The Kita-Nippon Bank,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Income: ¥2.09B
• EPS: ¥252.41

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

Kita-Nihon Bank (TSE: 8551) reported FY2026 Q2 consolidated results under JGAAP with ordinary income and operating income both at ¥3.09bn, indicating a relatively clean quarter with limited contribution from non-operating items. Net income came in at ¥2.10bn, down 7.5% YoY, suggesting some pressure versus the prior year despite stable pre-tax profit levels. Using period-end equity of ¥91.3bn, the half-year ROE is roughly 2.3% (annualized ~4.6%), modest for a regional bank but broadly consistent with sector norms in a low-rate environment. Total assets stood at ¥1.54tn and total liabilities at ¥1.44tn, implying book equity/assets of about 5.9% at period-end; leverage is high as typical for banks, with debt-to-equity near 15.8x. The reported effective tax expense was ¥0.65bn, implying an effective tax rate near 23.8% for the half-year, a reasonable level and a potential factor behind the YoY decline in net income. EPS was ¥252.41, which back-solves to roughly 8.31 million average shares outstanding; this provides a basis to assess per-share trends despite share count not being disclosed in the feed. Cash flow statements and several line items (revenue, D&A, interest expense, current assets/liabilities, and cash) were unreported in the XBRL, which is common for banks and should not be interpreted as zeros. As a bank, traditional manufacturing-style ratios (gross margin, current ratio, quick ratio) are not informative; focus should be on net interest margin, fee income, securities gains/losses, and credit costs, none of which were disclosed here. Ordinary income equaling operating income suggests limited securities-related or one-off gains/losses in this period, but we cannot conclusively assess the mix without detailed notes. The balance sheet size of ¥1.54tn places the bank among smaller regional peers, where profitability is typically constrained by competition, low loan yields, and demographic headwinds in local markets. The YoY net income decline points to either higher credit costs, a less favorable securities result, or a higher effective tax rate; the data available directly supports tax being a partial factor, but the other drivers remain unconfirmed. ROA approximates 0.14% for the half-year (annualized 0.27%), consistent with regional bank norms but leaving limited buffer for shocks. Capitalization by book equity appears adequate for a regional bank, though regulatory capital ratios (CET1/total capital) were not disclosed and remain a key data gap. With dividends not disclosed, we cannot evaluate payout trends; however, earnings capacity (¥4.2bn annualized on a simple run-rate) suggests room for distributions if credit costs remain benign. Overall, earnings quality looks stable on headline ordinary income, but visibility is limited given unreported cash flow data and lack of detail on credit costs, NIM, and securities positions. The outlook hinges on credit provisioning trends and the interest rate environment, both of which can materially swing second-half results for a regional bank.

Profitability Analysis

ROE_decomposition: Using a banking-adapted lens: Net income (H1) ¥2.10bn on period-end equity ¥91.30bn implies ROE of ~2.3% for H1; annualized ~4.6%. Asset-side profitability: NI/Assets ~0.14% for H1; annualized ROA ~0.27%. Financial leverage is high at ~16.9x (Assets/Equity), consistent with the sector. Classic DuPont components (net margin, asset turnover) based on 'revenue' are not meaningful for banks given unreported revenue and the nature of interest income. margin_quality: Ordinary income equals operating income (¥3.09bn), indicating limited non-operating items this quarter. Effective tax rate is ~23.8% (¥654m tax on pre-tax income of ~¥2.75bn), within a normal range and possibly higher YoY if contributing to the -7.5% NI decline. Without NIM, fee income, and securities P&L disclosures, the stability/resilience of core margins cannot be fully assessed. operating_leverage: Insufficient data on operating expenses and gross revenues to quantify operating leverage. However, given stable ordinary vs operating income, non-core volatility appears low this quarter. For a regional bank, operating leverage typically depends on scale benefits versus wage and IT costs; this remains an analytical gap pending disclosure of OHR (cost-to-income).

Growth Assessment

revenue_sustainability: Top-line constructs (interest income, fees) are not disclosed; therefore, we cannot quantify revenue growth or NIM trajectory. Asset base at ¥1.54tn suggests a stable franchise scale; sustainability hinges on loan growth in the core region and deposit cost management. profit_quality: Net income declined 7.5% YoY to ¥2.10bn despite steady ordinary income, implying either higher taxes, elevated credit costs, or lower below-the-line gains versus last year. The close match between operating and ordinary income indicates limited reliance on non-operating gains this period, a positive for quality, but lack of credit cost detail is a key missing piece. outlook: Assuming a steady macro and rates backdrop, annualized NI run-rate is ~¥4.2bn; risks include credit cost normalization and securities valuation volatility if yields move. Upside could come from loan spread improvement or fee growth; downside from regional economic softness and competition compressing NIM.

