THE TAIKO BANK,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.92B
• Net Income: ¥1.50B
• EPS: ¥158.35

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: A mixed FY2026 Q2 print for Daiko Bank—top-line expansion and disciplined costs, but profit softness and structurally thin margins keep ROE low. Revenue rose 16.8% YoY to 129.2, while ordinary income fell 10.6% YoY to 23.93 and net income declined 16.4% YoY to 15.09. Net profit margin stands at 11.7% (15.09/129.2), but the bank’s asset-turnover is inherently low (0.008), producing a modest ROE of 1.9% despite high financial leverage (21.07x). Banking metrics highlight pressure: NIM is just 0.70%, well below a healthy 2–3% benchmark, indicating tight loan–deposit spreads. Cost discipline is a bright spot with a Cost-to-Income Ratio of 49.5%, better than the 50–60% range typical of many regional peers. The loan-to-deposit ratio is 79.7%, suggesting sound on-balance-sheet funding with room to lend without stretching liquidity. Equity of 809.9 supports the balance sheet (assets 170,611.2; liabilities 162,512.1), but the reported D/E of 20.07x reflects the typical leverage of banking models. Total comprehensive income of 57.78 far exceeds net income, pointing to sizable unrealized gains (likely on securities) flowing through OCI. Effective tax rate is 34.4% (7.97/23.18), consistent with domestic statutory levels. Margin expansion/compression YoY at the operating or net level cannot be quantified due to absent prior-period margin disclosures; however, the very low NIM implies continued structural margin compression risks. Earnings quality cannot be assessed via OCF vs NI (cash flow unreported), but the large gap between comprehensive income and net income underscores dependence on market valuation gains. Dividend capacity appears reasonable with a calculated payout ratio of 41.7%, but sustainability hinges on recurring earnings rather than OCI. Forward-looking, earnings sensitivity will be driven by BOJ policy path, deposit beta behavior, and securities portfolio duration management. With ROIC/ROE at 1.9%—well below typical cost of equity—the strategic imperative remains improving spread income, fee income, and maintaining best-in-class cost controls. Overall, liquidity is stable, costs are well managed, but low NIM and profit declines YOY cap returns, keeping the outlook cautiously balanced.

Profitability Analysis

ROE decomposition (DuPont): ROE 1.9% = Net profit margin (11.7%) × Asset turnover (0.008) × Financial leverage (21.07x). The binding constraint is extremely low asset turnover (banking balance-sheet model) and thin net margin driven by a 0.70% NIM. The most impactful component is net margin, which is structurally suppressed by low NIM; leverage is already high, and turnover is inherently low for banks. Business reason: intense competition for deposits and a gradual rise in deposit betas compress asset–liability spreads; conservative loan pricing and a sizable securities book at low yields also weigh on NIM. Sustainability: cost efficiency (CIR 49.5%) looks sustainable; however, NIM recovery depends on asset repricing outpacing deposit repricing and BOJ policy normalization—uncertain and gradual at best. Concerning trends: ordinary income -10.6% YoY vs revenue +16.8% YoY indicates negative operating leverage; this implies either margin compression or higher credit/other costs despite top-line growth. With SG&A detail unreported, we cannot isolate expense drivers, but the combination suggests profitability pressure despite revenue growth.

Growth Assessment

Revenue grew 16.8% YoY to 129.2, signaling solid activity (likely higher interest income at 101.6 and some fee momentum), but ordinary income fell 10.6% and net income declined 16.4%, implying unfavorable mix or margin pressure. NIM at 0.70% indicates spreads are tight; interest expense of 15.26 is rising relative to asset yields, likely reflecting deposit beta catch-up. Fee/non-interest trends are not disclosed, limiting visibility on recurring growth durability. The outsized total comprehensive income (57.78) versus net income implies securities valuation gains; these are non-cash and volatile, limiting quality of headline growth if relied upon. Outlook: loan growth appears paced by an LDR of ~80% (room to deploy), but any growth must be margin-accretive to support earnings; otherwise, it could dilute ROE. Near term, maintaining CIR ~50% and selective asset repricing are key to stabilizing profit trajectory. Absent a clear NIM recovery, earnings growth likely lags revenue growth.

