Japanese banks face uncertainty
JAPAN’S third-biggest bank stuck to its full-year forecast yesterday despite reporting robust first-quarter earnings, due to uncertainty about the economic outlook.
Sumitomo Mitsui Financial Group (SFMG) said net profit soared nearly three-fold to 211.8bn yen (£1.55bn) in the three months to the end of June.
Citigroup analyst Hironari Nozaki had forecast the bank would earn a profit of 100bn yen.
SMFG’s strong quarterly results are likely to be mirrored by its bigger rivals, top-ranked Mitsubishi UFJ Financial Group and second-placed Mizuho Financial Group, which will announce earnings tomorrow.
“It was a very strong result but there is a question of sustainability, since the bank achieved topline growth by offsetting a decline in net interest income with highly volatile market income,” said Nana Otsuki, an analyst at UBS Securities Japan. Net interest income is what a bank earns from lending activities.
Japanese banks are seeing a decline in credit costs as the economy stages a moderate pickup, but their core lending to households and businesses remain sluggish.
SMFG president Teisuke Kitayama, who took over the helm in 2005, has been steering the bank in its efforts to build revenue generators beyond its lending business in a mature Japanese market.
SMFG acquired a two per cent stake in Barclays in 2008, and plans to list its shares on the New York Stock Exchange later this year. It also agreed in June to buy a 4.5 per cent stake in Indian lender Kotak Mahindra Bank. Shares in the bank have rise 1.3 per cent so far this year, outperforming the benchmark Nikkei average of a 7.5 per cent loss.