Sumitomo Mitsui braces for tariff fallout with more buffers
Sumitomo Mitsui Financial Group is shoring its buffers to prepare for U.S. President Donald Trump's trade war, even as it forecast another year of record profit.
Japan's second-largest lender expects net income to climb about 10% to ¥1.3 trillion ($8.8 billion) in the year that started in April, it said on Wednesday. That is slightly less than the ¥1.37 trillion average estimate of analysts as the company said the U.S. tariff measures may have a ¥100 billion impact on profit.
Tokyo-based Sumitomo Mitsui is the first of Japan's biggest banks to give profit guidance as earnings drivers come under strain from Trump's tariffs. Lending income has benefited from the Bank of Japan's interest-rate hikes — a campaign that is now in doubt as recession fears mount.
Net income for the fourth quarter tumbled 75% to ¥42 billion as the bank booked losses on bonds and securities trading and set aside ¥90 billion in "forward-looking provisions' for "recession risks initiated by U.S. tariffs' and high interest rates, Sumitomo Mitsui said in a presentation. It still beat its ¥1.16 trillion profit goal for the year, posting a record ¥1.18 trillion.
The bank's clients are becoming cautious about making deals and investments, CEO Toru Nakashima said at a briefing in Tokyo. Companies in the U.S. have paused mergers and equity underwriting transactions, he added.
For Sumitomo Mitsui, too, Nakashima said now is not the time to aggressively pursue more acquisitions.
His hesitation comes after a flurry of dealmaking to expand globally. The company's main banking unit last week agreed to buy a 20% stake in India's Yes Bank for about 135 billion rupees ($1.6 billion), as it seeks opportunities in faster-growing markets. It also clinched a deal to expand in private credit in the U.S.
Sumitomo Mitsui unveiled plans to buy back up to 1% of its shares for as much as ¥100 billion and cancel them. It will consider further repurchases this fiscal year, depending on performance and capital conditions.
Bank stocks are among the worst performers in Japan since Trump announced his so-called reciprocal tariffs on April 2. Shares of Sumitomo Mitsui have slid about 12% from an 18-year high in March.
The Bank of Japan earlier this month slashed its growth forecasts, citing "extremely high' uncertainties. Japan's economy probably shrank in the first quarter, even before the tariffs started hitting the country in earnest.
Sumitomo Mitsui said bad-loan costs are likely to reach ¥300 billion this fiscal year, down from ¥344.5 billion in the previous year.
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