SMFG s Growth Strategy

Transcription

1 SMFG s Growth Strategy Koichi Miyata, President Sumitomo Mitsui Financial Group, Inc. February & March, 214

2 Agenda Ⅰ. Growth strategy Ⅱ. Good financial performance Ⅲ. Challenges Ⅳ. Capital policy Appendix 1

3 I. Growth strategy 1. Group structure * Sumitomo Mitsui Financial Group Consolidated total assets Consolidated Common Equity Tier 1 capital ratio 1% JPY 149 tn 1.35% Sumitomo Mitsui Banking Corporation 6% 3% 1% 1% Sumitomo Mitsui Finance and Leasing 6% Became a subsidiary in Jun. 212 SMBC Aviation Capital Became a wholly-owned subsidiary in Oct. 29 Securities SMBC Nikko Securities No. of accounts: approx.2.4mn SMBC Friend Securities 4% 1% Leasing Sumitomo Corporation Assets JPY 126 tn 1% SMFG Card & Credit Consumer Finance Deposits Loans No. of retail accounts JPY 81 tn JPY 61 tn approx. 28 mn 66% 1% No. of card holders: approx. 23 mn Sumitomo Mitsui Card 34% NTT docomo Became a wholly-owned subsidiary in May 211 Cedyna No. of existing customers: approx. 19 mn No. of corporate loan clients Ratings (Moody s/s&p/fitch) approx. 1, Aa3 / A+ / A- 1% Became a wholly-owned subsidiary in Apr. 212 SMBC Consumer Finance No. of accounts of unsecured loans : approx. 1.4 mn 1% Became a wholly-owned subsidiary in Oct. 213 SMBC Trust Bank * As of Oct. 31, 213 for percentage of voting rights and as of Sep. 3, 213 for other figures 1% Other business Japan Research Institute 44% 4% Daiwa SB Investments Sumitomo Mitsui Asset Management 2

4 I. Growth strategy 2. Consumer banking business (1) Business environment Balance of financial assets owned by individuals *1 Distribution of households by total assets *2 (JPY tn) 1,8 1,6 1,4 Others Insurance and annuity Stocks and investments Securities excluding stocks Cash and deposits (%) <Total assets> JPY -1 mn JPY 1-3 mn JPY 3-5 mn JPY 5-1 mn JPY 1 mn- 25 1,2 1, Under 3 3's 4's 5's 6's Over 7 Age of household head 8 (Thousand businesses) Age of business owners * (FY) Under 3 3's 4's 5's 6's 7's Over 8 *1 Source: Bank of Japan *2 Source: Ministry of Internal Affairs and Communications National Survey of Family Income and Expenditure *3 Source: Teikoku Databank; Scope: Privately owned business with financial results data in FY211 3

5 I. Growth strategy 2. Consumer banking business (2) Bank-securities integration model Strong and large client base Consultants withcapabilityto build relationships Capability to offer sophisticated asset management services small AUM large Expand asset management client base SMBC s client base: 28 mn accounts Clarification of responsibilities Referral to SMBC Nikko (needs: growth of wealth) Securities intermediary Referral to SMBC (needs: preserve and pass on wealth) No. of trial offices for bank-securities integration SMBC Nikko s client base: 2.5 mn accounts SMBC Nikko to open three new branches in Feb./ Mar. 214 to enhance collaboration with SMBC No. of NISA accounts (Dec. 213) May SMBC 15 SMBC Nikko 1 double Oct SMFG group of which SMBC SMBC Nikko 6 thousand 18 thousand 27 thousand 4

6 I. Growth strategy 2. Consumer banking business (3) Wealth management and inheritance / succession businesses Provide solutions based on client needs Private banking/ upper affluent segment Solutions related to M&A and capital policy for business owners Solutions for business succession Specialized solutions related to stocks held by business owners Asset management segment SMBC Nikko Securities SMBC Barclays Division Investment solutions from Barclays Joined in Oct. 213* Wealth management solutions utilizing trust bank capabilities Asset building segment Mass segment Enhance consumer and middle market banking combined operation Promote testamentary trust and inheritance settlement businesses Deploy specialized advisors in front offices Provide expertise and transfer know-how of inheritance-related business to sales staff * Made Societe Generale Private Banking Japan a wholly-owned subsidiary and changed name in Oct

7 I. Growth strategy 2. Consumer banking business (4) SMBC Consumer Finance Financial results (consolidated) Financing business *1 FY3/213 Apr.-Dec. 213 YOY change Operating income Ordinary profit (.6) Net income Consumer loans outstanding (consolidated) Sum of SMBC Consumer Finance and Mobit Mobit Consumer loans outstanding Loan guarantee for regional financial institutions, etc No. of companies with guarantee agreements: 189 (as of Dec. 213) 6 5 Mar.12 Mar.13 Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Approval rate(%) * Overseas business No. of transaction-record disclosure requests No. of interest refund claims Started operation in Chengdu and Wuhan in Dec Expanded network in mainland China to six offices Mar. 31, 213 Dec. 31, 213 Change from Mar. 31, 213 Consumer loans outstanding * of which Hong Kong (Thousand) *1 SMBC Consumer Finance non-consolidated basis *2 Approval ratio = Number of new customers / Number of loan applications. Quarterly basis *3 Translated into Japanese yen at respective period-end exchange rates FY21 FY211 FY212 FY213 Jun. Sep. Dec. Mar. (Thousand) 2 1 FY21 FY211 FY212 FY213 Jun. Sep. Dec. Mar. 6

8 I. Growth strategy 3. Corporate banking business (1) Business environment Sales of overseas subsidiaries of Japanese corporations *1 No. of M&A deals *2 (JPY tn) 1 Growth rate from FY 21 (No.) 3, In-In In-Out Out-In 9 8 Asia +99% 2,5 7 6 North America (13%) 2, 5 1,5 4 3 Europe +13% 1, (FY) *1 Source: Ministry of Economy, Trade and Industry Basic Survey of Overseas Business Activities *2 Source: Recof data corporation 7

9 I. Growth strategy 3. Corporate banking business (2) Investment banking Income related to Investment banking business (SMBC) League tables (Apr.-Dec. 213) Brokerage Real estate finance Structured finance Securitization of monetary claims Loan syndication H 2H 1H 2H 1H FY3/12 FY3/13 FY3/14 Dual-role SMBC Nikko Securities was awarded Yen Bond House of the Year 213 by International Financing Review From bank-securities collaboration to integration Established a new bank-securities dual-role department (Nov. 213); allows for simultaneous proposal for syndicated loans and bonds etc. Banking services Tokyo Corporate Banking Dept. IX <NEW> Corporate Clients VIII Div. <NEW> Clients Rank Securities services Front offices Mkt share Global equity & equity-related (book runner, underwriting amount) *1 #3 14.5% JPY denominated bonds (lead manager, underwriting amount) *2 #5 14.4% Financial advisor (M&A, transaction volume) *3 #5 15.3% Financial advisor (M&A, No. of deals) *3 #4 2.4% collaboration *1 Source: SMBC Nikko, based on data from Thomson Reuters. Japanese corporate related only. SMFG group aggregate basis *2 Source: SMBC Nikko. Consisting of corporate bonds, FILP agency bonds, municipality bonds, and samurai bonds *3 Source: Thomson Reuters. Japanese corporate related only. Excluding real estate deals 8

