The payments were made by the Japanese government during 1998 and 1999 to rescue Sumitomo Bank and Sakura Bank, which merged to create SMFG in 2001.
The financial group said that it would buy back all remaining preferred shares currently being held by the Deposit Insurance Corporation â the government agency that oversaw the initial loans.
The shares are valued at around $1.7 billion.
The buy-back represents only the latest repayment made by the bank â Japan's third largest â with the government still holding around 50 billion yen of SMFG stock.
Bank officials say that they intend to buy back this stock as well, although no date has been specified.