Japan Post Bank (7182)

Signal panel

Investment thesis

1. Earnings are inflecting with rates. Q1 FY2026 net profit was ¥177.5bn (+69.3%) and net interest income ¥407.1bn (+¥178.3bn). The gross interest spread rose to 0.73% from 0.43% (Q1 説明会 p.4, p.6). ROE on shareholders' equity was 7.13% for Q1 against 4.33% a year earlier (p.4). Reported fact.
2. The mix of the gain matters. Interest on foreign securities rose ¥150.6bn to ¥411.8bn, mainly from investment trusts that hold foreign bonds. JGB interest rose only ¥30.4bn to ¥109.8bn. Funding costs rose ¥47.3bn (p.6). Gains on equity sales fell ¥65.5bn (p.4). Investment-trust distributions and private-equity gains are lumpier than coupon income. Reported fact; the lumpiness is an inference.
3. The plan sets a high bar. The FY2026–2028 plan targets FY2028 net profit above ¥1tn and ROE of about 10%. The bank says ROE would be about 9% if yen rates stayed where they are (company plan, via search summary of the IR materials). FY2026 guidance is ordinary profit ¥955bn and NP ¥660bn (FY 説明会 p.14). Company guidance.
4. Valuation already discounts the plan. PBR is 1.20x on a 7.2% forecast ROE. A PBR of 1.2x at an 8.5% cost of equity implies a sustainable ROE of about 10% (inference, zero-growth simplification). Peers: SMFG 1.55x / ROE 10.4%, MUFG 1.72x / 11.3%, Resona 1.75x / 9.2% (Yahoo! Finance Japan, 2026-10-16). Inference.
5. There is a supply overhang. Japan Post Holdings owns 49.70% (Yahoo! Finance Japan). It sold shares at ¥1,444 in March 2025, a ¥592bn offering that took it below 50% (Nikkei). Further sales are possible. Timing and size are not disclosed (unknown).

Business and earnings

Japan Post Bank is Japan's largest deposit-taker, with ¥186.2tn of deposits (¥126.4tn liquid, ¥59.7tn time) at 2026-06-30. It collects them mainly through Japan Post's post office network, which it pays ¥79.6bn a quarter in agency fees plus ¥68.4bn to the postal network support organisation (Q1 説明会 p.8, p.9). It barely lends: loans are ¥6.1tn. The money goes into securities: JGBs ¥42.4tn, foreign securities ¥87.6tn (foreign bonds ¥29.4tn, investment trusts ¥58.0tn, mostly foreign bonds plus private equity), deposits at the BoJ and other placements ¥48.6tn, and money held in trust ¥6.5tn (p.10). In effect it is a very large bond portfolio funded by cheap retail deposits.

Profit drivers:

• Yen rates: JGBs bought in the low-rate era roll off, and the money is reinvested at higher yields. Reserves at the BoJ also earn the policy rate. Against this, deposit costs rise: deposit interest went from ¥104.3bn (FY2024) to ¥313.4bn (FY2025) (FY 短信, consolidated P&L).
• Risk assets: foreign bond funds, private equity, real estate and direct-lending funds (the "strategic investment area" in the bank's materials). The strategic investment area earned ¥415.0bn in FY2025 (Q1 説明会 p.6).
• Fees: ¥43.0bn a quarter, +¥1.9bn, mainly settlement fees. The passbook app has 17.49m registered accounts (p.7).
• Costs: quarterly operating expenses of ¥243.9bn (+¥3.9bn). The cost-to-income ratio fell to 49.4% from 61.0% (p.4, p.8). Over half of costs go to the Japan Post network, so they are hard to cut.

FY2026 guidance bridge (FY 説明会 p.14): ordinary profit goes from ¥759.1bn to ¥955bn. Yen-rate assets add +¥340bn. Risk assets lose ¥90bn, as fewer equity-sale gains are planned. Fees add +¥2bn. Expenses rise by ¥51bn. The rate assumption is the yen implied-forward curve as of 2026-03-31, when the policy rate was 0.75%. Credit spreads and FX are held at FY2025 averages.

Forecast test

Guidance (2026-05-15, reaffirmed 2026-08-07): ordinary profit ¥955bn, NP ¥660bn, EPS ¥185.29, DPS ¥93 (50.1% payout). Consensus (IFIS, 2026-10-16): ordinary profit ¥999.2bn, NP ¥690.1bn (+4.6% above the guide). FY2027/03 consensus NP is ¥840.6bn. The target price rose 6.2% over 1 month and 8.9% over 3 months.

