Banks. Sumitomo Mitsui Financial Group, Inc. Japan. Full Rating Report. Key Rating Drivers. Rating Sensitivities. Ratings

Transcription

1 Japan Full Rating Report Ratings Foreign Currency Long-Term IDR Short-Term IDR Local Currency Long-Term IDR Short-Term IDR Viability Rating A F1 A F1 Support Rating 1 Support Rating Floor A- Sovereign Risk Long-Term Foreign-Currency IDR A Long-Term Local-Currency IDR A Short-Term Foreign-Currency IDR F1 Short-Term Local-Currency IDR F1 Outlooks Long-Term Foreign-Currency IDR Stable Long-Term Local-Currency IDR Stable Sovereign Long-Term Foreign- Stable Currency IDR Sovereign Long-Term Local- Stable Currency IDR Financial Data 31 Dec 17 a 31 Mar 17 Total assets (USDm) 1,764,151 1,693,8 Total assets (JPYbn) 199, ,72 Total equity (JPYbn) 11,314 1,421 Net income (JPYbn) ROA.5.45 ROE Common equity Tier capital (CET1, %) Fitch Core Capital (FCC, %) Key Rating Drivers Viability Rating-Driven IDRs: The Long-Term Issuer Default Ratings (IDRs) of Sumitomo Mitsui Financial Group, Inc. (SMFG) and core subsidiary, Sumitomo Mitsui Banking Corporation (SMBC; A/Stable), are driven by their common Viability Ratings (VRs). The ratings reflect SMFG s strong domestic franchise, healthy liquidity and sound asset quality. They also capture modest profitability, improving capitalisation and hardened resilience to market risk. Modest Yet Stable Profitability: SMFG s net interest margins from its larger consumer finance and SME loan portfolio, which are above those of its peers, and low credit costs offset persistent margin pressures from low interest rates and fierce competition. Fitch Ratings expects SMFG to post modest and stable profitability in the financial year ending March 219 (FYE19) given modest growth expectations in 218, and progress from the plans to boost fee income from the banking, securities and other businesses, and to maintain cost efficiency. Slower Overseas Growth: SMFG s exposure to Asia s retail and SME sector is mainly via minority equity participation in local institutions. Fitch expects the contribution from overseas businesses (1HFYE18: 34% of net business profit) to grow slightly but slower than in previous years due to higher regulatory capital requirements, while maintaining higher risk buffers for any larger risk appetite. Solid Capitalisation, Modest Growth: Fitch believes adequate capitalisation will be sustained, which compares well with domestic peers but will take a few years to catch up with global peers, due to modest capital generation. Fitch Core Capital (FCC) 14.5%, or 12.9% without unrealised gains from available-for-sale (AFS) securities at 3QFYE18 and the common equity Tier 1 (CET 1) ratio (13.3%) would be affected by a 25% rise in risk-weighted assets (RWA) from Basel III reforms, but with a manageable impact in light of the grandfathering (to 227). Manageable Market Risk: Fitch expects SMFG s risk resilience to improve further through reduction of equity holdings, as indicated by its equity exposure to a CET 1 capital target of 14% by 22 (21% at end-december 217). SMFG is less exposed to higher interest rates than Japan s other mega banks, with Japanese government bond (JGB) holdings of 83% of FCC at end-december 217 (mega-bank average 125%), while its duration of 2.4 years is similar. Healthy Liquidity: SMFG s key strength is its ample liquidity, which stems from its strong domestic deposit franchise. SMFG s foreign-currency (FC) needs will remain supplemented by rising overseas and domestic FC deposits and the issuance of FC debt. However, FC funding has become more costly due to competition and the prospect of rising interest rates. Any shortfall could be covered by yen liquidity and the Bank of Japan s (BOJ) liquidity facilities. Related Research Japanese Mega Banks: Further Capital Build- Up Ahead (February 218) Fitch 218 Outlook: Asia-Pacific Banks Japanese Mega Banks' Securities Holdings (October 217) Analysts Kaori Nishizawa kaori.nishizawa@fitchratings.com Naoki Morimura naoki.morimura@fitchratings.com Rating Sensitivities Limited Upside: Fitch thinks there is limited upside potential for SMFG s VR, given lower profitability than a rated global peers. Positive rating action would also depend on an upgrade of the Japan sovereign rating (A/Stable), as their ratings are at the same level and SMFG has large sovereign exposure. The VRs are sensitive to changes in Fitch s assessment of the operating environment, and the degree to which risk buffers compensate for risk appetite. Operating Environment, Risk Appetite: The VRs could be downgraded if there were unexpected deterioration in the operating environment. Negative rating factors would also be a significant increase in risk appetite without boosting loss-absorption buffers; heightened volatility of earnings and capital from higher equity exposure; or weaker internal capital generation leading to pressure on capitalisation and leverage. 27

2 Sumitomo Mitsui Financial Group s Major Subsidiaries - 1HFYE18 Assets Name (JPYtrn) SMFG Subsidiaries SMBC (A/a/Stable) SMBC Nikko Securities SMBC Friend Securities a, b Sumitomo Mitsui Finance and Leasing SMBC Consumer Finance SMFG (by assets) SMFG s stake Sumitomo Mitsui Card b Cedyna Figure as of end-september 217 Percentages may not add up to 1% due to consolidated base a Merged into SMBC Nikko Securities in January 218 b Non-consolidated figure Source: Bank Profits by Business Units - 1HFYE18 Business gross profits (consolidated) (by gross profits) Retail 42.1 Wholesale 24.1 International 2.7 Global markets 13.1 Source: Bank Related Criteria Bank Rating Criteria () Operating Environment Stable Environment, But Pressure on Profitability Remains Fitch s stable outlook on the banking sector is underpinned by slow-yet-steady economic growth in Japan, with qoq GDP growth for eight consecutive quarters and our real GDP growth forecast of 1.3% for 218. However, operating conditions remain subdued with a slow recovery in consumption from muted wage growth and inflation below the 2% target. The banks are facing less pressure from low interest rates, but Fitch believes that the banks revenue will remain under pressure from fierce competition. Fitch believes the banks operate in a highly developed and transparent regulatory framework, with legislation and regulations being enforced effectively by the Japan Financial Services Agency (JFSA) and overseen by the BOJ. Major banks in Japan (designated either as a Global Systemically Important Bank (G-SIB) or a Domestic Systemically Important Bank (D-SIB) SMFG is designated as a G-SIB with a 1% surcharge) continue to face challenges to meet stricter regulatory requirements, such as Basel III capital, leverage and liquidity and surcharge requirements. The capitalisation of Japan s major banks will be affected due to the rise in RWAs caused by the Basel III reforms. That said, it will be manageable as the Japanese banks (like their global peers) will have time to adapt to the rules by 227. Company Profile Strong SME Franchise with Business Diversity SMFG is the third-largest banking group in Japan in terms of total assets, with a strong franchise supported by an extensive nationwide network (SMBC s loans represent about 16% of banking sector loans). In addition to its core commercial banking business (mainly via SMBC), SMFG carries out diversified financial services including securities brokerage, lease operations, credit cards and consumer finance. SMFG has strong SME/retail businesses inherited from its predecessor, but with more limited trust operations than its mega-bank peers. SMFG has extended its offshore business via equity investments, although its crossjurisdictional exposures are lower than its European or US major G-SIB peers. The group announced in January 218 its proposal to merge its consolidated subsidiary with its unconsolidated affiliated local bank in Indonesia, which we feel would bolster its overseas presence. Fitch expects the overseas business to continue to expand but at a slower pace as the company seeks to manage its assets more efficiently. Management and Strategy Sound Governance in Line with Industry Norms Fitch views SMFG s corporate governance as broadly in line with industry norms for Japanese major banks, but expects more time will be needed for a more substantive governance culture to sink in throughout the group. SMFG introduced group-wide business units, CxO system, and transformed into a company with three-committees (Nomination, Compensation and Audit committees consisting largely