TOKYO: Sumitomo Mitsui Financial Group (SMFG), Japan's second-largest bank, on Thursday reported a 10.7% increase in third-quarter net profit thanks to brisk loan demand at home.

       SMFG posted a profit of 266.37 billion yen ($1.8 billion) in the October-December period versus 240.6 billion yen a year earlier, according to Reuters' calculations based on nine-month cumulative figures disclosed in a stock exchange filing.

       SMFG kept its full-year profit forecast through March at 920 billion yen, which compared with the 921.36 billion yen average of 12 analyst estimates compiled by LSEG.

       The annual outlook exceeds the previous record set a decade ago and is also above the 900 billion yen target the bank set in its business strategy for three years through March 2026.

       The Topix banks index has surged to the highest since 2008 on hopes that an exit from the central bank's ultra-easy policy would widen the spread between deposit and lending rates and boost Japanese banks' net interest income after years of being squeezed by rock-bottom rates.

       But uncertainties over the U.S. economy could weigh on profit at Japanese banks. High rates last year boosted banks' net interest income, but that revenue driver looks to be flagging as the Federal Reserve pauses interest rate hikes, loan growth slows, and banks pay more to retain deposits. - Reuters