The Chiba Bank, Ltd. :CHBAY-US: Earnings Analysis: Q1, 2018 By the Numbers : September 19, 2017

The Chiba Bank, Ltd. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of The Chiba Bank, Ltd. – Mitsubishi UFJ Financial Group, Inc. Sponsored ADR and Mizuho Financial Group, Inc. Sponsored ADR (MTU-US and MFG-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 418.03 million, Net Earnings of USD 153.25 million.
  • Net interest income margins widened from 64.04% to 65.71% compared to the same period last year.
  • Net loan assets changed -3.22% compared to same period last year and -2.25% from previous period, total deposits changed -4.52% compared to same period last year and 0.43% from previous period.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 418.03 409.61 429.02 423.71 455.28
Revenue Growth (%YOY) -8.18 -1.82 6.55 6.96 7.48
Earnings (mil) 153.25 77.74 125.89 113.84 171.1
Earnings Growth (%YOY) -10.43 -7.16 16.69 -7.61 17.86
Net Margin (%) 36.66 18.98 29.34 26.87 37.58
EPS 0.96 0.48 0.78 0.71 1.05
Return on Equity (%) 1.88 0.99 1.54 1.33 2.12
Return on Assets (%) 0.49 0.25 0.4 0.34 0.54

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Market Share Versus Profits

Revenues History
Earnings History

CHBAY-US’s change in revenue this period compared to the same period last year of -8.18% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that CHBAY-US is holding onto its market share. Also, for comparison purposes, revenues changed by 2.06% and earnings by 97.14% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

{arg3)’s earnings declined year-on-year because of the increases in loan loss provisions. Its net interest income after provisions margins went from 72.71% to 69.86%. The fall in earnings would have been worse were it not for the fact that the company’s net interest income margins improved, from 64.04% to 65.71%. For comparison, net interest income margins were 59.64% and net interest income after provisions margins 57.50% in the immediate last period.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

CHBAY-US’s improvement in net interest income margins came in spite of relative drops in the levels of net loan assets and total deposits. On an absolute basis, net loan assets changed -3.22% compared to the same period last year and -2.25% from the previous period. Total deposits changed -4.52% compared to the same period last year and 0.43% from the previous period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 46.98% to 46.34% and (2) One-time items that contributed to a decrease in pretax margins from 53.87% to 52.09%

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for The Chiba Bank, Ltd.

Company Profile

The Chiba Bank, Ltd. engages in banking services. It also provides other services deposits, loans, domestic and foreign exchange, securities, credit card, consulting, business management, and staffing services. The company was founded on March 31, 1943 and is headquartered in Chiba, Japan.

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