ENVALITH
株式会社 東北銀行 logo

THE TOHOKU BANK,LTD.

8349・Standard Market・Banks

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株式会社 東北銀行 logo
THE TOHOKU BANK,LTD.8349

Business

The Bank of Tohoku, Ltd. is a regional bank based in Morioka City, Iwate Prefecture, established in 1950 and listed on the Standard Market of the Tokyo Stock Exchange. Through its head office plus 54 branches and 2 sub-branches, the bank offers deposit-taking, lending, securities investment, domestic exchange, investment trusts, and over-the-counter sales of insurance products. Its consolidated subsidiary Togin General Lease Co., Ltd. handles the Leasing Business, while Tohoku JCB Card Co., Ltd. handles the credit card business, with the group as a whole providing comprehensive financial services to regional small and medium-sized enterprises and individual customers. Its main customers are small and medium-sized businesses and individuals within Iwate Prefecture, and it functions as a core financial institution supporting the regional economy.

Business Model

The core earnings driver is the traditional deposit-and-lending model, in which funds procured from customer deposits are deployed into loans (¥712,411 million) and securities (¥210,920 million). Net interest income of ¥10,342 million accounts for approximately 83% of consolidated gross profit of ¥12,454 million. In addition, fee income (Fee-based Services Business profit of ¥2,290 million), underpinned by an assets-in-custody balance of ¥102,897 million comprising investment trusts, insurance, and public bonds, functions as a stable source of non-interest income.

Company Strengths

The loan balance at the end of FY2026 (ending March 2026) reached ¥712,411 million, a record high for a fiscal year-end balance. Personal loans of ¥127,324 million and housing loan balances of ¥107,424 million also reached record-high levels. Against an average loan balance of ¥703,010 million, a yield of 1.45% was secured, and interest on loans of ¥10,196 million (¥8,513 million in the previous period) was recorded.

The balance of assets in custody, consisting of the three pillars of investment trusts, insurance, and public bonds, reached ¥102,897 million (¥88,473 million in the previous period), an increase of ¥14,424 million from the previous period. Fee-based Services Business profit expanded to ¥2,290 million (¥2,125 million in the previous period), and the fee income base, which does not depend on interest income, is steadily gaining depth.

The non-consolidated non-performing loan ratio declined to 2.15% (2.83% in the previous period). Doubtful claims under asset assessment decreased from ¥14,346 million to ¥10,749 million, and losses on sales of delinquent claims, etc. disappeared, falling from ¥639 million to ¥0 million. Credit-related expenses shrank to ¥1,433 million (¥1,635 million in the previous period), contributing to a boost in profit.

ENVALITH's Perspective

As an external factor, the Bank of Japan has raised its policy interest rate to around 0.75%, improving the yield on fund management to 1.23% (from 1.05% in the previous period), while the loan yield also rose to 1.44% (from 1.26% in the previous period). On the other hand, valuation gains/losses on other securities deteriorated to ¥-14,883 million (from ¥-10,144 million in the previous period), pushing down net assets to ¥33,497 million (from ¥35,376 million in the previous period). The consolidated capital adequacy ratio (preliminary) declined to 8.62% (from 9.05% in the previous period), and close attention is warranted regarding the risk that the increase in risk assets accompanying loan expansion, combined with the widening of valuation losses, may constrain improvement in capital efficiency.

For FY2026 (ending March 2026) (consolidated), the company achieved a significant recovery in performance, with ordinary revenue of ¥17,932 million (up 19.3% year on year), ordinary profit of ¥2,523 million (up 27.8%), and profit attributable to owners of parent of ¥1,693 million (up 58.3%). However, the consolidated earnings forecast for FY2027 (ending March 2027) anticipates revenue growth to ¥19,600 million (up 9.3%), while ordinary profit is expected to decline to ¥2,500 million (down 0.9%) and profit attributable to owners of parent to decline to ¥1,600 million (down 5.5%). Increases in credit-related expenses and operating expenses are expected to weigh on profits, leaving concerns about a structure in which revenue growth does not readily translate into profit growth.

The paid-in amount of Class 1 preferred shares, ¥10,000 million (with dividends of ¥23 million per period), is deducted from net assets, leaving net assets per share attributable to common shares at only ¥2,482.61. Diluted earnings per share, adjusted for potential shares, comes to ¥104.45, representing significant dilution from basic EPS of ¥176.63. Under the long-term management plan, the company aims to repay public funds by the end of March 2037, but the non-consolidated capital adequacy ratio (preliminary) declined to 8.56% (from 8.99% in the previous period), and balancing loan expansion with capital enhancement remains an important management challenge going forward. The PBR improved to 0.57x (from 0.41x in the previous period), but it still remains well below 1x.

Growth Strategy

Pursuing four projects under the Second Medium-Term Management Plan (FY2025 (ending March 2025) to FY2028 (ending March 2028)), targeting profit attributable to owners of parent of ¥2.0 billion

Promoting support for resolving management challenges faced by SMEs and expanding lending to individuals. The loan balance at period-end reached ¥716,064 million (against a target of ¥750,000 million), progressing steadily. Housing loans and lending to individuals reached record highs, while the ratio of loans to SMEs, etc. was maintained at 72.62%.

The loan balance to the electricity, gas, heat supply, and water industries increased to ¥33,813 million (from ¥29,939 million in the previous period), showing an upward trend. Lending to agriculture, forestry, and fisheries also continues. The Bank is promoting support for structural transformation of regional industries through decarbonization-related financing such as renewable energy.

Assets in custody balance expanded to ¥102,897 million (from ¥88,473 million in the previous period), and consolidated fee-based services business profit increased to ¥2,290 million. Customer service profit, etc. (core business profit) reached ¥1,858 million (from ¥1,296 million in the previous period), progressing steadily toward the target of ¥2,000 million. Non-consolidated core net business profit also improved to ¥3,392 million (from ¥2,935 million in the previous period).

Personnel expenses continued to increase to ¥4,538 million (from ¥4,400 million in the previous period), reflecting ongoing investment in human capital. OHR improved to 72.32% (from 74.39% in the previous period), reflecting improved cost efficiency. Software investment increased to ¥274 million (from ¥193 million in the previous period), and progress continues on digitalization and operational efficiency initiatives.

The long-term goal is to complete repayment of public funds (preferred shares of ¥10,000 million) by the end of March 2037. The non-consolidated capital adequacy ratio (preliminary figure) stood at 8.56% (down from 8.99% in the previous period), remaining above the target level of 8.5%, but showing a declining trend due to an increase in risk assets accompanying loan growth. Balancing the accumulation of retained earnings with capital efficiency remains a challenge.

Last updated: July 19, 2026