Sumitomo Mitsui Financial Group saw its net profit fall 21 percent in October-December after hefty bond trading gains enjoyed in the previous two quarters petered out, but it kept its full-year outlook for a doubling of profit. SMFG and rivals saw their earnings buoyed by gains from bond trading in the first half, when prices of both US Treasury debt and Japanese government bonds rose sharply.
But they were unable to receive such a boost in the latest quarter amid falls in the bond market, while their core lending activities remained sluggish as households and businesses continue to be skittish about spending with the economy still weak. Chikako Horiuchi, analyst at Fitch Ratings in Tokyo, said Japanese banks will likely struggle to boost revenues this year. "But if they can control credit costs, we can expect a decent bottom line," she said.
SMFG, the first of Japan's top three lenders to report results, said net profit came to 97.6 billion yen ($1.2 billion) for the October-December quarter, down from 124.3 billion yen in the same period a year earlier. The bank only disclosed nine-month results, and the quarterly figures were calculated by Reuters. The latest quarter's net profit was less than half of what the bank earned in the first and second quarters respectively. SMFG's core commercial banking unit suffered 13.5 billion yen loss on JGB and other bond trading in the quarter, following strong trading gains in the first half.