Sumitomo Mitsui Profit Beats Estimates as Rate Hikes Kick In

(Bloomberg) — Sumitomo Mitsui Financial Group Inc.’s profit rose more than analysts estimated in the fiscal third quarter, as the Bank of Japan’s interest-rate hikes put it on track to deliver record annual earnings.
Net income at Japan’s second-largest bank rose 54% from a year earlier to ¥410.8 billion ($2.6 billion) for the three months ended Dec. 31, according to calculations based on nine-month results released Wednesday. That beat the ¥340.2 billion average of three analysts’ estimates compiled by Bloomberg.
Japanese banks are enjoying bumper earnings as they begin to benefit from rising interest rates following more than a decade of ultra-easy monetary policy. Lenders are also getting a boost by selling stakes in other firms as Japanese companies seek to unwind cross-shareholdings to improve governance.
Read more of the results here
Sumitomo Mitsui is the first of Japan’s three largest lenders to release results. Mitsubishi UFJ Financial Group Inc., the nation’s biggest bank, and Mizuho Financial Group Inc. are scheduled to report next week.
In the first nine months, Sumitomo Mitsui earned 98% of its ¥1.16 trillion annual net income forecast, which it left unchanged. Domestic business was the main driver, along with gains on stocks, it said.
Domestic loan balances grew 7% from a year earlier, spread across corporate and individual clients.
Still, the bank said it expects to book losses from the sale of “low-profit assets” in the fourth quarter, along with provisions to prepare for future risks.
It estimated that the Bank of Japan’s rate hikes — which have taken the policy rate to 0.5% so far — will generate an annualized ¥200 billion increase in net interest income. For the current fiscal year, the figure is expected to be ¥90 billion yen. Every 25 basis-point increase would generate an additional ¥100 billion, it said.
Separately, the bank said Chairman Takeshi Kunibe will retire. He will be replaced by Makoto Takashima, who is currently chairman of the main lending unit, on June 27.
–With assistance from Anshuman Daga.
(Updates with details of results from the fifth paragraph)
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