Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

<p>Next in line to confess their sins after <a href="https://www.smartkarma.com/entities/6599" target="_blank" data-smartkarma-citation="entities:6599:1">Michinoku Bank (8350 JP)</a> (see our Insight <a href="https://www.smartkarma.com/insights/michinoku-bank-8350-jp-clipped-by-a-synthetic-hedge" target="_blank" data-smartkarma-citation="insights:29415">Michinoku Bank  (8350 JP):  Clipped by a Synthetic Hedge</a> ) and admit that their earnings guidance was way too optimistic are the directors of <a href="https://www.smartkarma.com/entities/26193" target="_blank" data-smartkarma-citation="entities:26193:1">First Bank Of Toyama (7184 JP)</a> .  This small secondary regional bank from Toyama Prefecture in the Hokuriku Region of central Japan has cut its full-year earnings forecast for consolidated recurring profits by 33% and net profits by 25%, citing greater than expected losses on sales of equities and rising credit costs.  But this only tells part of the story: the new profit figures suggest heavy net losses may have been incurred in 4Q (January-March 2019) of up to ¥490 million related to the bank’s large securities portfolio.  Two recurring features of this wholly-domestic bank’s past financial results have been losses on its share portfolio and a relentless rise in the level of foreign securities as management has struggled to find alternative sources of revenue to offset declining loan interest and fee income.  The bank’s unrealised gains in its securities portfolio fell ¥11 billion (US$98 million) in 3Q FY3/2019 to just ¥636 million.  Something is terribly wrong here.  <em>Caveat emptor!</em>  (May the buyer beware!)</p>

Next in line to confess their sins after Michinoku Bank (8350 JP) (see our Insight Michinoku Bank  (8350 JP):  Clipped by a Synthetic Hedge ) and admit that their earnings guidance was way too optimistic are the directors of First Bank Of Toyama (7184 JP) .  This small secondary regional bank from Toyama Prefecture in the Hokuriku Region of central Japan has cut its full-year earnings forecast for consolidated recurring profits by 33% and net profits by 25%, citing greater than expected losses on sales of equities and rising credit costs.  But this only tells part of the story: the new profit figures suggest heavy net losses may have been incurred in 4Q (January-March 2019) of up to ¥490 million related to the bank’s large securities portfolio.  Two recurring features of this wholly-domestic bank’s past financial results have been losses on its share portfolio and a relentless rise in the level of foreign securities as management has struggled to find alternative sources of revenue to offset declining loan interest and fee income.  The bank’s unrealised gains in its securities portfolio fell ¥11 billion (US$98 million) in 3Q FY3/2019 to just ¥636 million.  Something is terribly wrong here.  Caveat emptor!  (May the buyer beware!)

First Bank of Toyama (7184 JP):  Never Say Never (Again)

Japan

THE TOYAMA BANK, LTD. is a regional bank based in Toyama.  The Bank provides banking services such as deposits, foreign exchange transactions, and loans to local customers.

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Bank Of Toyama /Ltd (8365 JP)

First Bank of Toyama (7184 JP): Never Say Never (Again)

Next in line to confess their sins after Michinoku Bank (8350 JP) (see our Insight Michinoku Bank (8350 JP): Clipped by a Synthetic Hedge ) and...

J. Brian Waterhouse

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