RPT-UPDATE 1-SMFG Q1 profit falls 43 pct, hurt by market slump

Mon Jul 30, 2012 4:09am EDT

* April-June net profit Y117.8 bln, vs 206.6 bln a year earlier

* Impairment losses on its equity portfolio hurt profits

TOKYO, July 30 (Reuters) - Sumitomo Mitsui Financial Group on Monday reported a 43 percent f all in its financial first quarter profit, dragged down by impairment losses on its equity portfolio amid a market slump.

SMFG, Japan' third-largest lender by assets, was the first among the country's top banks to announce April-June results, with Mitsubishi UFJ Financial Group and Mizuho Financial Group due to follow on Tuesday.

The bank said its quarterly net profit was 117.8 billion yen ($1.5 billion), down from 206.6 billion y en a year earlier.

SMFG and its domestic rivals suffered sharp falls in the value of their equity holdings during the April-June period, when the benchmark Nikkei average declined 10.7 percent.

Japanese banks have massive share portfolios due to the traditional business practice of taking equity stakes in their clients.

With little exposure to Europe's troubled economies, Japanese banks are seen as well-positioned to take advantage of European rivals' retreat from Asia and other regions, while weak growth prospects at home have put further pressure on Japanese lenders to accelerate their overseas push.

Last month, SMFG completed the $7.3 billion acquisition of Royal Bank of Scotland's aircraft leasing business.

SMFG kept its full-year net profit forecast at 480 billion yen, down 7.4 percent from a year earlier, below an average estimate of 494.4 billion yen in a poll of 16 analysts by Thomson Reuters.

Shares of SMFG have risen 16 percent so far this year, outperforming a 1.9 percent gain in benchmark Nikkei average .

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