Authors: Anton Bridge and Miho Uranaka
TOKYO (Reuters) – Sumitomo Mitsui Financial Group (NYSE: ) CEO said the company could post more than 1.2 trillion yen ($7.65 billion) in net profit in the year from next April, as Japan’s booming banking sector cashes in on efforts to diversify overseas revenue sources amid normalization interest rates.
The forecast exceeds the previous record target of 1.16 trillion yen for this year, although higher interest rates in Japan and a massive deleveraging of cross-shareholdings have bolstered the current year’s results.
“If we continue to operate as we have done, we should exceed 1.2 trillion next year,” SMFG Chief Executive Officer Toru Nakashima told Reuters in an interview.
Japan’s second-largest lender by assets posted a gain of 196 billion yen on the sale of equity stakes, according to second-quarter earnings results in November. That primarily came from cross-shareholding dispositions, which Nakashima said inflated the bottom line.
“We can’t bet on that. In five years they will be gone,” he said.
SMFG has seen gross profit growth across all of its business segments and Nakashima expects this to continue as large Japanese corporate clients expand overseas and pursue mergers and acquisitions as well as capital investments.
“The domestic business opportunities are really increasing,” he said.
SMFG’s online banking app Olive also exceeded expectations and is expected to turn a profit this financial year ahead of schedule, Nakashima said.
But the group must look for new opportunities during the next medium-term planning period, starting in April 2025, so that its profits do not fall when sales of cross-shareholdings dry up, Nakashima said.
“That’s not enough. I want to achieve continuous profit growth.”
($1 = 156.9600 yen)