10 I. Growth strategy 4. International business (1) Multi-Franchise strategy Expand full-line banking services with a focus on Asia In the medium term, establish second and third SMBC Present Going forward Corporate clients Individual clients Large Middle Small PB Middle Mass Japan Full banking operation Asia Americas /EMEA Existing overseas business Multi-Franchise strategy Japan Full banking operation Asia Vietnam Indonesia Franchise Others Americas /EMEA Building business with mid-to-long term perspectives Commitment to business in Asia 9

11 I. Growth strategy 4. International business (2) Increasing profit / competitive advantages Overseas banking profit and ratio (before provisioning)* 1,2 Project finance/ Loan syndication league tables * % Overseas banking profit (left axis) of which 1H (left axis) Overseas banking profit ratio (right axis) of which 1H (right axis) Financial target of medium-term management plan % % % % 32% 3% FY % 3% 2% 1% % Global Asia *4 Japan Project finance #4 #9 Loan syndication #9 #5 #3 (USD mn) Cash management service (CMS) as voted by corporations EMEA Americas Asia Trade finance related profit Apr. - Sep. results FY3/11 FY3/12 FY3/13 FY3/14 Cash management providers ranking (in Asia Pacific) *5 Large corp Medium corp Small corp JPY CMS as voted by financial institutions 5th 5th 5th 1st #1 among Japanese banks for 6 consecutive years #1 for 8 consecutive years CMS in Asia Aim to be one of the top 3 global banks *1 Managerial accounting basis. Sum of SMBC and major overseas subsidiary banks *2 Based on the medium-term management plan assumed exchange rate of USD1=JPY85 since FY3/12 *3 Source: Thomson Reuters (Mandated Arrangers); Jan.-Dec. 213 *4 Project finance: Asia Pacific. Loan syndication: Asia (excl. Japan), all international currency syndicated and club loans 1 *5 Source: ASIAMONEY cash management poll (published Aug. 213)

12 I. Growth strategy 4. International business (3) Loan balance / foreign currency funding (USD bn) EMEA Americas Asia Overseas loan balance *1, (USD bn) Overseas deposit balance *1, 2 CDs & CP : less than 3 months CDs & CP : 3 months or more Deposits * Mar. 1 Mar. 11 Mar. 12 Mar. 13 Dec.13 Issued amount of foreign-currency denominated bonds (in millions of currency units) Subordinated bonds to overseas institutional investors Senior bonds to overseas institutional investors Senior bonds to domestic retail investors US$1,5 GBP US$3, US$1,5 US$2, US$3, US$2, US$2, US$2, US$12 US$1,5 A$14 A$54 A$43 A$42 A$2 US$15 A$13 Mar. 1 Mar. 11 Mar. 12 Mar. 13 Dec. 13 Mar.1 Sep.1 Mar.11 Sep.11 Mar.12 Sep.12 Mar.13 Sep.13 Oct.9- Apr.1- Oct.1- Apr.11- Oct.11- Apr.12- Oct.12- Apr.13- Oct.13- Feb.13 *1 Managerial accounting basis. Sum of SMBC, SMBC Europe and SMBC (China) *2 Translated into USD at respective period-end exchange rates *3 Includes deposits from central banks 11

13 II. Good financial performance 1. Financial performance for 3Q, FY3/214 SMFG <consolidated> SMBC <non-consolidated> Income statement Apr.-Dec. 213 results YOY change Consolidated gross profit USD 21.1 bn 2, Net fees and commissions General and administrative expenses (1,169.8) (79.5) Overhead ratio *2 51.5% (.3%) FY3/214 forecast Total credit cost (reversal) (7) Ordinary profit 1, ,28 Variance with SMBC non-consolidated Net income USD 6.7 bn Variance with SMBC non-consolidated Gross banking profit USD 11.3 bn 1, ,54 Expenses *3 (557.7) (19.7) (74) Overhead ratio 46.7% +.5% Banking profit * Total credit cost (reversal) Gains (losses) on stocks Ordinary profit Net income USD 4.6 bn *1 *1 *1 USD 6. bn *1 *1 Contribution of subsidiaries to SMFG s Net income Apr.-Dec. 213 YOY change SMBC Nikko Securities SMBC Consumer Finance 5 +1 Sumitomo Mitsui Finance and Leasing SMBC Guarantee 18 + Cedyna * Sumitomo Mitsui Card 14 + SMBC Friend Securities 1 +5 Includes profits from equity index-linked investment trusts Per share information (SMFG consolidated) Apr.-Dec. 213 results Dec. 31, 213 YOY change Change from Mar. 31, 213 Net assets JPY 5, JPY FY3/214 forecasts Net income JPY JPY JPY ROE *6 15.7% + 1.7% *1 Translated into USD at period-end exchange rate of USD 1 = JPY *2 Based on consolidated G&A expenses net of SMBC s non-recurring losses *3 Excluding non-recurring losses *4 Before provision for general reserve for possible loan losses *5 After adjustment for consolidation *6 Annualized 12

14 II. Good financial performance 2. Robust asset quality Unrealized gains (losses) on Other securities * Non-performing loan balance and ratio 2,4 2, 1,6 1,2 8 4 (4) 1, Mar. 12 1,4.1 Mar. 13 Stocks Bonds Others Total 1,641.6 Sep. Dec , Mar. 12 Mar. 13 1,811. 1,953.2 Sep. Dec Mar. 12 1,5.5 Mar. 13 1,181.9 Sep. Dec SMFG MUFG Mizuho FG SMFG <consolidated> SMBC <non-consolidated> (JPY tn) (JPY tn) Substandard loans (left axis) Doubtful assets (left axis) Bankrupt / quasi-bankrupt assets (left axis) NPL ratio (right axis) Coverage ratio Coverage ratio Mar. 13 Sep % 85.15% 1.57 Mar. 13 Sep % 9.24% % Mar.12 Mar.13 Sep. 13 Dec % 4% 3% 2% 1% % 4% 3% 2% 1%. Mar.12 Mar.13 Sep. 13 Dec. 13 % * Based on each company s disclosure. The figures shown in the graph are consolidated figures of SMFG, MUFG and Mizuho FG 13

