By Anton Bridge
TOKYO (Reuters) – Japan’s Sumitomo Mitsui Financial Group said third-quarter net profit surged 54% on a boost in interest income, putting it on track to post record annual profit and eclipse its forecasts for the year.
Long-awaited interest rate hikes from the country’s central bank after years of deflation helped push up loan margins, while lending grew on the back of healthy merger and acquisition activity which included some large leveraged buyouts.
Companies’ demand for working capital increased, as did loan-related fees. SMFG’s wealth management business also grew fee income now that Japanese households have moved towards investing in assets as inflation eats away at the value of cash holdings.
Net profit for October-December hit a record 410.8 billion yen ($2.7 billion).
For the first nine months of the financial year, SMFG logged net income of 1.14 trillion yen, just shy of its prediction of 1.16 trillion yen in annual income.
Analysts expect SMFG to post annual net profit of 1.2 trillion yen, according to an LSEG consensus estimate.
Asked why the lender had not lifted its annual net income estimate, a spokesperson said the bank was considering the sale of certain assets in the current quarter and is making allowances for future risks such as the risk of a return to high levels of inflation abroad.
The Bank of Japan’s gradual exit from its ultra-easy monetary policy has widened the spread between deposit and lending rates after years of squeezed margins.
Three interest rate hikes since last March will contribute an additional 90 billion yen to net interest income in the year through March, SMFG said, while any additional hike of 0.25% would add a further 100 billion yen annually.
($1 = 155.2700 yen)
(Reporting by Anton Bridge; Editing by Edwina Gibbs)
