Morningstar | Sumitomo Mitsui Trust Raises Guidance and Dividend to Match Our Existing Forecast
Sumitomo Mitsui Trust Holdings increased its full-year profit and dividend guidance modestly after reporting slightly stronger-than-expected results for the July-September quarter owing to net reversals of credit costs. The new guidance is in line with our existing forecasts and we are not changing our JPY 4,844 fair value estimate, which is 0.69 times book value and 7% above the current share price. Even with the dividend increase, SMTH yields slightly less than other major Japanese banks at 3.1%.We continue to like SMTH’s moaty fiduciary services businesses (pensions and asset management) but see its undifferentiated banking businesses as a drag on overall returns. If SMTH were to downsize areas of commercial banking where it has less scale than competitors and focus on less-balance-sheet-intensive areas where it has a competitive edge, we could grow much more bullish on the stock as a long-term investment than we are currently.
Sumitomo Mitsui Trust Holdings is a holding company engaged in the management of Sumitomo Mitsui Trust Group Companies. Co.'s main business activities are banking, asset management and administration, and real estate. Co.'s banking business offers retail banking services throughout Japan; wholesale banking services to corporate clients; and marketable financial products for investment and risk management needs Co.'s asset management and administration business provides various products including pension plan for institutional investors and investment trusts primarily for individual clients. Co.'s real estate business offers a full line of real estate related transaction services.
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