15 II. Good financial performance 3. High profitability 1.6% Domestic loan-to-deposit spread *1 (%) 1 Overhead ratio (consolidated) * % 1.4% % 3 1.1% 1.6% 2 1 Proportion of loans to individuals & SMEs SMFG MUFG Mizuho FG 68.4% 58.2% 56.9% SMFG HSBC Mizuho FG MUFG Citi RBS BNP Barclays JPM BAC DB *1 Based on each company s 1H, FY3/14 disclosure. The figures shown in the graph are: non-consolidated figures of SMBC for SMFG, non-consolidated figures of The Bank of Tokyo-Mitsubishi UFJ for MUFG, and non-consolidated figures of Mizuho Bank for Mizuho FG *2 Based on each company s disclosure. G&A expenses (for Japanese banks, excluding non-recurring losses) divided by top-line profit (net of insurance claims). 1H, FY3/214 results for SMFG, MUFG, and Mizuho FG, and nine months ended Sep. 3, 213 for others 14

16 III. Challenges SMBC: YOY comparison of average corporate loans 1,2 1, (4) (6) (8) (%) Mid-sized corporations/smes (Middle Market Banking Unit) Large corporations (Corporate Banking Unit) Apr.12 (2) Jul. Oct. Jan. 13 Apr. Jul. Oct. Average loan spread of domestic banks *1,2 (JPY tn) Loans and deposits of domestic banks *1 Deposits Loans Corporate loans Consumer loans 1. Jan. 5 Jan. 6 Jan. 7 Jan. 8 Jan. 9 Jan. 1 Jan. 11 Jan. 12 Jan. 13 Apr. 1 Apr. 2 Apr. 3 Apr. 4 Apr. 5 Apr. 6 Apr. 7 Apr. 8 Apr. 9 Apr. 1 Apr. 11 Apr. 12 Apr. 13 *1 Source: Bank of Japan *2 Stock basis 15

17 IV. Capital policy CET 1 capital ratio Riskweighted assets Common Equity Tier 1 capital ratio (JPY tn) (fully-loaded *1, pro forma) Mar. 12 Mar. 13 Sep. 13 Dec. 13 Nearly 7.5% 8.6% 9.9% 9.7% - JPY 62.1 tn JPY 6.9 tn JPY 65.2 tn Common Equity Tier 1 capital of w hich net unrealized gains (losses) on other securities included in OCI (JPY) commemorative dividends ordinary dividends of which interim dividends 3 Return to shareholders *2,3 Increased annual dividend forecast from JPY 11 to JPY FY 3/6 3/7 3/8 3/9 3/1 3/11 3/12 3/13 3/14 Payout ratio *4 3.4% 12.5% 2.5% % 3.% 26.8% 21.3% 22.6% 1 11 ROE *5 22.8% 13.8% 15.8% - 7.5% 9.9% 1.4% 14.8% Treasury stock (as of Sep. 213) 2 Held by SMFG Held by SMBC Mar. 12 Mar. 13 Sep. 13 Dec million shares 42.8 million shares (*) (*) Sold 13.3 million shares through a securities disposal trust in May 213 *1 Based on the Mar. 31, 219 definition *2 SMFG implemented a 1 for 1 stock split of common stock on Jan. 4, 29. Figures shown above reflect the stock split, assuming that it had been implemented at the beginning of FY3/6 *3 Common stock only *4 Consolidated payout ratio *5 On a stockholders equity basis 16

18 Appendix

19 Update on financial targets Already achieved all the financial targets in the medium-term management plan Common Equity Tier 1 capital ratio Mar. 211 Sep. 213 Mar. 214 target Basel 3 fully-loaded basis *1 above 6% 9.9% 8% Basel 3 transitional basis above 8% 1.35% FY3/11 1H, FY3/13 FY3/14 target Consolidated net income RORA.8% 1.6%.8% Consolidated ROE 9.9% 17.1% Consolidated overhead ratio 52.5% 5.6% 5% - 55% SMBC non-consolidated overhead ratio 45.6% 44.9% 45% - 5% Overseas banking profit ratio *2 23.3% 31.9% 3% *3 *3 *1 Based on the definition as of Mar. 31, 219 *2 Based on the medium-term management plan assumed exchange rate of 1 USD=JPY 85 for FY3/212 to FY3/214 *3 Annualized 18

20 Balance sheet and credit ratings Balance sheet (as of Sep. 213) Total assets : JPY 149.3tn Balance sheet related items Sep. 3, 213 Loan to deposit ratio 64.5% Loans JPY 65.7tn Securities JPY 27.3tn JGB JPY 15.3tn Other assets JPY 56.3tn Deposits, Negotiable certificates of deposits (NCD) JPY 11.9tn Other liabilities JPY 38.4tn Total net assets JPY 9.tn Total stockholders equity JPY 6.1tn Risk-weighted assets JPY 61.3 tn Common Equity Tier 1 capital ratio 1.35% Net assets per share JPY 5,13.52 ROE* (Denominator: Total stockholders equity) Credit ratings SMBC SMFG Moody s Aa3 / P-1 - S&P A+ / A-1 A / A-1 Fitch A- / F1 A- / F1 R&I AA- / a-1+ - JCR AA / J % * Annualized 19

21 Loan balance SMBC non-consolidated (JPY tn, at period-end) (JPY tn, at period-end) Mar. 1 *1 Loan balance Breakdown of change from Mar. 213 to Dec. 213 Domestic offices excl. Japan offshore banking accounts excl. loans to the government *2 Mar. 5 Mar. 6 Mar. 7 Overseas offices and Japan offshore banking accounts after adjustment for changes in exchange rates Mar. 8 Mar. 9 Mar Mar. 11 Mar. 12 (JPY tn) Mar. 13 Dec. 13 Loan balance by domestic Marketing units, managerial accounting basis (JPY tn, at period-end) Dec. 213 Change from Mar. 213 Consumer Banking Unit 14.8 (.1) *3 Middle Market Banking Unit * Corporate Banking Unit Overseas loans, classified by region, *5 managerial accounting basis (JPY tn, at period-end) Dec. 213 Change from Mar. 213 After adjustment for changes in exchange rates Overseas total to Japanese corporations (.) Asia to Japanese corporations Americas to Japanese corporations (.2) EMEA to Japanese corporations (.) *1 The aggregate of former Sakura bank and Sumitomo Bank *2 Loans to the Special Account for Allotment of Local Allocation Tax and Local Transfer Tax, etc. *3 After adding back the portion of housing loans securitized in Apr.-Dec. 213 of approx. JPY 16 bn *4 Excluding loans to the Special Account for Allotment of Local Allocation Tax and Local Transfer Tax, etc. *5 Sum of SMBC, SMBC Europe and SMBC (China). Based on location of banking office 2

22 Loan spread *1 Domestic *2 Overseas *3 Medium-sized enterprises and SMEs (Middle Market Banking Unit) Large corporations (Corporate Banking Unit) 1.4% 1.4% 1.2% 1.2% 1.% 1.%.8%.8%.6%.6%.4% Sep. 8 Mar. 9 Sep. 9 Mar. 1 Sep. 1 Mar. 11 Sep. 11 Mar. 12 Sep. 12 Mar. Sep % Sep. 8 Mar. 9 Sep. 9 Mar. 1 Sep. 1 Mar. 11 Sep. 11 Mar. 12 Sep. 12 Mar. Sep *1 Managerial accounting basis. Average loan spread of existing loans *2 SMBC non-consolidated *3 Sum of SMBC, SMBC Europe and SMBC (China) 21

