6-K 1 d79930d6k.htm FORM 6-K FORM 6-K
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

For the month of December 2020

Commission file number 001-34919

 

 

SUMITOMO MITSUI FINANCIAL GROUP, INC.

(Translation of registrant’s name into English)

 

 

1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005, Japan

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:    Form 20-F  ☒    or    Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):    ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):    ☐

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.    Yes  ☐    No  ☒

 

*

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):    82-            

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE INTO THE PROSPECTUS FORMING A PART OF SUMITOMO MITSUI FINANCIAL GROUP, INC.’S REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-228913) AND TO BE A PART OF SUCH PROSPECTUS FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

 

 

 


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EXHIBITS

 

Exhibit number

    
101. INS    XBRL Instance Document
101. SCH    XBRL Taxonomy Extension Schema
101. CAL    XBRL Taxonomy Extension Calculation Linkbase
101. DEF    XBRL Taxonomy Extension Definition Linkbase
101. LAB    XBRL Taxonomy Extension Label Linkbase
101. PRE    XBRL Taxonomy Extension Presentation Linkbase


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Sumitomo Mitsui Financial Group, Inc.
By:  

  /s/ Toru Nakashima

  Name:  Toru Nakashima
 

Title:    Senior Managing Corporate Executive Officer

             Group Chief Financial Officer

Date: December 23, 2020


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This document contains a review of our financial condition and results of operations for the six months ended September 30, 2020.

TABLE OF CONTENTS

 

     Page  

Cautionary Statement Regarding Forward-Looking Statements

     1  

Financial Review

     2  

Recent Developments

     2  

Operating Environment

     2  

SMBC Group’s Response to COVID-19

     5  

Developments Related to Our Business

     5  

Accounting Changes

     5  

Operating Results and Financial Condition

     6  

Executive Summary

     6  

Operating Results

     7  

Business Segment Analysis

     15  

Financial Condition

     20  

Liquidity

     34  

Capital Management

     35  

Financial Risk Management

     39  

Risk Management System

     39  

Credit Risk

     39  

Market Risk

     39  


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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” (as defined in the U.S. Private Securities Litigation Reform Act of 1995), regarding the intent, belief or current expectations of Sumitomo Mitsui Financial Group, Inc. (the “Company”) and its management with respect to the Company’s future financial condition and results of operations. In many cases but not all, these statements contain words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “probability,” “risk,” “project,” “should,” “seek,” “target,” “will,” and similar expressions. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those expressed in or implied by such forward-looking statements contained or deemed to be contained herein. The risks and uncertainties which may affect future performance include: deterioration of Japanese and global economic conditions and financial markets; declines in the value of the Company’s securities portfolio; incurrence of significant credit-related costs; the Company’s ability to successfully implement its business strategy through its subsidiaries, affiliates and alliance partners; and exposure to new risks as the Company expands the scope of its business. Given these and other risks and uncertainties, you should not place undue reliance on forward-looking statements, which speak only as of the date of this document. The Company undertakes no obligation to update or revise any forward-looking statements. Please refer to the Company’s most recent disclosure documents such as its annual report on Form 20-F and other documents submitted to the U.S. Securities and Exchange Commission, as well as its earnings press releases, for a more detailed description of the risks and uncertainties that may affect its financial conditions, its operating results, and investors’ decisions.

 

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FINANCIAL REVIEW

Sumitomo Mitsui Financial Group, Inc. (“we,” “us,” “our,” the “Company” or “SMFG”) is a holding company for Sumitomo Mitsui Banking Corporation (“SMBC”), SMBC Trust Bank Ltd. (“SMBC Trust Bank”), Sumitomo Mitsui Finance and Leasing Company, Limited (“SMFL”), SMBC Nikko Securities Inc. (“SMBC Nikko Securities”), Sumitomo Mitsui Card Company, Limited (“Sumitomo Mitsui Card”), SMBC Finance Service Co., Ltd. (“SMBC Finance Service”), SMBC Consumer Finance Co., Ltd. (“SMBC Consumer Finance”), The Japan Research Institute, Limited (“The Japan Research Institute”), Sumitomo Mitsui DS Asset Management Company, Limited (“SMDAM”) and other subsidiaries and affiliates. Through our subsidiaries and affiliates, we offer a diverse range of financial services, including commercial banking, leasing, securities, consumer finance and other services. References to the “SMBC Group” are to us and our subsidiaries and affiliates taken as a whole.

RECENT DEVELOPMENTS

Operating Environment

Economic Environment

Our results of operations and financial condition are significantly affected by developments in Japan as well as the global economy.

Since December 2019, COVID-19 has spread throughout the world. The COVID-19 pandemic has impacted many countries and regions resulting in the implementation of numerous measures to prevent the spread of COVID-19, such as restrictions on movement and closures of schools, businesses, factories and other public and private facilities. These measures significantly have affected people’s lives and business activities and contributed to declines in consumer spending and stagnant business operations. Coupled with these measures, the COVID-19 pandemic has had a severe impact on both Japanese and global economic conditions.

In Japan, a state of emergency was declared in April 2020 in response to the COVID-19 pandemic, and economic activity shrank as a result of requests for voluntary restraint on movement and business closure requests to commercial facilities. Under these circumstances, the Japanese government approved “Emergency Economic Measures in Response to COVID-19” to protect the lives and lifestyles of the public and move toward economic recovery. The state of emergency in Japan was lifted in May 2020, and business activities have been resumed gradually, paying extra attention to prevent the spread of COVID-19.

In many countries and regions other than Japan, including the United States and those in Europe and Asia, numerous measures to prevent the spread of COVID-19 such as restrictions on business operations and movement continued to be implemented after April 2020, while China began resuming business activities in April 2020 and became the first major economy to return to growth after the COVID-19 pandemic. Subsequently, subject to regional variations in the spread of COVID-19, restrictive measures were eased, and economic activities began to resume gradually. However, in some countries where an upward trend in new cases of COVID-19 has been observed, restrictive measures have been reintroduced.

Due in part to the measures and restrictions on business activities described above, the COVID-19 pandemic had a severe impact on both Japanese and global economic conditions for the six months ended September 30, 2020.

The Japanese economy deteriorated due to the COVID-19 pandemic in the former half of the six months ended September 30, 2020. However, it showed signs of pick-up in the latter half of the period, reflecting the gradual resumption of business activities in Japan and overseas.

 

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The following table presents the quarter-on-quarter growth rates of Japanese gross domestic product (“GDP”) from the third quarter ended December 31, 2018 for the fiscal year ended March 31, 2019 through the second quarter ended September 30, 2020 for the fiscal year ending March 31, 2021, based on data published in December 2020 by the Cabinet Office of the Government of Japan.

 

     For the fiscal year ended/ending March 31,  
     2019      2020      2021  
     3Q      4Q      1Q      2Q      3Q      4Q      1Q      2Q  

Japanese GDP

     0.5%        0.6%        0.1%        0.2%        (1.9%)        (0.5%)        (8.3%)        5.3%  

Japanese GDP decreased by 8.3% on a quarter-on-quarter basis for the first quarter ended June 30, 2020. This was primarily due to decreases in private consumption resulting from the voluntary restraint on social and business activities and exports of goods and services caused by the downturn in overseas economies and a sharp decline in foreign tourist spending, affected by the COVID-19 pandemic. However, following a sharp decline in the previous quarter, Japanese GDP increased by 5.3% for the second quarter ended September 30, 2020, primarily due to increases in private consumption and exports of goods and services resulting from the resumption of business activities in Japan and overseas.

The employment situation weakened due to the COVID-19 pandemic. The active job openings-to-applicants ratio continued to decline gradually for the six months ended September 30, 2020. The unemployment rate in September 2020 was 3.0%, an increase of 0.6 percentage points from the same month of the previous year, based on the data published in October 2020 by the Statistics Bureau in the Ministry of Internal Affairs and Communications of Japan. Compensation of employees decreased by 3.7% on a quarter-on-quarter basis for the first quarter ended June 30, 2020. Thereafter, for the second quarter ended September 30, 2020, it increased by 0.5% on a quarter-on-quarter basis.

