The Miyazaki Taiyo Bank, Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.38B
• Net Income: ¥592M
• EPS: ¥103.15

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: Soft quarter for Miyazaki Taiyo Bank—top-line grew but earnings contracted as margin pressures kept ROE subdued. Revenue rose 14.0% YoY to 83.82 (100M JPY), indicating healthy activity and fee/interest income momentum. Ordinary income fell 25.2% YoY to 9.24, and net income declined 31.2% YoY to 5.97, signaling profit compression despite growth. Net profit margin stands at 7.1%, consistent with the calculated figure from disclosed data, but down versus last year given the earnings decline against rising revenue (exact YoY bps change not disclosed). Banking efficiency is solid with a Cost-to-Income Ratio (CIR) of 48.4%, staying below the 50% benchmark threshold. However, Net Interest Margin (NIM) is just 0.91%, well below the 1.5% warning threshold and ~109 bps under the 2.0% healthy benchmark, highlighting structural yield pressure. Asset efficiency remains low with asset turnover at 0.010, and ROE is a muted 1.3% due to balance-sheet-heavy banking economics and thin spreads. Leverage is high at a reported D/E of 16.34x, typical for banks but still a risk factor under generic thresholds; the equity ratio is roughly 5.8% of assets. Loan-to-deposit ratio (LDR) is 72.4%, within the optimal 70–90% range and supportive of liquidity. Effective tax rate is 31.5%, broadly in line with statutory levels. Notably, total comprehensive income surged to 28.30, far exceeding net income—likely driven by unrealized gains in the securities portfolio (OCI), introducing volatility but cushioning capital. Earnings quality cannot be assessed via cash flows due to unreported OCF; this is a key limitation for judging sustainability. Dividend payout ratio is 44.7%, appearing reasonable relative to earnings, though free cash flow coverage is unassessable. Forward-looking, earnings leverage hinges on NIM stabilization, credit cost discipline, and fee income resilience; with solid cost control (CIR) and prudent LDR, incremental rate tailwinds or asset mix optimization could support recovery. Overall, the quarter reflects resilient revenues but compressed profitability, with capital supported by OCI and efficiency intact, yet core spread pressure remains the main headwind.

Profitability Analysis

ROE decomposition (DuPont): ROE 1.3% = Net Profit Margin (7.1%) × Asset Turnover (0.010) × Financial Leverage (17.34x). The largest drag is the very low asset turnover (0.010) typical of banks and the thin net margin due to a 0.91% NIM. Compared with last year, the fall in ordinary and net income despite higher revenue indicates margin compression (exact bps change not disclosed), likely from weaker lending spreads and/or securities income normalization. Business drivers: NIM at 0.91% suggests asset yield compression and possibly limited loan repricing relative to funding cost shifts; fee and non-interest contributions are not disclosed but revenue growth implies they helped offset spread pressure. Sustainability: Low NIM appears structural in regional Japan but could improve modestly with mix or rate environment; the efficient CIR (48.4%) is likely sustainable. Watch for any SG&A (part of CIR) growth outpacing revenue—data not disclosed, but current CIR implies disciplined cost control. Overall, profitability is constrained by spread economics and balance-sheet intensity rather than expense inefficiency.

Growth Assessment

Top-line grew 14.0% YoY to 83.82, demonstrating customer activity and balance growth, possibly fees and loan volumes. However, ordinary income (-25.2% YoY) and net income (-31.2% YoY) declined, indicating weaker operating leverage and margin pressure. Net margin is 7.1% this period, implying profitability lagged revenue momentum. NIM at 0.91% is the primary headwind; without improvement, revenue growth may not translate to earnings growth. CIR at 48.4% shows costs are controlled, supporting earnings resilience if spreads stabilize. Comprehensive income of 28.30 suggests securities valuation gains in OCI—helpful for capital but volatile and non-cash. Outlook hinges on loan growth quality, funding cost management (deposit pricing discipline), and fee businesses. Given LDR at 72.4%, there is room to deploy liquidity into higher-yielding assets if risk-adjusted returns are acceptable. Absent explicit guidance, base case is modest earnings recovery only if NIM stabilizes and credit costs remain benign.

