Tsukuba Bank,Ltd. Q2 FY2026 earnings call

• Company Overview and Positioning

  • Tsukuba Bank is a regional bank formed by the merger of Kanto Tsukuba Bank and Ibaraki Bank in 2010, listed on the Tokyo Stock Exchange Prime Market, with its main operating base in Ibaraki Prefecture. Ibaraki Prefecture has a 2.8 million population, ranks 3rd nationally in per capita prefectural income and agricultural output, and ranked 1st nationally in factory location counts and out-of-prefecture company factory locations in 2024, giving the region high growth potential.
  • As of March 2025, Tsukuba Bank holds 17.8% share of loans, 10.3% share of deposits, 18.92% share of companies with the bank as their main bank (approximately 6,100 out of 32,265 Ibaraki Prefecture companies), and 25% share of designated financial institutions for local governments (serving 11 of 44 Ibaraki Prefecture municipalities), demonstrating strong regional standing. The bank's core competitive advantages are its agile decision-making ("small turning radius") and high-quality, thorough client support, enabled by an internal Consulting Support Council platform that brings together approval, review, and specialized human resources to deliver fast, customized client solutions.

• Long-Term Vision "Future Strategy Design"

  • Launched in February 2025 (the bank's 15th anniversary) with a target completion date of the fiscal year ending March 2034. The bank's purpose is defined as "For the Region, For the Future", with the goal of contributing to sustainable development of Ibaraki Prefecture through employee commitment (Tsukuba PRIDE) and the bank's core competitive strengths.
  • Long-term target financial metrics: net income of 10 billion yen or more, ROE of 8% or more, combined total balance of loans + deposits + entrusted assets of 6 trillion yen or more. After repaying public funds, the bank targets a total shareholder return payout ratio of approximately 40%.
  • The long-term vision is split into three phases, with the 6th Medium-Term Management Plan (the current plan) serving as Phase 1.

• 6th Medium-Term Management Plan (Fiscal 2025 April to Fiscal 2028 March)

  • Plan name: "Rising Innovation 2028 ~ Tsukuba, Exciting New Beginnings ~", with the goal of building a sustainable business model that delivers unique value to the region and clients. Target end-of-plan financial metrics: net income of 5 billion yen or more, ROE of 5% or more, core OHR in the 70% range, capital adequacy ratio of 9% or more.
  • Human Capital Strategy: Aims to achieve "5 Types of Wellbeing" for employees, with diverse training and customized career support, flexible work arrangements (flextime, short-time work, remote work, side job systems, satellite offices) to boost employee engagement. A talent management system has been introduced for centralized talent information management, appropriate placement, training, fair evaluation, and active promotion of capable staff. Targets a 15% or higher share of female managers by March 2028, and aims to raise the share of employees at the "Advanced Class" (business expert level) or higher to 55% through a skill evaluation system and targeted training.
  • Management Infrastructure Strategy: Implements business process reengineering (BPR) to eliminate inefficiency and free up 200,000+ cumulative hours over the 3-year plan period, which will be redirected to increased client interaction time. Will optimize the branch network by reducing the total number of branches from 70 to 66 for greater efficiency, while maintaining client convenience via integrated online and offline sales channels. Strengthens digital strategy, targeting 302,300 digital users by March 2028; development of a renewed personal smartphone banking app is underway, with launch scheduled for January 2027.
  • Business (Corporate Banking) Strategy: Strengthens comprehensive consulting business (financial and non-financial services) leveraging the bank's core strengths, focusing on thorough support for local small and medium-sized enterprises. Targets an end-of-plan business loan balance of 912.8 billion yen, cumulative 3-year business loan interest income of 45.3 billion yen, and cumulative 3-year corporate fee revenue of 5.25 billion yen.
  • Business (Retail Banking) Strategy: Leverages high population growth and strong personal loan demand (especially housing loans) in southern Ibaraki Prefecture to implement "life companion" support for financial asset building and household cash flow management, integrating in-person and digital channels. Targets an end-of-plan consumer loan balance of 687.8 billion yen, cumulative 3-year consumer loan interest income of 33.3 billion yen, and cumulative 3-year entrusted asset related fees of 9.942 billion yen, while growing NISA accounts and mutual fund investment auto-debit amounts.
  • Business (Deposit Strategy: With rising interest rates now a reality, deposit procurement has grown in importance. The bank will strengthen its deposit acquisition promotion structure, utilize digital channels to support clients' wealth growth and retention goals, and target growth of high-stickiness corporate and personal deposits.
  • As of 6 months into the plan (end of September 2025), KPI progress is overall good, and the bank will continue steady implementation of plan initiatives.

