Sumitomo Mitsui to Benefit From Rising Interest Margin and Improved Capital Flexibility

Sumitomo Mitsui Financial Group, with a 7.1% share of domestic loans and 8.9% of deposits as of March 2023, is one of Japan’s Big Three banking groups. Compared with its two megabank rivals, SMFG has a greater focus on retail customers and small and medium-size enterprises rather than large corporate clients. This has given it a higher average asset yield in Japan but we don't think it has necessarily meant higher credit costs in the core banking business. SMFG has strengths in consumer finance, where it owns 100% of the Promise business, and in credit cards. Like the other two Japanese megabanks, SMFG has expanded its overseas business significantly since 2010, with overseas loans constituting 40% of total loans as of March 2023, compared with 15% in March 2011. SMFG also owns Indonesian bank BTPN, Fullerton India Credit, around 20% of Hong Kong-based Bank of East Asia, 20% of Rizal Commercial Banking in the Philippines, 18% of Cambodian lender Acleda, and 49% of Vietnamese nonbank lender VPBank SMBC Finance.