Seven Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥107.55B
• Net Income: ¥9.61B
• EPS: ¥9.35

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: FY2026 Q2 was a mixed quarter for Seven Bank, with modest top-line growth but double-digit declines in ordinary income and single-digit declines in net income, pointing to margin pressure and cost headwinds. Revenue grew 1.1% YoY to 1,075.52, while ordinary income fell 11.5% YoY to 148.14 and net income declined 8.9% YoY to 99.66. Operating income came in at 148.14, implying an operating margin of roughly 13.8% on our calculation, though the YoY margin change cannot be quantified from disclosed data. Net profit margin is 9.3% (99.66/1,075.52), and given revenue growth with lower profits, net margin likely compressed YoY, but the exact basis-point change is not derivable with the provided information. Cost efficiency as measured by the banking Cost-to-Income Ratio (CIR) stands at 57.1%, above the <50% efficiency benchmark but below the >60% warning threshold, indicating manageable but elevated cost pressure. Interest income was 75.07 and interest expense 14.57, with a reported NIM of 7.4%—high versus typical banks, reflecting Seven Bank’s atypical balance sheet mix and fee-centric model rather than traditional lending spreads. Deposits totaled 8,639.27 and loans 821.21, yielding a very low loan-to-deposit ratio (LDR) of 9.5%, consistent with an ATM/settlement-centric franchise rather than a lending-heavy bank. Leverage (Assets/Equity) is 6.13x, typical for banks, driving a DuPont ROE of 4.3% (NPM 9.3% × AT 0.075 × Leverage 6.13). ROIC is 4.4%, below the 5% warning threshold, signaling subpar capital efficiency for this period. The effective tax rate is 31.4%, broadly in line with Japan norms. Earnings quality cannot be assessed due to unreported cash flow items; OCF/NI and FCF are not available. The calculated payout ratio is a high 130.2%, suggesting distributions may exceed earnings for the period (or reflect interim timing effects), raising sustainability questions absent cash flow visibility. Equity stands at 2,332.74 against assets of 14,300.49, keeping the bank within typical sector leverage norms but optically high D/E (5.13x) due to deposit liabilities. Intangible assets are 493.92, modest relative to equity, indicating limited balance-sheet fragility from intangibles. Forward-looking, maintaining transaction volumes, controlling CIR, and stabilizing ordinary income will be key as cashless adoption and fee renegotiations remain structural headwinds.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 9.3% × Asset Turnover 0.075 × Financial Leverage 6.13x = ROE 4.3% (matches reported). The most constraining component is asset turnover (0.075), which is structurally low for deposit-taking institutions with large balance sheets; leverage is adequate, and net margin is moderate. The decline in ordinary income (-11.5% YoY) alongside revenue growth (+1.1%) suggests margin compression from higher operating costs and/or lower fee yields per transaction, consistent with a CIR at 57.1%. Business reasons likely include higher network/IT costs, wage inflation, and mix effects in ATM/settlement fees; lending remains a small profit contributor given a 9.5% LDR. Sustainability: low asset turnover is structural for the model; margin pressure can be mitigated via cost control and pricing, but competitive and regulatory dynamics may cap improvements. Watch for concerning trends where expense growth could be outrunning revenue—SG&A details are unreported, but the profit decline versus revenue growth implies negative operating leverage in the period.

Growth Assessment

Revenue growth of 1.1% YoY is modest and likely volume-driven in ATM/settlement services rather than loan growth, given loans are only 821.21 versus deposits of 8,639.27. Profit growth is negative: ordinary income -11.5% and net income -8.9% YoY, indicating pressure on unit economics or higher costs. With NIM at 7.4% but an LDR of 9.5%, interest earnings are not the primary growth engine; fee-based revenue dominates. Outlook hinges on transaction volume resilience (domestic ATM usage), expansion/optimization of the ATM network, and overseas ATM businesses, offset by structural headwinds from cashless payments. Absent evidence of material cost rationalization, near-term operating leverage appears unfavorable. ROIC at 4.4% underscores the need for either higher margin businesses or tighter capital allocation to lift returns. Guidance is not provided; therefore, revenue sustainability remains dependent on macro footfall and partner-bank fee arrangements.