of outside directors) in 217, with the objective of establishing a G-SIB standard governance framework. These features are mostly in line with international norms, and Fitch views governance as neutral to the current rating. Strategy Focuses on Fee Business and Efficiency Fitch believes SMFG s strategic objectives and financial targets are challenging but achievable, given the actions the group has taken in the first year of its new medium-term management plan (FYE18-FYE2). The new plan follows the previous one but with a greater emphasis on consolidated profitability, as reflected in the three key financial targets (7%-8% ROE at the lower end of a rated global peers 6%-1%, overhead ratio at 1% reduction from 62% level (with around 6% target at the earliest opportunity) and 1% CET1 ratio (excludes AFS revaluation gains, final fully implemented basis)). The targets are to be met by effectively allocating resources to businesses with growth potential while maintaining cost control. 2

3 FYE14 9MFYE18 FYE14 9MFYE18 FYE14 9MFYE18 Banks Focus on cost efficiency has become crucial for the banking group under the current operating environment where top-line growth opportunity is limited and investment in technology is mandatory. SMFG s plan is natural reduction in headcount and making use of IT such as to centralise back-office operations, together with branch reorganisation. The bank s strength is its firm cost control compared with its peers, but the gap has narrowed in recent years. Key Financial Targets: SMFG (FYE3/18-FYE3/2) Dec 17 ROE a Overhead ratio CET1 ratio 1 b a Annualised b final fully implemented basis Source: Fitch AFS JGBs at Market Value/FCC Source: Banks AFS Equities at Cost/FCC Risk Appetite Above-Peer Credit Risk Appetite, Yet Offshore Growth Slows Fitch assesses SMFG s credit risk appetite as somewhat higher than its mega-bank peers, as the group has sought higher return opportunities and maintains a larger exposure to the SME/retail sector, which is also one of the areas of its long-term overseas expansion in growing markets (such as investments in Indonesia). SMFG says it intends to adhere to equity participation initially, to benefit from local expertise, which may ultimately lead to increased investments where opportunity and return prospects are met, as in the case of PT Bank Tabungan Pensiunan Nasional Tbk (AAA(idn)) in Indonesia. Fitch expects the pace of offshore business expansion to slow down, given the higher capital requirements under the Basel III. Modest and Manageable Market Risk SMFG has the strongest risk resilience against major key securities holdings JGBs, foreign bonds, and equity among its mega-bank peers. JGB and equity holdings as a percentage of FCC had dropped to 83% and 16%, respectively, as of end-december 217 (mega-bank average: 125% and 17%), from 143% and 26%, respectively, at FYE14, due to a reduction in holdings and improved capitalisation. Further improvement is planned as the group has committed to sell its strategic shareholdings to about 14% of CET1 by around 22 (from 28% at end-september 215). The risk in foreign bonds has increased with relatively longer duration, representing 68% (mega average: 13%) of FCC for the same period (62% at FYE14), while overall risk resilience has remained manageable. (Please also refer to the Special Report (Japanese Mega Banks Securities Holdings October 217). Credit Underwriting Standards in Line with Industry Practice There have been no significant changes in the bank s underwriting standards over the past few years, and it is unlikely to make rapid changes in its standards in the short to medium term. That said, the Japanese major banks are known to have a large exposure to domestic corporates with thin interest margins. The bank s highest concentration is in residential loans (18%), followed by real estate (11%). SMFG s NPL and credit cost/loan ratios have been in line with industry peers, although the group has higher exposure to SMEs, reflecting robust and conservative risk controls. Credit-risk appetite for non-loan exposure is limited, with AFS representing about 13% of total assets (4% in equity holdings and corporate bonds combined). Source: Fitch and Bank AFS Foreign Bonds/FCC Source: Banks Financial Profile Asset Quality Impaired Loan Ratios on a Par with Peers Despite a Higher Share of SME Loans Asset Quality Maintained Dec 17 Impaired loans/gross loans Growth of gross loans Reserves for impaired loans/impaired loans Loan-impairment charges/average gross loans Source: Fitch and SMFG Fitch expects SMFG s asset quality to remain stable, with low NPL ratios and modest credit losses reflecting the stable operating environment in Japan, as well as lower downside risks in its overseas portfolio with an overseas NPL ratio of.5% (lower than the domestic NPL ratio of.7%), given the generally stable economic outlook. Special-mention loans, which 3