23 Bond portfolio (1) Yen bond portfolio SMBC non-consolidated (Total balance of Other securities with maturities and bonds classified as held-to-maturity i.e. total of JGBs, Japanese local government bonds and Japanese corporate bonds) (Balance (JPY tn)) 35 More than 1 years 3 5 to 1 years 1 to 5 years 25 1 year or less 2 of which 15-year floating-rate JGBs : approx. JPY 1.6 tn Mar. 2 Mar. 3 Mar. 4 Mar. 5 Mar. 6 Mar. 7 Mar. 8 Mar. 9 Mar. 1 Mar. 11 Mar. 12 Mar. 13 Sep.13 Average duration (years) *1 Unrealized gains (losses) (11.9) 7.7 (282.2) (151.4) (129.5) (1.2) *2 *1 Excluding bonds classified as held-to-maturity, bonds for which hedge-accounting is applied, and private placement bonds. Duration of 15-year floating rate JGBs is regarded as zero. Duration at Mar. 2 is for JGB portfolio only *2 15-year floating-rate JGBs have been evaluated at their reasonably estimated price from Mar. 9 22

24 Bond portfolio (2) (JPY tn) Balance sheet amount Mar. 213 Sep. 213 Dec. 213 Net unrealized gains (losses) Balance sheet amount Net unrealized gains (losses) Balance sheet amount Net unrealized gains (losses) Change from Sep. 213 Balance sheet amount Net unrealized gains (losses) SMBC <non-consolidated> Yen-denominated bonds (.9) (.1) of which JGB (1.) (.) Held-to-maturity (.3) (.) Others (.7) (.) < Reference > Yen-denominated bonds (1.) (.1) SMFG <consolidated> of which JGB (1.1) (.1) Held-to-maturity (.3) (.) Others (.8) (.) 23

25 1H, FY3/214 performance by segment Gross profit YOY change Expenses YOY change Consolidated net business profit *1 YOY change Total 1, (752.4) (52.4) Banking business (444.8) (17.1) of which SMBC (368.6) (1.6) Leasing (26.3) (2.8) of which Sumitomo Mitsui Finance and Leasing * (26.4) (2.7) Securities services (142.) (28.4) of which SMBC Nikko Securities (114.1) (24.) Consumer finance business (167.2) (1.7) of which Sumitomo Mitsui Card (67.7) (1.6) Cedyna (57.2) SMBC Consumer Finance * (34.7) (3.) Other businesses * (2.4) *1 Consolidated net business profit = SMBC s non-consolidated banking profit (before provision for general reserve for possible loan losses) + SMFG s non-consolidated ordinary profit + Other subsidiaries ordinary profit (excluding non-recurring factors) + Equity method affiliates ordinary profit X Ownership ratio Internal transactions (dividends, etc.) *2 On a consolidated basis *3 Includes profits/losses to be offset as internal transactions between segments 24

26 SMBC s performance by business unit *1 Consumer Banking Unit Middle Market Banking Unit Corporate Banking Unit International Banking Unit (IBU) Marketing units Treasury Unit Headquarters Total Banking profit by business unit 1H, FY3/13 FY3/13 1H, FY3/14 YOY change *2 Gross banking profit (5.4) Expenses (14.9) (284.4) (14.7) +.5 Banking profit (4.9) Gross banking profit (3.6) Expenses (16.7) (216.7) (17.7) (.6) Banking profit (4.2) Gross banking profit Expenses (19.5) (39.6) (2.1) (.5) Banking profit Gross banking profit Expenses (36.3) (72.9) (45.2) (5.4) Banking profit Gross banking profit 58. 1, Expenses (33.4) (613.6) (313.7) (6.) Banking profit Gross banking profit Expenses (1.2) (21.) (11.6) (1.) Banking profit Gross banking profit (22.2) (7.9) Expenses (44.4) (93.1) (43.3) (3.6) Banking profit (39.4) (83.9) (65.5) (11.5) Gross banking profit , Expenses (358.) (727.7) (368.6) (1.6) Banking profit Average loan balance and spread by business unit (JPY tn) 1H, FY3/14 Balance YOY change *2 Domestic loans of which Consumer Banking Unit 14.9 (.2) Middle Market Banking Unit * Corporate Banking Unit IBU s interest earning assets *4 USD 155. bn +USD 12.5 bn (%) 1H, FY3/14 Spread YOY change *2 Domestic loans.99 (.5) of which Consumer Banking Unit 1.41 (.3) Middle Market Banking Unit *3.99 (.1) Corporate Banking Unit IBU s interest earning assets * *1 SMBC non-consolidated. Managerial accounting basis *2 After adjustments for interest rates and exchange rates, etc. *3 Excluding loans to the Special Account for Allotment of Local Allocation Tax and Local Transfer Tax, etc. *4 Sum of loans, trade bills and securities 25

27 SMBC s gross banking profit by product *1 Gross banking profit by product 1H, FY3/13 FY3/13 1H, FY3/14 YOY change *2 of which: Income on domestic loans (5.3) Income on domestic yen deposits (3.5) IBU s interest related income * Interest income (3.8) of which: Investment trust Single premium type permanent life insurance (3.5) Level premium insurance (1.3) Income related to financial consulting for retail customers of which: Loan syndication Structured finance * Real estate finance * (2.5) Income related to IB business * of which: Sales of derivatives Money remittance, electronic banking Foreign exchange (.1) IBU's non-interest income * Non-interest income Gross banking profit of Marketing units 58. 1, Adjustment for changes in interest rates and exchange rates, etc.: Nominal YOY change : *1 SMBC non-consolidated. Managerial accounting basis *2 After adjustment for changes in interest rates and exchange rates, etc. *3 Includes profit from Japanese corporations in Hong Kong Branch and Taipei Branch *4 Includes interest income 26

28 Expenses Expenses, Overhead ratio *1 Overhead ratio (consolidated) *3 1H, FY3/14 YOY change FY3/14 forecast (revised in Nov. 213) (%) 1 9 SMFG consolidated Expenses *2 (763.4) (53.7) Overhead ratio 5.6% (1.1%) SMBC non-consolidated Expenses (368.6) (1.6) (74.) Overhead ratio 44.9% (.6%) 48.1% SMFG HSBC Mizuho FG MUFG Citi RBS BNP Barclays JPM BAC DB *1 Excluding non-recurring losses *2 Consolidated G&A expenses net of SMBC s non-recurring losses *3 Based on each company s disclosure. G&A expenses (for Japanese banks, excluding non-recurring losses) divided by top-line profit (net of insurance claims). 1H, FY3/214 results for SMFG, MUFG, and Mizuho FG, and nine months ended Sep. 3, 213 for others 27