Financial Health

Leverage: D/E is 5.13x, which triggers a generic high-leverage flag but is typical for banks given deposit liabilities fund assets; contextually less alarming than for non-financials. Liquidity: Current/quick ratios are not reported; however, an LDR of 9.5% implies ample liquidity with deposits largely parked in cash and securities rather than loans. Solvency: Total equity is 2,332.74 against total assets of 14,300.49 (equity ratio ~16.3% by our calculation), consistent with a leveraged but not excessive banking balance sheet. Maturity mismatch risk: Specific maturity buckets are not disclosed, but the low LDR suggests limited reliance on long-dated lending; interest-rate risk sits more in securities duration, which is undisclosed. No off-balance sheet obligations are reported in the data provided. Intangibles are 493.92 (~21% of equity), manageable. Explicit warnings: D/E > 2.0 flagged, but interpreted within banking norms.

Cash Flow Quality

OCF, capex, and FCF are unreported; therefore OCF/NI and FCF coverage cannot be assessed. As such, we cannot confirm the conversion of accounting earnings into cash nor detect working-capital-driven earnings management for this period. Given the business model, working capital swings are typically deposit/settlement related rather than inventory/receivables, but confirmation is not possible with current disclosures. Dividend and capex funding capacity relative to internal cash generation cannot be evaluated without cash flow data.

Dividend Sustainability

The calculated payout ratio is 130.2%, indicating dividends exceeding period earnings; however, the timing basis (interim vs full-year) is unclear, and DPS data is unreported. Without OCF/FCF disclosure, we cannot confirm cash coverage. Retained earnings of 2,106.28 provide a cushion, but sustaining payouts above earnings would erode capital over time. Policy-wise, Seven Bank historically targets stable dividends, but current-period profit decline and ROIC of 4.4% suggest limited headroom for increases without profit recovery. Key watchpoints: full-year EPS versus DPS, regulatory capital metrics (not disclosed), and OCF trajectory.

Risk Assessment

Business Risks:

• Structural decline in cash usage and shift to cashless payments reducing ATM transaction volumes
• Fee pressure from partner banks and retailers, including potential renegotiation of ATM fees
• Operational and cybersecurity risks tied to a large ATM network and payment systems
• Execution risks in overseas ATM businesses (country, regulatory, and demand risks)
• Technology obsolescence and higher IT investment needs to maintain uptime and security

Financial Risks:

• Margin pressure evidenced by ordinary income -11.5% YoY and CIR at 57.1%
• High reported leverage (D/E 5.13x) inherent to banking; sensitive to deposit stability and interest-rate risk in securities
• ROIC at 4.4% below the 5% warning threshold, signaling weak capital efficiency
• Dividend payout ratio at 130.2% raises sustainability concerns absent strong cash generation
• Interest-rate and duration risk on investment assets (undisclosed), which can affect OCI and equity

Key Concerns:

• Profitability compression despite revenue growth (+1.1% YoY) points to negative operating leverage
• Limited visibility on cash generation and capital adequacy due to unreported cash flow and regulatory capital data
• Dependence on domestic ATM volumes in a structurally declining cash-usage environment

Investment Implications

Key Takeaways:

• Top-line grew modestly (+1.1% YoY) but ordinary income (-11.5%) and net income (-8.9%) declined
• Net margin 9.3% and ROE 4.3% reflect a fee-centric, low-AT, leveraged banking model
• CIR at 57.1% indicates elevated cost intensity; cost control is a lever for recovery
• ROIC 4.4% is below threshold, signaling need for higher-return initiatives or capital discipline
• Payout ratio at 130.2% appears stretched; sustainability depends on H2 earnings and cash flow

Metrics to Watch:

• ATM transaction volumes, fee per transaction, and network uptime
• Cost-to-Income Ratio trajectory and any cost reduction programs
• OCF and FCF when disclosed; OCF/NI conversion
• Regulatory capital ratios (CET1/Total capital) and OCI sensitivity to rates
• Overseas ATM business profitability and expansion pace
• Full-year guidance versus interim run-rate for ordinary and net income

Relative Positioning: Versus traditional Japanese regional banks, Seven Bank is less loan-driven (LDR 9.5%) and more fee/ATM-driven, which reduces credit risk but heightens exposure to cash usage trends and fee negotiations; profitability currently lags efficiency targets (CIR and ROIC), suggesting a need for operational improvements to defend returns.

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