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Tuesday, Nov. 20, 2007
Sumitomo Mitsui logs 30% profit drop
Subprime woes exacted a toll, as did Promise, OMC stock price falls
Sumitomo Mitsui Financial Group Inc., Japan's third-biggest banking group by assets, said Monday its group net profit dropped 30 percent to ¥170.6 billion in the six months to September partly due to losses resulting from the U.S. subprime loan crisis.
Sumitomo Mitsui also attributed the losses to falling stock prices of affiliate consumer lender Promise Co. and OMC Card Inc., a credit card firm that Sumitomo Mitsui partially bought in July from the Daiei Inc. supermarket chain.
But profit from its core banking business increased by ¥79.3 billion from the same period last year to ¥390.9 billion.
Losses incurred from the mortgage loan woes reached ¥32 billion in the April-September period, the banking group said, adding it expects the losses to balloon to ¥87 billion for the full business year to March.
"I would not say the (subprime-linked) losses are small," Sumitomo Mitsui President Teisuke Kitayama said. "But since we sold ¥350 billion worth of related securities in the first quarter of this fiscal year, the losses were limited."
Sumitomo Mitsui booked ¥4 billion in losses through the ¥350 billion in securities sales.
Kitayama stressed that the unrealized profit from stocks and securities owned by the group amounted to ¥1.5 trillion as of the end of September, easily offsetting the losses from the mortgage loan upheaval.
However, the value of securities linked to subprime mortgage loans continued to fall since the end of September, which is likely to cause Sumitomo Mitsui more losses in the latter half of this business year.
As of the end of September, the ¥70 billion worth of securities related to the U.S. mortgage loans the banking group had was devalued by ¥18 billion to ¥52 billion.
But as of Nov. 8, the figure had fallen to ¥20 billion, or less than a third of the initial price, Sumitomo Mitsui said.
"The market price (for securities related to U.S. mortgage loans) as of the end of October is about 20 percent of the invested price," Kitayama said.
Sumitomo Mitsui, which currently has a 4.43 percent stake in OMC Card, will become the credit card company's biggest shareholder, with 31.8 percent of outstanding shares after a second transaction takes place in February. The combined sales will cost Sumitomo Mitsui some ¥74.8 billion.
The Sumitomo Mitsui banking group includes its core business, Sumitomo Mitsui Banking Corp., SMBC Friend Securities Co. and the think tank Japan Research Institute.
Chuo Mitsui down
Chuo Mitsui Trust Holdings Inc. said Monday its consolidated net profit in the first six months of fiscal 2007 fell 46.9 percent from a year before to ¥35.57 billion as it faced an increased tax burden and lost one-off gains from employee pension trusts posted in the previous fiscal year.