Financial Health

Leverage: D/E at 16.34x triggers a generic high-leverage warning, though typical for banks. Equity to assets approximates 5.8% (475.66 / 8,245.96), consistent with regional bank capital structures; regulatory capital ratios are not disclosed. Liquidity: LDR at 72.4% is within the optimal range, suggesting comfortable funding and asset-liability balance. Maturity mismatch: Current vs noncurrent breakdown is unreported; however, deposit funding concentration is implicit—monitor interest-sensitive deposits in a rising-rate scenario. Off-balance sheet: Not disclosed; contingent exposures (guarantees, derivatives, securitizations) may exist but cannot be assessed. No current ratio applicable for banks; nonetheless, available data do not indicate liquidity stress.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported, so OCF/Net Income and FCF coverage cannot be evaluated. This limits assessment of earnings-to-cash conversion and sustainability. The large gap between net income (5.97) and total comprehensive income (28.30) indicates significant OCI gains, likely from securities valuation, which are non-cash and volatile—earnings quality is thus more sensitive to market movements. Working capital metrics for banks are not directly applicable; no signs of manipulation can be inferred given missing data.

Dividend Sustainability

Calculated payout ratio is 44.7%, within a conservative range (<60%) and consistent with maintaining capital while paying dividends. Free cash flow coverage is not calculable due to missing cash flow data. Capital appears supported by OCI this quarter, but reliance on valuation gains is volatile; sustainable dividends depend on recurring net income from core banking (NIM + fees) and stable credit costs. With ROE at 1.3%, dividend growth potential looks limited without profitability improvement.

Risk Assessment

Business Risks:

• Structural margin pressure evidenced by NIM at 0.91%
• Regional demographic headwinds potentially limiting loan and fee growth
• Dependence on securities portfolio performance for comprehensive income
• Competition for deposits and loans compressing spreads

Financial Risks:

• High balance-sheet leverage (D/E 16.34x, though typical for banks)
• Interest rate risk in the securities book and ALM (OCI sensitivity)
• Potential increase in funding costs if deposit repricing accelerates
• Credit cost normalization from low levels (data not disclosed)

Key Concerns:

• Earnings decline despite revenue growth (Ordinary income -25.2% YoY, Net income -31.2% YoY)
• Low ROE at 1.3% and ROIC at 1.3% indicating weak capital efficiency
• Lack of cash flow disclosure hampers earnings quality assessment
• Dilution risk signals (basic EPS 103.15 JPY vs diluted 59.84 JPY) suggesting potential dilutive securities

Investment Implications

Key Takeaways:

• Revenue up 14.0% YoY but profit down; margin compression is the swing factor
• NIM of 0.91% is the core profitability constraint despite a solid CIR of 48.4%
• Comprehensive income strong via OCI (28.30) but volatile and non-cash
• Liquidity positioning sound (LDR 72.4%); room to redeploy assets if returns justify
• ROE at 1.3% underscores need for mix optimization and spread recovery

Metrics to Watch:

• NIM trajectory and loan/deposit repricing gap
• Credit costs and NPL trends (not disclosed this quarter)
• Fee income contribution to offset spread pressure
• Securities portfolio duration/OCI sensitivity and realized gains
• CIR stability vs revenue growth
• Capital ratios (CET1/Total capital) once disclosed

Relative Positioning: Within Japan’s regional banks, Miyazaki Taiyo exhibits good cost efficiency (CIR <50%) and prudent LDR, but sits on the weaker end for core profitability given sub-1% NIM and low ROE; capital is supported by OCI, leaving underlying earnings leverage dependent on spread stabilization and fee growth.

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