Sumitomo Mitsui axes forecast on bad loans

Sumitomo Mitsui Financial Group Inc, Japan's third-biggest bank by revenue, cut its full-year profit forecast 63 percent after credit market losses and bad loans triggered a plunge in first-half earnings.

Net income will drop to 180 billion yen ($1.9 billion) in the year through March, Tokyo-based Sumitomo Mitsui said in a statement yesterday, scrapping a May forecast of 480 billion yen. First-half profit dropped 50 percent to 85 billion yen, according to a preliminary earnings statement.

Bad-loan costs more than doubled to 220 billion yen in the six months through September as Lehman Brothers Holdings Inc collapsed and bankruptcies surged in Japan. The credit market turmoil that opened the door for Sumitomo Mitsui to invest 500 million pounds in Barclays Plc in July is now eroding the value of that transaction and making it harder for the Japanese bank's customers to repay loans.