Seasonal progress: Q1 NP was 26.9% of guidance. The median at Q1 of the four prior years was 26.1% on guidance then in force, and 23.8% on final actuals. Progress is +0.8 points against the first and +3.1 points against the second. That is slightly ahead, not decisively. Q1 included ¥67.5bn from the strategic investment area within net interest income, against ¥30.4bn a year earlier (p.6), so part of the lead depends on fund distributions that may not repeat evenly.

Track record (NP): FY2025 initial guide ¥470bn, revised ¥500bn, actual ¥525.5bn (+11.8% against the initial guide) (FY 説明会 p.14). That followed beats in FY2023 and FY2024: actual NP was ¥356.1bn and ¥414.3bn (fact sheet), but the initial guides for those years were not checked (unknown). The guides look moderately conservative.

Rates since the guide: the BoJ raised its rate in June and on 2026-09-18, to about 1.25% (search summary of BoJ coverage). Whether that is above the March 2026 implied-forward path is likely but not verified, because the forward curve values are not in the materials read. Higher short rates lift income on ¥48.6tn of BoJ reserves and placements and on JGB reinvestment. They also raise deposit costs and add to JGB unrealised losses (¥−2.76tn at 2026-06-30, up ¥0.23tn in the quarter; p.11).

Revision probability: Medium. An H1 raise toward consensus (¥690bn) is plausible at the mid-November H1 results. The size depends on deposit pass-through, which is not disclosed.

One-offs inside guidance: the guide already assumes lower equity-sale gains under the "risk adjustment" programme. No large gains on sale were found to restate.

Financial strength and capital allocation

• Capital: domestic-standard capital ratio 15.15% at 2026-06-30, against a 4% requirement. CET1 under international standards, fully loaded and excluding unrealised gains on available-for-sale securities, is 10.09% (11.34% transitional) (Q1 説明会 p.12). Gates pass.
• Liquidity: funded by deposits, with ¥48.6tn in BoJ deposits and placements. The generic current ratio does not apply. The fact sheet's ocf-weak and fcf-negative flags reflect deposit and securities flows and do not apply to a bank. On the gate itself, OCF was negative in only one of the last three years (FY2025: −¥9.4tn).
• Unrealised gains and losses (available-for-sale, after hedges): net ¥−1.08tn pre-tax at 2026-06-30, an improvement of ¥152.6bn in the quarter. JGBs are at ¥−2.76tn. Foreign bonds are at +¥3.66tn before ¥−1.94tn of fair-value hedge effects. Investment trusts are at +¥1.92tn, including private-equity gains of ¥1.39tn (p.11). Rising yen rates widen the JGB loss. Banks account for most JGBs outside fair value, so this hits equity, not profit, unless the bank sells.
• Capital efficiency: ROE was 3.3% (FY2021) → 3.7% → 4.4% → 5.8% (FY2025, IFIS; 5.30% on the company's equity basis) → 7.2% (FY2026 guide). ROA is 0.2%. Leverage is about 24x (assets ÷ equity), set by the deposit base. ROE moves with the spread, not with balance-sheet decisions. It is still below an assumed 8–9% cost of equity (analyst assumption) until the plan's target of about 10% is reached.
• Returns: the policy is a payout of about 50% with progressive dividends, paid once a year at year-end (FY 説明会 p.15). DPS went from ¥50 (FY2021) to ¥74 (FY2025) to ¥93 (FY2026 guide). Buybacks have been small and tied to Japan Post Holdings' sales: ¥150bn in FY2022, ¥60bn in FY2024, ¥30bn from 2025-12-24 to 2026-03-04. The plan treats buybacks as case-by-case. A long-holding shareholder perk starts with the March 2027 record date (p.15).

IR and management credibility

• FY2021–2025 plan: ROE target 5% "early in the next plan". Reached 5.30% in FY2025 (FY 説明会 p.15 reference; Q1 説明会 p.5).
• 2025-03: Japan Post Holdings sold shares at ¥1,444, taking its stake to below 50% (Nikkei).
• 2026-05-15: new FY2026–2028 plan (NP above ¥1tn, ROE about 10%). Guidance assumptions and the earnings bridge are disclosed (FY 説明会 p.14–16).
• 2026-08-07: Q1 results. Plan-basis ROE and cost-to-income ratio are now disclosed quarterly (Q1 説明会 p.4).
• Consistency: the "strategic investment area" is disclosed in both net interest income and non-recurring gains (p.6). Credit-cost disclosure (金融再生法債権) is routine (p.22).

Valuation and scenarios

Share count is about 3,576m (inference: ¥11.09tn market cap ÷ ¥3,102). The basis is FY2027/03 EPS, one year forward.

With weights of 25/50/25, the expected value is about ¥3,190, or +3%. Adding the 3.0% forecast yield gives a total of about 6%. A consensus target of ¥3,829 is an external estimate, not fair value.