4 FYE14 9MFYE18 FYE14 1HFYE18 FYE14 1HFYE18 Banks SMBC: NPL Ratio (Overseas/Domestic Breakdown, SMBC) Source: Bank NIM (SMBC) Source: Bank Gross overseas NPLs/total loans Gross domestic NPLs/total loans Total NPLs/total loans Overall NIM Domestic NIM Overseas NIM FCC Ratio Comparison SMFG SMFG (AFS U/G) correspond to special-attention loans (a portion of normal loans defined by classification as per the Financial Reconstruction Law with a possibility to become non-performing) as a percentage of total credit exposure at 1.8% as of end-september 217 (2.2% at FYE14), have been one of the lowest among its peers. Downside risks to asset quality would include a sharp and unexpected contraction in the domestic economy, which is not Fitch s base case. Earnings and Profitability Under Pressure, but Better than Peers Persistent Pressure on NIM Dec 17 Operating profit/risk-weighted assets Net interest income/average earning assets Non-interest expense/gross revenues Loans and securities impairment charges/ pre-impairment operating profit Operating profit/average total assets Net income/average equity Source: Fitch and SMFG Fitch expects SMFG to maintain higher profitability than its peers, although the bank is more susceptible to economic downturns due to its larger exposure to SMEs and consumer finance businesses. Net interest income remains subdued, but a buffer would be rising fee income from other businesses (such as securities, credit cards and consumer finance representing 55% of net fees and commission for 1HFYE18) through cross-selling and collaboration among group companies. Fitch sees SMFG s profit in FYE19 remaining modest, supported by continued cost control, low credit costs and net gains from equity sales to resolve cross-shareholdings. Capitalisation and Leverage Solid Buffers Commensurate with Risk but Slightly Behind Global Peers Maintain Modest Capital Build-Up Dec 17 Fitch Core Capital/FCC-adjusted risk-weighted risk assets Basel leverage ratio Tangible common equity/tangible assets CET1 regulatory capital ratio Impaired loans less reserves for impaired loans/fitch Core Capital Source: Fitch and SMFG 3 Source: Bank, Fitch SMFG s capitalisation remains the highest among its domestic peers but lags its global peers when deducting the unrealised gains on AFS (1.6% of FCC) which are immaterial for non- Japanese global peers. Fitch expects SMFG s capitalisation to improve consistently and modestly through accumulation of retained earnings. Basel III Finalisation Impact is Manageable Fitch believes that the recent finalisation of Basel III reforms would result in RWA inflation for SMFG, given the group s high proportion of corporate loans and sizeable equity holdings (albeit declining). SMFG estimates its RWA inflation to be around 25% should it be adopted promptly. Fitch expects the actual impact to be limited as SMFG, like its mega-bank peers, has sufficient time to build up capital through modest internal capital generation and partially reduce RWA from asset-growth control to meet the final reforms by 227. In 217, SMFG announced the reorganisation of its ownership structure in some of its subsidiaries to improve capital efficiency (about JPY7 trillion reduction in RWA). Fitch thinks SMFG will also continue to build risk buffers by issuing TLAC debt to diverse the investor base, although it has been in adherence with the TLAC requirements of 219 and 222 since end-september 216, based on Fitch s estimates. 4

