Bottom-Up EquitiesDaily Briefs

Brief Equities Bottom-Up: Sumitomo Mitsui Financial Group – Best House In a Bad Neighborhood and more

In this briefing:

  1. Sumitomo Mitsui Financial Group – Best House In a Bad Neighborhood

1. Sumitomo Mitsui Financial Group – Best House In a Bad Neighborhood

  • A Progressive Bank For Japan: SMFG has adopted some progressive strategies – digital; the growth potential of Asian operations; control efforts; and buoyed capital position. 
  • Returns on SME Loans Have Troughed: In FY 1H19, returns on loans to SMEs stopped declining  as spreads on new loans returned to positive growth. 
  • Fee-based Business Accelerating: Due to SMFG’s expansion of non-deposit/loan operations, its fee-based business has grown rapidly. 
  • Overhead Levels Being Addressed:Management expects to reduce costs by ¥ 50 bn over the next three years and then by another ¥ 50 bn over the medium term. 
  • Capital Strength: SMFG has achieved its capital adequacy ratio target, and growth investments and shareholder returns are now increasing. 
  • Areas of Growth:Priority areas of growth for SMFG include: commercial banking in Asia; high-margin business in Europe and the U.S.; and asset management. 

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