TOKYO Sumitomo Mitsui Financial Group has proved a major beneficiary of the end of deflation in Japan, posting a rise in first-quarter profit of 49.7% on Friday as margins and volumes shot up at its core lending business.

Japan's second-largest bank maintained its full-year profit target and calculated an additional ¥70-billion windfall over this financial year from the Bank of Japan's interest rate hikes in March and July this year.

The growth in the bank's quarterly profit exceeded that of fellow megabanks Mizuho Financial Group and Mitsubishi UFJ Financial Group (MUFG), which reported on Wednesday and Thursday respectively.

The end of deflation in Japan has spurred demand for loans and corporate action such as mergers and acquisitions among Japanese companies, while the Bank of Japan's first interest rate hike in 17 years in March pushed up loan spreads.

At Sumitomo Mitsui, large corporate clients drove the increase in loan volumes while the bank's retail businesses, including wealth management, consumer finance and payments, also performed well, with gross profit increasing more than 30%.

On Wednesday, the BOJ raised the short-term interest rate to 0.25%, fuelling expectations of yet higher profits to come due to wider spreads between deposit and lending interest rates.

Sumitomo Mitsui recorded a profit of ¥371.4 billion (US$2.49 billion or RM11.2 billion) in the April-June period, up from ¥248 billion a year earlier.

It maintained its record full-year net profit forecast of ¥1.06 trillion - the first time it will exceed the ¥1 trillion mark - in the 12 months to March 2025.

Mizuho's first-quarter profit rose 17.9% while Japan's largest lender by assets, MUFG, posted a rise of 11.7%, adjusted for a change in accounting period.

  - Reuters