Quick View
| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥1396.1B | ¥1088.8B | +28.2% |
| Operating Income | - | - | - |
| Ordinary Income | ¥293.6B | ¥177.0B | +65.8% |
| Net Income | ¥203.5B | ¥124.9B | +63.0% |
| ROE | 5.1% | 3.2% | - |
Executive Summary
The Company posted significant earnings growth in addition to higher revenue, primarily due to the expansion of interest income. Ordinary revenue was ¥1,396.10B (+28.2% year on year), ordinary income was ¥293.57B (+65.8%), and net income attributable to owners of the parent was ¥204.13B (+62.1%). Basic earnings per share were ¥54.21 (¥32.87 in the previous year). In the Banking Business segment, the increase in funds investment income exceeded the increase in funding costs, improving the ordinary income margin from 16.3% to 21.0%.
Factors Affecting Performance
【Revenue】Ordinary revenue increased 28.2% year on year to ¥1,396.10B. The Banking Business led overall performance with ¥1,165.10B (+33.8% year on year; 83.4% of total), while the Leasing Business generated ¥182.14B (+5.1%) and Other Businesses generated ¥49.05B (+9.7%). In the Banking Business, funds investment income increased by ¥220.36B year on year, serving as the primary driver of revenue growth.
【Income】Ordinary income increased 65.8% year on year to ¥293.57B, while net income attributable to owners of the parent was ¥204.13B (+62.1%). Funding costs in the Banking Business expanded to ¥175.11B, more than 3.6 times the level in the same period of the previous year. However, the increase in funds investment income exceeded this increase, resulting in net interest income of ¥670.08B (+16.3%). SG&A expenses were ¥542.06B (+6.3%), below the growth rate of ordinary revenue, and the resulting cost absorption contributed to the improvement in the profit margin. Net extraordinary losses amounted to ¥4.13B, comprising a ¥3.78B loss on the sale of fixed assets and a ¥0.54B impairment loss. Their impact on the transition from ordinary income to net income was limited. Overall, the results can be characterized as higher revenue and higher income.
Segment Analysis
The Banking Business was the core source of earnings, generating ordinary revenue of ¥1,165.10B (+33.8% year on year), segment income of ¥286.38B (+65.4%), and a profit margin of 24.6% (+469bp from 19.9% in the previous year). The Leasing Business generated ordinary revenue of ¥182.14B (+5.1%), segment income of ¥6.54B (+3.6%), and a profit margin of 3.6%, substantially below that of the Banking Business. Other Businesses, including the credit guarantee business, generated ordinary revenue of ¥49.05B (+9.7%), segment income of ¥9.63B (+2.1%), and maintained a relatively high profit margin of 19.6%. The majority of consolidated income is concentrated in the Banking Business, indicating a high degree of dependence on this business.
Key Financial Indicators
【Profitability】The ordinary income margin was 21.0%, improving by 478bp from 16.3% in the same period of the previous year. The net income margin also increased by 306bp from 11.6% in the same period of the previous year to 14.6%. The Banking Business segment income margin improved to 24.6% from 19.9% in the previous year, with the expansion of interest income driving the overall improvement in profitability.【Cash Quality】Net extraordinary losses were limited to ¥4.13B, a minor impact relative to pretax income of ¥289.44B. The increase in recurring net interest income was the primary driver of earnings growth.【Investment Efficiency】ROE was 5.1%. Although the return of profits relative to net assets of ¥4,010.52B is trending upward, there remains room to improve capital efficiency by the standards of general operating companies.【Financial Soundness】The Equity Ratio was 3.0% (2.8% in the previous year), remaining at a level associated with the capital regulations applicable to the banking industry. The loan-to-deposit ratio was 78.4%, within the standard range of 70–90%. Total assets were ¥13,333.715B, and net assets were ¥4,010.52B (+4.3% year on year).
Cash Flow Analysis
Although a statement of cash flows was not disclosed, an analysis of fund movements based on changes in the balance sheet indicates that loans increased by ¥538.337B year on year (+6.9%), while deposits decreased by ¥392.832B (-3.5%). Cash and deposits were ¥1,899.234B, down ¥754.405B from ¥2,653.639B in the same period of the previous year, suggesting that funds were reallocated by drawing down liquid assets in line with the expansion of lending operations. Securities amounted to ¥2,657.181B, increasing from the previous year, indicating continued accumulation of marketable assets. Net income for the period of ¥204.13B was supported by the recurring expansion of net interest income. The conversion of earnings into cash should be evaluated together with the composition of lending, deposits, and securities investments.