Bands: the 1-year-forward consensus PER is 14.3x against a 1-year band mean of 16.0x (z −2.58). PBR is 1.20x against a mean of 1.26x (z −1.50). The bands cover only one year in which the stock re-rated (+81% over 1 year), so a "cheap against its own history" reading is weak.

Peers (Yahoo! Finance Japan, 2026-10-16):

Its PBR discount matches its ROE gap.

What the price implies: ¥3,102 at 14x needs EPS of about ¥222, or NP of about ¥790bn for FY2027/03. That is a little below the ¥840bn consensus, and well on the way to the plan's ¥1tn for FY2028.

Why the market may be right not to pay more: the earnings depend on BoJ policy, on foreign-bond fund distributions and on private-equity exits. Costs are tied to Japan Post. A seller owns half the company. Deposits could leave for higher-yielding products as rates normalise: time deposits fell ¥1.1tn in Q1 (p.9).

Bull case

• The BoJ keeps hiking (to 1.5% or more by 2027). Deposit pass-through stays low because ¥126tn of liquid deposits pay near-zero. Net interest income compounds as ¥42tn of JGBs reprice.
• An H1 raise to about ¥700bn NP and DPS of ¥100 or more.
• Japan Post Holdings sells through an orderly offering paired with a bank buyback, removing the overhang.

Bear case

• Foreign credit spreads widen, or the US cuts rates sharply. Fund distributions and private-equity gains fall, taking out part of the ¥415.0bn strategic investment area profit.
• Deposit competition from megabanks and net banks forces faster rate pass-through. Deposits shrink, as they did from ¥190.9tn to ¥186.2tn over the year to 2026-06 (p.9).
• A large Japan Post Holdings offering prices at a discount.
• JGB unrealised losses grow and limit room to rebalance.

Catalysts

What would change the rating

• Upgrade to Buy if the H1 guide rises to ¥700bn or more NP and the bank discloses a rate sensitivity that supports FY2027 NP of ¥900bn or more. Also upgrade if the price falls below about ¥2,800 (12x consensus FY2027 EPS) without a deterioration in those inputs.
• Downgrade to Sell if Q2 shows fund distributions falling enough that H1 NP progress is below 48% of guidance, or if deposits fall faster than ¥3tn a quarter.
• Thesis invalidated if the FY2028 targets are withdrawn or the CET1 ratio (fully loaded) falls below 9%.

Monitoring

Scorecard

The total sits at the bottom of the Buy band. The rating is Hold because the price already capitalises the plan's ROE target, and the scenario-weighted return is about 6% including the dividend.

Fact-sheet flags

Computed by factsheet.mjs. Each flag is a prompt to investigate, not a conclusion.

• iinfofinancial-sector 銀行業 (bank): cash-flow, net-debt, current-ratio and working-capital flags are suppressed, since deposits, reserves or client money drive them; judge capital, ROE, ROA and payout instead
• iinfoper-cheap Forward PER 14.31 vs 1-year mean 16.01 (+1σ 16.67), z -2.58: cheap vs own history

Sources and limitations

• filings/2026-03_FY_短信_20260515.pdf: dividend policy (lines on the 2021–25 and 2026–28 policies), consolidated P&L.
• filings/2026-03_FY_説明会_20260515.pdf: p.14 guidance and bridge, p.15 dividends and return policy, p.16 rate assumptions.
• filings/2027-03_Q1_説明会_20260807.pdf: p.4 P&L, p.5 ROE path and plan targets, p.6 net interest income and strategic investment area, p.7 fees, p.8 expenses, p.9 deposits, p.10 assets, p.11 unrealised gains and losses, p.12 capital.
• Snapshot data/7182/2026-10-17/: fact sheet, report_est consensus.
• Nikkei, March 2025: Japan Post Holdings' offering at ¥1,444.
• Nikkei, August 2026: shares fall up to 4.8% after Q1.
• Company IR (via search summaries): FY2026 results release, plan materials. The ROE of about 9% in the flat-rate scenario was taken from the search summary and not checked in the PDF.
• Yahoo! Finance Japan, 2026-10-16: 7182 (Japan Post Holdings 49.70%), MUFG, SMFG, Resona.
• BoJ: the 2026-09-18 hike to about 1.25% is from a search summary of news coverage, not the BoJ release.
• Limitations:
• No disclosed net-interest-income sensitivity to rates, and the March 2026 forward-curve values were not read.
• The 有報 risk section (2026-03_FY_有報_20260618.pdf) was not read.
• Japan Post Holdings' plans are unknown.
• The IFIS segment and region feeds failed (HTTP 403).
• The fact sheet's cash-flow flags do not apply to a bank.
• This is research, not individualised investment advice.