DBRS Confirms Sumitomo Mitsui Banking Corporation at “A,” Stable Trend

DBRS has today confirmed the Issuer Rating and the Long-Term Deposits & Senior Debt of Sumitomo Mitsui Banking Corporation (SMBC or the Bank) and related entities at “A.” The Short-Term Instruments have been confirmed at R-1 (middle). All trends remain Stable. The intrinsic assessment for SMBC is A (low). The long-term rating incorporates the implied support of the Japanese government, adding one notch to the intrinsic assessment (based on the floor rating approach). The ratings of SMBC are based on DBRS’s assessment of Sumitomo Mitsui Financial Group, Inc. (SMFG or the Group).

For the six-month period ended September 30, 2012 (H1 2013), operating profit before provision for loan losses for SMFG fell by 4.3% from the comparable prior-year period. This recent result indicates that SMFG, like its Japanese banking peers, continues to face the following challenges, which have been reflected in the ratings for many years: (1) domestic loan demand is weak, largely as a result of the still-weak domestic economy and intense competition, and (2) net interest margin remained low at 1.02% in H1 2013, which is attributable to competition among the banks for loans and Japan’s near-zero rate monetary policy.

Asset quality is not expected to emerge as a major issue for SMFG, based on its relatively limited exposure to European peripheral countries and the Group’s emphasis on asset quality over the past decade. SMFG also continues to focus on the development of international business to help improve growth. The consolidation of Promise Co., Ltd. in December 2011, now SMBC Consumer Finance Co. Ltd., was the main contributor to the increase in profits year-over-year.

Notes:

All figures are in Japanese Yen unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Global Methodology for Rating Banks and Banking Organisations (June 29, 2012) and DBRS Criteria: Intrinsic and Support Assessments (February 11, 2009), which can be found on our website under Methodologies.

DBRS ratings on Sumitomo Mitsui Banking Corporation of Canada apply to debt that is guaranteed by Sumitomo Mitsui Banking Corporation.