According to Teikoku Databank, a research institution in Japan, there were approximately 4,000 corporate bankruptcies in Japan for the six months ended September 30, 2020, a decrease of 5.2% from the same period in the previous year, involving approximately ¥0.6 trillion in total liabilities, an increase of 6.5% from the same period in the previous year.

Interest rates in Japanese financial and capital markets are affected by the monetary policy measures of the Bank of Japan (“BOJ”). In February 2016, in addition to the existing provision of ample funds, the BOJ introduced “quantitative and qualitative monetary easing with a negative interest rate.” Thereafter, the BOJ announced the introduction of a new policy framework, “quantitative and qualitative monetary easing with yield curve control” in September 2016. Under this policy framework, the BOJ would keep short-term interest rates down by maintaining its policy of applying a negative interest rate of minus 0.1% to certain excess reserves of financial institutions held at the BOJ. Moreover, the BOJ indicated it would purchase Japanese government bonds so that the yield of the 10-year Japanese government bonds would be close to around 0% to control long-term interest rates. In July 2018, the BOJ decided to introduce forward guidance for policy rates with a view to persistently continuing with powerful monetary easing. Further, on October 31, 2019, the BOJ amended its forward guidance to indicate that it expects short- and long-term interest rates to remain at or below their present levels so long as the BOJ believes it is necessary to pay close attention to the possibility of a loss in momentum toward achieving its 2% price stability target. Thereafter, on March 16, 2020, the BOJ announced “enhancement of monetary easing in light of the impact of the outbreak of COVID-19.” The BOJ stated in this announcement that it decided to enhance monetary easing with a view to doing its utmost to ensure smooth corporate financing and maintaining stability in financial markets, thereby preventing firms’ and households’ sentiment from deteriorating. Thereafter, on April 27, 2020 and May 22, 2020, the BOJ decided to further enhance monetary easing and introduce measures to support corporate financing taking into account the negative impact of the COVID-19 pandemic on Japanese economic conditions. Under such circumstances, the uncollateralized overnight call rate, which is the benchmark short-term interest rate, remained negative for the six months ended September 30, 2020. The yield on newly issued Japanese government bonds with a maturity of 10 years, which is the benchmark long-term interest rate, was at around 0% for the same period.

 

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The yen appreciated against the U.S. dollar from ¥108.42 at March 31, 2020 to ¥105.62 at September 30, 2020, according to the statistical data published by the BOJ.

The Nikkei Stock Average, which is a price-weighted average of 225 stocks listed on the Tokyo Stock Exchange First Section, rose from ¥18,917.01 at March 31, 2020 to ¥23,185.12 at September 30, 2020.

According to a report published by the Ministry of Land, Infrastructure, Transport and Tourism of Japan, the average residential land price and the average commercial land price in Japan decreased by 0.7% and 0.3%, respectively, from July 1, 2019 to July 1, 2020.

The global economy deteriorated owing to the COVID-19 pandemic in the former half of the six months ended September 30, 2020. However, it showed signs of pick-up in the latter half of the period, reflecting the gradual resumption of business activities around the world. The U.S. economy deteriorated rapidly in the former half of the six months ended September 30, 2020, primarily due to declines in private consumption, business fixed investment and exports of goods and services affected by the COVID-19 pandemic. However, it was gradually picking up in the latter half of the period, primarily due to an increase in private consumption, reflecting the gradual recovery of business activities. Economic growth in Europe showed a sharp decline in the former half of the six months ended September 30, 2020. This was primarily due to decreases in private consumption resulting from the restraint on movement and exports of goods and services caused by a decline in foreign tourist spending, affected by the COVID-19 pandemic. In the latter half of the period, European economy began to recover resulting from the gradual resumption of business activities, although the pace of its recovery was slow reflecting the upward trend in new cases of COVID-19. In Asia, the Chinese economy was picking up because of recovery of business activities in April 2020. Asian economies other than China continued to slow down due to the COVID-19 pandemic. However, it showed signs of bottoming out in some countries and regions.

New cases of COVID-19 globally increased and remained high in October and November 2020 according to the “COVID-19 Weekly Epidemiological Update” issued by the World Health Organization. Following the rise in new cases of COVID-19, some countries slowed or stopped the process of easing coronavirus curbs and brought back tougher measures. For example, based on the rapid upward trend in new COVID-19 cases, many countries in Europe entered a second lockdown. Therefore, it is difficult to predict the evolution of COVID-19 and the impact of the COVID-19 pandemic on the Japanese and global economy, considering the effect of measures taken by governments and regulators around the world. The future direct and indirect impact of the COVID-19 pandemic on our operational and financial performance remains uncertain.

Regulatory Environment

In addition to economic factors and conditions, we expect that our results of operations and financial condition will be significantly affected by regulatory trends.

Capital Adequacy Requirements

Each year, the Financial Stability Board (“FSB”) publishes a list of global financial institutions that it has identified as Global Systemically Important Banks (“G-SIBs”) based on the methodology issued by the Basel Committee on Banking Supervision (“BCBS”). G-SIBs included on the list are required to maintain an amount of Common Equity Tier 1 (“CET1”) capital above the Basel III minimum requirement and applicable capital conservation buffer to discourage such financial institutions from becoming even more systemically important. This is commonly known as the G-SIB capital surcharge.

The G-SIB capital surcharge ranges from 1% to 2% of additional CET1 capital as a percentage of risk-weighted assets based on the organization’s size, interconnectedness, substitutability, complexity and cross-jurisdictional activity as determined by the FSB.

 

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We have been included in the list of G-SIBs each year since the initial list was published in November 2011 and were included on the list published in November 2020. Based on that list, the additional CET1 capital as a percentage of risk-weighted assets we are currently required to maintain is 1%.

SMBC Group’s Response to COVID-19

Considering the significant impact on people’s lives and the economy caused by the COVID-19 pandemic, we strive to ensure the health and safety of our customers and employees. Furthermore, the SMBC Group supports our customers through financial services and is committed to contributing to local communities and society including support of the medical industry.

Support for Customers through Financial Services

For our clients, the SMBC Group, as a financial institution which is a part of the social infrastructure, fulfills our responsibility by continuing to provide services such as financing and settlement. In Japan, we have kept all SMBC branches open and ATMs accessible. We have also offered flexible responses to urgent financial needs and requests for new loans and changes in loan terms and conditions. In addition to the above, we are planning to launch a new investment fund to support medical-related venture companies in Japan in order to contribute to solving social issues that have become apparent due to the COVID-19 pandemic.

Prevention of the Spread of Infection and Initiatives for Continuous Business Operation

For our employees, in addition to maintaining employment and salary, we promote teleworking capabilities and conduct operations by separating staff into two or more teams on alternating shifts. By thoroughly implementing infection prevention and control measures in branches and offices, we are continuing our operations. We are also giving consideration to the physical and mental health of our employees by establishing a consultation counter to support our employees who are concerned about their physical and/or mental health.

Contributing to Local Communities and Society

In order to contribute to the soundness of the local community and society, we are providing donations to support medical institutions, education and welfare, and cultural & artistic activities. In addition to donations from us, SMBC is carrying out a campaign called “SMBC at HOME” through which SMBC aims to make donations to battle COVID-19 in response to the number of individual and corporate customers using certain of SMBC’s internet banking services.

Developments Related to Our Business

Issuance of a perpetual subordinated bond qualified as Additional Tier 1 capital

In September 2020, we issued a ¥100 billion perpetual subordinated bond. The bond is a Basel III-compliant Additional Tier 1 capital instrument and is classified as equity under International Financial Reporting Standards (“IFRS”). For further information, see Note 12 “Equity Attributable to Other Equity Instruments Holders” to our consolidated financial statements included elsewhere in this report.

Accounting Changes

See Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this report.

 

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OPERATING RESULTS AND FINANCIAL CONDITION

The figures in our operating results and financial condition presented below are prepared in accordance with IFRS as issued by the International Accounting Standards Board, except for the risk-weighted capital ratios, the segment results of operation and some other specifically identified information, which are prepared in accordance with Japanese banking regulations or accounting principles generally accepted in Japan (“Japanese GAAP”), and expressed in Japanese yen, unless otherwise stated or the context otherwise requires.

