Allocations in financial institutions abroad should anchor Sumitomo Mitsui Financial Group's (TYO:8316) diversification efforts and boost its profitability, S&P Global Ratings said in a Wednesday release.

The Japanese megabank group has focused on expanding its offshore investment banking segment and business in the US and Asia, which should strengthen its international presence, S&P said.

Specifically, building an Indian base would benefit the group's future business expansion given the high growth outlook, although foreign bank investment rules in the country are firm, the rating agency said.

However, Japanese banks could see long-term headwinds for these offshore investments in terms of earnings stability, gaining synergies, and governance management of investees, the rating agency said.

Still, S&P believes there is enough room within the group's capital measures and earnings assessment for the overseas investments.

"Although we anticipate that its exposure to the US and Asia may increase, we also expect that the pressure to increase capital required for organic growth will be eased as the group is currently reducing less-profitable assets," S&P said.