The Bank of Nagoya,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥60.41B
• Net Income: ¥9.54B
• EPS: ¥185.93

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, but profitability quality leans on non-interest drivers with structurally thin NIM and a potentially inflated payout ratio signal. Revenue rose 24.9% YoY to 604.05, with ordinary income up 23.7% to 127.38 and net income up 21.8% to 91.45. Net margin stands at 15.1%, while ordinary margin is 21.1% this half. Based on growth rates, net margin compressed by roughly 40 bps YoY (from ~15.5% to 15.1%), and ordinary margin by ~20 bps (from ~21.3% to 21.1%). EPS (basic) printed at 185.93 JPY for the period, and book value per share is 6,045.52 JPY. NIM is 0.6%, well below healthy benchmarks and indicative of industry-wide rate pressure and potentially higher securities/fee reliance. Cost discipline is strong, with a very low cost-to-income ratio at 27.2%, supporting operating leverage despite thin NIM. LDR is 77.7%, indicating a conservative funding structure with deposits comfortably covering loans. ROE (DuPont) is 3.1% = 15.1% net margin × 0.010 asset turnover × 20.51x leverage; capital efficiency remains modest. Total assets are 61,010.86 and equity is 2,974.25, implying a high D/E of 19.51x (typical for banks but still a leverage flag by general metrics). Comprehensive income surged to 233.27, suggesting sizable valuation gains in OCI (likely securities), which are non-cash and market-sensitive. Cash flow data are unreported, so earnings quality via OCF reconciliation cannot be assessed. The reported payout ratio of 145.8% looks unsustainably high on face value, but may be distorted by using full-year dividends against half-year earnings; caution is warranted until full FY data are available. Forward-looking, earnings sensitivity to securities valuation (OCI) and rate normalization (impacting NIM and unrealized bond positions) remains the key swing factor, while low CIR provides a buffer.

Profitability Analysis

ROE (3.1%) decomposes into Net Profit Margin (15.1%) × Asset Turnover (0.010) × Financial Leverage (20.51x). The largest structural constraint is the very low asset turnover typical for banks and the thin NIM underpinning revenue productivity. YoY, revenue grew faster than net income (24.9% vs 21.8%), implying a ~40 bps net margin compression; ordinary margin also compressed ~20 bps as ordinary income trailed revenue growth slightly. Business drivers likely include: (1) improved fee and market-related revenues supporting top-line growth, (2) NIM at 0.6% limiting core spread earnings, and (3) strong cost control keeping CIR at 27.2%. The cost efficiency appears sustainable given regional bank benchmarks, but any outsized securities gains or one-time fees would be non-recurring. Watch for adverse operating leverage if SG&A (unreported) or credit costs were to rise faster than revenue. In summary, leverage is doing most of the heavy lifting for ROE, margin is stable-to-slightly weaker YoY, and turnover remains structurally low; durable improvement hinges on core spread expansion and stable fee income rather than market gains.

Growth Assessment

Top-line momentum is strong with revenue up 24.9% YoY, outpacing ordinary income (+23.7%) and net income (+21.8%). The modest margin compression (~20–40 bps) suggests revenue mix or higher non-interest income components that carry volatility and possibly lower incremental margins. Interest income of 333.02 versus interest expense of 93.88 implies net interest income of ~239.14, with NIM at 0.6% underscoring reliance on volume growth and non-interest income to deliver profit growth. CIR at 27.2% is a tailwind enabling profit growth even when NIM is thin. Loan growth versus deposit base yields an LDR of 77.7%, signaling capacity to expand loans without straining funding. Outlook hinges on: (1) BOJ policy normalization affecting asset yields and securities valuations, (2) credit cost trends as the cycle turns, and (3) sustainability of fee/market-related income. Base case: mid-teen to low-20% YoY profit growth is unlikely to be repeated without either core NIM improvement or persistently favorable market conditions.