Financial Health

liquidity: Bank-specific liquidity (LCR/NSFR) not disclosed. Deposits and interbank funding are embedded within liabilities (¥1.44tn), but the mix is unknown. Traditional current/quick ratios are not applicable for banks. solvency: Book equity/asset ratio approximates 5.9% (¥91.30bn / ¥1.54tn). Debt-to-equity at ~15.8x aligns with regional bank norms. Regulatory capital ratios (CET1/total capital) and risk-weighted assets were not disclosed, limiting solvency assessment on a regulatory basis. capital_structure: High leverage typical for banks; balance sheet growth capacity constrained by capital. No data on hybrid capital, subordinated debt, or unrealized gains/losses on securities, which can materially affect tangible capital.

Cash Flow Quality

earnings_quality: Operating, investing, and financing cash flows were not reported in the feed, which is common for financial institutions and should not be interpreted as zero. As such, OCF/NI and FCF cannot be assessed. FCF_analysis: Free cash flow metrics are not meaningful for banks in the same way as for non-financials; loan/deposit flows and securities repositioning drive cash movements. With no CF statement, we cannot evaluate cash generation or uses. working_capital: Working capital metrics are not applicable for banks; liquidity is better assessed via deposit stability and regulatory liquidity ratios, both undisclosed.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio were unreported. Based on H1 EPS of ¥252.41 (annualized ~¥505), payout capacity would depend on credit costs and capital plans. Without DPS history or policy guidance, we cannot quantify coverage. FCF_coverage: FCF coverage not calculable due to unreported cash flows and the limited relevance of FCF for banks. policy_outlook: Regional banks often target stable or gradually rising dividends tied to earnings stability and capital adequacy. Continuation would hinge on maintaining ROA/ROE and meeting regulatory capital buffers; absent CET1 data, visibility is low.

Risk Assessment

Business Risks:

• Net interest margin compression from competition and deposit beta increases
• Regional economic weakness leading to slower loan demand
• Demographic headwinds in the home market reducing credit growth
• Fee income softness if customer activity declines
• Operational and IT modernization costs pressuring efficiency

Financial Risks:

• Credit cost normalization or spikes in NPLs affecting earnings
• Securities portfolio valuation losses amid rate volatility
• Capital ratio pressure without access to external capital at favorable terms
• Interest rate risk from asset-liability duration mismatches
• Liquidity stress if deposit outflows rise (LCR/NSFR undisclosed)

Key Concerns:

• YoY net income decline of 7.5% despite stable ordinary income
• Lack of disclosure on credit costs and securities gains/losses
• Absence of regulatory capital metrics (CET1/total capital)
• Unreported cash flow statements limiting earnings quality assessment

Investment Implications

Key Takeaways:

• H1 net income of ¥2.10bn implies annualized ROE of ~4.6%, in line with regional bank averages but below cost of equity for many investors
• Book equity to assets near 5.9% indicates moderate capitalization on a book basis; regulatory ratios remain a blind spot
• Ordinary income equals operating income, suggesting limited non-core distortions in the quarter
• Earnings declined YoY, likely influenced by taxes and possibly credit or securities factors, though details are not disclosed
• Data gaps (cash flow, DPS, NIM, credit costs) constrain conviction on trend sustainability

Metrics to Watch:

• Net interest margin and loan-deposit spread
• Credit costs/provisioning and NPL ratio
• Securities portfolio duration and unrealized gains/losses (OCI)
• Cost-to-income ratio (operating efficiency)
• Loan growth, deposit mix, and deposit beta
• Regulatory capital ratios (CET1, total capital) and leverage ratio
• Guidance on dividends and capital policy

Relative Positioning: A smaller regional bank (~¥1.5tn assets) with modest profitability (annualized ROA ~0.27%, ROE ~4.6%), typical leverage, and adequate book capitalization; competitiveness and resilience hinge on NIM management, credit discipline, and securities risk control relative to regional peers.

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