Sumitomo Mitsui Trust Holdings Inc. plans to halve its profit forecast for the current fiscal year to around ¥100 billion ($668 million) due to a hedging loss, people with knowledge of the matter said. The shares fell.
Board members will meet on Monday to approve the downward revision to net income before the Japanese bank announces it later in the day, according to the people, who asked not to be identified because the matter is private.
The Tokyo-based lender will record an impairment loss in the year ending March because it will realize losses in so-called bear funds, the people said. It holds such instruments to hedge against the risk of stock price fluctuations, on bigger-than-expected gains in the value of its shareholdings. The bank plans to maintain its dividend as business is steady, according to the people.
A spokesman for Sumitomo Mitsui Trust declined to comment.
Shares of Sumitomo Mitsui Trust declined as much as 4.5% on Monday morning in Tokyo. The stock traded 2% lower as of 10:32 a.m., paring this year’s advance to 21%.
Sumitomo Mitsui Trust currently forecasts net income to rise to a record ¥200 billion this fiscal year. The revised target would represent a drop from last year’s ¥191 billion.
Japan’s Topix index has climbed about 11% since the beginning of this fiscal year after a weak yen supported robust earnings by exporters including Toyota Motor Corp. Billionaire Warren Buffett’s investments in Japanese trading companies has also spurred foreign interest in the country’s stocks.
Sumitomo Mitsui Trust posted a ¥31.5 billion loss on the bear funds in the April-June quarter, pushing down its net income 43% from a year earlier to ¥36.7 billion. It is due to report fiscal first-half results in mid-November.
--With assistance from Yuji Okada.
