +12.4% YoY), ordinary income was ¥198.3B (up +42.1%), and net income was ¥140.9B (up +45.3%). The profit growth rate significantly exceeded the revenue growth rate, reflecting operating leverage from the expansion of funds investment income and the containment of growth in general and administrative expenses (+2.5%). Net assets increased by +17.2% YoY to ¥2,223.3B, primarily due to the accumulation of comprehensive income centered on the valuation difference on securities.

Factors Affecting Financial Performance

【Revenue】Ordinary revenue of ¥901.6B (up +12.4% YoY) was driven by the banking business. Ordinary revenue from external customers in the banking business was ¥845.3B (up +13.8%), accounting for 93.8% of the total. Interest on loans increased to ¥358.7B (up +18.0%), while interest and dividends on securities rose to ¥223.8B (up +8.2%). Meanwhile, the leasing business recorded ¥50.4B (down -5.7%), resulting in a revenue decline. Fee income increased slightly to ¥127.6B (up +3.1%), but net fee income declined because fee expenses increased by +9.8%; this indicates that interest income is the central driver of revenue growth.

【Profit and Loss】Ordinary income of ¥198.3B (up +42.1%) and net income of ¥140.9B (up +45.3%) both increased substantially. Funding costs were ¥199.5B (up +22.6%), exceeding the +15.4% growth in funds investment income, making the sustainability of spread expansion an area requiring attention. Extraordinary gains and losses were almost nonexistent (extraordinary gain of ¥0.01B and extraordinary loss of ¥0.34B), indicating that profit growth was structural, driven by the expansion of core interest income and expense controls. In conclusion, the Company achieved both revenue and profit growth.

Segment Analysis

The banking business recorded ordinary revenue of ¥845.3B (up +13.8% YoY) and segment profit of ¥192.2B (up +43.4%), accounting for 93.8% of total ordinary revenue and 96.9% of segment profit. The leasing business recorded ordinary revenue of ¥50.4B (down -5.7%) and segment profit of ¥4.8B (up +12.2%), securing higher profit despite lower revenue. Other segments recorded ordinary revenue of ¥5.9B (up +1.4%) and segment profit of ¥1.4B (up +12.8%), with profit increasing in both categories. The revenue structure is highly concentrated in the banking business, reflecting the business structure of a regional financial institution.

Key Financial Metrics

【Profitability】The ordinary income margin was 22.0%, an improvement of 4.6pt from 17.4% in the previous year, while the net income margin was 15.6%, an improvement of 3.4pt from 12.2% in the previous year. General and administrative expenses increased by only +2.5% YoY, below the +12.4% growth in ordinary revenue, contributing to the improvement in profit margins.【Cash Flow Quality】Operating CF was negative ¥1,106.0B, and its ratio to net income was negative 7.85x, representing a substantial divergence. However, banking businesses have unique characteristics reflecting fund movements in deposits, loans, and securities, and therefore require an interpretation different from cash-conversion metrics for general operating companies.【Investment Efficiency】ROE improved to 6.3% from 5.1% in the previous year, but remains below the 8% benchmark often used for general operating companies. The total asset turnover ratio was low at 0.022x and was supplemented by financial leverage of 18.33x; this structure reflects the characteristics of banking businesses, in which deposits are treated as liabilities.【Financial Soundness】The equity ratio was 5.5%. Loans amounted to ¥24,672.7B, and the loan-to-deposit ratio was 78.5% against deposits of ¥31,445.5B, within an appropriate range. Loan growth (+3.2%) exceeded deposit growth (+0.7%), making the balance with the funding base an area to monitor going forward.

Cash Flow Analysis

Operating CF was negative ¥1,106.0B, improving from negative ¥1,242.7B in the previous year, but still representing a substantial outflow. Investing CF was an inflow of ¥576.3B, with fund movements in securities and other assets partially offsetting the operating CF outflow. Financing CF was negative ¥33.9B, including ¥9.4B in share buybacks. Free cash flow was negative ¥529.8B. In banking businesses, operating CF reflects changes in the funding positions of deposits, loans, and securities, making it difficult to interpret as a profit cash-conversion metric in the same manner as for general operating companies. However, the continuing cash outflow relative to net income of ¥140.9B should be assessed together with the turnover of the funds investment portfolio and trends in increases or decreases in deposits. Capital expenditures were ¥7.1B, while depreciation and amortization was ¥28.3B, indicating that capital expenditures have continued to remain below depreciation and amortization.

