Sumitomo Mitsui Financial Group, Japan's third-largest bank, said it would fall about 20 percent short of its earnings estimate for the year that ended in March, hurt by losses on its stock holdings and higher provisions for bad loans.
The bank also said it planned to raise its full-year dividend by 20 percent, a move that could prevent a stock sell-off following the lower profit estimates.
Sumitomo Mitsui has so far lost 99 billion yen ($949 million) on investments related to risky U.S. mortgages, much less than larger rival Mizuho Financial Group, which estimates $5.5 billion in subprime-related losses for the full year.
While Mizuho has cut its full-year estimates three times already, this was Sumitomo Mitsui's first profit warning for the year that ended on March 31.
Sumitomo Mitsui said group net profit likely totalled 460 billion yen in the year, down from its previous estimate of 570 billion yen.
That is 18 percent short of the average estimate of 559.2 billion yen in a poll of 11 analysts by Reuters Estimates.
Sumitomo Mitsui said in a statement it was hurt by the market downturn, which sparked 140 billion yen in losses on its stock portfolio.
Japan's benchmark Topix index has fallen about 9 percent so far this year, and 20 percent over the past 12 months.
The bank was also forced to raise provisions against bad loans by 40 billion yen, reflecting the worsening outlook for the world's second-largest economy.
It raised its full year dividend estimate to 12,000 yen from its previous estimate of 10,000 yen.