Financial Health

Liquidity is supported by deposits of 14,601.5 versus loans of 11,642.0 (LDR 79.7%), indicating a stable funding base and headroom without resorting to wholesale funding. Balance sheet leverage is high with D/E 20.07x; while typical for banks, this exceeds the generic >2.0 warning threshold and amplifies sensitivity to credit and market shocks. Current and quick ratios are not meaningful for banks and are unreported. Maturity mismatch risk: manageable on the credit side given LDR, but interest rate risk resides in the securities portfolio (unrealized gains reflected in OCI this quarter), which could reverse if yields rise. No off-balance sheet obligations are disclosed; contingent exposures (guarantees, derivatives) are not reported here, representing a data gap. Capital adequacy (e.g., CET1/RWAs) is not provided, limiting solvency assessment beyond book equity of 809.9.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported; OCF/NI cannot be calculated, preventing a direct earnings quality assessment. The significant divergence between total comprehensive income (57.78) and net income (15.09) suggests reliance on unrealized valuation gains in AFS/OCI, which are non-operating and volatile. For banks, OCF can be distorted by deposit and securities flows; in the absence of data, we focus on recurring spread income quality, which is currently constrained by a 0.70% NIM. Dividend and capex cash demands are not a major factor for banks; sustainability hinges on steady net income and capital buffers rather than FCF in the industrial sense.

Dividend Sustainability

The calculated payout ratio is 41.7%, within a generally sustainable range (<60%) if earnings are stable. DPS and total dividends paid are unreported, and OCF is unavailable, so cash coverage cannot be verified. Given YoY profit decline (-16.4%) and low ROE (1.9%), maintaining dividends assumes stabilization in core profits (NIM, fees) and benign credit costs. Absence of disclosed capital ratios (CET1) is a key limitation; if unrealized OCI gains were to reverse, capital headroom for dividends could tighten. Policy-wise, regional banks often target stable or gradually increasing dividends; near-term sustainability looks acceptable assuming no sharp credit deterioration.

Risk Assessment

Business Risks:

• Sustained NIM compression at 0.70% limits earnings capacity
• Profitability sensitivity to BOJ policy and deposit beta dynamics
• Regional economic concentration risk in the bank’s home market
• Fee income and non-interest diversification unknown due to data gaps

Financial Risks:

• High leverage (D/E 20.07x) magnifies shocks (though model-consistent for banks)
• Interest rate risk in the securities portfolio (OCI gains could reverse if yields rise)
• Potential credit cost normalization from low levels could pressure net income
• Liquidity risk if deposit competition intensifies, although current LDR (79.7%) is comfortable

Key Concerns:

• ROE/ROIC at 1.9% is below cost of equity, challenging capital efficiency
• Ordinary income -10.6% YoY despite revenue +16.8% points to negative operating leverage
• Earnings quality question: large OCI vs NI gap (57.78 vs 15.09)
• Lack of disclosure on capital ratios (CET1), OCF, and segment/non-interest income mix

Investment Implications

Key Takeaways:

• Top-line up 16.8% YoY but profits down (ordinary -10.6%, net -16.4%) indicates margin pressure
• NIM at 0.70% is the primary constraint on profitability
• Cost discipline strong with CIR 49.5%, offering some buffer
• LDR 79.7% supports liquidity and lending capacity without stretching funding
• ROE 1.9% highlights low capital efficiency relative to peers and cost of equity
• OCI-driven comprehensive income surge is non-recurring and volatile
• Dividend payout ratio 41.7% appears manageable if core earnings stabilize

Metrics to Watch:

• Net interest margin (quarterly trend and asset/deposit repricing)
• Credit costs (NPL ratio, provisioning) and their impact on ordinary income
• Cost-to-income ratio sustainability around ~50%
• Loan-to-deposit ratio and deposit mix/betas
• Securities portfolio duration/unrealized gains and rate sensitivity
• Capital adequacy (CET1 ratio) and leverage exposure
• Non-interest income share (fees) to diversify away from spread income

Relative Positioning: Within Japanese regional banks, Daiko Bank’s NIM of ~0.70% is on the low end, but operating efficiency (CIR ~49.5%) is comparatively solid; liquidity (LDR ~80%) is prudent, while overall returns (ROE ~1.9%) remain below sector aspirations, leaving the bank reliant on cost control and gradual spread recovery to close the gap.

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
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