Quality of Earnings

The current period’s profit growth was almost entirely independent of extraordinary gains and losses (extraordinary gain of ¥0.01B and extraordinary loss of ¥0.34B), and can be considered high-quality growth driven by recurring factors, namely the expansion of funds investment income and expense controls. Nevertheless, the growth in funding costs (+22.6%) exceeded the growth in funds investment income (+15.4%), and whether the significant improvement in profit margins achieved during the current period can be sustained amid rising funding costs warrants attention. Comprehensive income was ¥360.4B, exceeding net income of ¥140.9B by ¥219.4B; the primary factor was an increase of ¥178.9B in the valuation difference on securities. This demonstrates the sensitivity of net assets to changes in interest rates and market prices, suggesting that a portion of current-period earnings includes valuation-related elements influenced by market conditions.

Earnings Forecasts and Guidance

The Company’s forecast for the next period is ordinary revenue of ¥954.0B (up +5.8% from the current period), ordinary income of ¥212.0B (up +6.8%), and net income of ¥140.0B (up +3.0%; ¥145.0B on a basis attributable to owners of the parent, up +2.9%). Current-period actual results have already reached 94.5% of the next-period forecast for ordinary revenue, 93.5% for ordinary income, and 97.2% for net income attributable to owners of the parent. The next-period plan does not assume the same high profit growth rate as the current period and appears to incorporate rising funding costs and normalization of the current period’s high profitability.

Shareholder Returns

On a post-stock-split basis, taking into account the stock split in April 2026 (1 share split into 5 shares), the full-year dividend for the current period was ¥40, representing an increase of +¥18 from ¥22 in the previous year. Total dividends were ¥24.4B, and the payout ratio relative to net income of ¥140.9B was approximately 17.3% (the figure is stated on an actual amount basis adjusted for the stock split because the calculation scope differs from the payout ratio of 23.9% disclosed in XBRL). Including ¥9.4B in share buybacks, total shareholder returns were ¥33.9B, resulting in a total return ratio of approximately 24.0%. The forecast dividend for the next period is ¥56 on a post-split basis, representing a planned increase of +40.0% from the current period. The forecast payout ratio against forecast EPS of ¥172.81 is 32.4%. Assessing the sustainability of dividend expansion will require consideration not only of earnings growth but also of capital capacity, including the equity ratio.

Risk Factors

1. Concentration in regional finance: The banking business accounts for 93.8% of ordinary revenue and 96.9% of segment profit. This structure means that regional economic trends directly affect loan demand and credit costs.

2. Compression of the investment and funding spread: Funding costs increased by +22.6% YoY, exceeding the +15.4% increase in funds investment income. If rising deposit interest rates outpace improvements in investment yields, the improvement in profit margins achieved during the current period could reverse.

3. Capital adequacy: The equity ratio is 5.5%, below the 8% level under generally applicable Basel III standards. Although net assets have increased, capital capacity during periods of securities valuation losses or increased credit costs remains an issue.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The net income margin exceeds the industry median and remains relatively high within the industry.

Growth and Capital Efficiency

The revenue growth rate also exceeds the industry median and remains near the upper bound of the IQR.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Ordinary income increased substantially by +42.1% YoY, while net income rose +45.3%, primarily due to the expansion of interest income accompanied by expense controls. Dependence on extraordinary gains and losses was limited, and the quality of profit growth was based on recurring factors.

2. The growth in funding costs (+22.6%) exceeded the growth in funds investment income (+15.4%), making the sustainability of the current period’s improvement in profit margins amid rising funding costs an area to monitor going forward.

3. ROE improved to 6.3% but remained below the 8% benchmark for general operating companies, while the equity ratio remained at 5.5%. Balancing the dividend increase plan (¥56 next period, +40.0%) with capital adequacy will be a key focus over the medium term.

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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. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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