Executive Summary

Under the economic and financial circumstances described in “Recent Developments—Operating Environment,” we made a profit through our business activities including commercial banking and other financial services businesses. Our total operating income increased by ¥114,984 million from ¥1,446,644 million for the six months ended September 30, 2019 to ¥1,561,628 million for the six months ended September 30, 2020, primarily due to increases in net interest income and net income from financial assets and liabilities at fair value through profit or loss. Our net profit increased by ¥57,911 million from ¥267,466 million for the six months ended September 30, 2019 to ¥325,377 million for the six months ended September 30, 2020, due to a decrease in operating expenses and the increase in total operating income described above, which were partially offset by an increase in impairment charges on financial assets.

Our total assets increased by ¥6,825,605 million from ¥212,158,463 million at March 31, 2020 to ¥218,984,068 million at September 30, 2020, primarily due to an increase in cash and deposits with banks.

Our total liabilities increased by ¥6,171,902 million from ¥201,223,585 million at March 31, 2020 to ¥207,395,487 million at September 30, 2020, primarily due to an increase in deposits.

Our total equity increased by ¥653,703 million from ¥10,934,878 million at March 31, 2020 to ¥11,588,581 million at September 30, 2020, primarily due to increases in retained earnings, other reserves and equity attributable to other equity instruments holders.

 

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Operating Results

The following table presents information as to our income, expenses and net profit for the six months ended September 30, 2020 and 2019.

 

    For the six months ended
September 30,
 
    2020     2019  
    (In millions, except per share data)  

Interest income

  ¥ 939,921     ¥ 1,236,043  

Interest expense

    242,059       584,973  
 

 

 

   

 

 

 

Net interest income

    697,862       651,070  
 

 

 

   

 

 

 

Fee and commission income

    542,388       562,875  

Fee and commission expense

    99,774       104,620  
 

 

 

   

 

 

 

Net fee and commission income

    442,614       458,255  
 

 

 

   

 

 

 

Net trading income

    114,571       86,323  

Net income from financial assets and liabilities at fair value through profit or loss

    107,224       29,678  

Net investment income

    135,721       131,683  

Other income

    63,636       89,635  
 

 

 

   

 

 

 

Total operating income

    1,561,628       1,446,644  
 

 

 

   

 

 

 

Impairment charges on financial assets

    245,319       48,634  
 

 

 

   

 

 

 

Net operating income

    1,316,309       1,398,010  
 

 

 

   

 

 

 

General and administrative expenses

    799,242       835,880  

Other expenses

    92,269       196,647  
 

 

 

   

 

 

 

Operating expenses

    891,511       1,032,527  
 

 

 

   

 

 

 

Share of post-tax profit of associates and joint ventures

    9,393       13,697  
 

 

 

   

 

 

 

Profit before tax

    434,191       379,180  
 

 

 

   

 

 

 

Income tax expense

    108,814       111,714  
 

 

 

   

 

 

 

Net profit

  ¥ 325,377     ¥ 267,466  
 

 

 

   

 

 

 

Profit attributable to:

   

Shareholders of Sumitomo Mitsui Financial Group, Inc.

  ¥ 316,382     ¥ 249,415  

Non-controlling interests

    2,566       12,076  

Other equity instruments holders

    6,429       5,975  

Earnings per share:

   

Basic

  ¥ 230.94     ¥ 180.64  

Diluted

    230.82       180.52  

Total operating income increased by ¥114,984 million, or 8%, from ¥1,446,644 million for the six months ended September 30, 2019 to ¥1,561,628 million for the six months ended September 30, 2020, primarily due to increases in net interest income and net income from financial assets and liabilities at fair value through profit or loss. However, due to an increase in impairment charges on financial assets, net operating income decreased by ¥81,701 million from ¥1,398,010 million for the six months ended September 30, 2019, to ¥1,316,309 million for the six months ended September 30, 2020.

Net profit increased by ¥57,911 million from ¥267,466 million for the six months ended September 30, 2019 to ¥325,377 million for the six months ended September 30, 2020, as a result of decreases in general and administrative expenses and other expenses, which were partially offset by the decrease in net operating income described above.

 

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Net Interest Income

The following tables show the average balances of our statement of financial position items, related interest income, interest expense, net interest income and average annualized interest rates for the six months ended September 30, 2020 and 2019.

 

    For the six months ended September 30,  
  2020     2019  
  Average
balance(3)
    Interest
income
    Average
rate
    Average
balance(3)
    Interest
income
    Average
rate
 
  (In millions, except percentages)  

Interest-earning assets:

           

Interest-earning deposits with other banks:

           

Domestic offices

  ¥ 844,611     ¥ 1,135       0.27%     ¥ 1,035,125     ¥ 1,604       0.31%  

Foreign offices

    4,824,779       8,719       0.36%       4,068,125       46,431       2.28%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

    5,669,390       9,854       0.35%       5,103,250       48,035       1.88%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Call loans and bills bought, reverse repurchase agreements and cash collateral on securities borrowed:

           

Domestic offices

    9,629,074        320        0.01%       8,971,755       8,661       0.19%  

Foreign offices

    3,087,331       15,337       0.99%       2,976,802       23,667       1.59%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

    12,716,405       15,657       0.25%       11,948,557       32,328       0.54%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Investment securities(1):

           

Domestic offices

    14,941,741       26,861       0.36%       10,271,365       29,680       0.58%  

Foreign offices

    5,235,027       41,347       1.58%       4,593,043       53,545       2.33%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

    20,176,768       68,208       0.68%       14,864,408       83,225       1.12%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Loans and advances(2):

           

Domestic offices

    64,329,484       431,083       1.34%       60,309,423       492,753       1.63%  

Foreign offices

    33,696,599       415,119       2.46%       30,453,653       579,702       3.81%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

    98,026,083       846,202       1.73%       90,763,076       1,072,455       2.36%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total interest-earning assets:

           

Domestic offices

    89,744,910       459,399       1.02%       80,587,668       532,698       1.32%  

Foreign offices

    46,843,736       480,522        2.05%        42,091,623       703,345       3.34%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

  ¥ 136,588,646     ¥ 939,921        1.38%     ¥ 122,679,291     ¥ 1,236,043       2.02%  
 

 

 

   

 

 

     

 

 

   

 

 

   

 

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    For the six months ended September 30,  
    2020     2019  
    Average
balance(3)
    Interest
expense
    Average
rate
    Average
balance(3)
    Interest
expense
    Average
rate
 
    (In millions, except percentages)  

Interest-bearing liabilities:

           

Deposits:

           

Domestic offices

  ¥ 89,087,943     ¥ 9,274       0.02%     ¥ 85,137,367     ¥ 28,176       0.07%  

Foreign offices

    28,187,307       102,883       0.73%       26,810,422       292,531       2.18%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

    117,275,250       112,157       0.19%       111,947,789       320,707       0.57%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Call money and bills sold, repurchase agreements and cash collateral on securities lent and other interest—bearing liabilities:

           

Domestic offices

    10,908,290       (418     (0.01%     11,225,473       16,192       0.29%  

Foreign offices

    5,271,647       8,005       0.30%       5,012,431       63,695       2.54%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

    16,179,937       7,587       0.09%       16,237,904       79,887       0.98%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Borrowings:

           

Domestic offices

    16,558,558       23,407       0.28%       12,099,874       31,266       0.52%  

Foreign offices

    747,148       16,362       4.38%       660,095       17,629       5.34%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

    17,305,706       39,769       0.46%       12,759,969       48,895       0.77%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Debt securities in issue:

           

Domestic offices

    9,921,363       58,576       1.18%       8,906,239       98,537       2.21%  

Foreign offices

    1,740,430       6,241       0.72%       1,743,363       18,433       2.11%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

    11,661,793       64,817       1.11%       10,649,602       116,970       2.20%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Premiums for deposit insurance:

           

Domestic offices

    —         16,914       —         —         17,552       —    

Foreign offices

    —         815       —         —         962       —    
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

    —         17,729       —         —         18,514       —    
 

 

 

   

 

 

     

 

 

   

 

 

   

Total interest-bearing liabilities:

           

Domestic offices

    126,476,154       107,753       0.17%       117,368,953       191,723       0.33%  

Foreign offices

    35,946,532       134,306       0.75%       34,226,311       393,250       2.30%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Total

  ¥ 162,422,686     ¥ 242,059       0.30%     ¥ 151,595,264     ¥ 584,973       0.77%  
 

 

 

   

 

 

     

 

 

   

 

 

   

Net interest income and interest rate spread

    ¥ 697,862       1.08%       ¥    651,070       1.25%  
   

 

 

   

 

 

     

 

 

   

 

 

 

 

(1)

Taxable investment securities and non-taxable investment securities are not disclosed separately because the aggregate effect of these average balances and interest income would not be material. In addition, the yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect of such calculation would not be material.

