The Keiyo Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥49.66B
• Net Income: ¥9.11B
• EPS: ¥75.59

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

FY2026 Q2 was solid but mixed for Keiyo Bank: profit grew double-digit while profitability ratios compressed amid a very low-rate environment. Revenue rose 25.4% YoY to 496.6, supported by stronger interest-related income (interest income 331.5 vs interest expense 60.8) and disciplined costs (CIR 41.1%). Ordinary income increased 11.1% YoY to 132.2, and net income grew 10.6% YoY to 91.6. Net profit margin stood at 18.4%, down about 250 bps YoY (from roughly 20.9% to 18.4%), implying operating deleverage despite top-line growth. NIM was 0.6%—well below the 1.5% warning threshold—highlighting rate pressure and intense competition in a regional banking market. ROE calculated at 2.8% remains subdued for equity efficiency, consistent with a high balance sheet leverage model. Asset turnover was 0.008, typical for banks given large balance sheets, and financial leverage was 20.2x. Total comprehensive income reached 174.0, materially exceeding net income, suggesting favorable valuation changes (e.g., available-for-sale securities) recognized in OCI. The effective tax rate was 29.9%, broadly in line with statutory norms. Balance sheet scale remained large with assets at 66,019.0 and equity at 3,261.8, implying an equity-to-asset ratio of about 4.9%. Funding profile appears sound with deposits of 55,824.7 and an LDR of 79.6%, within a healthy 70–90% range. The cost base remains controlled as indicated by a low CIR of 41.1%, a competitive strength versus peers. Despite limited disclosure on operating cash flow, earnings are primarily spread-driven and fee-based, with OCI adding non-cash upside this quarter. Dividend affordability looks reasonable with a 43% payout ratio, though capital metrics (not disclosed) remain key to longer-term distributions. Looking forward, earnings sensitivity to interest rates and credit costs remains high; upside could come from even modest NIM normalization or fee growth, while downside risks include credit cycle turns and securities valuation volatility. Overall, results show healthy growth with margin compression and structurally low NIM, reinforcing a stable but rate-sensitive earnings profile.

Profitability Analysis

ROE decomposition: ROE (2.8%) = Net profit margin (18.4%) × Asset turnover (0.008) × Financial leverage (20.24x). The most notable change YoY is net margin compression: with revenue up 25.4% and net income up 10.6%, implied NPM fell by about 250 bps (from ~20.9% to 18.4%), outweighing any modest changes in leverage or turnover. Business drivers: a very low NIM at 0.6% skews earnings toward volume and securities/fees rather than spread; while revenue grew, funding costs likely ticked up and mix effects (e.g., securities gains not fully passed to bottom line) limited margin retention. Financial leverage is broadly stable for a regional bank model, and asset turnover is structurally low given the large balance sheet. Sustainability: margin pressure is likely to persist absent rate normalization; cost discipline (CIR 41.1%) provides a partial offset and is a sustainable tailwind. Watch for any acceleration in SG&A (not disclosed) or credit costs (not disclosed) rising faster than revenue; with revenue growth outpacing net income, operating leverage was negative this quarter.

Growth Assessment

Top-line growth was robust at +25.4% YoY to 496.6, supported by higher interest income (331.5) and controlled costs. Ordinary income and net income grew +11.1% and +10.6%, respectively, indicating revenue quality tilted toward lower-margin components and/or higher expenses below revenue. NIM at 0.6% underlines structural headwinds; sustainability of revenue growth will depend on loan volume, fee income, and securities-related gains rather than spread expansion. Total comprehensive income at 174.0 suggests mark-to-market tailwinds in the securities book this period; those are inherently volatile and not fully recurring. Outlook hinges on: (1) BOJ policy normalization path influencing asset yields and deposit betas, (2) credit quality as the cycle matures, and (3) fee growth from settlement, asset management, and solutions businesses. Near term, expect steady but rate-sensitive earnings with low-single-digit ROE unless NIM or fee mix improves.