29 Credit costs SMFG consolidated SMBC non-consolidated Total credit cost (left axis) of which 1H (left axis) Total credit cost / Total claims (right axis) H, FY3/14 YOY change (39.6) (87.6) (bp) Total credit cost (left axis) of which 1H (left axis) Total credit cost / Total claims (right axis) 1H, FY3/14 YOY change Change from May forecast (78.3) (53.9) (88.3) (bp) Forecast (39.6) FY3/9 3/1 3/11 3/12 3/13 3/ Forecast (5.) (24.4) (78.3) FY3/9 3/1 3/11 3/12 3/13 3/ (2) (4) (2) (4) Variance between SMFG consolidated and SMBC non-consolidated* 1H, FY3/14 YOY Change Variance with SMBC non-consolidated 38.7 (33.7) SMBC Consumer Finance 2 () Cedyna 8 (1) Kansai Urban Banking Corporation 7 () * In round numbers Recorded net reversal of total credit cost due to a minimal incurrence of such cost and a reversal of provisions made in previous years, as well as a decline in reserve ratio 28

30 Non-performing loan balance and ratio SMFG consolidated SMBC non-consolidated Mar. 13 Sep. 13 Coverage ratio 85.84% 85.15% Mar. 13 Sep. 13 Coverage ratio 92.63% 9.24% (JPY tn) 3 Substandard loans (left axis) Doubtful assets (left axis) 6% (JPY tn) 3 Substandard loans (left axis) Doubtful assets (left axis) 6% Bankrupt / quasi-bankrupt assets (left axis) Bankrupt / quasi-bankrupt assets (left axis) NPL ratio (right axis) NPL ratio (right axis) % 2 4% % 2.27% 2% % 2.8% 1.86% 1.6% 1.47% Mar.9 Mar.1 Mar.11 Mar.12 Mar.13 Sep. 13 % Mar.9 Mar.1 Mar.11 Mar.12 Mar.13 Sep. 13 % (JPY tn) Claims on borrowers requiring caution * Total claims * Excluding claims to Substandard borrowers 29

31 Corporate, sovereign and bank exposures Domestic Overseas [as of Sep. 3, 213] PD LGD Risk weight (Trillions 4 of 3 yen) Internal Rating (Certainty of debt repayment) (Trillions of yen) [as of Sep. 3, 213] PD LGD Risk Weight.6% 36.4% 18.47% 月 3 日 1 月 3 日 (Very high - Satisfactory).16% 3.96% 21.15%.74% 32.28% 47.62% 月 (Likely 6 日 - Currently 4 月 no 6 日 problem) 2.72% 21.12% 54.9% 12.56% 3.74% 128.6% 7 (excl. 7R) 7(excl.7R) (Borrowers requiring 7(excl.7R) caution) 23.13% 22.86% 121.1% 1.% 47.66% 5.46% Default(7R, 8-1) Default(7R, 8-1) Default (7R, 8-1) Mar. 31, % 64.75% 51.35%.% 35.45%.4% Japanese Japanese Japanese government, government, Government, etc. etc. etc Mar. 31, 212 Mar. 31, 213 Sep. 3, % 38.73% 54.2% Others Others Others 2.12% 33.96% 99.18% JPY 79.5 trillion Total (as of Sep. 3, 213) JPY 3.9 trillion (SMFG consolidated) 3

32 Equity holdings Balance of equity holdings *1 (JPY tn) 7 Equity holdings (acquisition cost on SMBC non-consolidated) Percentage of equity holdings to SMFG consolidated Tier I *3 *2 175% % 15% 125% 4 1% 3 75% % 1 32% 29% 29% 24% 22% 25% Apr. 1 Mar. 2 Mar. 3 Mar. 4 Mar. 5 Mar. 6 Mar. 7 Mar. 8 Mar. 9 Mar. 1 Mar. 11 Mar. 12 Mar. 13 Sep. 13 % *1 Balance of domestic listed stocks classified as other securities *2 Amount of un-hedged equity. Shares of SMFG related to share exchange for acquiring former Promise are excluded *3 Until Mar. 22, percentage to SMBC consolidated Tier I. After Mar. 213, percentage to SMFG consolidated Tier 1 based on Basel 3 31

33 Capital and risk-weighted assets (SMFG consolidated) Capital ratio (transitional basis) Common Equity Tier 1 capital ratio (fully-loaded *1, pro forma) Mar. 31, 213 Dec. 31, 213 Mar.31, 213 Dec. 31, 213 Common Equity Tier 1 capital (CET1) 5, ,555.6 of which: Total stockholders equity related to common stock 5, ,27.5 Minority interests related to CET Tier 1 capital of which: 6,829. 7,625.2 Eligible Tier 1 capital instruments (grandfathered) 1, ,463.3 Adjusted Minority interests related to Additional Tier Foreign currency translation adjustments (97.4) (47.6) Regulatory adjustments (52.3) (485.4) Tier 2 capital of which: 2,357. 2,511.6 Eligible Tier 2 capital instruments (grandfathered) 1,83.9 1,83.9 Unrealized gains on other securities after 55% discount and land revaluation excess after 55% discount Variance with CET1 on a transitional basis Accumulated other comprehensive income of which: ,8.7 Net unrealized gains on other securities ,89.5 Minority interests (subject to be phased-out) (129.6) (135.) Regulatory adjustments related to CET1 (1,18.1) (1,76.4) Common Equity Tier 1 capital 5, ,352.8 Risk-weighted assets 62, ,191.9 Common Equity Tier 1 capital ratio 8.6% 9.7% Preferred securities which become callable in FY3/14 Issuer Issued date Aggregate issued amount Dividend rate *2 First call date *3 Step-up Regulatory adjustments (76.7) (163.8) Total capital 9,186. 1,136.8 Risk-weighted assets 62, ,658.1 Common Equity Tier 1 capital ratio 9.38% 9.98% Tier 1 capital ratio 1.93% 11.61% Total capital ratio 14.71% 15.43% SMFG Preferred Capital USD2 Limited May 28 SMFG Preferred Capital JPY2 Limited Series D Series G Dec. 28 Jan. 29 USD 1,8 mn 8.75% Jul. 213 None JPY bn 4.76% Jan. 214 None JPY bn 4.65% Jan. 214 None Called Jul. 213 Called Jan. 214 *1 Based on the Mar. 31, 219 definition *2 For SMFG Preferred Capital JPY 2 Limited only, floating rate after the first call date *3 Callable at any dividend payment date on and after the first call date, subject to the prior approval of FSA 32