(2)

Loans and advances include impaired loans and advances. The amortized portion of net loan origination fees (costs) is included in interest income on loans and advances.

(3)

Average balances are generally based on a daily average. Weekly, month-end or quarter-end averages are used for certain average balances where it is not practical to obtain applicable daily averages. The allocations of amounts between domestic and foreign are based on the location of the office.

 

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The following tables show changes in our interest income, interest expense and net interest income based on changes in volume and changes in rate for the six months ended September 30, 2020 compared to the six months ended September 30, 2019.

 

     Six months ended September 30, 2020 compared to
six months ended September 30, 2019
Increase / (decrease)
 
   Volume     Rate     Net change  
   (In millions)  

Interest income:

      

Interest-earning deposits with other banks:

      

Domestic offices

   ¥ (273   ¥ (196   ¥ (469

Foreign offices

     7,312       (45,024     (37,712
  

 

 

   

 

 

   

 

 

 

Total

     7,039       (45,220     (38,181
  

 

 

   

 

 

   

 

 

 

Call loans and bills bought, reverse repurchase agreements and cash collateral on securities borrowed:

      

Domestic offices

     582       (8,923     (8,341

Foreign offices

     849       (9,179     (8,330
  

 

 

   

 

 

   

 

 

 

Total

     1,431       (18,102     (16,671
  

 

 

   

 

 

   

 

 

 

Investment securities:

      

Domestic offices

     10,743       (13,562     (2,819

Foreign offices

     6,750       (18,948     (12,198
  

 

 

   

 

 

   

 

 

 

Total

     17,493       (32,510     (15,017
  

 

 

   

 

 

   

 

 

 

Loans and advances:

      

Domestic offices

     31,175       (92,845     (61,670

Foreign offices

     56,720       (221,303     (164,583
  

 

 

   

 

 

   

 

 

 

Total

     87,895       (314,148     (226,253
  

 

 

   

 

 

   

 

 

 

Total interest income:

      

Domestic offices

     42,227       (115,526     (73,299

Foreign offices

     71,631       (294,454     (222,823
  

 

 

   

 

 

   

 

 

 

Total

   ¥ 113,858     ¥ (409,980   ¥ (296,122
  

 

 

   

 

 

   

 

 

 

 

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     Six months ended September 30, 2020 compared to
six months ended September 30, 2019
Increase / (decrease)
 
   Volume     Rate     Net change  
   (In millions)  

Interest expense:

      

Deposits:

      

Domestic offices

   ¥ 1,322     ¥ (20,224   ¥ (18,902

Foreign offices

     14,293       (203,941     (189,648
  

 

 

   

 

 

   

 

 

 

Total

     15,615       (224,165     (208,550
  

 

 

   

 

 

   

 

 

 

Call money and bills sold, repurchase agreements and cash collateral on securities lent and other interest-bearing liabilities:

      

Domestic offices

     (447     (16,163     (16,610

Foreign offices

     3,131       (58,821     (55,690
  

 

 

   

 

 

   

 

 

 

Total

     2,684       (74,984     (72,300
  

 

 

   

 

 

   

 

 

 

Borrowings:

      

Domestic offices

     9,217       (17,076     (7,859

Foreign offices

     2,147       (3,414     (1,267
  

 

 

   

 

 

   

 

 

 

Total

     11,364       (20,490     (9,126
  

 

 

   

 

 

   

 

 

 

Debt securities in issue:

      

Domestic offices

     10,190       (50,151     (39,961

Foreign offices

     (31     (12,161     (12,192
  

 

 

   

 

 

   

 

 

 

Total

     10,159       (62,312     (52,153
  

 

 

   

 

 

   

 

 

 

Premiums for deposit insurance:

      

Domestic offices

     (638     —         (638

Foreign offices

     (147     —         (147
  

 

 

   

 

 

   

 

 

 

Total

     (785     —         (785
  

 

 

   

 

 

   

 

 

 

Total interest expense:

      

Domestic offices

     19,644       (103,614     (83,970

Foreign offices

     19,393       (278,337     (258,944
  

 

 

   

 

 

   

 

 

 

Total

   ¥   39,037     ¥ (381,951   ¥ (342,914
  

 

 

   

 

 

   

 

 

 

Net interest income:

      

Domestic offices

   ¥ 22,583     ¥ (11,912   ¥ 10,671  

Foreign offices

     52,238       (16,117     36,121  
  

 

 

   

 

 

   

 

 

 

Total

   ¥ 74,821     ¥ (28,029   ¥ 46,792  
  

 

 

   

 

 

   

 

 

 

Interest Income

Our interest income decreased by ¥296,122 million, or 24%, from ¥1,236,043 million for the six months ended September 30, 2019 to ¥939,921 million for the six months ended September 30, 2020. This decrease was primarily due to a decrease in interest income on loans and advances of ¥226,253 million, or 21%. Interest income on loans and advances decreased by ¥61,670 million, or 13% at domestic offices and by ¥164,583 million, or 28% at foreign offices. The decreases were primarily due to a decrease in the average rate of loans, which was partially offset by an increase in the average balance of loans to corporate customers as a result of our responses to their financing needs arising from the COVID-19 pandemic.

 

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Interest Expense

Our interest expense decreased by ¥342,914 million, or 59%, from ¥584,973 million for the six months ended September 30, 2019 to ¥242,059 million for the six months ended September 30, 2020, primarily due to a decrease in interest expense on deposits. Our interest expense on deposits decreased by ¥208,550 million, or 65%, from ¥320,707 million for the six months ended September 30, 2019 to ¥112,157 million for the six months ended September 30, 2020, primarily due to a decrease at foreign offices reflecting a decrease in the average rate.

Net Interest Income

Our net interest income increased by ¥46,792 million, or 7%, from ¥651,070 million for the six months ended September 30, 2019 to ¥697,862 million for the six months ended September 30, 2020, primarily due to an increase in the volume of interest-earning assets, primarily loans.

From the six months ended September 30, 2019 to the six months ended September 30, 2020, the average rate on loans and advances at domestic offices decreased by 0.29 percentage points from 1.63% to 1.34%. The average rate on loans and advances at foreign offices decreased by 1.35 percentage points from 3.81% to 2.46%, resulting in the total for loans and advances decreasing by 0.63 percentage points from 2.36% to 1.73%. On the other hand, the average rate on deposits decreased by 0.38 percentage points from 0.57% to 0.19%, primarily due to a decrease in the average rate on deposits at foreign offices by 1.45 percentage points from 2.18% to 0.73%.

Net Fee and Commission Income

The following table sets forth our net fee and commission income for the six months ended September 30, 2020 and 2019.

 

     For the six months ended
September 30,
 
           2020                 2019        
     (In millions)  

Fee and commission income from:

    

Loans

   ¥ 55,601     ¥ 62,815  

Credit card business

     146,308       150,857  

Guarantees

     32,459       33,669  

Securities-related business

     75,761       68,803  

Deposits

     7,314       6,796  

Remittances and transfers

     67,867       70,384  

Safe deposits

     2,106       2,191  

Trust fees

      2,243         2,119   

Investment trusts

     71,930       72,609  

Agency

     3,973       4,956  

Others

     76,826       87,676  
  

 

 

   

 

 

 

Total fee and commission income

     542,388       562,875  
  

 

 

   

 

 

 

Fee and commission expense from:

    

Remittances and transfers

     20,098       20,299  

Others

     79,676       84,321  
  

 

 

   

 

 

 

Total fee and commission expense

     99,774       104,620  
  

 

 

   

 

 

 

Net fee and commission income

   ¥ 442,614     ¥ 458,255  
  

 

 

   

 

 

 

Fee and commission income decreased by ¥20,487 million, or 4%, from ¥562,875 million for the six months ended September 30, 2019 to ¥542,388 million for the six months ended September 30, 2020. Primary sources of

 

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fee and commission income are fees obtained through our credit card business, fees and commissions obtained through investment trusts, remittance and transfer fees, fees and commissions obtained through securities-related business, and loan transaction fees. The decrease in fee and commission income was primarily due to a decrease in loan transaction fees, and the income from the credit card business reflecting a decline in private consumption affected by the COVID-19 pandemic.