• Sustainability Initiatives

  • The bank's sustainability efforts originated from post-Great East Japan Earthquake reconstruction support, evolving from the 2011 Reconstruction Support Project "Ayumi" to the current SDGs Promotion Project "Ayumi" focused on solving regional social challenges. The bank endorsed TCFD in August 2021 and joined the TNFD forum in September 2025.
  • Targets 50% CO2 emission reduction from 2013 levels by 2030; 2024 results show a 45.6% reduction already achieved. Sustainable finance execution target of 300 billion yen by March 2031 was achieved 6 years early, with 316.4 billion yen executed as of September 2025. Additional initiatives include annual commemorative tree-planting for new employees, adding Ibaraki Prefecture forest/water conservation as a theme for SDGs private placement bonds (with two donations to Ibaraki Prefecture to date), and annual hosting of the Economics Koshien high school economics competition Ibaraki Prefecture round.

• Shareholder Returns and Corporate Value Improvement

  • Between April 2023 and December 2025, Tsukuba Bank's share price rose approximately 1.9x, with the recent rally driven by strong H1 FY2026 results and upward full-year guidance revision, as the market recognized the bank's ability to grow earnings in a rising interest rate environment. The bank has publicly stated it targets medium-to-long term ROE of 8% or more and PBR of 1x or more. ROE improved to 4.45% in FY2025, and rose to 7.91% in H1 FY2026; PBR remains at a low level and is identified as a key improvement priority. The bank will balance shareholder returns, strategic investment for sustainable growth, and maintaining appropriate capital levels for the public nature of banking, while working toward the 40% total payout ratio target after public fund repayment. As of September 2025, retained earnings available for public fund repayment already totals approximately 45 billion yen, exceeding the 35 billion yen public fund balance.

The provided transcript only presents standalone (non-consolidated) results for the first half (Q2) of the fiscal year ending March 2026, with no segmented product breakdown reported. Aggregate standalone results are as follows:

• Gross business profit: 14.8 billion yen, up 0.4 billion yen year-over-year
• Core business net profit: 4.6 billion yen, up 1.1 billion yen year-over-year
• Ordinary profit: 4.0 billion yen, up 1.8 billion yen year-over-year
• Interim net profit: 3.7 billion yen, up 1.8 billion yen year-over-year (the second highest level on record for interim profit)
• Financial Reconstruction Act disclosed non-performing loans: 54.6 billion yen, down 5.1 billion yen year-over-year; non-performing loan ratio 2.47%, down 0.35 percentage points year-over-year
• Operating expenses: 11.9 billion yen, up 0.4 billion yen year-over-year (driven by wage increase-related personnel cost growth)
• Core OHR: 71.80%, an improvement of 4.74 percentage points year-over-year
• Capital adequacy ratio: 9.45%, up 0.42 percentage points year-over-year
• ROE: 7.91%, up 3.83 percentage points year-over-year As of September 2025, total assets are 2.8703 trillion yen, net assets are 102.7 billion yen, with 1,263 employees, capital stock of 48.8 billion yen, and 70 branch locations in Ibaraki Prefecture.

• Full-year standalone guidance for the fiscal year ending March 2026 has been upward revised, with ordinary profit set to 5.9 billion yen and net income set to 5.1 billion yen. The upward revision is driven by stronger-than-expected core business net profit from growth in loan interest and securities interest/dividend income, supported by rising interest rates following the Bank of Japan's December 2025 additional rate hike from 0.5% to 0.75%.
• The 6th Medium-Term Management Plan (ending March 2028) targets: net income of 5 billion yen or more, ROE of 5% or more, core OHR in the 70% range, capital adequacy ratio of 9% or more.
• Long-term guidance (ending March 2034) under the Future Strategy Design vision: net income of 10 billion yen or more, ROE of 8% or more, combined total balance of loans + deposits + entrusted assets of 6 trillion yen or more; a total shareholder return payout ratio of approximately 40% after public fund repayment.

The bank notes that it will continue to monitor the impact of future interest rate increases, and will work to fully incorporate the benefits of rising interest rates into business performance while managing related risks. No other specific operational risks or failures are discussed in the provided transcript.

No question and answer section is included in the provided transcript.