The Minaminihon Bank, Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.10B
• Net Income: ¥1.44B
• EPS: ¥178.04

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: FY2026 Q2 was a mixed quarter with resilient bottom-line versus top-line softness and ordinary profit pressure, supported by a tax benefit and OCI gains. Revenue declined 4.8% YoY to 81.0, while ordinary income fell 30.0% YoY to 14.07, indicating weaker core profitability. Net income declined only 3.8% YoY to 14.55, aided by a negative effective tax rate of -5.1% (tax benefit of -0.71), which cushioned earnings. Ordinary income margin compressed sharply to 17.4% from roughly 23.6% a year ago, a contraction of about 620 bps. Conversely, net margin ticked up about 20 bps to 18.0% due to the tax effect despite lower revenue. Total comprehensive income surged to 28.33, exceeding net income by 13.78, implying sizable unrealized gains (likely on securities) flowing through OCI. Banking KPIs point to profitability headwinds: NIM at ~1.0% is below the healthy range, and the cost-to-income ratio at 60.2% is at the warning threshold for efficiency. Balance sheet scale reached total assets of 8,474.15 with equity of 431.76, implying high financial leverage of 19.6x, typical for banks but still a solvency watchpoint. Loan-to-deposit ratio stands at 75.5%, within the optimal range and supportive of liquidity. ROE was 3.4%, subdued versus many regional peers targeting mid-single-digit ROE, reflecting margin and efficiency drag. ROIC of 3.3% is below the 5% warning threshold, signaling modest capital productivity. EPS (basic) was 178.04 JPY on average shares of ~7.76 million, while BVPS is calculated at ~5,566 JPY. Dividend payout ratio is a modest 18.7%, suggesting room to maintain distributions; however, cash flow data are not disclosed, so FCF coverage cannot be verified. Earnings quality is mixed: net income was propped up by tax benefits, and comprehensive gains rely on market-driven OCI. Forward-looking, sustained recovery hinges on stabilizing margins (NIM), improving efficiency (CIR < 60%), and maintaining conservative credit costs while managing securities-related valuation volatility.

Profitability Analysis

DuPont decomposition: ROE (3.4%) = Net profit margin (18.0%) × Asset turnover (0.010) × Financial leverage (19.63x). The largest change driver this quarter versus last year is the ordinary profitability layer: ordinary income fell 30% YoY, compressing the ordinary income margin by ~620 bps (to 17.4% from ~23.6%), likely reflecting narrower spreads (NIM ~1.0%) and/or higher operating costs. Net margin resilience (up ~20 bps YoY) owes to a tax benefit (effective tax rate -5.1%), not core strength. Asset turnover remains structurally low for a bank (0.010), broadly stable, and leverage remains high by design (19.6x), little changed. Business reason: persistent margin compression amid low rate environment and deposit pricing inertia, alongside cost pressure keeping CIR at ~60%. Sustainability: tax benefits and OCI-driven boosts are non-core and not repeatable; without NIM improvement and/or cost control, ROE will likely remain in the low single digits. Concerning trends: revenue down 4.8% YoY while ordinary profit down 30% indicates negative operating leverage; with CIR breaching 60%, SG&A/overhead control needs attention even though SG&A detail is undisclosed. Overall, profitability quality leans toward non-core supports (tax/OCI) rather than underlying spread and fee income expansion.

Growth Assessment

Top-line declined 4.8% YoY to 81.0, signaling pressure on interest and/or fee-related income. Ordinary income fell 30.0% YoY to 14.07, a steeper decline than revenue, showing negative operating leverage. Net income decreased 3.8% YoY to 14.55, holding up better due to a tax benefit. Banking indicators suggest core headwinds: NIM at ~1.0% is below healthy levels, and CIR at 60.2% is just above the warning threshold. Loan-to-deposit ratio is 75.5%, indicating capacity to grow loans if risk-adjusted returns are adequate. The uplift in total comprehensive income (28.33) vs net income implies favorable securities valuation in OCI—beneficial short term but inherently volatile and not a growth driver. Outlook: absent a structurally higher rate environment or improved asset mix/fee growth, near-term revenue growth looks constrained. Profit growth will depend on cost discipline, maintaining benign credit costs, and managing securities portfolio duration/valuation risk. With ROE at 3.4% and ROIC at 3.3%, the earnings base needs margin and efficiency improvements to re-accelerate.