Earnings Quality
The primary driver of earnings growth was the expansion of net interest income, a recurring source of revenue. Funds investment income increased by ¥220.36B year on year, while funding costs also increased by ¥126.59B, resulting in a net increase in net interest income of ¥93.77B. The increase in net fees and commissions was limited to ¥0.81B, indicating an earnings structure highly sensitive to the interest-rate environment. Extraordinary income was ¥0.19B, compared with extraordinary losses of ¥4.32B, comprising a ¥3.78B loss on the sale of fixed assets and a ¥0.54B impairment loss. Their impact relative to ordinary income of ¥293.57B was small and was not at a level that materially impaired earnings quality through temporary factors. Impairment losses in the Banking Business decreased to ¥0.54B from ¥1.96B in the same period of the previous year, reducing the burden of losses related to fixed assets. Comprehensive income was ¥263.04B, including ¥260.91B attributable to owners of the parent. The difference from net income of ¥204.13B was primarily attributable to a ¥60.0B increase in the valuation difference on available-for-sale securities, an item affected by market conditions and therefore requiring attention.
Earnings Forecasts and Guidance
Progress against the full-year forecast was 81.1% for ordinary income (¥293.57B versus the forecast of ¥362.00B) and 84.0% for income attributable to owners of the parent (¥204.13B versus the forecast of ¥243.00B). Both exceeded the 75% benchmark for cumulative Q3 results. Progress for ordinary revenue was 65.6% (¥1,396.10B versus the forecast of ¥2,128.00B), below the progress for income, reflecting the improvement in profit margins resulting from the expansion of net interest income. No revisions were made to the earnings or dividend forecasts.
Shareholder Returns
The dividend was ¥6.50 per share in each of Q1 through Q3, resulting in cumulative dividends of ¥19.50 per share. The cumulative payout ratio against cumulative Q3 EPS of ¥54.21 was 36.0%. The full-year dividend forecast is ¥26.00 per share, and the forecast payout ratio based on full-year forecast EPS of ¥64.54 is 40.3%. The dividend burden relative to forecast full-year net income of ¥243.00B remains at a moderate level. Treasury stock decreased by ¥78.56B year on year. However, because the breakdown of acquisitions and disposals was not disclosed, the Total Return Ratio, including treasury stock acquisitions, has not been calculated.
Risk Factors
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Net Interest Margin Risk: NIM was 0.80%, below the 1.5% level considered a warning threshold. Although funds investment income increased by ¥220.36B year on year, funding costs also increased by ¥126.59B. Further increases in deposit and market funding rates could slow the pace of expansion in net interest income.
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Earnings Concentration Risk: The Banking Business accounts for 83.4% of consolidated ordinary revenue, while segment income of ¥286.38B represents the majority of consolidated ordinary income of ¥293.57B. This structure makes consolidated performance particularly susceptible to changes in the regional economy and interest-rate environment.
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Securities Valuation Risk: Securities amounted to ¥2,657.181B, representing 19.9% of total assets. The valuation difference on available-for-sale securities changed from a negative ¥36.61B in the same period of the previous year to a positive ¥20.59B, indicating that fluctuations in market prices can affect equity and comprehensive income.
Industry Benchmark (Reference; Compiled by the Company)
Industry Benchmark (bank)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Income Margin | 14.6% | – | – |
Because industry median data for the Company’s net income margin of 14.6% is not yet available, relative comparison is limited.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 28.2% | – | – |
Because industry median data for the Company’s revenue growth rate of 28.2% is not yet available, relative comparison is limited.
※Source: Compiled by the Company
Key Points from the Financial Results
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Ordinary income increased 65.8% year on year, while income attributable to owners of the parent increased 62.1%. The expansion of net interest income and controlled growth in SG&A expenses drove the increase in income. Full-year progress was 81.1% for ordinary income and 84.0% for net income, both exceeding the usual 75% benchmark.
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NIM remained at 0.80%, while funding costs expanded sharply alongside the increase in funds investment income. The sustainability of future earnings will depend on the balance between the pace of improvement in loan and securities yields and rising deposit costs.
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Treasury stock decreased by ¥78.56B year on year, indicating a change in the capital structure. The dividend forecast remains unchanged at ¥26.00 per share, with a forecast payout ratio of 40.3%, maintaining a moderate return burden relative to forecast income.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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, and investors should consult a professional as necessary.