Financial Health

Leverage: D/E is 19.51x, which triggers a high-leverage flag under general metrics but is typical for banks; capital adequacy (e.g., CET1) is not disclosed here, limiting solvency assessment. Liquidity: LDR of 77.7% indicates deposits comfortably fund loans, reducing liquidity stress; deposits are 52,902.99 and loans 41,083.24. Maturity mismatch risk cannot be fully assessed without the securities portfolio duration and wholesale funding mix; however, deposit surplus suggests a conservative stance. Current ratio and quick ratio are not meaningful for banks and are unreported. Off-balance sheet obligations (e.g., guarantees, commitments) are not disclosed in the data provided. Overall, balance sheet scale (assets 61,010.86) and strong funding profile are positives, but interest rate risk in the banking book remains a key unknown.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported, so OCF/NI and FCF cannot be assessed. Earnings quality therefore cannot be validated against cash conversion metrics. The large gap between net income (91.45) and comprehensive income (233.27) indicates significant OCI items, likely from securities valuation gains; these are non-cash and reversible, tempering the quality of headline comprehensive profitability. Working capital analysis is not applicable in a conventional sense for banks; however, reliance on market-related income elevates volatility risk. Until OCF data and credit cost details are available, treat cash flow quality as unverified.

Dividend Sustainability

The calculated payout ratio of 145.8% appears unsustainably high relative to half-year earnings but is likely distorted by comparing full-year dividend guidance (if any) against interim net income; dividend and cash flow data are unreported. Without OCF and FCF, coverage cannot be determined. Retained earnings of 1,801.47 provide a buffer, but sustainability depends on full-year profit, credit cost normalization, and the absence of securities valuation losses. Policy-wise, regional banks often aim for stable or steadily increasing dividends; the bank’s actual stance is not disclosed here. Until full-year earnings and cash flow are known, flag dividend coverage as uncertain.

Risk Assessment

Business Risks:

• Sustained NIM compression (0.6%) limiting core earnings
• Dependence on non-interest income and market-related gains elevating volatility
• Credit cost normalization or uptick from SME exposures in the regional economy
• Competition for deposits and loans further pressuring spreads
• Local economic concentration risk given regional bank footprint

Financial Risks:

• High leverage inherent to banking (D/E 19.51x)
• Interest rate risk in the banking book; potential unrealized losses on JGBs and bonds
• OCI volatility (comprehensive income far above net income suggests valuation sensitivity)
• Liquidity stress in tail scenarios despite low LDR if deposit outflows rise
• Capital adequacy unknown (CET1/risk-weighted assets undisclosed)

Key Concerns:

• Margin compression (~40 bps net, ~20 bps ordinary) alongside very low NIM
• Dividend sustainability unclear with a reported payout ratio of 145.8% (likely distorted)
• Earnings quality unverified due to missing OCF and credit cost disclosure
• Rate normalization could pressure securities valuations and capital

Investment Implications

Key Takeaways:

• Strong top-line and profit growth, aided by excellent cost efficiency (CIR 27.2%)
• Core profitability is constrained by very low NIM (0.6%)
• Margins compressed modestly YoY despite growth, suggesting mix or pricing pressure
• Balance sheet funding is conservative (LDR 77.7%), supporting stability
• ROE of 3.1% is held back by structural factors (low turnover and thin spreads)
• High comprehensive income points to market tailwinds that may revert

Metrics to Watch:

• NIM trajectory and deposit beta post-BOJ policy changes
• Credit costs, NPL ratio, and coverage trends
• Unrealized gains/losses (OCI) on securities and duration gap
• Core fee income vs. trading/securities gains split
• Cost-to-income ratio excluding market-related gains
• Capital adequacy (CET1 ratio) and dividend policy guidance
• Loan growth vs. deposit growth to maintain LDR in 70–90% range

Relative Positioning: Among regional banks, efficiency is a standout positive (CIR 27.2%), but NIM at 0.6% and ROE at 3.1% lag typical peers, implying stronger cost control but weaker core spread earnings; funding profile is conservative with ample deposits.

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