Sumitomo Mitsui 9-month profit tumbles 74 percent

TOKYO - Major Japanese bank Sumitomo Mitsui Financial Group Inc. said Wednesday its net profit for the April-December period tumbled nearly 74 percent due to bad loans and stock losses.

The company, known as SMFG, one of Japan's three "megabanks," reported that net profit for the nine months fell to 83.4 billion yen ($935 million) from 319.5 billion yen during the same period last year.

The bank did not release a quarterly breakdown, but calculations by The Associated Press showed that net profit for the October-December quarter shriveled to 154 million yen from a year-earlier profit of 149 billion yen.

April-December revenue fell 13 percent to 2.8 trillion yen, while pretax profit declined 47 percent to 276.4 billion yen.

Higher interest income and better bond returns were overshadowed by heavy credit costs — mostly bad loan write-offs — which surged to 399.9 billion yen from 238.1 billion yen last year.

The company blamed "the earnings deterioration of borrowers and loss provisions for claims on certain overseas financial institutions against a backdrop of financial market turmoil and global economic slowdown."

Slumping equity markets also hit hard, with losses on its stock holdings totaling 106.1 billion yen.

Still, analysts took the numbers in stride, saying the results were better than expected.

"Obviously, anything down 74 percent year on year can't be described as good," said David Threadgold, a banking analyst with Fox-Pitt Kelton Cochran Caronia Waller. "But I think we were braced for worse."

Credit costs, while substantial, came down in the third quarter, analysts said. The bank's stockholding losses are also milder compared to those at rivals Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc.

"Other banks have a large exposure to the stock market, and so the break even point is much higher," said Kristine Li, an analyst at KBC Securities in Tokyo. "I suspect their numbers could be worse."

Mizuho is scheduled to report earnings on Friday, and Mitsubishi UFJ's results will be released on Feb. 6.

For the full fiscal year through March, the bank left its forecasts unchanged. It expects net profit to fall 61 percent to 180 billion yen on revenue of 3.7 trillion yen.

Analysts, however, say the bank may downgrade its outlook again before the end of the quarter.

Shares of SMFG rose 1.2 percent to 3,360 yen Wednesday on the Tokyo Stock Exchange. Its earnings were released after market closed.

The company's earnings are based on Japanese accounting standards.

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