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AI Financial Analysis
Executive Summary
Hokuyo Bank delivered a strong FY2026 Q3 cumulative earnings outcome, with ordinary income and profit attributable to owners materially outpacing revenue growth. Consolidated ordinary revenue rose 28.2% year on year to ¥139.61bn. Ordinary income increased 65.8% to ¥29.36bn. Profit attributable to owners increased 62.1% to ¥20.41bn, and EPS rose to ¥54.21 from ¥32.87. The ordinary-income margin expanded to 21.0% from 16.3% in the prior-year period, an improvement of approximately 478bp. Net profit margin expanded to 14.6% from 11.6%, or approximately 306bp. Interest income increased 35.3% to ¥84.52bn, supported by a 6.8% increase in loans and bills discounted to ¥8.39tn. Net interest income increased 16.3% to ¥67.01bn, as interest expense rose sharply to ¥17.51bn from ¥4.85bn amid higher deposit funding costs. Fee and commission income rose 3.3% to ¥23.34bn, providing modest diversification beyond interest income. General and administrative expenses increased only 6.3% to ¥54.21bn, well below revenue growth, demonstrating favorable operating leverage. Banking was the principal earnings driver, generating segment profit of ¥28.64bn, up 65.4% year on year and representing the overwhelming majority of consolidated segment profit. Leasing revenue grew 5.1% to ¥18.21bn, while segment profit rose 3.6% to ¥6.54bn. The annualized reported ROE was 6.8%, improved by stronger profitability but still below the 8% threshold often associated with an attractive bank return profile. Comprehensive income turned positive at ¥26.30bn from a ¥25.75bn loss, principally reflecting a recovery in securities valuation gains. FY2026 guidance appears conservatively framed relative to the Q3 run rate, with ordinary-income progress already at 81.1% and profit-attributable progress at 84.0% of full-year targets. The principal forward issue is whether loan repricing and securities income can continue to offset funding-cost normalization, particularly given the reported 0.80% NIM.
Profitability Analysis
The reported annualized DuPont ROE of 6.8% is decomposed into a 14.6% net profit margin, 0.014x asset turnover and 33.25x financial leverage. The strongest contributor to the year-on-year improvement was margin expansion: ordinary-income margin increased by about 478bp and net margin by about 306bp. Asset turnover is structurally low for a bank because the balance sheet is dominated by financial assets and deposits rather than conventional industrial-company revenue generation. Financial leverage is structurally high because customer deposits and other funding liabilities are recorded as liabilities; consequently, the 32.25x D/E ratio should not be interpreted using non-financial corporate leverage thresholds. Net interest income rose to ¥67.01bn from ¥57.63bn, supported by ¥64.62bn of interest on loans and ¥12.42bn of interest and dividends on securities. Interest expense nevertheless rose by ¥12.66bn year on year, reflecting the sensitivity of earnings to higher deposit rates and wholesale funding costs. Fees and commissions generated a positive but comparatively limited contribution, with income of ¥23.34bn and expense of ¥10.90bn. Operating leverage was favorable because G&A expense growth of 6.3% was substantially below 28.2% ordinary-revenue growth. The 29.7% effective tax rate was normal, and the 0.705 tax burden in the five-factor DuPont analysis indicates no unusual tax drag. The 0.986 interest burden indicates that profit before tax was close to the reported operating/ordinary profit measure. Extraordinary items were immaterial: ¥0.19bn of extraordinary income was more than offset by ¥4.32bn of extraordinary losses, including ¥0.54bn of impairment loss. This supports the view that the Q3 profit uplift was predominantly generated in recurring banking operations rather than by exceptional gains.
Growth Assessment
Growth was led by the banking segment, where external ordinary revenue increased 33.8% to ¥116.51bn and segment profit increased 65.4% to ¥28.64bn. The leasing segment's external ordinary revenue increased 5.1% to ¥18.21bn, while segment profit rose 3.6% to ¥6.54bn, indicating substantially slower growth than banking. Other businesses, including credit guarantee operations, increased external ordinary revenue 9.7% to ¥4.91bn and segment profit 4.1% to ¥9.63bn. Loan balances increased 6.8% year on year to ¥8.39tn, providing an underlying volume base for interest income growth. Deposits declined 3.0% to ¥10.70tn, while the loan-to-deposit ratio increased to 78.4% from 70.8%, moving into the stated 70-90% target range. Securities increased 2.3% to ¥2.66tn and interest and dividends on securities increased 17.3% to ¥12.42bn. Against full-year guidance, Q3 cumulative ordinary revenue represents 65.6% of the ¥212.80bn forecast, 9.4 percentage points below the standard 75% seasonal progress rate. Ordinary income represents 81.1% of the ¥36.20bn forecast, 6.1 percentage points above standard Q3 progress, and profit attributable to owners represents 84.0% of the ¥24.30bn forecast, 9.0 percentage points above standard progress. The forecast implies a Q4 ordinary-income contribution of ¥6.84bn and profit attributable to owners of ¥3.89bn, below the nine-month average quarterly earnings pace. No forecast revision has been announced. Revenue growth should be assessed against the trade-off between loan-asset repricing and materially rising funding costs, as interest on deposits rose to ¥13.25bn from ¥3.59bn.
