First Read: Japan Post Bank "An earnings structure with time on its side:..."

研报英文原文证据摘录

First Read: Japan Post Bank "An earnings structure with time on its side:..."

Forecast returns

Forecast price appreciation 32.4%

Forecast dividend yield 3.0%

Forecast stock return 35.4%

Market return assumption 7.7%

Forecast excess return 27.7%

Company Description

As part of the Japan Post Group, the company engages in banking operations such as

deposits, lending, foreign exchange, and securities investments. It was established in 2007

following privatisation and corporate restructuring. Leveraging its extensive nationwide

network of branches and ATMs, the company has a strong focus on individual services. It

collaborates with insurance and postal services within the group to provide regionally focused

financial services.

Valuation Method and Risk Statement

Our price target is based on a residual income model (RIM). Risks to our view are as follows.

(1) The pace of increase in Japan's policy interest rate falling below our assumption (a total of

50bps by 2026), and (2) company guidance for FY2027 (EPS/DPS) coming in significantly

below our forecast, driven primarily by core business rather than temporary factors. Other

fundamental risk factors are as follows. Market: (1) Declines in stock prices and (2) sharp

fluctuations in domestic and overseas interest rates and a drying up of foreign currency

liquidity could lead to declines in the market value of shareholdings and a deterioration in

bond valuation losses, and hence CET1 capital erosion and weakened financial soundness.

Regulatory: (1) The system of approvals for new businesses under the Postal Privatisation Act

and (2) deposit limit regulations can restrict the diversification of lending and investment

methods and flexibility on deposit acceptance and thereby lead to competitive disadvantages