The Ehime Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥33.24B
• Net Income: ¥2.46B
• EPS: ¥68.90

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 earnings acceleration with disciplined cost control, but structurally thin margins and low capital efficiency keep returns muted. Revenue rose 6.0% YoY to 332.42 (100M JPY), while ordinary income increased 14.8% YoY to 39.39 and net income climbed 19.9% YoY to 26.91. The ordinary income margin stands at 11.9% and the net margin at 8.1%, showcasing improved operating leverage versus top line growth, though prior-period margins are not disclosed to quantify basis-point expansion. Banking efficiency is a relative strength: the cost-to-income ratio is a lean 39.9% (well below the 50% benchmark). Profitability from core intermediation remains constrained, with NIM at 0.9% (below the 1.5% warning threshold), implying limited pricing power or high deposit betas. Asset efficiency is very low (asset turnover 0.011), and leverage is structurally high (D/E 19.94x) as typical for banks, culminating in a modest ROE of 1.9%. The effective tax rate is 31.0%, consistent with standard ranges. Liquidity appears prudent with an LDR of 76.9% (optimal 70–90%), suggesting stable funding and room to lend. Earnings quality cannot be fully assessed due to unreported operating cash flow and credit cost details. Comprehensive income of 77.79 materially exceeds net income, likely reflecting valuation gains on securities, which are volatile and non-cash. Dividend affordability looks reasonable with a payout ratio of 49.8%, but FCF coverage cannot be verified. Balance sheet equity totals 1,428.53 (100M JPY), with retained earnings at 974.24, supporting capital accumulation. For a regional bank footprint, demographic headwinds and NIM pressure remain key structural constraints. Forward-looking, sustaining low CIR and managing deposit pricing while modestly expanding fee income will be critical to raise ROE. Monitoring credit cost normalization and unrealized securities gains/losses is essential as rate environments shift.

Profitability Analysis

ROE decomposition: Net profit margin (8.1%) × Asset turnover (0.011) × Financial leverage (20.94x) = ~1.9% ROE (matches reported). The weakest link is asset turnover, which is characteristic of banking balance sheets but underscores low capital efficiency. The net margin improved alongside revenue (+6.0%) and ordinary income (+14.8%), implying positive operating leverage; however, exact basis-point margin expansion versus last year is not quantifiable due to missing prior margins. The business driver mix likely includes strict cost discipline (CIR 39.9%) offsetting a structurally thin NIM of 0.9%. Sustainability: cost efficiency appears durable given the low CIR, but margin expansion is constrained by competitive deposit markets and rate sensitivity. Watch for any SG&A growth outpacing revenue; detailed SG&A was unreported, but the CIR suggests expenses remained well controlled in the period.

Growth Assessment

Top line growth of 6.0% YoY indicates steady intermediation volume and/or fee income resilience despite a low NIM backdrop. Profit growth outpaced revenue (ordinary income +14.8%, net income +19.9%), reflecting operating leverage and likely benign credit costs in the half. Recurrence: core profitability remains dependent on low-cost funding and stable asset yields; the NIM at 0.9% implies growth may hinge more on volumes and fees than spread improvement. Comprehensive income strength (77.79) suggests sizable valuation tailwinds in securities; these are non-recurring and volatile. Outlook: modest loan growth (LDR 76.9% provides capacity), disciplined costs, and careful ALM (managing duration risk) can sustain earnings, but ROE uplift requires either higher NIM, stronger fee income, or optimized capital. Any normalization of credit costs from current benign levels would temper earnings growth.

Financial Health

Leverage is high with D/E at 19.94x; this is standard for banks given deposit-funded models but still merits prudence. Current and quick ratios are unreported; for banks, deposit stability and LDR are more relevant. The LDR at 76.9% indicates no immediate maturity mismatch stress and healthy liquidity buffers. Total equity is 1,428.53 (100M JPY) versus assets of 29,909.35, implying an equity-to-asset ratio of ~4.8%, typical for regional banks. No explicit off-balance sheet obligations were disclosed; contingent liabilities (guarantees, commitments) are common in banking but unreported here. Explicit warning per policy: D/E > 2.0. Capital adequacy (e.g., CET1) was not provided; inability to assess regulatory capital headroom is a limitation.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow are unreported, so OCF/Net Income and FCF cannot be calculated. Consequently, we cannot test the OCF/Net Income quality threshold of 0.8 or assess dividend coverage by FCF. Working capital dynamics for banks are driven by deposits and loans; with LDR at 76.9%, funding looks stable, but without cash flow data and credit cost disclosure, we cannot rule out timing effects or one-off items. Comprehensive income substantially exceeding net income indicates securities valuation gains; these improve equity but do not enhance cash earnings quality.

Dividend Sustainability

The payout ratio is 49.8%, below the 60% benchmark, suggesting headline sustainability. DPS and total dividends were unreported, and FCF coverage cannot be verified. With ROE at 1.9% and NIM at 0.9%, internal capital generation is modest; sustaining the payout likely depends on continued cost discipline, stable credit costs, and limited risk asset growth. Absent regulatory capital metrics, we assume no immediate constraints, but market value fluctuations in AFS portfolios could affect distributable capacity via capital buffers.

Risk Assessment

Business Risks:

• Structural NIM pressure at 0.9%, indicating limited pricing power and sensitivity to deposit betas.
• Regional demographic headwinds (Ehime/Shikoku) potentially suppressing loan demand and fee growth.
• Fee income concentration risk if reliance on traditional lending persists.
• Affiliate/other income volatility if securities-related gains are significant (as implied by comprehensive income).

Financial Risks:

• Interest rate risk in the banking book (ALM duration mismatch affecting OCI and capital).
• Credit cost normalization from currently benign levels could compress earnings leverage.
• High leverage (D/E 19.94x) inherent to banking magnifies shocks to asset quality and funding costs.
• Liquidity risk if deposit competition intensifies; mitigated currently by LDR at 76.9%.

Key Concerns:

• NIM below 1.5% benchmark; profitability relies on volume and cost control rather than spreads.
• ROE at 1.9% and ROIC at 1.9% signal low capital efficiency vs. cost of equity.
• Earnings quality opacity due to absent cash flow data and unreported credit cost details.
• Reliance on OCI from securities for comprehensive income; subject to market rate volatility.

Investment Implications

Key Takeaways:

• PBT/ordinary income up strongly (+14.8% YoY) on 6.0% revenue growth, indicating operating leverage.
• Net income +19.9% YoY with a net margin of 8.1%; cost base is well managed (CIR 39.9%).
• Core spread profitability is weak (NIM 0.9%), limiting ROE to 1.9%.
• Liquidity sound (LDR 76.9%), providing lending capacity without stressing funding.
• Comprehensive income strength suggests securities gains; not a recurring earnings driver.

Metrics to Watch:

• Net interest margin (trend and deposit beta behavior).
• Credit costs/loan loss provisions and NPL ratio (not disclosed).
• Fee and commission income growth to diversify earnings.
• Cost-to-income ratio sustainability and headcount/IT spend trajectory.
• Capital adequacy (CET1 ratio, unrealized securities gains/losses in OCI).
• Duration gap and AFS portfolio sensitivity to rate moves.
• Loan growth vs. deposit growth and LDR trajectory.

Relative Positioning: Versus Japanese regional bank peers, Ehime Bank exhibits strong cost efficiency (CIR well below 50%) and prudent funding (LDR ~77%), but underperforms on core profitability metrics (NIM 0.9%, ROE 1.9%). The franchise appears stable yet return-dilutive absent improved spreads, fee diversification, or optimized capital.

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