Financial Health
Total assets decreased 0.8% year on year to ¥13.33tn, while total equity increased 4.3% to ¥401.05bn. Owners' equity was ¥396.90bn, equal to a book value per share of ¥1,065.22. Liabilities represented 97.0% of total assets, which is normal for a deposit-taking bank but makes capital protection and liquidity management central to the risk assessment. The reported D/E ratio of 32.25x triggers the high-leverage quality alert and would be aggressive for an ordinary corporation. In banking context, however, this ratio is chiefly driven by ¥10.70tn of deposits and should not be assessed against the generic 2.0x corporate threshold. Borrowed money increased 2.2% to ¥920.00bn, negotiable certificates of deposit increased sharply to ¥277.20bn from ¥74.20bn, and payables under securities lending remained substantial at ¥782.14bn. These funding sources require ongoing liquidity and collateral management, although deposits remain the dominant funding source. Cash and due from banks declined 28.4% to ¥1.90tn, while loans expanded and securities increased; this represents a shift toward higher-yielding earning assets but reduces the cash buffer. The loan-to-deposit ratio of 78.4% remains within the stated optimal range and does not indicate an excessive loan-funding mismatch. The reported capital adequacy ratio was 2.9%, below the 8% Basel benchmark and marginally above the prior-period 2.8%; this measure warrants close attention in interpreting regulatory capital resilience. Treasury stock decreased from ¥8.35bn to ¥0.50bn, a ¥7.86bn reduction, which increased equity relative to the prior period and may reflect cancellation or disposal of treasury shares. Intangible assets declined 9.5% to ¥14.35bn and represented only 0.1% of assets, limiting intangible-asset and goodwill-related balance-sheet risk. Deferred tax assets declined 23.7% to ¥11.35bn, reducing their reliance within capital and assets.
Notable B/S Changes
Treasury stock: +¥7.86bn reduction in the contra-equity balance, from negative ¥8.35bn to negative ¥0.50bn (+94.1%) - increased reported equity; the underlying capital-allocation mechanism should be monitored. Cash and due from banks: -¥754.05bn (-28.4%) to ¥1.90tn - indicates deployment of liquidity toward other assets and reduces the immediately available cash buffer. Negotiable certificates of deposit: +¥203.00bn (+273.6%) to ¥277.20bn - indicates a materially greater role for market-sensitive deposit funding. Other liabilities: +¥47.86bn (+41.6%) to ¥162.81bn - warrants monitoring of the composition and maturity profile within funding and operational liabilities. Valuation and translation adjustments: +¥5.65bn, from negative ¥0.22bn to positive ¥5.43bn - improved equity through securities valuation movements but also highlights market-value sensitivity.
Cash Flow Quality
Reported earnings quality is supported by the predominance of ordinary banking income, with only a small net extraordinary loss of ¥0.41bn before tax. Net income attributable to owners of ¥20.41bn exceeded the prior-year period by ¥7.83bn, while comprehensive income was ¥26.30bn because positive securities valuation movements supplemented retained earnings. The improvement in comprehensive income contrasts with a ¥25.75bn comprehensive loss in the prior-year period, when securities valuation differences were negative. The allowance for loan losses was broadly stable at negative ¥42.70bn versus negative ¥42.92bn a year earlier, despite 6.8% loan growth. This stability may reflect benign realized credit conditions, but it leaves future credit-cost normalization as a monitoring item if regional borrower conditions weaken. Bank cash-flow statements are affected by deposit movements, interbank placements, securities transactions and lending activity, so period cash flows require balance-sheet context rather than industrial-company free-cash-flow conventions. The expansion in loans, reduction in cash and due from banks, and decline in deposits collectively indicate active balance-sheet deployment. Cash conversion and operating-cash-flow-to-net-income measures are not used here.
