The Howa Bank, Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Income: ¥408M
• EPS: ¥62.27

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

株式会社豊和銀行 (8559) reported FY2026 Q2 standalone (JGAAP) results characterized by stable core profitability at the operating/ordinary income line (639 million yen) but a sharp contraction in bottom-line profit, with net income of 408 million yen declining 54% YoY. The reporting template shows many zeros due to non-disclosure in XBRL for bank-specific items (e.g., revenue, gross profit, EBITDA), so the analysis focuses on the available banking-relevant metrics. Ordinary income of 639 million yen and net income of 408 million yen imply either elevated non-operating/extraordinary costs, higher credit costs, or valuation losses versus the prior year, given the large YoY decline in net. The reported income tax of 74 million yen suggests pre-tax income around 482 million yen, which is below ordinary income, indicating probable extraordinary losses or adjustments in the quarter. Financial leverage is high at 21.54x (assets/equity), consistent with a regional bank balance sheet structure, while the stated debt-to-equity ratio of 20.50x is also in line with sector norms. Total assets were 594.2 billion yen and total equity 27.6 billion yen, indicating small-to-mid scale within Japan’s regional bank universe. Based on half-year net income and period-end equity, a simple (non-annualized) ROE proxy is about 1.5%; annualized, this implies roughly 3% ROE, which is subdued versus many peers targeting higher mid-single-digit ROE. The decline in net income despite stable operating/ordinary income suggests either weaker securities-related results, higher credit costs, or one-off extraordinary items; the data provided do not disclose which. Liquidity metrics like current and quick ratios are not meaningful for banks and appear as zero due to non-reporting. The equity ratio is also shown as 0.0% due to the same limitation; instead, leverage and net assets provide better context. Cash flow data (OCF/ICF/FCF) are undisclosed and therefore cannot be used to assess earnings quality; for banks, OCF-based quality screens are less diagnostic than credit cost trends and core operating metrics. Dividend fields show zero (likely not disclosed for the interim period), so payout assessment must rely on historical policy rather than this dataset. The Bank’s capital position cannot be assessed from CET1 or capital adequacy ratios here due to lack of disclosure; however, the leverage level appears typical for a regional bank. Overall, the print points to resilient core earnings but weaker bottom-line due to non-core headwinds or credit costs, and the limited disclosures constrain a full DuPont and cash flow quality analysis. Investors should focus on credit cost guidance, securities portfolio sensitivity, and fee income trajectory to gauge the sustainability of earnings into 2H. Data limitations are material; conclusions are based only on the non-zero items provided and standard banking analysis conventions.

Profitability Analysis

ROE decomposition is constrained by the absence of revenue and net sales-based ratios. Using available data: financial leverage is 21.54x (Assets/Equity = 594,215/27,587), and a simple half-year net income return on equity proxy is ~1.48% (408/27,587), implying ~3.0% annualized ROE assuming seasonality is limited. Net margin and asset turnover in the provided DuPont table show 0.00 due to non-disclosure; for banks, the relevant operating measure is ordinary income and net income relative to assets/equity rather than sales-based margins. Operating income equals ordinary income (639 million yen), indicating limited reported non-operating spread at this stage, but the gap between ordinary income (639 million yen) and implied pre-tax income (~482 million yen = 408 + 74) suggests extraordinary losses or valuation impacts in the period. Margin quality: the sharp YoY decline in net income (-54% YoY) despite flat operating/ordinary income indicates non-core headwinds (e.g., higher credit costs, securities valuation losses, or special losses). Operating leverage cannot be directly assessed due to lack of revenue and cost breakdown; however, stability at the ordinary income line suggests core earnings resilience even as bottom line weakened. Interest coverage is not meaningful here due to bank accounting (interest expense is part of interest margin). Overall profitability remains modest relative to equity, with outsized sensitivity to non-core items.

Growth Assessment

Revenue is not disclosed for banks in the provided template; growth discussion centers on ordinary income and net income. Operating/ordinary income was 639 million yen, with YoY marked as +0.0%, indicating flattish core earnings versus the prior period. Net income of 408 million yen declined 54% YoY, implying either higher credit costs, weaker securities gains, or extraordinary items; absent detail, this appears non-core-driven. Profit quality is mixed: core profitability appears steady, but bottom-line volatility suggests exposure to market movements or credit costs. Outlook hinges on 2H credit cost normalization, securities portfolio performance (especially interest rate-driven valuation on JGBs and foreign bonds), and fee income growth (settlement, asset management, and bancassurance). Without loan/deposit growth, NIM, or fee data, sustainability of earnings cannot be quantified; however, scale (assets ~0.59 trillion yen) suggests sensitivity to cost efficiency and credit events. If extraordinary losses were one-off, earnings could normalize; if driven by rising credit costs, FY profitability may remain pressured. Monitoring management guidance for full-year net income and credit cost expectations is critical.

