| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥435.0B | ¥378.1B | +15.0% |
| Operating Income | - | - | - |
| Ordinary Income | ¥-298.4B | ¥63.9B | +47.3% |
| Net Income | ¥-245.3B | ¥45.0B | +28.2% |
| ROE | -27.1% | 4.9% | - |
For FY2026 full year, Ordinary Revenue reached ¥435.0B (¥+56.9B YoY, +15.0%), achieving revenue growth, but the Bank posted an Ordinary Loss of ¥298.4B (prior year Ordinary Income ¥63.9B, YoY change -¥362.3B) and a Net Loss of ¥245.3B (prior year Net Income ¥45.0B, YoY change -¥290.3B) due to a sharp expansion in Other Operating Expenses including securities-related gains/losses. Interest income was ¥314.0B (+26.7%) and Fee Income was ¥72.6B (+6.3%), so core revenue remained robust. Conversely, interest expense surged to ¥46.7B (from ¥13.9B prior, +236%) and Other Operating Expenses ballooned to ¥371.5B (from ¥12.5B prior, +2,872%), nearly 30x, which was the primary driver of profit deterioration. Operating Cash Flow (OCF) was ¥13.9B (+108.7% YoY), Investment Cash Flow recorded an inflow of ¥1,148.8B driven by securities sales, and Free Cash Flow was strongly positive at ¥1,162.6B. Total assets were ¥2.42 trillion (+1.4% YoY), Net Assets were ¥905.4B (-0.7% YoY), and the Equity Ratio was 3.7%, roughly unchanged from the prior year but close to regulatory minimum levels.
[Revenue] Ordinary Revenue was ¥435.0B (+15.0% YoY), achieving double-digit growth. Interest income rose significantly to ¥314.0B (+26.7%), with loan interest contributing ¥240.5B (+20.1%) and securities interest ¥65.1B (+48.5%). Loan balance expanded steadily to ¥1.65 trillion (+2.5%), improving yields in a rising rate environment. Fee Income was ¥72.6B (+6.3%), and Other Operating Income was limited at ¥0.7B. Cost-to-Income Ratio (CIR) on an operating expense basis was 733.4B ÷ 435.0B = 168.6% (worsened from 83.1% prior), though this includes one-off Other Operating Expenses. SG&A was ¥213.1B (+4.1%), below Ordinary Revenue growth, indicating continued control of core costs.
[Profitability] Expansion of operating expenses led to a large deficit at the operating profit level. Interest expense jumped to ¥46.7B (from ¥13.9B prior, +236%), mainly driven by deposit interest of ¥44.0B (from ¥13.1B prior, +235%), reflecting higher funding costs in a rising rate environment. Fee-related expenses were ¥39.6B (-0.8%), essentially flat. Other Operating Expenses reached an abnormal level of ¥371.5B (from ¥12.5B prior, +2,872%), likely driven by deterioration in securities-related gains/losses (impairment losses and realized losses), which directly hit profitability. SG&A of ¥213.1B (+4.1%) rose below revenue growth, showing progress in managing personnel and occupancy costs. Against an Ordinary Loss of ¥298.4B, Non-recurring Gains were ¥16.9B (gain on disposal of fixed assets) and Non-recurring Losses were ¥3.1B (including impairment losses of ¥2.9B), so the impact from extraordinary items was limited. Pre-tax loss was ¥284.5B, and Income Taxes were -¥39.7B (tax benefit recognized), resulting in a Net Loss of ¥245.3B. In conclusion, the Bank experienced revenue growth but turned to large losses.
[Profitability] ROE fell sharply to -27.1% (prior +4.3%), driven primarily by Net Margin of -56.4% (down 68.3pt from prior +11.9%). ROA (based on Ordinary Income) was -1.2% (prior +0.2%), with the surge in Other Operating Expenses eroding all profitability metrics. Expense ratio on an operating expense basis was 168.6%, but using SG&A of ¥213.1B as the basis, expense-to-revenue is 49.0%, indicating maintained efficiency on core costs. [Cash Quality] With OCF of ¥13.9B versus Net Loss of ¥245.3B, OCF/Net Income is -0.06x, indicating very weak cash conversion. Free Cash Flow of ¥1,162.6B depended on Investment CF inflows (+¥1,148.8B) from securities sales and presents sustainability concerns. [Investment Efficiency] Capex was ¥18.2B and depreciation ¥22.7B, with CAPEX/Depreciation at 0.80x, reflecting a conservative investment stance. Securities holdings were compressed to ¥4,113B (from ¥5,350B prior, -23.1%), significantly reducing the portfolio and strengthening market risk resilience. [Financial Soundness] Equity Ratio was 3.7% (same level as prior), close to regulatory floors (domestic benchmark ~4%), offering little capital buffer. D/E ratio remained highly leveraged at 25.69x (prior 25.35x). Loan-to-deposit ratio was about 75.8% (Loans ¥1.65 trillion ÷ Deposits ¥2.17 trillion), showing solid liquidity, but Retained Earnings fell sharply to ¥326.4B (from ¥592.4B prior, -44.9%), indicating substantial erosion of internal reserves.
