SMFG’s Third Quarter Net Profit in Japan Falls 8.4% Due to Credit Costs
TOKYO (Reuters) – Sumitomo Mitsui Financial Group Inc (SMFG), Japan’s second-largest lender by assets, on Tuesday reported an 8.4% drop in third-quarter net profit, mainly due to an increase in credit-related costs.
SMFG posted a profit of 163.8 billion yen ($ 1.56 billion) for the three months to December, up from 178.9 billion yen a year ago, according to Reuters calculations based on nine-month cumulative figures disclosed in an exchange record.
SMFG reiterated its profit forecast of 400 billion yen for the full year through March. This compares to the 500.1 billion yen average of estimates from 12 analysts compiled by Refinitiv.
The lender, which has already exceeded its annual profit target, has maintained its forecast for the full year as the situation becomes “increasingly uncertain” due to the coronavirus outbreak, a spokesperson says of the society.
Japanese bank profits, already shaken by years of negative interest rates and shrinking population, are expected to come under pressure from increased credit losses due to the COVID-19 pandemic.
SMFG recorded 234.8 billion yen in credit-related costs for the nine months through December, up from 96.5 billion yen in the same period a year ago.
Although credit-related costs weighed on its profits, they were lower than expected as the lender estimated costs for the current fiscal year at 450 billion yen.
Falling credit costs bode well for the earnings outlook for local banks with an expected recovery in the world’s third-largest economy, which suffered its biggest post-war slump in April-June last year.
Japan’s economy will likely return to pre-COVID-19 pandemic levels as early as March next year, Bank of Japan Governor Haruhiko Kuroda said last month.
The number of bankruptcies in Japan amounted to 1,751 in the third quarter, down 20.8% from the previous year, according to research firm Tokyo Shoko Research.
Reporting by Takashi Umekawa; Editing by Christian Schmollinger, Kim Coghill and Amy Caren Daniel