* Net profit Y734.4 bln vs Y706.5 bln year prior
* Expects profit to fall 4.7 pct in current year (Adds further earnings details, context)
TOKYO, May 14 (Reuters) - Sumitomo Mitsui Financial Group Inc (SMFG) on Monday reported a 3.9 percent rise in net profit for the year ended March, reaching its highest in three years, helped by lower bad loan costs and gains from equity holdings.
Japan’s second-largest bank by market valuation said profit totalled 734.4 billion yen ($6.70 billion), versus 706.5 billion yen a year earlier. The result beat the 725.3 billion yen average of 14 analyst estimates compiled by Thomson Reuters.
Japanese banks have been suffering diminishing returns from loans to both retail and corporate customers due in part to the Bank of Japan’s five-year-old economic stimulus programme, under which the central bank charges for some excess reserves private lenders deposit with it. That effectively forces banks to increase lending, raising competition and pushing down loan interest rates.
At SMFG’s core banking unit, net interest income from domestic operations - or profit from lending - fell 22 percent to 707.3 billion yen.
Helping SMFG’s earnings was a decline in costs to cover delinquent loans and gains booked from sale of equity holdings.
For the year ending March 2019, SMFG forecast profit of 700 billion yen, down 4.7 percent from the just-ended year. That compared with an average analyst estimate of 704.3 billion yen. ($1 = 109.5400 yen) (Reporting by Taiga Uranaka Editing by Christopher Cushing)