Fee and commission expense decreased by ¥4,846 million, or 5%, from ¥104,620 million for the six months ended September 30, 2019 to ¥99,774 million for the six months ended September 30, 2020.

As a result, net fee and commission income decreased by ¥15,641 million, or 3%, from ¥458,255 million for the six months ended September 30, 2019 to ¥442,614 million for the six months ended September 30, 2020.

Net Income from Trading, Financial Assets and Liabilities at Fair Value Through Profit or Loss, and Investment Securities

The following table sets forth our net income from trading, financial assets and liabilities at fair value through profit or loss, and investment securities for the six months ended September 30, 2020 and 2019.

 

     For the six months ended
September 30,
 
           2020                 2019        
     (In millions)  

Net trading income:

    

Interest rate

   ¥ 86,559     ¥ 42,852  

Foreign exchange

     33,519       26,944  

Equity

     (3,239     17,102  

Credit

     (2,529     (4,214

Others

     261       3,639  
  

 

 

   

 

 

 

Total net trading income

   ¥ 114,571     ¥ 86,323  
  

 

 

   

 

 

 

Net income from financial assets and liabilities at fair value through profit or loss:

    

Net income from financial assets at fair value through profit or loss:

    

Net income from debt instruments

   ¥ 96,645     ¥ 28,415  

Net income from equity instruments

     12,944       1,263  

Net loss from financial liabilities designated at fair value through profit or loss

     (2,365     —    
  

 

 

   

 

 

 

Total net income from financial assets and liabilities at fair value through profit or loss

   ¥ 107,224     ¥ 29,678  
  

 

 

   

 

 

 

Net investment income:

    

Net gain from disposal of debt instruments

   ¥ 104,141     ¥ 92,317  

Dividend income

     31,580       39,366  
  

 

 

   

 

 

 

Total net investment income

   ¥ 135,721     ¥ 131,683  
  

 

 

   

 

 

 

Net trading income, which includes income and losses from trading assets and liabilities and derivative financial instruments, increased by ¥28,248 million from ¥86,323 million for the six months ended September 30, 2019 to ¥114,571 million for the six months ended September 30, 2020. The increase was primarily due to an increase in net trading income from interest rate related transactions.

Net income from financial assets and liabilities at fair value through profit or loss increased by ¥77,546 million from ¥29,678 million for the six months ended September 30, 2019 to ¥107,224 million for the six months ended September 30, 2020. This was primarily due to an increase in net gains from investment trusts.

 

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Net investment income increased by ¥4,038 million from ¥131,683 million for the six months ended September 30, 2019 to ¥135,721 million for the six months ended September 30, 2020. This was primarily due to an increase in net gains from sales of bonds.

Impairment Charges on Financial Assets

The following table sets forth our impairment charges (reversals) on financial assets for the six months ended September 30, 2020 and 2019.

 

     For the six months ended
September 30,
 
           2020                 2019        
     (In millions)  

Loans and advances

   ¥ 224,996     ¥ 57,996  

Loan commitments

     15,587       (1,970

Financial guarantees

      4,736        (7,392
  

 

 

   

 

 

 

Total impairment charges on financial assets

   ¥ 245,319     ¥   48,634  
  

 

 

   

 

 

 

Our impairment charges on financial assets consist of losses relating to loans and advances, loan commitments and financial guarantee contracts. Impairment charges on these financial assets are mainly affected by the economic environment and financial conditions of borrowers.

Impairment charges on financial assets increased by ¥196,685 million from ¥48,634 million for the six months ended September 30, 2019 to ¥245,319 million for the six months ended September 30, 2020, primarily due to an increase in impairment charges on loans and advances. The increase was primarily due to an increase in the provision for loan losses related to our corporate customers affected by the COVID-19 pandemic. For detailed information on provision for loan losses, see “—Financial Condition—Allowance for Loan Losses.”

General and Administrative Expenses

The following table sets forth our general and administrative expenses for the six months ended September 30, 2020 and 2019.

 

     For the six months ended
September 30,
 
           2020                 2019        
     (In millions)  

Personnel expenses

   ¥ 365,575     ¥ 393,551  

Depreciation and amortization

     128,436       125,702  

Building and maintenance expenses

      2,654         3,925   

Supplies expenses

     7,158       7,371  

Communication expenses

     15,959       16,640  

Publicity and advertising expenses

     36,747       32,651  

Taxes and dues

     42,191       41,504  

Outsourcing expenses

     52,477       51,372  

Office equipment expenses

     26,782       24,696  

Others

     121,263       138,468  
  

 

 

   

 

 

 

Total general and administrative expenses

   ¥ 799,242     ¥ 835,880  
  

 

 

   

 

 

 

General and administrative expenses decreased by ¥36,638 million from ¥835,880 million for the six months ended September 30, 2019 to ¥799,242 million for the six months ended September 30, 2020, as a result of a decrease in personnel expenses of ¥27,976 million, or 7%, from ¥393,551 million for the six months ended

 

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Table of Contents

September 30, 2020 to ¥365,575 million for the six months ended September 30, 2020 reflecting a decrease in defined benefit cost. Furthermore, restrictions on operating activities affected by the COVID-19 pandemic and our cost reduction efforts contributed to a decrease in general and administrative expenses.

Share of Post-tax Profit of Associates and Joint Ventures

Share of post-tax profit of associates and joint ventures decreased by ¥4,304 million from ¥13,697 million for the six months ended September 30, 2019 to ¥9,393 million for the six months ended September 30, 2020, primarily due to a decrease in our share of the profit of foreign associates and joint ventures.

Income Tax Expense

Income tax expense decreased by ¥2,900 million from ¥111,714 million for the six months ended September 30, 2019 to ¥108,814 million for the six months ended September 30, 2020. The decrease was primarily due to a decrease in current tax expense resulting from a decrease in taxable income, which was partially offset by an increase in deferred tax expense.

Business Segment Analysis

Our business segment information is prepared based on the internal reporting system utilized by management to assess the performance of our business segments under Japanese GAAP.

We have four main business segments: the Wholesale Business Unit, the Retail Business Unit, the Global Business Unit, which was renamed from the International Business Unit on April 1, 2020, and the Global Markets Business Unit, with the remaining operations recorded in Head office account and others. Due to an internal reorganization of certain SMBC businesses, and changes in the revenue management system at SMBC Nikko Securities, both effective from April 1, 2020, the comparative information for the six months ended September 30, 2019 has been restated.

Since figures reported to management are prepared under Japanese GAAP, the segment information does not agree to the figures in the consolidated financial statements under IFRS. This difference is addressed in Note 4 “Segment Analysis—Reconciliation of Segmental Results of Operations to Consolidated Income Statements” to our consolidated financial statements included elsewhere in this report.

Description of Business Segments

Wholesale Business Unit

The Wholesale Business Unit provides financing, investment management, risk hedging, and settlement services as well as financial solutions that respond to wide-ranging client needs in relation to M&A and other advisory services and leasing, primarily for corporate clients in Japan. This business unit mainly consists of the wholesale businesses of SMBC, SMBC Trust Bank, SMFL and SMBC Nikko Securities.

Retail Business Unit

The Retail Business Unit provides financial services to consumers residing in Japan, and mainly consists of the retail business of SMBC, SMBC Trust Bank and SMBC Nikko Securities together with the three consumer finance companies, Sumitomo Mitsui Card, SMBC Finance Service, which changed its corporate name from Cedyna Financial Corporation upon merger with former SMBC Finance Service Co., Ltd. in July 2020, and SMBC Consumer Finance. This business unit offers a wide range of products and services for consumers, including wealth management, settlement services, consumer finance and housing loans, in order to address the financial needs of all individual customers.

