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Sumitomo Mitsui Financial Group
- Sector: Financial Services
- Sub Sector: Banks
- Region: Japan
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Fundamental View
AS OF 23 Sep 2025After reorganising and building up capital for the full impact of Basel 3, SMFG has recently 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 23 Sep 2025- The core unit of SMFG is Sumitomo-Mitsui Banking Corp (SMBC), whose main predecessors were Sumitomo Bank and Mitsui Bank.
- 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.
- 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.
- 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 24% stake in India's Yes Bank, and increase its Jefferies stake to 20%.
Risk & Catalysts
AS OF 23 Sep 2025SMFG has the strongest Japan retail franchise amongst its peers, and a very strong corporate banking franchise.
Similar 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 made a number of acquisitions and taken stakes in banks and NBFIs in Vietnam, the Philippines, India and Indonesia. The group took JPY 135 bn of goodwill impairments in FY24 on its Vietnam investments. RoE on these investments has been poor.
It is increasing its 15% stake in Jefferies to 20%, to develop revenue opportunities for SMBC Nikko. Further investments in SMBC Nikko will be required.
Credit costs have seen volatility and its NPL ratio increased in the last quarter.
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 23 Sep 2025| JPY bn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| Net Interest Revenue/Average Assets | 0.64% | 0.68% | 0.70% | 0.82% | 0.87% |
| Operating Income/Average Assets | 1.23% | 1.26% | 1.39% | 1.44% | 1.51% |
| Operating Expense/Operating Income | 62% | 61% | 60% | 58% | 55% |
| Pre-Impairment Operating Profit / Average Assets | 0.48% | 0.51% | 0.58% | 0.60% | 0.76% |
| Impairment charge/Average Loans | (0.31%) | (0.22%) | (0.27%) | (0.32%) | (0.27%) |
| ROAA | 0.30% | 0.32% | 0.36% | 0.41% | 0.52% |
| ROAE | 5.9% | 6.5% | 7.0% | 8.0% | 10.3% |
CreditSight View Comment
AS OF 05 Aug 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, 1Q25 was a flat quarter. Govt. support is assured. We like its PerpNC10 AT1s for duration.
Recommendation Reviewed: August 05, 2025
Recommendation Changed: August 05, 2025
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