Dividend Sustainability
The full-year dividend forecast is ¥26.00 per share, consistent with the disclosed ¥6.50 per-share quarterly dividends through Q3. Based on forecast EPS of ¥64.54, the prospective dividend-only payout ratio is approximately 40.3%. This is below the 60% sustainability benchmark and leaves capacity for capital retention. The cumulative Q3 earnings level of ¥54.21 per share already covers three ¥6.50 quarterly dividends by approximately 2.8x. Forecast profit attributable to owners of ¥24.30bn would cover the approximately ¥9.83bn annual cash dividend implied by ¥26.00 per share and 378.06 million issued shares by roughly 2.5x. The reduction in treasury stock by ¥7.86bn is a material capital-allocation movement, but its precise mechanism is not identified; it should not be treated as a cash share buyback for total-return-ratio purposes. Dividend capacity should be considered alongside the reported capital adequacy ratio and the need to retain capital against credit and market-risk exposures.
Risk Assessment
Business risks include Net interest margin risk: the 0.80% NIM is below the 1.5% warning threshold. Loan and securities yields must continue to reprice sufficiently to offset the rapid increase in deposit interest expense, which rose to ¥13.25bn from ¥3.59bn., Regional credit-cycle risk: loan balances rose 6.8% to ¥8.39tn while the loan-loss allowance remained broadly flat at ¥42.70bn. Deterioration in Hokkaido regional corporate, real-estate or SME conditions could require higher provisions., Securities market risk: securities totaled ¥2.66tn, approximately 19.9% of assets. The return to positive comprehensive income was helped by ¥6.00bn of securities valuation gains, leaving capital exposed to interest-rate and market-price movements., Leasing exposure risk: leasing growth and profit growth were modest relative to banking, and the portfolio remains exposed to customer residual-value, credit and funding conditions..
Financial risks include High reported leverage: the 32.25x D/E quality alert reflects the deposit-funded bank model, but it also highlights the small equity base relative to total assets and the importance of preserving depositor confidence., Regulatory capital risk: the reported 2.9% capital adequacy ratio is below the stated 8% Basel benchmark. Even though it improved from 2.8%, this reported level requires monitoring against applicable regulatory definitions and capital-management actions., Liquidity and funding-mix risk: deposits declined 3.0%, cash and due from banks declined 28.4%, and negotiable certificates of deposit rose to ¥277.20bn. The 78.4% LDR is sound, but greater use of market-sensitive funding can raise funding-cost and rollover sensitivity., Interest-rate risk: higher rates have lifted asset income, but interest expense increased 261.0% year on year, demonstrating meaningful deposit-beta and liability-repricing sensitivity..
Key concerns include Highest priority: sustainability of margin expansion despite the 0.80% NIM warning and rapidly rising deposit costs., High priority: reported regulatory capital adequacy and the ability to absorb securities valuation volatility or a rise in credit costs., Medium priority: whether deposit contraction persists as loan growth continues, potentially requiring greater reliance on CDs, borrowings or secured funding., Medium priority: the reduced cash-and-due-from-banks position should be evaluated alongside regulatory liquidity metrics..
Investment Implications
Key takeaways include Nine-month earnings were strong: ordinary income rose 65.8% to ¥29.36bn and profit attributable to owners rose 62.1% to ¥20.41bn., Margin expansion and operating leverage were the dominant sources of earnings growth, with G&A growth limited to 6.3%., Banking is the core business, contributing ¥28.64bn of segment profit versus ¥6.54bn in leasing., The annualized reported ROE of 6.8% improved but remains below the 8% return threshold., Full-year earnings guidance appears achievable based on 81.1% ordinary-income and 84.0% net-income progress at Q3, without requiring a forecast revision., The prospective ¥26.00 DPS implies a moderate forecast dividend-only payout ratio of about 40.3%..
Metrics to watch include NIM and the relationship between loan yields, securities yields and deposit funding costs., Loan growth, deposit trends and the loan-to-deposit ratio, which was 78.4% at Q3., Credit costs and loan-loss allowance coverage as the loan portfolio expands., Capital adequacy ratio and the effect of securities valuation changes on equity., Cash and due from banks, CD balances, borrowings and secured funding balances., Progress against FY2026 guidance, particularly the implied lower Q4 profit contribution..
Regarding relative positioning, The bank combines strong current-period profit momentum, a balanced 78.4% loan-to-deposit ratio and a moderate prospective payout ratio with a low reported NIM and a balance sheet that remains highly sensitive to funding costs, securities valuations and regulatory capital requirements. Its FY2026 Q3 profitability trend is favorable, but the durability of returns depends more on asset-liability repricing discipline and credit performance than on conventional industrial-company revenue growth.