Japan bank SMFG’s Q1 profit jumps 3pc on robust loan demand

TOKYO: Sumitomo Mitsui Financial Group recorded a 33percent rise in first-quarter profit, marking the latest Japanese financial institution to weather huge swings in global markets and trade and stay on track for record profits.

Strong loan demand from SMFG’s clients, which are primarily made of up of large, listed Japanese firms with a global footprint, persisted despite rocky energy markets and supply chain disruption brought about by war in the Middle East.

“The anticipated negative impact of Middle East-related risks has not yet materialised,” SMFG said in an earnings presentation. Japan’s second largest lender by assets said on Friday net profit for the April-June quarter was 501.4 billion yen (USD3.13 billion) compared with 376.9 billion yen in the same year-ago period. SMFG has also benefited from rising interest rates as Japan exits deflation, lifting lending margins.

SMFG’s domestic loan to deposit spread rose to 1.31percent from 1.08percent a year previously, while its loan balance grew 7percent to 113.4 trillion yen at the end of June. Earlier on Friday the Bank of Japan held rates at 1percent, although a majority of analysts polled by Reuters expect a hike to 1.25percent before the end of the year. SMFG estimates that each incremental rise of 0.25percent translates to an additional 150 billion yen of interest income over five years. The bank identified further upside in adjusting its Japanese government bond portfolio. Over the past quarter, it increased its exposure to longer-dated, higher-yielding JGBs, lifting the share of bonds maturing in five to 10 years to over 50percent of its 11.4 trillion yen portfolio. As with other global banks, volatile markets buoyed trading flows with quarterly gross profit in SMFG’s global markets unit rising sharply by 74percent year-on-year. SMFG maintained its annual profit forecast for the year ended March 2027 at 1.7 trillion yen.