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Silver Point

Thomas J. Monaco

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Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

Sumitomo Mitsui Financial Group / Equity Bottom-Up

Sumitomo Mitsui Financial Group (8316 JP)

<p><em><strong>* Pre-COVID-19 Challenges:</strong></em>SMBC Americas Holdings (8316.JP) [SMBCA] had a number of challenges even prior to the impact of COVID-19, which included: remaining profitable after two consecutive quarters of losses due to volatile capital markets revenues; weak NIMs attributed to a wholesale funded balance sheet; and an elevated cost structure with an efficiency and overhead ratio of 70.6% and 4.63% at 4Q19, respectively;</p><div><p><em><strong>*  COVID-19 Earnings Impact:</strong></em>Our “burn down” results for SMBCA suggest that the 4Q19 Tier 1 capital ratio would decline from 15.9% to 12.4% - implying that it would remain “well-capitalized”. Nevertheless, we believe that COVID-19 will be more of a significant earnings event which would amount to close to 10 years of SMBCA’s operating results; and</p></div><div><p><em><strong>* SMFG’s Chronic Challenges:</strong></em> Sumitomo Mitsui Financial Group (8316.JP) [SMFG] relies quite heavily on lower quality volatile sources of trading revenue, has significant Softbank risk, and it expanded late to USD-based Asia. The current environment is likely to cause a bit of delay in partnership expansion as well. SMBCA’s earnings at risk of USD 1 bn should translate into 1.9% of SMFG’s bottom-line. </p></div>

* Pre-COVID-19 Challenges:SMBC Americas Holdings (8316.JP) [SMBCA] had a number of challenges even prior to the impact of COVID-19, which included: remaining profitable after two consecutive quarters of losses due to volatile capital markets revenues; weak NIMs attributed to a wholesale funded balance sheet; and an elevated cost structure with an efficiency and overhead ratio of 70.6% and 4.63% at 4Q19, respectively;*  COVID-19 Earnings Impact:Our “burn down” results for SMBCA suggest that the 4Q19 Tier 1 capital ratio would decline from 15.9% to 12.4% - implying that it would remain “well-capitalized”. Nevertheless, we believe that COVID-19 will be more of a significant earnings event which would amount to close to 10 years of SMBCA’s operating results; and* SMFG’s Chronic Challenges: Sumitomo Mitsui Financial Group (8316.JP) [SMFG] relies quite heavily on lower quality volatile sources of trading revenue, has significant Softbank risk, and it expanded late to USD-based Asia. The current environment is likely to cause a bit of delay in partnership expansion as well. SMBCA’s earnings at risk of USD 1 bn should translate into 1.9% of SMFG’s bottom-line. 

Mitsubishi UFJ Financial (MUFG) (8306 JP)

Sumitomo Mitsui Financial Group (Sponsored Adr) (SMFG US)

Sumitomo Mitsui Financial Group (Sponsored Adr)

SMBC Americas Holdings – Expecting 19% NPLs in USA