5 Funding and Liquidity Stable Funding and Liquidity Strong Yen Liquidity Dec 17 Loans/customer deposits Liquidity coverage ratio n.a Customer deposits/total funding (excluding derivatives) Source: Fitch and SMFG TLAC (RWA) as of 31 Dec 17 DIF contribution TLAC eligible senior debt, excess (CET1, AT1, T2) T2 AT1 CET1 Capital conservation buffer G-SIB buffer Required SMFG Required SMFG Source: Fitch, banks TLAC (Leverage) as of 31 Dec 17 CET1 AT1 T2 TLAC eligible senior debt, excess (CET1, AT1, T2) DIF contribution Excess yen liquidity stems from limited domestic loan demand amid a constant rise in deposits from retail and wholesale clients, as reflected in a declining overall loan/deposit ratio (see table above). Excess liquidity is kept as cash or invested partially in JGBs, which provides ample flexibility if needed. SMFG s FC loans/deposit ratio remains above 12%, albeit down from 17% at FYE13 due to higher FC deposits in overseas markets and FC debt issuance. SMFG s asset-liability maturity gap is large, like most Japanese banks, with short-term deposits funding long-term loans, but is mitigated by the loyalty of long-term retail depositors in Japan. Liquidity coverage was 128% as of end-december 217, reflecting a stable liquidity source (such as cash representing more than 2% of total assets since 214). Support Fitch views the probability of sovereign support for systemically important financial institutions in Japan will remain extremely high, even though there is a global trend towards reducing the extent of sovereign support for banks and, notwithstanding the Japanese G-SIBs implementing global TLAC requirements. The effective TLAC thresholds for the Japanese banks are lower, however, as pre-emptive support under the Deposit Insurance Act (DIA) counts against them. Holding Companies SMFG s rating is equalised with the ratings of its main operating bank, SMBC, reflecting its role as a holding company, functional interconnectedness, the regulator's group-level focus, and Fitch s expectation that double leverage (calculation: holding company s equity investments in subsidiaries and associates divided by holding company s equity) will be maintained below 12%. SMFG has managed down its double leverage to 113% as of September 217, from 134% at September 213, from accumulation of retained earnings, while equity investment in subsidiaries has remained flat. Fitch expects SMFG to maintain double leverage below 12%. Debt Ratings SMFG's US dollar-denominated Basel III-compliant Tier 2 subordinated bonds anchor rating, which best reflects non-performance risk, is the higher of the VR (a) or support-driven Long- Term IDR (A-). Fitch believes that support can be factored into such instrument ratings because under Japan s DIA, the government can pre-emptively provide support to a solvent bank holding company when a serious systemic disruption is anticipated. The two-notch downward adjustment from the VR reflects the prospect of the full and permanent write-down of the securities upon reaching the point of non-viability, resulting in additional loss severity Requiredª SMFG Requiredᵇ SMFG a Including DIF contribution (RWA 2.5% equivalent amount) b Including DIF contribution (RWA 3.5% equivalent amount) Source: Fitch, bank 5

6 Income Statement 31 Dec Mar Mar Mar Mar Months - 3rd Quarter 9 Months - 3rd Quarter As % of Year End As % of Year End As % of Year End As % of Year End As % of USDm JPYbn Earning JPYbn Earning JPYbn Earning JPYbn Earning JPYbn Earning Reviewed - Reviewed - Assets Audited - Assets Audited - Assets Audited - Assets Audited - Assets 1. Interest Income on Loans 9,96.1 1, , , , , Other Interest Income 4, Dividend Income n.a. n.a. - n.a. - n.a. - n.a. - n.a Gross Interest and Dividend Income 14, , , , , , Interest Expense on Customer Deposits 1, Other Interest Expense 3, Total Interest Expense 5, Net Interest Income 9,38.2 1, , , , , Net Gains (Losses) on Trading and Derivatives 1, Net Gains (Losses) on Other Securities n.a. n.a. - n.a. - n.a. - n.a. - n.a Net Gains (Losses) on Assets at FV through Income Statemen n.a. n.a. - n.a. - n.a. - n.a. - n.a Net Insurance Income n.a. n.a. - n.a. - n.a. - n.a. - n.a Net Fees and Commissions 6, , , Other Operating Income 1, Total Non-Interest Operating Income 1,55.9 1, , , , , Personnel Expenses n.a. n.a Other Operating Expenses 11, , , , , Total Non-Interest Expenses 11, , , , , , Equity-accounted Profit/ Loss - Operating