 

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Table of Contents

Global Business Unit

The Global Business Unit supports the global businesses of a diverse range of clients, such as Japanese companies operating overseas, non-Japanese companies, financial institutions, and government agencies and public corporations of various countries. This business unit provides a variety of tailored products and services to meet customer and market requirements, including loans, deposits, clearing services, trade finance, project finance, loan syndication, derivatives, global cash management services, leasing and securities business such as underwriting activities. This business unit mainly consists of the global businesses of SMBC, SMBC Trust Bank, SMFL, SMBC Nikko Securities and their foreign subsidiaries.

Global Markets Business Unit

The Global Markets Business Unit offers solutions through foreign exchange products, derivatives, bonds, stocks, and other marketable financial products and also undertakes asset liability management operations, which help comprehensively control balance sheet liquidity risks and interest rate risks. This business unit consists of the Treasury Unit of SMBC and the global markets businesses of SMBC Nikko Securities.

Head office account and others

The Head office account and others represent the difference between the aggregate of the Wholesale Business Unit, the Retail Business Unit, the Global Business Unit and the Global Markets Business Unit, and the Company and its subsidiaries as a whole. It mainly consists of administrative expenses related to headquarters operations and profit or loss from other subsidiaries including The Japan Research Institute and SMDAM, which was formed through the merger of Sumitomo Mitsui Asset Management Company, Limited and Daiwa SB Investments Ltd., on April 1, 2019. It also includes internal transactions between the Group companies, which are eliminated in the consolidated financial statements.

 

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Table of Contents

Segmental Results of Operations

For the six months ended September 30, 2020:

 

    Wholesale
Business
Unit
    Retail
Business
Unit
    Global
Business
Unit
    Global Markets
Business
Unit
    Head office
account and
others
    Total  
    (In billions)  

Consolidated gross profit(1)

  ¥ 282.5     ¥ 548.7     ¥ 343.4     ¥ 257.9     ¥ (55.1   ¥ 1,377.4  

General and administrative expenses

    (146.6     (443.3     (177.7     (40.2     (28.6     (836.4

Others(2)

    24.5       1.2       8.9       17.1       (41.5     10.2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net business profit

  ¥ 160.4     ¥ 106.6     ¥ 174.6     ¥ 234.8     ¥ (125.2   ¥ 551.2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Gross Profit by Business Segment

(For the six months ended September 30, 2020)

 

LOGO

 

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For the six months ended September 30, 2019:

 

    Wholesale
Business
Unit
    Retail
Business
Unit
    Global
Business
Unit
    Global Markets
Business
Unit
    Head office
account and
others
    Total  
    (In billions)  

Consolidated gross profit(1)

  ¥ 297.0     ¥ 572.1     ¥ 323.6     ¥ 247.2     ¥ (56.7   ¥ 1,383.2  

General and administrative expenses

    (149.4     (459.1     (178.5     (39.3     (32.4     (858.7

Others(2)

    21.8       0.9       25.4       15.3       (33.3     30.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net business profit

  ¥ 169.4     ¥ 113.9     ¥ 170.5     ¥ 223.2     ¥ (122.4   ¥ 554.6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Consolidated gross profit = (Interest income – Interest expenses) + Trust fees + (Fee and commission income – Fee and commission expenses) + (Trading income – Trading losses) + (Other operating income – Other operating expenses).

(2)

“Others” includes share of profit or loss of equity-method associates and joint ventures and cooperated profit and loss, that is, profit and loss double-accounted for in the managerial accounting.

The following are explanations of our results of operations by business segment for the six months ended September 30, 2020. It also includes the changes from the same period of the previous year, which are adjusted by eliminating the impact of factors such as changes in interest rates and exchange rates that may distort the comparison.

Wholesale Business Unit

Consolidated gross profit for the six months ended September 30, 2020 was ¥282.5 billion and decreased by ¥14.5 billion on an adjusted basis compared to the six months ended September 30, 2019. This was primarily due to a decrease in non-interest income affected by the restraint on economic activity because of the COVID-19 pandemic, which was partially offset by increases in interest income on loans and loan-related fees of SMBC in responses to urgent financial needs caused by the COVID-19 pandemic.

General and administrative expenses for the six months ended September 30, 2020 was ¥146.6 billion and decreased by ¥2.8 billion on an adjusted basis compared to the six months ended September 30, 2019 as a result of restrictions on marketing activities affected by the COVID-19 pandemic and cost reduction efforts.

Others for the six months ended September 30, 2020 was ¥24.5 billion.

As a result, consolidated net business profit for the six months ended September 30, 2020 was ¥160.4 billion and decreased by ¥9.0 billion on an adjusted basis compared to the six months ended September 30, 2019.

Retail Business Unit

Consolidated gross profit for the six months ended September 30, 2020 was ¥548.7 billion and decreased by ¥23.4 billion on an adjusted basis compared to the six months ended September 30, 2019. This was primarily due to a decrease in income from the payment businesses and the consumer finance businesses reflecting a decline in private consumption affected by the COVID-19 pandemic, which was partially offset by an increase in income from the wealth management businesses.

General and administrative expenses for the six months ended September 30, 2020 was ¥443.3 billion and decreased by ¥15.8 billion on an adjusted basis compared to the six months ended September 30, 2019. This was primarily due to decreases in revenue-linked variable costs of Sumitomo Mitsui Card and SMBC Finance Service and cost reduction efforts including the branch reorganization of SMBC.

Others for the six months ended September 30, 2020 was ¥1.2 billion.

As a result, consolidated net business profit for the six months ended September 30, 2020 was ¥106.6 billion and decreased by ¥7.3 billion on an adjusted basis compared to the six months ended September 30, 2019.

 

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Global Business Unit

Consolidated gross profit for the six months ended September 30, 2020 was ¥343.4 billion and increased by ¥19.8 billion on an adjusted basis compared to the six months ended September 30, 2019. This was primarily due to an increase in income from lending businesses and securities businesses in responses to strong financing needs caused by the COVID-19 pandemic.

General and administrative expenses for the six months ended September 30, 2020 was ¥177.7 billion and decreased by ¥0.8 billion on an adjusted basis compared to the six months ended September 30, 2019.

Others for the six months ended September 30, 2020 was ¥8.9 billion and decreased by ¥16.5 billion on an adjusted basis compared to the six months ended September 30, 2019. This was primarily due to a decrease in our share of post-tax profit of associates and joint ventures reflecting the deterioration of global economic conditions caused by the COVID-19 pandemic.

As a result, consolidated net business profit for the six months ended September 30, 2020 was ¥174.6 billion and increased by ¥4.1 billion on an adjusted basis compared to the six months ended September 30, 2019.

Global Markets Business Unit

Consolidated gross profit for the six months ended September 30, 2020 was ¥257.9 billion and increased by ¥10.7 billion on an adjusted basis compared to the six months ended September 30, 2019. This was primarily due to the recognition of gains on sales of bonds by SMBC through nimble portfolio management dealing with the decline in overseas interest rates and an increase in sales and trading profits of SMBC Nikko Securities.

General and administrative expenses for the six months ended September 30, 2020 was ¥40.2 billion and increased by ¥0.9 billion on an adjusted basis compared to the six months ended September 30, 2019.

Others for the six months ended September 30, 2020 was ¥17.1 billion.

As a result, consolidated net business profit for the six months ended September 30, 2020 was ¥234.8 billion and increased by ¥11.6 billion on an adjusted basis compared to the six months ended September 30, 2019.

Revenues by Region

The following table sets forth the percentage of our total operating income under IFRS for each indicated period, based on the total operating income of our offices in the indicated regions. For each of the periods presented, we earned more than half of our total operating income in Japan, where we compete with other major Japanese banking groups and financial service providers. We earned the remainder in the Americas, Europe and Middle East, and Asia and Oceania, where we mainly compete with global financial institutions.

 

     For the six months ended
September 30,
 
     2020     2019  

Region:

    

Japan

     63     68

Foreign:

    

Americas

     14     10

Europe and Middle East

     9     6

Asia and Oceania (excluding Japan)

     14     16
  

 

 

   

 

 

 

Total

     100     100
  

 

 

   

 

 

 

 

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Financial Condition

Assets

Our total assets increased by ¥6,825,605 million from ¥212,158,463 million at March 31, 2020 to ¥218,984,068 million at September 30, 2020. The increase was primarily due to an increase in cash and deposits with banks.

