Sumitomo Mitsui Financial Group cuts net profit outlook

The U.S. subprime mortgage crises made Sumitomo Mitsui Financial Group Inc. cut its net profit outlook by 23 percent.

Japan's No. 3 financial group by market capitalization said it expects a group net profit of 170 billion yen (US$1.49 billion; EUR1.04 billion) for its fiscal first half, down from its previous outlook for net profit of 220 billion yen.

The company is set to release earnings report Nov. 19.

Sumitomo Mitsui cited an appraisal loss of about 18 billion yen (US$157.34 million; EUR109.96 million) due to its exposure to residential-mortgage backed securities and asset-backed securities amid the global credit turmoil sparked by defaults in U.S. subprime mortgages to people with poor credit histories.

It said that provisions of about 11 billion yen (US$96.15 million; EUR67.2 million) for subprime-related losses, as well as increasing credit costs, weighed on its profit for the first fiscal half.

The bank revised the size of credit costs to 115 billion yen (US$1.01 billion; EUR710 million), up from a previous forecast for 70 billion yen (US$611.89 million; EUR427.63 million), as some borrowers' business conditions have worsened.

But Sumitomo Mitsui raised its group net profit outlook for the fiscal year ending in March to 570 billion yen (US$4.98 billion; EUR3.48 billion) from 540 billion yen, due to an extraordinary profit for the merger of its leasing unit Sumitomo Mitsui Finance & Leasing with Sumitomo Mitsui Finance & Leasing.