Financial Health

Leverage is high with a reported D/E of 19.24x; this is typical for banks but still warrants monitoring per risk limits. Equity/asset is about 4.9% (3,261.8 / 66,019.0), consistent with regional bank capitalization, though regulatory capital ratios are not disclosed. Liquidity profile appears sound: deposits of 55,824.7 comfortably fund loans of 44,431.9, with LDR at 79.6% (optimal 70–90%). No maturity mismatch details are disclosed, but the deposit-funded model and LDR suggest manageable liquidity risk. Current and quick ratios are not meaningful for banks and are unreported. No off-balance sheet obligations (e.g., guarantees, securitizations) are disclosed in the provided data; absence of data does not imply absence of risk.

Cash Flow Quality

Operating cash flow data is not disclosed; OCF/Net Income is therefore not calculable, limiting direct earnings quality assessment. Free cash flow is unreported; for banks, cash flow quality is better inferred from core earnings drivers (NIM, CIR, credit costs) and funding stability. This quarter’s earnings show strong cost efficiency (CIR 41.1%) but extremely low NIM (0.6%), implying sensitivity to funding cost increases. Working capital ‘manipulation’ concepts are less applicable for banks; instead, watch for loan growth funded by higher-cost deposits or wholesale funding. The large gap between total comprehensive income (174.0) and net income (91.6) indicates valuation gains recognized in OCI; these are non-cash and reversible.

Dividend Sustainability

The calculated payout ratio is 43.0%, within a prudent range (<60%) and consistent with regional bank policies. With net income at 91.6, earnings coverage of dividends appears adequate, though FCF coverage cannot be assessed due to missing cash flow data. Capital adequacy (e.g., CET1 ratio) is not disclosed; dividend sustainability ultimately hinges on regulatory capital headroom and unrealized securities gains volatility. Given low ROE (2.8%) and low NIM, dividend growth will likely track earnings conservatively unless capital buffers materially improve.

Risk Assessment

Business Risks:

• Sustained low NIM at 0.6% compresses core profitability and heightens sensitivity to deposit betas.
• Revenue mix reliance on securities and OCI valuations introduces earnings volatility.
• Regional economic concentration risk affecting loan demand and fee income.

Financial Risks:

• High balance sheet leverage (D/E 19.24x), typical for banks but amplifies shocks.
• Interest rate risk: mark-to-market on securities could reverse if yields rise.
• Credit cost normalization risk as the credit cycle matures (data not disclosed).
• Funding cost pressure if deposit competition intensifies.

Key Concerns:

• Margin compression: implied NPM down ~250 bps YoY despite strong revenue growth.
• Very low NIM (0.6%) below the 1.5% warning line.
• Dependence on OCI gains (total comprehensive income 174.0 vs net income 91.6).
• Lack of disclosure on capital ratios and cash flows limits visibility.

Investment Implications

Key Takeaways:

• Solid profit growth (NI +10.6% YoY) with strong revenue (+25.4%) but weaker margins.
• CIR of 41.1% demonstrates good cost discipline relative to peers.
• NIM at 0.6% constrains ROE (2.8%); earnings remain highly rate-sensitive.
• Funding/liquidity sound with LDR at 79.6%.
• OCI contributed significantly to total comprehensive income, adding volatility.

Metrics to Watch:

• NIM trajectory and deposit beta as BOJ policy evolves.
• Credit costs/NPAs (not disclosed) for signs of normalization.
• CIR/operating expenses to preserve efficiency amid margin pressure.
• Securities portfolio duration/OCI sensitivity to rate moves.
• Capital adequacy ratios (CET1/Total capital) and unrealized gains buffer.
• Loan growth vs deposit growth to maintain LDR within 70–90%.

Relative Positioning: Among regional banks, Keiyo Bank shows strong cost efficiency (low CIR) and healthy LDR, but profitability is constrained by very low NIM and low ROE; performance will be leveraged to even modest rate normalization and disciplined credit costs.

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