34 Earnings forecast for FY3/214 SMFG <consolidated> FY3/13 results 1H results FY3/14 forecast <as of Nov. 213> Change from May forecast YOY change Ordinary profit 1, , Variance with SMBC non-consolidated Net income (44.1) Variance with SMBC non-consolidated Gross banking profit 1, ,54 - (.1) Assumptions for earnings forecast *3 May 213 forecast Nov. 213 forecast 3M TIBOR.27%.23% FF target rate Exchange rate. ~.25%. ~.25% (JPY/USD) 9 95 (JPY/EUR) SMBC <non-consolidated> Expenses* 1 (727.7) (368.6) (74) - (12.3) <OHR> 47.3% 44.9% 48.1% - +.8% Banking profit* (12.4) Total credit cost (19.5) Gains (losses) on stocks (35.7) 76.5 Ordinary profit Net income (17.8) Per share information (common stock) (JPY/share) Net income (consolidated) FY3/14 forecast <as of Nov. 213> Change from May forecast Annual dividend Lower tax burden *1 Excluding non-recurring losses *2 Before provision for general reserve for possible loan losses *3 Nominal GDP growth rate: FY3/213 result was +.3%; FY3/214 forecast estimated by Japan Research Institute was +2.6% as of May, 213 and 2.7% as of Nov., 213 Nikkei stock average: JPY12, as of Mar. 29, 213 and JPY14,455.8 as of Sep. 3,

35 Overseas loan balance classified by borrower type (Geographic classification based on booking office) Total *1 By region (Sep. 213) *1 (USD bn) 15 Non-Japanese corporations and others (product type lending) Japanese corporations % 75% Non-Japanese corporations and others Japanese corporations 128 5% 14 25% 1 9 % Total Asia Americas EMEA Major marketing channels in Asia (Sep. 213) *1 5 1% 75% 5% 25% Non-Japanese corporations and others Japanese corporations Mar.1 Mar.11 Mar.12 Mar.13 Sep.13 % Hong Kong Singapore Sydney China Bangkok Indonesia Seoul *2 *1 Managerial accounting basis. Sum of SMBC, SMBC Europe and SMBC (China) *2 Sum of SMBC and PT Bank Sumitomo Mitsui Indonesia 34

36 Loan balance in Asian countries (Geographic classification based on borrowers domicile)* Hong Kong Singapore Australia 1,2 1, Mar.1 Mar.11 Mar.12 Mar.13 Sep.13 1,2 1, Mar.1 Mar.11 Mar.12 Mar.13 Sep.13 1,2 1, Mar.1 Mar.11 Mar.12 Mar.13 Sep.13 China Thailand Indonesia 1,2 1, Mar.1 Mar.11 Mar.12 Mar.13 Sep.13 1,2 1, Mar.1 Mar.11 Mar.12 Mar.13 Sep.13 1,2 1, Mar.1 Mar.11 Mar.12 Mar.13 Sep.13 India Korea Taiwan 1,2 1, Mar.1 Mar.11 Mar.12 Mar.13 Sep.13 1,2 1, Mar.1 Mar.11 Mar.12 Mar.13 Sep.13 1,2 1, Mar.1 Mar.11 Mar.12 Mar.13 Sep.13 * Managerial accounting basis. Sum of SMBC, SMBC Europe, SMBC (China) and PT Bank Sumitomo Mitsui Indonesia. * Loan balances are translated into JPY from each country s local currency at the exchange rate of Sep

37 SMBC s footprint in Asia * China Mainland China: 16 offices Chongqing Br. opened (Aug. 212) Kunshan Sub-Br. Opened (Feb. 214) Shanghai Pilot Free Trade Zone Sub-Br. Opened (Feb. 214) 国旗 Mongolia Ulaanbaatar Rep. Office opened (Oct. 213) Myanmar Yangon Rep. Office upgraded (Aug. 212) Australia India New Delhi Br. opened (Mar. 213) Perth Branch opened (Apr. 213) Thailand Chonburi Exchange Office opened (May 213) * Channels opened since Apr. 212 are listed above 36

38 SMFG s footprint in Asia : SMBC : Overseas offices of SMFG group companies other than SMBC. Red outline indicates commenced operations in FY3/214 Banking Leasing Securities M&A advisory Market research < Asia and Oceania > 14 countries/areas, 37 offices *1 Beijing Bangkok Shanghai Kuala Lumpur Chengdu Singapore Guangzhou Jakarta Hong Kong Hong Kong Sydney Shanghai Hong Kong Hong Kong Singapore Jakarta Singapore Jakarta Prepaid card services Seoul *2 Consulting Shanghai Auto loans Ho Chi Minh *3 Australia Consumer finance Loan management and collection Consulting System integration Hong Kong Shenzhen Shenyang Tianjin Taipei Shanghai Shanghai Singapore Chongqing Chengdu Wuhan Bangkok *1 As of February 2, 214. Includes SMBC s overseas offices and offices of major overseas subsidiary banks. Excludes offices planned to be closed *2 Prepaid cards targeted at travelers to Korea from Japan offered through an alliance with Hana SK Card Co., Ltd and AsiaPass Co., Ltd since Nov. 212 *3 Expanded auto loan business through alliance with Vietnam Eximbank since May

39 Strategic partners in Asia China Strategic partner * Relationship since Bank of China 2 Renminbi business cooperation Industrial and Commercial bank of China 1995 Ship finance business in China Agricultural Bank of China 22 Funding activities in China Korea Kookmin Bank 27 Taiwan First Commercial Bank 27 Hong Kong Bank of East Asia 28 Philippines Metrobank 1995 Vietnam Vietnam Eximbank 27 Malaysia RHB Bank 1974 Indonesia Outline of alliance / cooperation Mutual introduction of customers inside/outside Japan/Korea, Loan syndication, funding activities Invested in KB Financial Group, the holding company, in 28 Local currency funding in China and Taiwan, usage of channel network Mutual introduction of customers in China and Hong Kong, credit card business, funding activities Invested in 29 and 212 Introduction of customers in Philippines, local currency transaction, usage of channel network. Established Japan desk in 27 Retail and SME banking business in Vietnam Invested in 28. Entered into technical service agreement in 29 Local currency funding in Malaysia, transaction services, Islamic finance Bank Tabungan Pensiunan Nasional 213 Invested in 213. Retail banking business in Indonesia Bank Central Asia 29 Cambodia ACLEDA Bank 212 India Kotak Mahindra Bank 21 Local currency funding in Indonesia, transaction services including CMS Usage of channel network in Cambodia, transaction services, trade finance. Technical assistance to Foreign Corporate Desk, consultation service department for Japanese companies, etc. Asset management business in India such as establishing infrastructure fund, securities and investment banking business. Invested in 21 * Banks in bold type denotes equity stake held by SMBC 38

40 Investment in BTPN / Vietnam Eximbank BTPN Investment overview SMBC acquired 24.26% stake of approx. USD.9 bn, IDR 6,5 per share, in May 213 SMBC plans to hold 4% stake subject to the approval by regulatory authorities An equity method affiliate of SMBC Overview of BTPN Established in 1958 to serve retired military personnel through pension banking services Ranked 6th by market cap. among Indonesian banks Asset Pension banking Loans to pension recipients Liability Deposit taking Focus on wealthy customers Consolidated net income (IDR bn) 2, 1, CAGR 5% Vietnam Eximbank Investment overview Acquired 15% stake in May 28 An equity method affiliate of SMBC Delegates a board member and staffs Business alliance SMBC collaborates and provides technical assistance for retail and wholesale banking, risk management, IT, etc. Technical assistance Employee training IT system Risk management Business collaboration Introduce Japanese corp. to acquire employees accounts Collaborate to provide cash management service Collaboration with Cedyna (auto loan) Promote business matching Micro-financing Loans to small shop owners