n.a. n.a. - n.a. - n.a. - n.a. - n.a Pre-Impairment Operating Profit 7, , , , , Loan Impairment Charge Securities and Other Credit Impairment Charges n.a. n.a. - n.a. - n.a. - n.a. - n.a Operating Profit 7, , , , Equity-accounted Profit/ Loss - Non-operating (36.2) (.3) (1.6) (.1) Non-recurring Income 1, Non-recurring Expense Change in Fair Value of Own Debt n.a. n.a. - n.a. - n.a. - n.a. - n.a Other Non-operating Income and Expenses (92.1) (1.4) (.1) (26.6) (.2) (5.1) (.) (11.8) (.1) (9.6) (.1) 29. Pre-tax Profit 8, , , Tax expense 1, Profit/Loss from Discontinued Operations n.a. n.a. - n.a. - n.a. - n.a. - n.a Net Income 6, Change in Value of AFS Investments 3, (445.) (.35) Revaluation of Fixed Assets Currency Translation Differences (12.7) (.1) (92.1) (.7) Remaining OCI Gains/(losses) (38.1) (4.3) (.) (31.3) (.2) (41.4) (.3) (32.3) (.3) 37. Fitch Comprehensive Income 1, , , , Memo: Profit Allocation to Non-controlling Interests Memo: Net Income after Allocation to Non-controlling Interests 5, Memo: Common Dividends Relating to the Period n.a. n.a Memo: Preferred Dividends Related to the Period n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Exchange rate USD1 = JPY112.9 USD1 = JPY112.5 USD1 = JPY USD1 = JPY12.11 USD1 = JPY

7 Balance Sheet 31 Dec Mar Mar Mar Mar Months - 3rd Quarter 9 Months - 3rd Quarter As % of Year End As % of Year End As % of Year End As % of Year End As % of USDm JPYbn Assets JPYbn Assets JPYbn Assets JPYbn Assets JPYbn Assets Assets A. Loans 1. Residential Mortgage Loans 132, , , , , , Other Mortgage Loans n.a. n.a. - n.a. - n.a. - n.a. - n.a Other Consumer/ Retail Loans n.a. n.a. - n.a. - n.a. - n.a. - n.a Corporate & Commercial Loans n.a. n.a. - n.a. - n.a. - n.a. - n.a Other Loans 636,8. 71, , , , , Less: Reserves for Impaired Loans 5, Net Loans 763, , , , , , Gross Loans 768, , , , , , Memo: Impaired Loans included above 7, , , Memo: Loans at Fair Value included above n.a. n.a. - n.a. - n.a. - n.a. - n.a. - B. Other Earning Assets 1. Loans and Advances to Banks 15, , , , , , Reverse Repos and Cash Collateral 86,98.5 9, , , , , Trading Securities and at FV through Income 49,96.1 5, , , , , Derivatives n.a. n.a. - 2, , , n.a Available for Sale Securities 223, , , , , , Held to Maturity Securities 3, , , , , Equity Investments in Associates n.a. n.a Other Securities 46, , , , , , Total Securities 49, , , , , , Memo: Government Securities included Above 8, , , , , , Memo: Total Securities Pledged n.a. n.a. - 13, , , , Investments in Property n.a. n.a. - n.a. - n.a. - n.a. - n.a Insurance Assets n.a. n.a. - n.a. - n.a. - n.a. - n.a Other Earning Assets n.a. n.a. - n.a. - n.a. - n.a. - n.a Total Earning Assets 1,188, , , , , , C. Non-Earning Assets 1. Cash and Due From Banks 458, , , , , , Memo: Mandatory Reserves included above n.a. n.a. - n.a. - n.a. - n.a. - n.a Foreclosed Real Estate n.a. n.a. - n.a. - n.a. - n.a. - n.a Fixed Assets 31, , , , , , Goodwill n.a. n.a Other Intangibles 8, Current Tax Assets n.a. n.a. - n.a. - n.a. - n.a. - n.a Deferred Tax Assets Discontinued Operations n.a. n.a. - n.a. - n.a. - n.a. - n.a Other Assets 77, , , , , , Total Assets 1,764, , , , , , Liabilities and Equity D. Interest-Bearing Liabilities 1. Customer Deposits - Current n.a. n.a. - 8, , , , Customer Deposits - Savings n.a. n.a. - n.a. - n.a. - n.a. - n.a Customer Deposits - Term 1,91, , , , , , Total Customer Deposits 1,91, , , , , , Deposits from Banks 16, , , , , , Repos and Cash Collateral 14, , , , , , Commercial Paper and Short-term Borrowings 151,9.8 17, , , , , Total Money Market and Short-term Funding 1,364, , , , , , Senior Unsecured Debt (original maturity > 1 year) 8, , , , , , Subordinated Borrowing n.a. n.a. - 2, , , , Covered Bonds n.a. n.a. - n.a. - n.a. - n.a. - n.a Other Long-term Funding 88,15.4 9, , , , , Total LT Funding (original maturity > 1 year) 168, , , , , , Derivatives n.a. n.a. - 2, , , n.a Trading Liabilities 38,91.2 4, , , , , Total Funding 1,571, , , , , , E. Non-Interest Bearing Liabilities 1. Fair Value Portion of Debt n.a. n.a. - n.a. - n.a. - n.a. - n.a Credit impairment reserves n.a Reserves for Pensions and Other 1, Current Tax Liabilities n.a. n.a. - n.a. - n.a. - n.a. - n.a Deferred Tax Liabilities 5, Other Deferred Liabilities n.a. n.a. - n.a. - n.a. - n.a. - n.a Discontinued Operations n.a. n.a. - n.a. - n.a. - n.a. - n.a Insurance Liabilities n.a. n.a. - n.a. - n.a. - n.a. - n.a Other Liabilities 71,55. 