SMFG Q1 FY2027: Net profit up 33%, revenue rises on higher rates

SMFG posted ordinary income of ¥2,850.4 billion (+16.6% YoY), ordinary profit of ¥693.1 billion (+43.4%), and net income of ¥501.4 billion (+33.0%) in the first quarter of FY2027, achieving strong double-digit growth at all levels. The performance was driven by rising domestic interest rates, boosting net interest income, especially loan interest, with gross profit rising 29.0% to ¥1,403.4 billion. Fee income from solutions such as M&A advisory, derivatives, and retail wealth management climbed 18.8% to ¥473.8 billion. Credit costs were held nearly flat at ¥74.8 billion, while operating expenses rose ¥12.5 billion, largely absorbed by top-line expansion.

All four segments grew gross profit year-on-year, with Retail and Markets leading. Retail and Markets segments posted sharp profit gains. The Wholesale Business segment posted gross profit of ¥372.1 billion (+34.1%) and business profit of ¥271.5 billion (+23.8%), driven by higher loan interest and solution fees. Retail Business gross profit reached ¥428.8 billion (+20.8%), and business profit surged 62.3% to ¥120.9 billion, thanks to housing and card loan interest and strong investment trust/insurance fees. Global Business gross profit rose 7.7% to ¥386.7 billion on yen depreciation and Asian loan growth, but business profit fell 18.1% to ¥151.2 billion due to higher costs and equity-method losses. Markets Business saw gross profit jump 49.1% to ¥233.5 billion and business profit climb 55.7% to ¥178.9 billion, driven by bond trading and derivatives amid rate volatility. Head Office/Other recorded a negative gross profit of ¥17.7 billion.

Total assets at end-June 2026 stood at ¥327,469.6 billion, slightly down from March 2026 as liquid assets were reduced, but loans increased by ¥2,129 billion to ¥119,758.2 billion and deposits were steady at ¥186,759.3 billion. The equity ratio improved to 4.9% from 4.8%. Net assets rose ¥307.6 billion to ¥16,240.7 billion, helped by gains on securities and translation adjustments. SMFG maintained its dividend plan for FY2027: an annual ¥90 per share (¥45 after a 2-for-1 stock split scheduled for September 30, 2026), up sharply from ¥157 in the prior year on a pre-split basis, implying a payout ratio of about 48%. The company reiterated its shareholder-friendly stance, with share buyback programs already authorized.

Key risks noted in the disclosure include: deterioration in domestic or global economic conditions that could pressure net interest income and credit costs; potential fair-value declines on securities holdings as rates rise, despite a positive ¥34.4 billion OCI balance; increase in non-performing loans and credit costs, though the current NPL ratio is low at 0.81%; failure of business strategies such as M&A or overseas expansion; and regulatory and tax changes, including stricter Basel rules. Particular attention falls on the risk that further BOJ rate hikes push up deposit rates, eroding lending margins. The global segment’s profit volatility remains a concern given sensitivity to macro and FX swings.

SMFG maintained its full-year net income forecast of ¥1,700.0 billion, up 7.4% from the prior year. Ordinary profit in Q1 already reached about 40.8% of the annual target implied by this profit goal, indicating a strong start. However, management refrained from raising the outlook, citing remaining uncertainties in interest rates and global economies. The forecast implies a stable performance trajectory, with potential for upward revision if favorable conditions persist.