July 30, 2019 / 7:07 AM / 10 months ago

UPDATE 1-Japan's SMFG says first-quarter net profit fell 5% as retail business struggles

* First-quarter net profit Y216 bln vs Y227 bln a year earlier

* Keeps full-year net profit forecast at Y700 bln (Adds further earnings details, context)

By Takashi Umekawa

TOKYO, July 30 (Reuters) - Sumitomo Mitsui Financial Group Inc (SMFG) on Tuesday reported a 5% decline in first-quarter net profit, saying its retail business was hit by adverse market conditions.

Profit reached 215.7 billion yen ($1.99 billion) for the three months through June, versus 227 billion yen in the same period a year earlier, Japan’s second-largest lender by assets said in a stock exchange filing.

For the full year through March, SMFG reiterated its forecast for profit of 700 billion yen. That compared with the 720.1 billion yen average of 11 analyst estimates compiled by Refinitiv.

SMFG is the first to report earnings among major Japanese lenders, which continue to struggle with weak returns on loans in part due to the central bank’s ultra-loose monetary policy aimed at reducing the cost of loans to stimulate the economy.

At its core bank unit, the domestic loan-to-deposit spread - the difference between interest earned on loans and interest paid on deposits - fell to 0.92% from 0.95% a year prior.

Boosting its bottom line, however, SMFG said it gained 30.9 billion yen from the sale of equity holdings.

SMFG has long been the leanest among Japan’s three megabanks in terms of expenses as a portion of revenue. It said its expense ratio was 63.4% in the first quarter, up about four percentage points from 59.6% a year earlier.

Peers Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc are scheduled to announce first-quarter earnings on Wednesday. ($1 = 108.6100 yen) (Reporting by Takashi Umekawa; Editing by Christopher Cushing)

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