8, , , , , Total Liabilities 1,649, , , , , , F. Hybrid Capital 1. Pref. Shares and Hybrid Capital accounted for as Debt 6, , , , Pref. Shares and Hybrid Capital accounted for as Equity 7, , , G. Equity 1. Common Equity 75, , , , , , Non-controlling Interest 6, Securities Revaluation Reserves 17, , , , , Foreign Exchange Revaluation Reserves Fixed Asset Revaluations and Other Accumulated OCI (97.) (.6) 6. Total Equity 1, , , , , , Total Liabilities and Equity 1,764, , , , , , Memo: Fitch Core Capital 91, , , , , , Exchange rate USD1 = JPY112.9 USD1 = JPY112.5 USD1 = JPY USD1 = JPY12.11 USD1 = JPY

8 Summary Analytics 31 Dec Mar Mar Mar Mar Months - 3rd Quarter Year End Year End Year End Year End A. Interest Ratios 1. Interest Income on Loans/ Average Gross Loans Interest Expense on Customer Deposits/ Average Customer Deposits Interest Income/ Average Earning Assets Interest Expense/ Average Interest-bearing Liabilities Net Interest Income/ Average Earning Assets Net Int. Inc Less Loan Impairment Charges/ Av. Earning Assets Net Interest Inc Less Preferred Stock Dividend/ Average Earning Assets B. Other Operating Profitability Ratios 1. Non-Interest Income/ Gross Revenues Non-Interest Expense/ Gross Revenues Non-Interest Expense/ Average Assets Pre-impairment Op. Profit/ Average Equity Pre-impairment Op. Profit/ Average Total Assets Loans and securities impairment charges/ Pre-impairment Op. Profit Operating Profit/ Average Equity Operating Profit/ Average Total Assets Operating Profit / Risk Weighted Assets C. Other Profitability Ratios 1. Net Income/ Average Total Equity Net Income/ Average Total Assets Fitch Comprehensive Income/ Average Total Equity Fitch Comprehensive Income/ Average Total Assets Taxes/ Pre-tax Profit Net Income/ Risk Weighted Assets D. Capitalization 1. FCC/FCC-Adjusted Risk Weighted Assets Tangible Common Equity/ Tangible Assets Tier 1 Regulatory Capital Ratio Total Regulatory Capital Ratio Common Equity Tier 1 Capital Ratio Equity/ Total Assets Cash Dividends Paid & Declared/ Net Income n.a E. Loan Quality 1. Growth of Total Assets Growth of Gross Loans Impaired Loans/ Gross Loans Reserves for Impaired Loans/ Gross Loans Reserves for Impaired Loans/ Impaired Loans Impaired loans less Reserves for Impaired Loans/ Fitch Core Capital Impaired Loans less Reserves for Impaired Loans/ Equity Loan Impairment Charges/ Average Gross Loans Net Charge-offs/ Average Gross Loans Impaired Loans + Foreclosed Assets/ Gross Loans + Foreclosed Assets F. Funding and Liquidity 1. Loans/ Customer Deposits Interbank Assets/ Interbank Liabilities Customer Deposits/ Total Funding (excluding derivatives) Liquidity Coverage Ratio n.a. n.a. 5. Net Stable Funding Ratio n.a. n.a. n.a. n.a. n.a. 8

9 Reference Data 31 Dec Mar Mar Mar Mar Months - 3rd Quarter 9 Months - 3rd Quarter As % of Year End As % of Year End As % of Year End As % of Year End As % of USDm JPYbn Assets JPYbn Assets JPYbn Assets JPYbn Assets JPYbn Assets A. Off-Balance Sheet Items 1. Managed Securitized Assets Reported Off-Balance Sheet n.a. n.a. - n.a. - n.a. - n.a. - n.a Other off-balance sheet exposure to securitizations n.a. n.a. - n.a. - n.a. - n.a. - n.a Guarantees n.a. n.a. - n.a. - n.a. - n.a. - n.a Acceptances and documentary credits reported off-balance sheet n.a. n.a. - n.a. - n.a. - n.a. - n.a Committed Credit Lines n.a. n.a. - n.a. - n.a. - n.a. - n.a Other Off-Balance Sheet items 79, , , , , , Total Assets under Management n.a. n.a. - n.a. - n.a. - n.a , B. Average Balance Sheet Average Loans 757, , , , , , Average Earning Assets 1,178, , , , , , Average Assets 1,722, , , , , , Average Managed Securitized Assets (OBS) n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Average Interest-Bearing Liabilities 1,542, , , , , , Average Common equity 73, , , , , , Average Equity 95,71.5 1, , , , , Average Customer Deposits 1,61, , , , , , C. Maturities Asset Maturities: Loans & Advances < 3 months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Loans & Advances 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Loans and Advances 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Loans & Advances > 5 years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Debt Securities < 3 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Debt Securities 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Debt Securities 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Debt Securities > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Loans & Advances to Banks < 3 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Loans & Advances to Banks 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Loans & Advances to Banks 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Loans & Advances to Banks > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Liability Maturities: Retail Deposits < 3 months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Retail Deposits 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Retail Deposits 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Retail Deposits > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Other Deposits < 3 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Other Deposits 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Other Deposits 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Other Deposits > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Deposits from Banks < 3 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Deposits from Banks 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Deposits from Banks 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Deposits from Banks > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Senior Debt Maturing < 3 months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Senior Debt Maturing 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Senior Debt Maturing 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Senior Debt Maturing > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Total Senior Debt on Balance Sheet n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Fair Value Portion of Senior Debt n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Subordinated Debt Maturing < 3 months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Subordinated Debt Maturing 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Subordinated Debt Maturing 1-5 Year n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Subordinated Debt Maturing > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - n.a. - Total Subordinated Debt on Balance Sheet n.a. n.a. - 2, , , , Fair Value Portion of Subordinated Debt n.a. n.a. - n.a. - n.a. - n.a. - n.a. - D. Risk Weighted Assets 1. Risk Weighted Assets 631, , , , , , Fitch Core Capital Adjustments for Insurance and Securitisation Risk Weighted Assets n.a. n.a. - n.a. - n.a. - n.a. - n.a Fitch Core Capital Adjusted Risk Weighted Assets 631, , , , , , Other Fitch Adjustments to Risk Weighted Assets n.a. n.a. - n.a. - n.a. - n.a. - n.a Fitch Adjusted Risk Weighted Assets 631, , , , , , E. Equity Reconciliation 1. Equity 1, , , , , , Add: Pref. Shares and Hybrid Capital accounted for as Equity 7, , , Add: Other Adjustments n.a. n.a. - n.a. - n.a n.a Published Equity 17, , , , , , F. Fitch Core Capital Reconciliation 1. Total Equity as reported (including non-controlling interests) 1, , , , , , Fair value effect incl in own debt/borrowings at fv on the B/S- CC only Non-loss-absorbing non-controlling interests Goodwill Other intangibles 8, Deferred tax assets deduction Net asset value of insurance subsidiaries First loss tranches of off-balance sheet securitizations Fitch Core Capital 91, , , , , , Exchange Rate USD1 = JPY112.9 USD1 = JPY112.5 USD1 = JPY USD1 = JPY12.11 USD1 = JPY

10 The ratings above were solicited and assigned or maintained at the request of the rated entity/issuer or a related third party. Any exceptions follow below. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright 218 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 14. Telephone: , (212) Fax: (212) Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided as is without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1, to US$75, (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$1, to US$1,5, (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no ) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 21. 1