Our assets at September 30, 2020 and March 31, 2020 were as follows:

 

     At September 30,
2020
     At March 31,
2020
 
     (In millions)  

Cash and deposits with banks

   ¥ 69,315,682      ¥ 62,471,453  

Call loans and bills bought

     2,347,828        898,256  

Reverse repurchase agreements and cash collateral on securities borrowed

     9,265,268        13,745,996  

Trading assets

     2,551,814        2,785,016  

Derivative financial instruments

     5,458,185        6,279,801  

Financial assets at fair value through profit or loss

     1,119,531        1,478,356  

Investment securities

     24,353,970        21,864,386  

Loans and advances

     95,958,431        94,671,818  

Investments in associates and joint ventures

     798,825        826,736  

Property, plant and equipment

     1,729,799        1,764,611  

Intangible assets

     834,990        835,477  

Other assets

     5,193,805        4,272,630  

Current tax assets

     24,344        161,729  

Deferred tax assets

     31,596        102,198  
  

 

 

    

 

 

 

Total assets

   ¥ 218,984,068      ¥ 212,158,463  
  

 

 

    

 

 

 

Loans and Advances

Our main operating activity is the lending business. We make loans and extend other types of credit principally to corporate and individual customers in Japan and to corporate and sovereign customers in foreign countries.

At September 30, 2020, our loans and advances were ¥95,958,431 million, or 44% of total assets, representing an increase of ¥1,286,613 million, or 1%, from ¥94,671,818 million at March 31, 2020. The increase in loans and advances was due to an increase in the balance of loans to domestic corporate customers as a result of our responses to their financing needs arising from the COVID-19 pandemic. On the other hand, the amount of outstanding loans and advances to foreign customers decreased due to a decrease in the amount outstanding to corporate customers in the United States and Asian countries. This was mainly because the amount of outstanding loans and advances to those customers at March 31, 2020 was higher due to a surge in drawdowns on loan commitments in March 2020 and the amount outstanding at September 30, 2020 was reduced due to repayments in the current period on the loan commitments previously drawn down.

 

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Domestic

Through SMBC and other banking and non-bank subsidiaries, we make loans to a broad range of industrial, commercial and individual customers in Japan. The following table shows our outstanding loans and advances to customers whose domiciles are in Japan, classified by industry, before deducting the allowance for loan losses, and adjusting unearned income, unamortized premiums-net and deferred loan fees-net at the dates indicated.

 

     At September 30,
2020
     At March 31,
2020
 
     (In millions)  

Manufacturing

   ¥ 11,498,927      ¥ 8,787,566  

Agriculture, forestry, fisheries and mining

     277,130        280,233  

Construction

     897,609        919,043  

Transportation, communications and public enterprises

     5,867,756        5,637,560  

Wholesale and retail

     5,317,093        5,375,802  

Finance and insurance

     3,123,766        3,217,545  

Real estate and goods rental and leasing

     10,904,862        10,666,446  

Services

     4,811,001        4,452,195  

Municipalities

     561,560        839,878  

Lease financing

     27,334        8,380  

Consumer(1)

     15,286,606        15,691,638  

Others(2)

         4,791,916            4,308,469  
  

 

 

    

 

 

 

Total domestic

   ¥ 63,365,560      ¥ 60,184,755  
  

 

 

    

 

 

 

 

(1)

The balance in Consumer mainly consists of housing loans. The housing loan balances amounted to ¥10,783,169 million and ¥10,913,869 million at September 30, 2020 and March 31, 2020, respectively.

(2)

The balance in Others includes loans and advances to the Government of Japan.

Foreign

The following table shows the outstanding loans and advances to our customers whose domiciles are not in Japan, classified by industry, before deducting the allowance for loan losses, and adjusting unearned income, unamortized premiums-net and deferred loan fees-net at the dates indicated.

 

     At September 30,
2020
     At March 31,
2020
 
     (In millions)  

Public sector

   ¥ 326,207      ¥ 335,071  

Financial institutions

     6,351,634        6,220,956  

Commerce and industry

     23,983,557        25,597,599  

Lease financing

     332,206        309,531  

Others

         2,705,381            2,994,838  
  

 

 

    

 

 

 

Total foreign

   ¥ 33,698,985      ¥ 35,457,995  
  

 

 

    

 

 

 

Allowance for Loan Losses

We calculate the allowance for loan losses under the expected credit losses (“ECL”) model. We use the latest obligor grades (our internal credit rating) and supplementary data such as the borrowers’ operating cash flows, realizable value of collateral and recent economic conditions. We incorporate forward-looking information into the ECL measurement by obligor grading, macroeconomic factors and additional adjustments if the current circumstances, events or conditions at the relevant portfolio level are not fully reflected in the ECL model.

The obligor grades were reviewed based on the most recent information available as appropriate. For the six months ended September 30, 2020, the obligor grades of many corporate borrowers affected by the COVID-19

 

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pandemic were downgraded to the extent that the credit risk on loans and advances to such borrowers was determined to be significantly increased since initial recognition and the allowance for loan losses for them was measured at an amount equal to the lifetime ECL.

The estimates of the key macroeconomic drivers for measuring the ECL were updated reflecting the recent economic forecasts. Although we understand that there is significant uncertainty in predicting the severity and duration of the COVID-19 pandemic and its impact on world economies, we assumed that the negative impact of the COVID-19 pandemic is expected to remain throughout the fiscal year ending March 31, 2021, and thereafter the Japanese and global economy will gradually pick up and recover from the fiscal year ending March 31, 2022. Based on the above forecasts of economic conditions, the growth rates of Japanese and global GDP, the key macroeconomic drivers impacting credit risks and losses, are expected to be around minus 5% and minus 4%, respectively for the fiscal year ending March 31, 2021, and around 3% and 5%, respectively for the fiscal year ending March 31, 2022.

Furthermore, we considered whether there is an increased credit risk for some portfolios on which the COVID-19 pandemic would have a material adverse impact but where the impact was not fully incorporated in the ECL model. We evaluated the forward-looking impact on credit risks and losses of not only the portfolios significantly affected by declines in market prices such as oil prices, but also certain industry-related portfolios selected based on changes in factors such as the market conditions and bankruptcy trends as a result of the reduction in economic activity by the voluntary restraint of social and business activities. As a consequence, we decided to make an additional ECL adjustment.

For the six months ended September 30, 2020, the allowance for loan losses increased by ¥151,543 million, or 21%, from ¥706,405 million at the beginning of the period to ¥857,948 million at the end of the period. The balance of the allowance for loan losses increases when a provision for loan losses is recognized and decreases when charge-offs are recognized through the sales of loans and write-offs. As we recorded a provision for loan losses of ¥224,996 million and charge-offs of ¥80,694 million for the six months ended September 30, 2020, the provision for loan losses exceeded charge-offs and the overall allowance for loan losses increased.

Provision for loan losses increased by ¥167,000 million from ¥57,996 million for the six months ended September 30, 2019 to ¥224,996 million for the six months ended September 30, 2020. The increase was primarily due to an increase in the provision for loan losses related to our corporate customers affected by the COVID-19 pandemic. Charge-offs increased by ¥9,045 million from ¥71,649 million for the six months ended September 30, 2019 to ¥80,694 million for the six months ended September 30, 2020, primarily due to an increase in charge-offs of foreign loans and advances.

 

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Table of Contents

The following tables show the analysis of our allowance for loan losses for the six months ended September 30, 2020 and 2019.