OCF was ¥13.9B (+108.7% YoY); against pre-tax loss of ¥284.5B, add-backs include depreciation of ¥22.7B, bringing pre-working-capital OCF subtotal to ¥19.6B, and corporate tax payments of ¥5.8B. OCF/Net Income is -0.06x, showing weak cash backing for losses of ¥245.3B. Investment CF recorded a large inflow of ¥1,148.8B as securities holdings were reduced by ¥1,237.3B YoY (-23.1%), monetizing the portfolio. Acquisition of tangible fixed assets was ¥18.2B, proceeds from disposals were ¥22.5B, and intangible asset additions were ¥5.2B, indicating conservative capex. Financing CF was -¥23.0B, mainly from ¥10.0B share buybacks and ¥12.9B dividend payments. Free Cash Flow was a very healthy ¥1,162.6B, but the source was one-off liquidation of the securities portfolio, so sustainable cash-generation depends on core revenue recovery. Cash and cash equivalents rose sharply to ¥2,810.4B (from ¥1,670.8B prior, +68.2%), substantially strengthening the liquidity buffer.
The primary cause of the Ordinary Loss of ¥298.4B was the sharp expansion of Other Operating Expenses to ¥371.5B (from ¥12.5B), centered on deterioration in securities-related gains/losses. Extraordinary items were limited: Non-recurring Gains ¥16.9B (gain on disposal of fixed assets) and Non-recurring Losses ¥3.1B (including impairment of ¥2.9B). Income Taxes were -¥39.7B (prior +¥16.3B), with tax benefit recognized, and Deferred Tax Assets increased to ¥62.7B (from ¥29.2B prior, +115%), reflecting recognition of future deductible temporary differences associated with loss carryforwards. Comprehensive income was ¥16.2B (despite Net Loss of ¥245.3B, a net positive contribution of ¥261.5B), driven by Other Securities Valuation Differences of ¥239.8B (prior -¥132.3B) and Remeasurements of Retirement Benefits of ¥21.1B (prior -¥7.3B); these valuation items improved from a mark-to-market recovery but do not substitute for operating profits. Given OCF falls well short of Net Loss (OCF/Net Income -0.06x), accrual dependence is high and earnings quality is fragile. That the main driver of Ordinary Income volatility stems from market-related gains/losses raises concerns about the stability and sustainability of earnings.
The full-year forecast had assumed Ordinary Income of ¥50.0B and Net Income of ¥55.0B, but actuals were an Ordinary Loss of ¥298.4B and Net Loss of ¥245.3B, a substantial miss. Achievement rate vs forecast for Ordinary Income was approximately -597% and for Net Income approximately -445%, driven by an unexpected surge in Other Operating Expenses (deterioration in securities-related gains/losses) and a large increase in interest expense (higher funding costs). Year-on-year, the plan had assumed reductions (Ordinary Income +47.3% from ¥63.9B prior → ¥50.0B forecast; Net Income +28.2% from ¥45.0B prior → ¥55.0B forecast), but the actual deterioration to losses indicates that forecast assumptions (stable market environment, maintained spreads) broke down. Next fiscal year, normalization of earnings will hinge on realized effects from compressed securities portfolio and monetization, improved loan yields in a higher-rate environment, and continued CIR improvement.
