SMFG posts rise in profit, forecasts modest growth

TOKYO (Reuters) - Sumitomo Mitsui Financial Group reported a 5 percent rise in annual profit as bond sales helped offset subprime losses, and it forecast modest growth this year.

SMFG, which has avoided most of the subprime damage that tore through larger rival Mizuho Financial Group, reported group net profit of 461.54 billion yen ($4.4 billion) for the year that ended in March.

That compares with an average estimate of 456.5 billion yen in a poll of seven analysts by Reuters Estimates. The results were largely expected after the bank cut its estimate by 20 percent to 460 billion yen last month.

SMFG also said it lost 93 billion yen in subprime-related losses for the year to March 2008, just a sliver of the 645 billion yen Mizuho lost on subprime-related investments.

For the year to March 2009, SMFG forecast a profit of 480 billion yen. The market consensus is for 547.8 billion yen.

During the last year, SMFG has replaced Mizuho as Japan's second-largest bank by market value, following a steep sell-off in Mizuho stock.

SMFG shares lost 22 percent in the January-March quarter, underperforming a 19 percent drop on Tokyo's banking index IBNKS.

(Reporting by David Dolan)