The Sumitomo Mitsui Financial Group said Tuesday it posted a 392.3 billion yen net profit in the first half of the 2005 business year -- more than seven times the 53.4 billion yen profit it recorded a year earlier.

The April-September figure is a record for the nation's third-largest banking group, which was created by the 2002 merger of two city banks.

The surge was largely attributed to commissions from sales of mutual funds and variable annuities for retail customers, as well as the launch of structured finance business targeting corporate borrowers -- a sector many banks focused on amid sluggish demand for funds.

The half-year results are another indication banks have put their nonperforming loans behind them and begun to reap the benefits of the economic upturn.

"In the first half of fiscal 2005, profits from mortgage loans and mutual funds in particular gained ground in the retail sector," SMFG President Teisuke Kitayama told a news conference. "I expect we will remain dominant in this sector."

For the full business year to March 2006, the banking group forecasts a 550 billion yen group net profit.

SMFG booked 176.5 billion yen in bad-loan disposal costs for the six-month period, roughly a third of 612.8 billion yen booked a year earlier.

The ratio of bad loans to total lending at the group's banking unit fell to 2.5 percent as of the end of September, down from 3.3 percent at the end of March, with outstanding bad loans shrinking to 1.4 trillion yen from 1.8 trillion yen.