Year-end dividend was ¥35.0, total dividend payouts were ¥12.9B. Given a Net Loss of ¥245.3B, the Payout Ratio is effectively meaningless; dividends were paid out of Retained Earnings of ¥326.4B (down -44.9% YoY). Prior year Payout Ratio was 28.6%, but continuation of dividends in a loss-making year further depleted internal reserves. Share buybacks of ¥10.0B were conducted, bringing total returns to ¥22.9B. Relative to Free Cash Flow of ¥1,162.6B, the dividend payout ratio is 1.1% and Total Return Ratio is 2.0%, which superficially indicates room, but because FCF was driven by one-off securities sales, comparisons with sustainable cash-generation capacity warrant caution. With an Equity Ratio of 3.7% and minimal capital buffer, dividend policy going forward should be flexibly revised in line with capital replenishment and profit recovery. Until profits recover and retained earnings rebuild, it is desirable to operate with conservative policy including dividend cuts or suspension.
Interest rate risk (IRRBB): Interest expense surged +236% YoY, with deposit interest expanding to ¥44.0B (from ¥13.1B prior). In a rising rate environment, funding costs rose faster than loan yields, compressing spreads. The rapid expansion of Other Operating Expenses to ¥371.5B (from ¥12.5B prior) appears mainly due to valuation losses and realized losses associated with a lengthened duration of held securities, indicating weaknesses in ALM effectiveness. Although securities holdings were reduced YoY by -23.1%, the remaining portfolio ¥4,113B still carries high embedded interest-rate sensitivity.
Fragility of capital buffer: Equity Ratio of 3.7% is near the regulatory floor (domestic benchmark ~4%), and the Net Loss of ¥245.3B caused Retained Earnings to fall to ¥326.4B (down -44.9% YoY). With D/E of 25.69x and high leverage, capacity to absorb additional losses or stress scenarios is limited. Continuing dividends (¥12.9B) and share buybacks (¥10.0B) while in a loss position trade off capital preservation versus capital efficiency; an urgent pivot to capital accumulation as the top priority in capital policy is required.
Quality and sustainability of earnings: The Ordinary Loss was driven by Other Operating Expenses (market-related gains/losses), indicating that earnings volatility originates from market risk rather than core costs. With OCF ¥13.9B versus Net Loss ¥245.3B (OCF/Net Income -0.06x), cash backing of profits is extremely weak. Free Cash Flow of ¥1,162.6B depends on one-off securities sales, and sustainable cash-generation is unconfirmed. While interest income +26.7% and Fee Income +6.3% show expansion in core revenues, until Other Operating Expenses normalize, questions remain over earnings quality and repeatability.
Profitability / Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Margin | -56.4% | 11.9% (7.2%–35.4%) | -68.3pt |
| Net Margin is 68.3pt below the median, ranking at the bottom in the industry. The surge in Other Operating Expenses has substantially damaged profitability. |
Growth / Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 15.0% | 10.1% (7.3%–12.1%) | +4.9pt |
| Revenue growth exceeds the median by 4.9pt, ranking the Bank in the upper tier of the industry, driven by expanding interest income in a rising rate environment. |
※ Source: Company aggregation
Progress in securities portfolio compression and liquidity strengthening: Securities holdings were reduced by ¥1,237.3B YoY (-23.1%) and Cash & Deposits increased by ¥1,139.6B (+68.2%), substantially strengthening market risk resilience and the liquidity buffer. The large Investment CF inflow (+¥1,148.8B) is one-off, but the direction—monetization in response to rising rates—is constructive for IRRBB management. Going forward, shortening duration of the remaining ¥4,113B portfolio and stabilizing unrealized P/L will be focal points.
Resilience of core revenue and continued efficiency gains: Interest income +26.7% and Fee Income +6.3% show solid core revenue trends, with loan balances +2.5% and deposit balances +0.7% sustaining balance sheet growth for a regional bank. SG&A of ¥213.1B (+4.1%) rose below Ordinary Revenue growth of +15.0%, indicating functioning core cost control. SG&A-based expense ratio is 49.0%, an efficient level, and normalization of Other Operating Expenses would leave substantial room for profitability improvement. Improving loan yields in a rising rate environment and continued CIR reduction are keys to profit recovery in subsequent periods.
Capital policy and dividend sustainability: With Equity Ratio 3.7%, D/E 25.69x, and Retained Earnings ¥326.4B (down -44.9% YoY), the capital buffer is fragile. Continuing dividends (¥12.9B) and share buybacks (¥10.0B) during a loss-making period further drain internal reserves. Going forward, until Equity Ratio stabilizes above regulatory minimums (4%+) and ideally targets 7%+ through profit recovery, dividend policy must be flexibly reviewed including dividend cuts or suspension. Balancing capital replenishment and shareholder returns will be the watershed for future valuation.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from published financial statements. Investment decisions are your responsibility; please consult advisors as needed before acting.