Sumitomo Mitsui Financial Group Inc. reported a profit that exceeded analysts’ expectations in the fiscal third quarter, positioning the company for record annual earnings due to the Bank of Japan’s interest rate hikes. The net income for Japan’s second-largest bank surged 54% year-over-year to ¥410.8 billion ($2.6 billion) for the three months ending December 31, surpassing the average estimate of ¥340.2 billion from three analysts. Japanese banks are experiencing significant earnings growth as they start to benefit from rising interest rates after more than a decade of ultra-loose monetary policy. Additionally, lenders are gaining from divesting stakes in other companies as Japanese firms aim to reduce cross-shareholdings to enhance governance.
Sumitomo Mitsui is the first among Japan’s three largest banks to announce its results, with Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. set to report next week. In the first nine months, Sumitomo Mitsui achieved 98% of its annual net income forecast of ¥1.16 trillion, which remains unchanged. The domestic business was the primary contributor to this growth, alongside gains from stock investments. Domestic loan balances increased by 7% compared to the previous year, benefiting both corporate and individual clients.
However, the bank anticipates recording losses from the sale of “low-profit assets” in the fourth quarter, along with provisions for future risks. It projects that the Bank of Japan’s rate hikes, which have raised the policy rate to 0.5% thus far, will lead to an annualized increase of ¥200 billion in net interest income, with an expected ¥90 billion for the current fiscal year. Each 25 basis-point increase in rates is estimated to generate an additional ¥100 billion.
In a separate announcement, the bank revealed that Chairman Takeshi Kunibe will retire, with Makoto Takashima, currently the chairman of the main lending unit, set to take over on June 27.