41 SMBC Aviation Capital / SMBC Rail Services SMBC Aviation Capital 1H, FY3/214 results 1H, FY3/214 results (USD mn) 1H, FY3/14 FY3/13 (1 months) *2 Total revenue * Net income Aircraft assets 8,71 7,288 Net assets 1,179 1,78 Ranking by number of aircraft *3 Leasing company Nationality No. of aircrafts 1 GECAS U.S. 1,742 ILFC + AerCap - 1,33 2 ILFC U.S. 1,33 3 BBAM U.S. 332 SMBC AC + Sumisho Aircraft Asset Mgmt AerCap Netherlands SMBC AC Ireland Sumisho Aircraft Asset Mgmt Netherlands 86 Initiatives Realize One Stop Shop structure among three shareholders in order to meet various needs of the aircraft industry and aircraft investors Capture increasing aircraft demand by leveraging economies of scale Build sustainable profit structure through a Buy and sell business model SMBC Rail Services Acquired Flagship Rail Services, LLC, the ninth largest railcar leasing company in the U.S., from Perella Weinberg Partners Asset Based Value Strategy Aim for expand U.S. business and diversify business portfolio Head office location Founded 26 Chicago, Illinois, U.S.A. Total assets approx. USD 1.1 bn (estimate, Dec. 31, 213) Number of cars approx. 15, *1 Leasing revenue + gains (losses) on sales of aircrafts *2 Excludes assets of SMFL Aircraft Capital Corporation B.V., SMFL Aircraft Capital Japan Co., Ltd., Sumisho Aircraft Asset Management B.V. *3 As of Dec. 31, 212 (Source: Flightglobal Insight Aircraft Finance 213 ) 4

42 SMBC Nikko Securities Net operating revenue Financial results (consolidated) FY3/213 (No. of referrals) Investment banking business 1,5 Fixed income business Apr.-Dec. 213 YOY change SG&A expenses (2.2) (171.7) (3.7) Ordinary income Net income Synergies between SMBC and SMBC Nikko Expanded bank-securities integration in Oct. 213 (Doubled number of offices. SMBC: 31 offices, SMBC Nikko: 22 offices) Established a new bank-securities dual-role department in Nov. 213 Number of referrals from SMBC to SMBC Nikko *1 (No. of referrals) 4, 4, 3, League tables (Apr.-Dec. 213) SMBC Nikko Securities was awarded Yen Bond House of the Year 213 by International Financing Review Domestic bonds Foreign bonds Investment trusts Product Sales 8, Rank Mkt share Global equity & equity-related (book runner, underwriting amount) *2 #3 14.5% JPY denominated bonds (lead manager, underwriting amount) *3 #5 14.4% Financial advisor (M&A, transaction volume) *4 #5 15.3% Financial advisor (M&A, No. of deals) *4 #4 2.4% 1, 2, 4, 5 2, 1, Apr.-Jun.13 Jul.-Sep.13 Oct.-Dec.13 Apr.-Dec.12 Apr.-Dec.13 Apr.-Jun.13 Jul.-Sep.13 Oct.-Dec.13 *1 Excludes number of referrals between offices conducting bank-securities integration model as a trial run *2 Source: SMBC Nikko, based on data from Thomson Reuters. Japanese corporate related only *3 Source: SMBC Nikko. Consisting of corporate bonds, FILP agency bonds, municipality bonds, and samurai bonds *4 Source: Thomson Reuters. Japanese corporate related only. Excluding real estate deals Apr.-Dec.12 Apr.-Dec.13 41

43 Business strategy for FY3/214 Macro trends Present Strategic initiatives Consumer banking Savings to investment Era of inheritance IT and internet society Leading financial consulting business model Strong retail securities business platform as a result of acquiring SMBC Nikko Securities Bank-securities integration model Strengthen inheritance related business Corporate banking Less deflationary pressure, recovery of financing demand Large corps: international business expansion Mid-sized corps and SMEs: overseas market entry Emerging needs of business succession planning Solution-based business for corporates Business support for mid-sized corps and SMEs High asset quality Proactively provide financing Accommodate global expansion and business restructuring Support growing industries International Emerging markets incl. Asia: high growth, increasing needs for infrastructure U.S.: economic recovery Europe: less fear of sovereign debt crisis Japanese banks: increasing presence Rapid growth of international business - Overseas banking profit ratio: FY3/1: 2% FY9/13: 32% Multi-Franchise strategy Sustainably expand existing business 42

44 Targets of Japan Revitalization Strategy (Released Jun. 213) Goals Numerical targets Current level Time period Unleash the power of the private sector to the fullest extent Expand private investment and promote business restructuring Domestic CAPEX JPY 7 tn JPY 63 tn in next 3 yrs Business startup rate vs. closure rate 1% range 5% - Create new businesses Ease of doing business ranking top 3 (in OECD) #15 22 Create and develop a good health and longevity industry Market for health promotion etc. JPY 1 tn JPY 4 tn Market for medicines etc. JPY 16 tn JPY 12 tn Market for the sixth industry JPY 1 tn JPY 1 tn Turn agriculture, forestry and fishery into growth industries Exports of agricultural, food products etc. JPY 1 tn JPY 45 bn 22 Income of farmers/ farming communities Double - in next 1 yrs Develop energy industry Domestic and international market share of energy-related industries JPY 26 tn (domestic JPY 1 tn) JPY 8 tn 22 Develop social infrastructure Size of PPP/PFI JPY 12 tn JPY 4.1 tn in next 1 yrs Propel innovation using IT Level of public data disclosures dataset over 1, - end of 215 Participation by all & foster human resources who can succeed in the global competition Fully utilize power of women Employment rate of women 73% 68% 22 Move labor without unemployment Unemployed for more than six months decrease by 2% - in next 5 yrs Unlock full potential of universities Ranking of Japanese universities 1+ to rank in top 1 - in next 1 yrs Create New Frontiers Create a country that continues to succeed through technology Others Tap into growth of emerging countries (economic partnership, etc.) 22 Global innovator World Economic Forum rankings #1 #5 in next 5 yrs Trading FTA ratio 19% 7% By 218 Export amount by SMEs X2 from 21 level - 22 Capture share of world s infrastructure Infrastructure sales JPY 3 tn JPY 1 tn 22 Promoting Cool Japan etc. Expand SMEs Overseas sales of broadcast contents X3 JPY 6.3 bn By 218 Foreign companies direct investment JPY 35 tn JPY 17.8 tn 22 Number of foreign visitors above 3 mn - 23 No. of companies expand overseas add 1, - in next 5 yrs Number of profit-making SMEs 1.4 mn.7 mn 22 Focus on Infrastructure management Next-gen intelligent infrastructures Domestic JPY 16 tn JPY 2 tn 22 * Source: Prime Minister of Japan and His Cabinet Japan Revitalization Strategy - Japan is Back - SMFG s initiatives - Utilize loan support program of BOJ - Enhance advisory capabilities - Affiliated loan for nursing homes - Health care REIT - Regenerative medicine fund - Agriculture fund - Project finance for solar energy projects - PFI - Enhance diversity - Trade finance - Project finance - Overseas expansion advisory 43

