Sumitomo Mitsui profit beats expectations on lending income
Net income climbed 50 per cent to 371.4 billion yen (S$3.32 billion) in the three months ended June 30
SUMITOMO Mitsui Financial Group’s profit increased more than analysts estimated last quarter, as the Japanese bank joined its local rivals in benefiting from higher lending income after interest rates rose.
Net income climbed 50 per cent to 371.4 billion yen (S$3.32 billion) in the three months ended June 30, the nation’s second-largest lender said on Friday (Aug 2). That beat the 287 billion yen average estimate of four analysts, and accounts for 35 per cent of its annual profit projection.
Sumitomo Mitsui is the last of Japan’s biggest banks to announce results, with Mitsubishi UFJ Financial Group and Mizuho Financial Group also reporting fiscal first-quarter profit that beat estimates and put them on course for record annual earnings.
Shares of Japanese banks and other financial firms tumbled earlier on Friday, part of a broader selloff in the country’s equity market in the wake of the central bank’s decision to raise rates earlier this week. Bank stocks have soared this year on expectations that tighter monetary policy will boost lending profitability, and the latest retreat doesn’t derail that notion, according to analysts.
“My impression is that a drop in overall market sentiment is dragging financial stocks lower, not that concerns over the potential worsening of fundamentals have emerged,” said Bloomberg Intelligence analyst Hideyasu Ban.
Rising lending rates bode well for commercial banks, while Japan’s hard-won inflation could prompt citizens to put more of their cash into shares and other investments to defend the value of their assets, benefiting brokerages, he said.
The Bank of Japan raised rates for the second time in 17 years on Wednesday, after scrapping its negative-rate policy in March. Sumitomo Mitsui shares are up 40 per cent this year, even after plunging 11 per cent on Friday as the benchmark Topix Index slid the most since 2016 and entered a correction.
It kept its annual net income projection at a record 1.06 trillion yen, versus analysts’ estimate for 1.09 trillion yen. BLOOMBERG
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