Title: Japan's Sumitomo Mitsui reports Q1 profit jump, Mizuho suffers drop

Jul 29, 2022 04:51AM ET

By: AnalysisWatch

Japan's Sumitomo Mitsui (NYSE:SMFG) Financial Group Inc reported a bigger-than-expected increase in first-quarter net profit thanks to improved economic conditions, while higher credit costs weighed on rival Mizuho Financial Group Inc.

Sumitomo Mitsui, Japan's second-largest lender, said demand for loans is coming back in commercial and industrial lending, as well as at the bank's credit card and consumer finance business units.

Eased pandemic curbs have helped revive commercial activities, boosting the need for funds and investments in Japan and abroad,

Net profit for the April-June period rose 24.2% from a year ago to 252.4 billion yen ($1.90 billion), far exceeding an average estimate of 156.33 billion yen from two analysts surveyed by Refinitiv.

In contrast, Mizuho Financial Group Inc, Japan's third-largest lender by assets, reported a drop of 36% in first-quarter net profit from a year ago, when earnings were boosted by tax-related gains.

Mizuho also took additional loan loss provisions for its $3- billion exposure to auto parts supplier Marelli Holdings Co, which entered a court-led restructuring process after a voluntary debt workout failed to gain full support.

But Mizuho said it saw brisk demand for loans overseas, as businesses were attracted to lower costs for loans in relation to fund raising in capital markets.

Mizuho's profit for the April-June quarter came in at 159.29 billion yen ($1.20 billion), beating the average of 115.25 billion yen estimate.

Both Sumitomo Mitsui and Mizuho maintained their full-year net profit forecast at 730 billion yen and at 540 billion yen, respectively, citing various uncertainties including the war in Ukraine.

Corporate bankruptcies in Japan have remained at historical lows, falling 1.2% from a year earlier to 3,045 cases in the first half of this calendar year, according to research firm Teikoku Databank.

But with zero-interest loans for pandemic-hit small businesses ending and materials costs rising, Teikoku now predicts a gradual upturn in bankruptcies in the second half.

($1=132.6800 yen)