45 (DI) Current Japanese economy Economy watchers survey* 1 BOJ Tankan survey - Business conditions DI* 2 Household activity Corporate activity 35 Sep. 12 Dec. 12 Mar. 13 Jun. 13 Sep. 13 Dec. 13 Orders received for machinery* 3 (%pt) 2 (%) (%) 1, ,2 1, 8 6 Total value of machinery orders for private sector excluding volatile orders (left axis) YOY change (right axis) 4 Sep. 12 Dec. 12 Mar. 13 Jun. 13 Sep (5) (1) (15) (5) (1) (15) (2) Large enterprises - Manufacturing Large enterprises - Non-manufacturing SMEs - Manufacturing SMEs - Non-manufacturing (25) Sep. 12 Dec. 12 Mar. 13 Jun. 13 Sep. 13 Dec (.5) (1.) (1.5) (2.) Employee earnings (YOY change)* 4 Scheduled cash earnings Non-scheduled cash earnings Special cash earnings Total cash earnings Sep. 12 Dec. 12 Mar. 13 Jun. 13 Sep. 13 Dec. 13 *1 Source: Cabinet Office. Diffusion index for current economic conditions *2 Actual results. Diffusion index of Favorable minus Unfavorable *3 Source: Cabinet Office. Original series (Volatile orders = orders for ships and those from electric power companies) *4 Source: Ministry of Health, Labour and Welfare Monthly Labour Survey 44

46 Overview of Abenomics 2% inflation target Policies : Three arrows Aggressive monetary policy Quantitative and qualitative monetary easing Main operating target: monetary base 27 trillion yen in 214 (double from 212) Average duration and balance of JGB: double from 212 (monthly purchase 7+ trillion yen) Purchase ETFs and J-REITs Flexible fiscal policy Create 15 months budget by coupling FY213 budget with 1.3 trillion yen FY212 supplementary budget Implement flexible economic / fiscal policy in next 2-3 years Large scale public investment based on national land reconstruction plan Achieve primary balance surplus in 22 Growth strategy encouraging private sector investment Aim to become trading / industrial investment nation within 5 years Deregulate aggressively / reduce corporate tax rate Extend overseas investments, promote economic partnership agreements (TPP), and international natural resources strategy Targets Ease excessive yen appreciation Recover exports Improve stock price Increase domestic demand + Support demand + Boost competitiveness of Japanese corporations Exit deflation/ Economic recovery Achieve nominal GDP growth rate of approx. 3% p.a. Increase per capita nominal Gross National Income by over 1.5 million yen (.2) (.4) (.6) Consumer price index (YOY change)* (%) Sep. 12 Core CPI for Japan Core CPI in the 23 wards of Tokyo Nov. 12 Jan. 13 Mar. 13 May. 13 Jul. 13 Sep. 13 Nov. 13 * Source: Statistics Bureau. Core CPI: all items, less fresh foods 45

47 Japanese national wealth Balance sheet of Japan (as of Dec. 212, JPY tn) *1 Net international investment position *2 Closing Assets 8,685 Closing liabilities plus net worth 8,685 Households 2,586 Households 354 Financial assets 1,554 Non-financial corporations 1,21 Non-financial assets 1,33 Stocks 421 Non-financial Land 686 Financial corporations 2,961 corporations 1,86 Stocks 121 Financial assets 848 General government 1,131 Non-financial assets 1,12 Closing liabilities 5,685 Land 277 Net worth 3, Financial corporations 3,5 Households 2,233 General government 1,93 Non-financial corporations Financial assets 518 To Nominal GDP:238.8% 65 Financial assets 5,981 Financial corporations 89 Non-financial assets 2,74 General government (39) (% of GDP) Net external assets : JPY 36 tn (Sep. 213) *3 Japan Germany U.K. Canada France U.S. Italy Spain Sep. *1 Source: Cabinet office *2 Source: IMF.Stat *3 Preliminary estimate 46

48 Meeting international financial regulations Target institutions Regulations Contents of regulation Effective date Action taken & impact on SMFG G-SIFIs Internationally active banks Domestic banks G-SIFIs capital surcharge Recovery and Resolution Plan OTC derivatives markets reforms Limitation on banking activities / Ring fencing regulation Required for additional loss absorption capacity above the Basel III minimum SMFG Group Recovery Plan Resolution Plan related to US operations SMBCE s Recovery Plan Centralizing of OTC derivatives clearing Margin requirement for non-centrally cleared derivatives Ring-fenced banks prohibited from providing certain services and required to be isolated from the rest of the financial group in UK and EU Depository institution and its affiliates prohibited from proprietary trading, sponsorship and ownership in fund in US Requirements for foreign banking organizations (FBO) 216 Requirement for SMFG to be 8% on a fully-loaded basis. Achieved 8% CET 1 ratio by the end of Mar. 213 Submitted Submitted Submitted Dec. 212 Jan. 215 US: Jul. 212 TBD Jul. 214 (full implementation) Jul. 216 Bank Levy EU Financial Transaction Tax (FTT) After mid-214 Capital requirement Fundamental review of trading book Leverage ratio requirement Minimum standards for liquidity (LCR / NSFR) G2 G2 US UK G2 US EU US G2 G2 G2 Required to raise the level and quality of the capital and enhance risk coverage under Basel III Strengthened capital standards for market risk, such as reviewing the trading book / banking book boundary for capital regulation Non-risk-based measure based on on- and off-accounting balance sheet items against Tier 1 capital. Minimum requirement: 3% (transition period commenced in 211) LCR: Required to have sufficient high-quality liquid assets to survive a significant stress scenario lasting for one month. > =1% needed NSFR: Required to maintain a sustainable maturity structure of assets and liabilities > 1% needed Other regulations G2 Strengthen the oversight and regulation of the shadow banking system illustrated such as MMFs, repos and securitizations Large exposure regulation Work in accordance with each respective due dates Taking actions needed although impact will be smaller compared to investment banks No retail business in UK and EU (although paying close attention to the discussion) Business related to regulation is limited. Paying close attention to discussions While details of regulation remain unclear, the impact is assumed to be manageable 213 Achieved our target of 8% CET 1 ratio by Mar. 213, one year ahead of schedule TBD Second consultative paper released. Paying attention to discussions 218 Currently have no issues in meeting requirements although paying attention to national finish 215 In good position due to domestic deposit base. Intend to further strengthen foreign currency ALM 218 TBD Jan. 219 FSB s August proposal to apply haircut floors on repo transactions excluded JGBs as applicable collateral Paying attention to final large exposure rules to be public in March Able to meet requirements easily Able to meet requirements Impact unclear 47