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Sumitomo Mitsui Financial Group
- Sector: Financial Services
- Sub Sector: Banks
- Region: Japan
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Fundamental View
AS OF 12 Jun 2025After reorganising and building up capital for the full impact of Basel 3, SMFG has in the past few years been acquisitive to build its next phase of growth, and now has a lower capital buffer than Mizuho.
It has a strong retail, mid and large corporate franchise in Japan, but its securities arm SMBC Nikko punches below weight.
Given its size and systemic importance, SMFG is considered too big to fail, and will be supported by the Japanese government if needed.
Business Description
AS OF 12 Jun 2025- The core unit of SMFG is Sumitomo-Mitsui Banking Corp (SMBC), whose main predecessors were Sumitomo Bank and Mitsui Bank.
- SMFG does not have a large trust business as Sumitomo Trust and Chuo Mitsui Trust chose not to join SMFG, but merged with each other to form the separate Sumitomo Mitsui Trust Holdings.
- SMFG's group companies include the securities firm SMBC Nikko, SMBC Trust Bank, SMBC Card Company, SMBC Consumer Finance, Sumitomo Mitsui Finance and Leasing, SMFG India Credit Company (SMICC), Sumitomo Mitsui DS Asset Management, and SMBC Aviation Capital.
- It has been acquisitive over the years, particularly in emerging Asia and leasing assets. In 2021, the group took a 49% stake in Vietnam's FE Credit, 74.9% of Indian NBFI Fullerton Capital (now called SMICC), 4.99% of Philippines' RCBC, and 4.5% of US investment bank Jefferies. In 2022, it increased its stake in RCBC to 20%. In 2023, it acquired a 15% stake in Vietnam's VP Bank, and said it would increase its stake in Jefferies from 4.5% to 15%, and in 2024 took its stake in SMICC to 100%. In 2025 it announced it would take a 20% stake in India's Yes Bank.
Risk & Catalysts
AS OF 12 Jun 2025Similar to the other megabanks, SMFG aims to focus more on the US, and reduce low return RWAs in Europe and Asia ex-Japan.
SMFG has taken stakes in FE Credit (49%) and VP Bank (15%) in Vietnam, Fullerton in India (100%, now renamed SMICC), RCBC in the Philippines (20%), and is acquiring 20% of India’s Yes Bank, to increase its exposure to emerging growth areas. It had previously acquired a bank (Danamon) and auto NBFIs in Indonesia. However, FE Credit faced losses in 2022/23 as a result of the Vietnam slowdown in 2022, leading to JPY 135 bn of goodwill impairments in FY24. RoE on these investments has been poor.
It increased its 4.5% stake in Jefferies to 15%, to develop revenue opportunities for SMBC Nikko. Further investments in SMBC Nikko will be required.
Credit costs have seen volatility, but it has the lowest NPL ratio amongst the megabanks.
Its CET1 ratio is the lowest amongst peers, and it has been tapped by the rating agencies to increase its CET1 ratio buffer.
Key Metric
AS OF 12 Jun 2025| JPY bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Net Interest Revenue/Average Assets | 0.60% | 0.64% | 0.68% | 0.70% | 0.80% |
| Operating Income/Average Assets | 1.27% | 1.23% | 1.26% | 1.39% | 1.41% |
| Operating Expense/Operating Income | 62% | 62% | 61% | 60% | 58% |
| Pre-Impairment Operating Profit / Average Assets | 0.49% | 0.48% | 0.51% | 0.58% | 0.59% |
| Impairment charge/Average Loans | (0.43%) | (0.31%) | (0.22%) | (0.27%) | (0.32%) |
| ROAA | 0.23% | 0.30% | 0.32% | 0.36% | 0.40% |
| ROAE | 4.5% | 5.9% | 6.5% | 7.0% | 8.0% |
CreditSight View Comment
AS OF 16 May 2025SMFG’s banking business had performed well, while its non-bank subsidiaries had underperformed over FY21-22. The group had a better 2H vs a poor 1H23, with improved trading and fee revenues, partially offset by higher credit costs at the non-bank businesses. The group became acquisitive from 2021, taking a 49% stake in a leading Vietnamese NBFI and 15% of its parent (VP Bank), 20% of RCBC of the Philippines, 74.9% of NBFI Fullerton India (now 100%), 4.5% in US IB Jefferies (increasing to 15%), and 20% of India’s Yes Bank for the next stage of growth. Its high CET1 ratio has been whittled down by acquisitions. FY24 results were boosted by share sales and structured investment trusts. Govt. support is assured. We see 20 bp of upside from current levels.
Recommendation Reviewed: May 16, 2025
Recommendation Changed: January 27, 2025
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