Financial Health

Liquidity ratios (current/quick) are not applicable for banks and shown as zero due to non-disclosure. Balance sheet shows total assets of 594,215 million yen and total equity of 27,587 million yen, implying leverage of 21.54x, typical for a regional bank. Total liabilities of 565,443 million yen suggest a liabilities-to-assets ratio of ~95.2%, consistent with deposit-funded models. There is a small arithmetic gap between assets and liabilities plus equity based on the presented figures (~1.185 billion yen), likely due to classification differences or rounding within net assets; we do not treat this as an inconsistency. No regulatory capital ratios (CET1, total capital adequacy) or NPL metrics are available, preventing assessment of solvency buffers or asset quality. Funding structure details (deposit mix, market funding reliance) are not disclosed; default assumption is deposit-led funding. Overall, financial health appears standard for a small regional bank by leverage, but the lack of capital and asset quality disclosures is a key limitation.

Cash Flow Quality

Cash flow data (operating, investing, financing) are undisclosed in this dataset, which is common for interim bank reports in summarized XBRL. For banks, earnings quality is better assessed via credit costs, core gross operating profit, and securities valuation impacts—none of which are provided here. The OCF/Net Income ratio and FCF are shown as zero due to non-reporting and should not be interpreted as actual zero cash generation. Working capital analysis is not meaningful for banks as presented. Given ordinary income stability and net income decline, the main quality question is whether the delta reflects one-off extraordinary items versus recurring credit or market valuation losses. Without breakdowns, we cannot conclusively judge accrual intensity or cash conversion.

Dividend Sustainability

Dividend per share (DPS) is shown as 0.00 and payout ratio as 0.0% due to non-disclosure; interim DPS may simply not be reported in this dataset. With half-year net income of 408 million yen, capacity for dividends exists in principle, but coverage by free cash flow cannot be assessed because FCF is undisclosed and not a useful construct for banks. Policy outlook is therefore uncertain from this data alone; regional banks generally target steady dividends contingent on full-year profits and capital adequacy. Absent CET1/adequacy ratios or guidance, we refrain from judging sustainability. Key determinants will be full-year net income trajectory, credit costs, and unrealized securities valuation buffer.

Risk Assessment

Business Risks:

• Net interest margin compression due to yield curve dynamics and deposit competition
• Credit cost volatility amid macro uncertainty and SME exposure typical of regional banks
• Securities portfolio valuation risk from interest rate moves (JGBs) and FX if foreign securities are held
• Fee income softness if retail investment flows weaken
• Operating efficiency constraints given small scale (assets ~0.59 trillion yen)

Financial Risks:

• High leverage inherent to banking (Assets/Equity 21.54x)
• Potential extraordinary losses impacting bottom line, as implied by the gap between ordinary and pre-tax income
• Capital adequacy uncertainty due to lack of disclosed regulatory ratios
• Concentration risk in the local economy and borrower base
• Interest rate risk in the banking book (duration mismatch)

Key Concerns:

• 54% YoY decline in net income despite flat ordinary income
• Lack of disclosure on credit costs and securities gains/losses
• Absence of capital adequacy and asset quality metrics in the dataset
• Earnings sensitivity to non-core items and market movements

Investment Implications

Key Takeaways:

• Core profitability appears stable (ordinary income 639 million yen), but bottom-line weakened materially (net income 408 million yen, -54% YoY).
• Leverage of 21.54x is typical for regional banks; scale remains small, implying higher sensitivity to credit and efficiency swings.
• The gap between ordinary and implied pre-tax income points to possible extraordinary losses or valuation impacts.
• Data limitations preclude full ROE DuPont, cash flow, and capital adequacy assessments; conclusions are tentative.
• Earnings trajectory for 2H will hinge on credit cost normalization and securities portfolio performance.

Metrics to Watch:

• Credit costs (net and gross), NPL ratio, and coverage ratio
• Net interest margin and loan/deposit growth
• Securities-related gains/losses and unrealized AFS valuation buffer
• Operating expense trend and cost-to-income ratio (OHR)
• Capital adequacy (CET1/total capital ratio) and dividend guidance

Relative Positioning: Within Japan’s regional bank cohort, Howa Bank appears smaller-scale with modest ROE (~3% annualized from H1) and heightened earnings sensitivity to non-core items; absent disclosure on capital and asset quality, it likely sits in the middle-to-weaker tier on profitability resilience pending 2H normalization.

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