Financial Health

Leverage is high with D/E at 18.63x; while typical for banks, it exceeds the generic 2.0 threshold and warrants prudence. Liquidity appears adequate with deposits of 7,897.75 vs loans of 5,963.38 (LDR 75.5%), suggesting a stable funding surplus; however, detailed maturity buckets are undisclosed. Current and quick ratios are not meaningful for banks and are unreported. Equity stands at 431.76 against assets of 8,474.15, implying financial leverage of 19.63x and modest loss-absorption capacity typical of regional banks. No off-balance sheet obligations are disclosed in the provided data; contingent liabilities and guarantees, if any, are unknown. Maturity mismatch risk exists structurally (deposit-funded longer-term loans and securities), and with low NIM, sensitivity to interest rate shifts and deposit beta increases is a key consideration.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow are unreported, so OCF/Net Income and FCF cannot be assessed. Earnings quality signals are mixed via P&L and OCI: net income benefited from a negative effective tax rate (-5.1%), and total comprehensive income exceeded net income by 13.78, indicating significant unrealized securities gains—market-driven and potentially reversible. Without working capital detail (not as relevant for banks) or credit cost disclosure, we cannot assess potential earnings smoothing via provisions. In the absence of OCF and capex data, FCF sustainability for dividends cannot be quantitatively validated.

Dividend Sustainability

The calculated payout ratio is 18.7%, which is conservative and suggests headroom for maintenance under normal conditions. However, cash flow data (OCF/FCF) are not disclosed; thus, coverage cannot be confirmed. Capital adequacy ratios (e.g., CET1) are not provided, limiting assessment of regulatory capital headroom for distributions. Given low NIM and pressured ordinary profitability, dividend growth would likely depend on cost control and stable credit costs rather than revenue expansion. Policy-wise, regional banks often aim for stable dividends; current low payout aligns with that stance but remains contingent on market volatility in securities and funding cost trends.

Risk Assessment

Business Risks:

• Margin compression with NIM at ~1.0%, below healthy thresholds
• Negative operating leverage as ordinary income fell faster than revenue
• Reliance on securities-related OCI for comprehensive income
• Regional competitive pressures in lending and deposits

Financial Risks:

• High leverage (D/E 18.63x) inherent to the banking model
• Interest rate risk on the securities portfolio and loan book
• Potential deposit beta rise increasing funding costs
• Credit cost normalization risk from macro slowdown

Key Concerns:

• CIR at 60.2% at the efficiency warning threshold
• ROE at 3.4% and ROIC at 3.3% indicate weak capital productivity
• Tax benefit (effective rate -5.1%) boosted NI; non-recurring support
• Data gaps (no OCF, credit costs, capital ratios) constrain visibility

Investment Implications

Key Takeaways:

• Top-line down 4.8% YoY with ordinary profit down 30% signals core pressure
• Net profit resilience driven by tax benefit, not operating strength
• NIM at ~1.0% and CIR at 60.2% cap ROE at 3.4%
• Comprehensive income buoyed by OCI gains, inherently volatile
• Funding profile sound (LDR 75.5%) but leverage is high as typical for banks

Metrics to Watch:

• Net interest margin (trend toward >1.5%)
• Cost-to-income ratio (aim <60%)
• Credit costs/provisioning and NPL trends
• Securities valuation/OCI swings and duration risk
• Loan growth vs deposit beta and LDR stability
• Regulatory capital ratios (CET1, total capital) if disclosed

Relative Positioning: Within Japanese regional banks, Minami Nippon Bank shows weaker profitability metrics with sub-1.5% NIM, CIR around the warning threshold, and ROE at 3.4%—below peers targeting mid-single digits—offset by a sound LDR and conservative dividend payout.

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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