KBRA Affirms Ratings for Sumitomo Mitsui Financial Group, Inc.
18 Oct 2024 | New York
KBRA affirms the senior unsecured debt rating of A and the short-term debt rating of K1 for Sumitomo Mitsui Financial Group, Inc. (NYSE: SMFG) (“the group”), an international financial services group. KBRA also affirms the deposit and senior unsecured debt ratings of A+ and the short-term deposit and debt ratings of K1 for Sumitomo Mitsui Banking Corporation (“SMBC”). The Outlook for all long-term ratings is Stable.
| This credit rating is an unsolicited credit rating | |
|---|---|
| With Rated Entity or Related Third-Party Participation | No |
| With Access to Internal Documents | No |
| With Access to Management | No |
The ratings are based on SMFG’s diversified business model, with a strong market position in Japan, combined with sound financial fundamentals including healthy asset quality, solid capital levels, a comfortable liquidity profile, and profitability historically stronger than domestic peers. Revenue is supported by the group’s fee-based businesses. However, profitability remains modest relative to international peers reflecting the structure and competitive nature of the Japanese banking industry with its ultra-low interest rates. That said, recent interest rate increases by the Bank of Japan could allow interest spreads to widen and benefit the group in coming quarters. SMFG’s diversified business model continues to help the group to navigate challenging global economic conditions. That said, KBRA expects earnings to be under pressure from higher loan impairment charges and weak economic recovery. SMFG has a solid funding profile, with a large base of stable domestic deposits. However, the group remains somewhat reliant on wholesale funding in foreign currencies to support its overseas operations. Asset quality is likely to weaken, although this should be manageable given the group’s diversified portfolios and conservative underwriting standards. SMFG has a solid capital position and a CET1 ratio in line with the domestic peers. In addition to the group’s fundamental credit strengths, the ratings also reflect SMFG’s strong market position in Japan and the high likelihood of government support in the event of need.
The ratings, used by KBRA’s financial institutions and CMBS teams, were not solicited by SMFG, and SMFG did not participate in the rating process.
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