ENVALITH
株式会社阿波銀行 logo

The Awa Bank, Ltd.

8388・Prime Market・Banks

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株式会社阿波銀行 logo
The Awa Bank, Ltd.8388

Business

The Bank of Awa, Ltd. was founded in 1896 and is a regional bank headquartered in Tokushima Prefecture, listed on the Prime Market of the Tokyo Stock Exchange. Through 105 domestic branches, it offers a wide range of financial services including deposits and lending, securities investment, foreign exchange, trust services, insurance sales, and financial instruments intermediation. It has seven consolidated subsidiaries (Awagin Hosho, Awagin Card, Awagin Consulting, Awagin Connect, Awagin Capital, Awagin Lease, etc.), and operates a Leasing Business in addition to its Banking Business. With lending to small and medium-sized enterprises at its core (loan ratio of 78.31%), the group also engages in the Financial Instruments Intermediary Business (intermediary balance of ¥1,357,963 million) through a comprehensive business alliance with Nomura Securities, and supports business startups and business succession through various funds, functioning as a comprehensive financial group that supports regional industrial development and individual asset formation.

Business Model

The main revenue sources consist of net interest income (¥45,572 million in FY2026 (ending March 2026)), comprising interest on loans (¥32,323 million) and interest and dividends on securities (¥22,239 million). Added to this is a multi-layered revenue structure that includes fee and commission income (¥9,553 million), centered on financial instruments intermediary fees through the alliance with Nomura Securities and corporate core-business support fees, as well as leasing sales (¥18,030 million) from its subsidiary Awagin Lease. Funding costs are centered on deposits and borrowed money, with management of the interest margin and raising the yield on the securities portfolio serving as the main pillars of earnings improvement.

Company Strengths

Of the domestic branch loan balance of ¥2,521,425 million, the ratio of loans to SMEs reached 78.31%, with a customer base diversified across multiple industries including manufacturing, real estate, and wholesale/retail. Through consulting-based sales grounded in business feasibility assessments and the philosophy of "Eitai Torihiki" (long-term, multi-generational relationships), the bank has built long-term customer relationships spanning generations.

Assets under custody in the Financial Instruments Intermediary Business, based on the comprehensive business alliance with Nomura Securities launched in April 2021, expanded to ¥1,357,963 million (up ¥303,000 million year on year). Securities-related business commissions increased by ¥367 million year on year to ¥3,187 million, functioning as a stable growth engine for fee income.

The bank has implemented a strategy of systematically selling low-yield yen bonds and replacing them with higher-yield bonds. In FY2025, replacement results were sales of ¥92.9 billion (yield 0.45%) and purchases of ¥96.6 billion (yield 1.66%), improving the securities yield to 2.38% (up 0.44 percentage points year on year). Interest and dividends on securities increased by ¥4,567 million year on year.

ENVALITH's Perspective

In FY2026 (ending March 2026), the Bank achieved record-high ordinary profit of ¥21,825 million and net income of ¥15,527 million. As an external factor, the Bank of Japan's continued rate hikes pushed up the loan yield (1.31%, up 0.15pt year on year) and the securities yield (2.38%, up 0.44pt year on year). On the other hand, interest expenses on deposits surged roughly threefold, from ¥2,233 million to ¥6,680 million, and the future pace of rising funding costs will determine the sustainability of the interest margin. The overall interest margin improved to 0.39% (up 0.15pt year on year), but continued monitoring is warranted.

The annual dividend for FY2026 (ending March 2026) was ¥142.50 (up ¥47.50 year on year), with a payout ratio of 35.9%. For FY2027 (ending March 2027), a further dividend increase to ¥190 (forecast) is planned, and the shareholder return policy was changed from "total of dividends and share buybacks equal to 40% or more of net income" to "payout ratio of 40% or more." The Bank also intends to conduct share buybacks flexibly, having already acquired 175 thousand shares for ¥999 million between February and March 2026. The concretization of capital policy aimed at improving PBR is commendable, but a challenge remains in reconciling this with the declining trend in the consolidated capital adequacy ratio (10.48%, down 0.20pt year on year).

Tokushima Prefecture is experiencing one of the fastest rates of aging and population decline in Japan, and its gross prefectural product accounts for less than 1% of the national total. The shrinking of the local market is a mid- to long-term structural risk, and loans within Tokushima Prefecture (period-end balance of ¥1,297.9 billion) decreased by ¥14.9 billion year on year. As a counter-strategy, the Bank plans wide-area expansion into the Kanto, Kansai, and Chushikoku regions (loans in these areas increased by ¥82.8 billion year on year), along with growth investments of ¥2.0 billion in human capital and ¥5.0 billion in digital investment over three years. The adjusted OHR improved to 56.11% (up 6.08pt year on year), indicating progress in efficiency, but attention should be paid to the balance between profitability and rising expenses (forecast of ¥31.9 billion for FY2027 (ending March 2027), up ¥1.9 billion year on year) amid the investment expansion phase.

Growth Strategy

Under "Growing beyond 130th," the company is advancing the evolution of Eitai Torihiki relationships, DX, human capital investment, and enhanced shareholder returns.

Continuing to strengthen lending to small and medium-sized enterprises based on "Eitai Torihiki" relationships. Loan balances in the Kanto, Kansai, and Chugoku-Shikoku regions have expanded to 128–233% compared to the end of March 2016. Plans to raise the loan balance at fiscal year-end to ¥2,590.9 billion by the end of FY2027 (an increase of ¥66.2 billion from the end of FY2025). Combined with head-office initiatives such as ocean-going vessel finance and structured finance, the company aims to achieve growth of over 4% versus the average balance within two years.

Through the comprehensive business alliance with Nomura Securities, the Financial Instruments Intermediary Business balance has reached ¥1,357.9 billion, achieving the initial target two years ahead of schedule. The company will continue to deepen its one-stop comprehensive financial services offering deposits, insurance, and securities, aiming to expand stock-type fee income. Fee Business (Services and Commissions) income is projected at ¥8.3 billion for FY2027 (ending March 2027), an increase of ¥0.4 billion from FY2026 (ending March 2026).

Continuing the planned sale of low-yield yen bonds and reinvestment into higher-yield bonds. In FY2025, ¥92.9 billion (yield of 0.45%) was sold and ¥96.6 billion (yield of 1.66%) was purchased. Yen bond yields are expected to reach 1.60% by FY2028 (ending March 2028). Gains from partial cancellation of asset swaps are also expected to be recorded in FY2027 (ending March 2027). Unrealized gains on securities stood at ¥179.5 billion, maintaining soundness while improving profitability.

Plans call for ¥2.0 billion in human capital investment and ¥5.0 billion in digital investment over three years. In June 2025, the Digital Innovation Promotion Section was established to promote AI utilization, develop 300 digital talent, and drive internal business process reform. An employee stock compensation plan (ESOP trust) will be introduced from FY2026 (ending March 2026). The modified OHR stood at 56.11%, progressing steadily toward the FY2027 target of below 55%.

From FY2026, the shareholder return policy was changed to "a dividend payout ratio of 40% or more (consolidated)," aiming to increase dividends per share through earnings growth. The annual dividend forecast for FY2027 (ending March 2027) is ¥190 (versus ¥142.50 in FY2026 (ending March 2026)). Cross-shareholdings are planned to be reduced by ¥4.0 billion on a book-value basis over three years from the end of March 2025, with proceeds redirected to growth investments. The company aims to maintain a consolidated capital adequacy ratio of over 10% by the end of FY2027.

Last updated: July 19, 2026