 

     At September 30, 2020  
     12-month ECL     Lifetime ECL
not credit-
impaired
    Lifetime ECL
credit-impaired
    Total  
     (In millions)  

Allowance for loan losses :

        

Balance at April 1, 2020

   ¥ 203,286     ¥ 147,382     ¥ 355,737     ¥ 706,405  

Net transfers between stages

     (3,299     (10,720     14,019       —    

Provision (credit) for loan losses

     (23,142     166,273       81,865       224,996  

Charge-offs(1)

     —         —         80,694       80,694  

Recoveries

     —         —         6,365       6,365  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs

     —         —         74,329       74,329  

Others(2)

     24       (572     1,424       876  
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2020

   ¥ 176,869     ¥ 302,363     ¥ 378,716     ¥ 857,948  
  

 

 

   

 

 

   

 

 

   

 

 

 
     At September 30, 2019  
     12-month ECL     Lifetime ECL
not credit-
impaired
    Lifetime ECL
credit-impaired
    Total  
     (In millions)  

Allowance for loan losses :

        

Balance at April 1, 2019

   ¥ 158,094     ¥ 92,446     ¥ 354,448     ¥ 604,988  

Net transfers between stages

     (2,995     (4,355     7,350       —    

Provision (credit) for loan losses

     (8,079     8,570       57,505       57,996  

Charge-offs(1)

     —         —         71,649       71,649  

Recoveries

     —         —         6,182       6,182  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs

     —         —         65,467       65,467  

Others(2)

     (2,388     (782     (2,090     (5,260
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2019

   ¥ 144,632     ¥ 95,879     ¥ 351,746     ¥ 592,257  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Charge-offs consist of the sales of loans and write-offs.

(2)

Others mainly include foreign exchange translations for the six months ended September 30, 2020 and 2019.

Impaired Loans and Advances

A portion of the total domestic and foreign loans and advances consists of impaired loans and advances, which are comprised of “potentially bankrupt, effectively bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” “restructured (loans)” and “other impaired (loans and advances).” The loans and advances for which management has serious doubts about the ability of the borrowers to comply in the near future with the repayment terms are wholly included in impaired loans and advances.

“Potentially bankrupt, effectively bankrupt and bankrupt (loans and advances)” comprise loans and advances to borrowers that are perceived to have a high risk of falling into bankruptcy, may not have been legally or formally declared bankrupt but are essentially bankrupt, or have been legally or formally declared bankrupt.

Loans classified as “past due three months or more (loans)” represent those loans that are three months or more past due as to principal or interest, which are not included in “potentially bankrupt, effectively bankrupt and bankrupt (loans and advances).”

 

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Table of Contents

The category “restructured (loans)” comprises loans not included above for which the terms of the loans have been modified to grant concessions because of problems with the borrower.

“Other impaired (loans and advances)” represent impaired loans and advances, which are not included in “potentially bankrupt, effectively bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” or “restructured (loans),” but for which information about credit problems causes management to classify them as impaired loans and advances.

 

24


Table of Contents

The following table shows the distribution of impaired loans and advances by “potentially bankrupt, effectively bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” “restructured (loans)” and “other impaired (loans and advances)” at September 30, 2020 and March 31, 2020 by domicile and type of industry of the borrowers. At September 30, 2020, gross impaired loans and advances were ¥984,677 million, an increase of ¥139,348 million from ¥845,329 million at March 31, 2020. The ratio of gross impaired loans and advances to the outstanding loans and advances before deducting the allowance for loan losses, and adjusting unearned income, unamortized premiums-net and deferred loan fees-net was 1.0% at September 30, 2020, an increase of 0.1 percentage points from 0.9% at March 31, 2020.

 

     At September 30,
2020
    At March 31,
2020
 
     (In millions)  

Potentially bankrupt, effectively bankrupt and bankrupt (loans and advances):

    

Domestic:

    

Manufacturing

   ¥ 54,012     ¥ 44,640  

Agriculture, forestry, fisheries and mining

     7,532       7,648  

Construction

     9,071       10,008  

Transportation, communications and public enterprises

     39,565       35,562  

Wholesale and retail

     66,284       67,810  

Finance and insurance

     5,541       5,556  

Real estate and goods rental and leasing

     31,140       28,189  

Services

     75,999       44,040  

Consumer

     169,309       162,881  

Others

     22,694       19,475  
  

 

 

   

 

 

 

Total domestic

     481,147       425,809  
  

 

 

   

 

 

 

Foreign:

    

Public sector

     9       —    

Financial institutions

     12,791       29  

Commerce and industry

     164,058       137,438  

Others

     15,385       9,118  
  

 

 

   

 

 

 

Total foreign

     192,243       146,585  
  

 

 

   

 

 

 

Total

     673,390       572,394  
  

 

 

   

 

 

 

Past due three months or more (loans):

    

Domestic

     36,143       27,923  

Foreign

     10,578       —    
  

 

 

   

 

 

 

Total

     46,721       27,923  
  

 

 

   

 

 

 

Restructured (loans):

    

Domestic

     141,123       144,034  

Foreign

     54,489       42,123  
  

 

 

   

 

 

 

Total

     195,612       186,157  
  

 

 

   

 

 

 

Other impaired (loans and advances):

    

Domestic

     62,540       52,020  

Foreign

     6,414       6,835  
  

 

 

   

 

 

 

Total

     68,954       58,855  
  

 

 

   

 

 

 

Gross impaired loans and advances

     984,677       845,329  
  

 

 

   

 

 

 

Less: Allowance for loan losses for impaired loans and advances

     (378,716     (355,737
  

 

 

   

 

 

 

Net impaired loans and advances

   ¥ 605,961     ¥ 489,592  
  

 

 

   

 

 

 

 

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Table of Contents

Investment Securities

Our investment securities, consisting of debt instruments at amortized cost, debt instruments at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income, totaled ¥24,353,970 million at September 30, 2020, an increase of ¥2,489,584 million, or 11%, from ¥21,864,386 million at March 31, 2020. The increase in our investment securities was primarily due to an increase in our holdings of Japanese government bonds, which were partially offset by decreases in our holdings of U.S. Treasury and other U.S. government agency bonds and mortgage-backed securities.

Our bond portfolio is principally held for asset and liability management purposes. It mostly consisted of Japanese government bonds, U.S. Treasury securities and bonds issued or guaranteed by foreign governments, government agencies or official institutions.

Our debt instruments at amortized cost amounted to ¥64,213 million at September 30, 2020, a decrease of ¥256,558 million, or 80%, from ¥320,771 million at March 31, 2020, primarily due to redemptions at maturity of Japanese government bonds.

Domestic debt instruments at fair value through other comprehensive income amounted to ¥11,443,653 million at September 30, 2020, an increase of ¥3,838,600 million, or 50%, from ¥7,605,053 million at March 31, 2020. The increase was primarily due to an increase in our holdings of Japanese government bonds. As for our foreign debt instruments at fair value through other comprehensive income, we had ¥8,869,520 million of foreign debt instruments at September 30, 2020, which was a decrease of ¥1,579,591 million, or 15%, from ¥10,449,111 million at March 31, 2020. Most of our foreign debt instruments, including mortgage-backed securities, are issued or guaranteed by foreign governments, government agencies or official institutions. The decrease was primarily due to decreases in our holdings of U.S. Treasury and other U.S. government agency bonds and mortgage-backed securities.

We had ¥3,433,111 million of domestic equity instruments and ¥543,473 million of foreign equity instruments at September 30, 2020, for which we made an irrevocable election at initial recognition to present subsequent changes in fair value in other comprehensive income under IFRS 9 “Financial Instruments.” Our domestic equity instruments, which consisted principally of publicly traded Japanese stocks and included common and preferred stocks issued by our customers, increased by ¥408,380 million, or 14%, from ¥3,024,731 million at March 31, 2020. Net unrealized gains on our domestic equity instruments increased by ¥437,855 million, or 28%, from ¥1,564,351 million at March 31, 2020 to ¥2,002,206 million at September 30, 2020. The increase was primarily due to an increase in the fair value of publicly traded Japanese stocks. Net unrealized gains on our foreign equity instruments increased by ¥80,195 million, or 24%, from ¥333,664 million at March 31, 2020 to ¥413,859 million at September 30, 2020, mainly reflecting favorable conditions in overseas stock markets.

We have no transactions pursuant to repurchase agreements, securities lending transactions or other transactions involving the transfer of financial assets with an obligation to repurchase such transferred assets that are treated as sales for accounting purposes.

 

26


Table of Contents

The following tables show the amortized cost, gross unrealized gains and losses, and fair value of our investment securities, which were classified as debt instruments at amortized cost, debt instruments at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income at September 30, 2020 and March 31, 2020.

 

     At September 30, 2020  
     Amortized
cost(1)
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair value  
     (In millions)  

Debt instruments at amortized cost:

           

Domestic:

           

Japanese municipal bonds

   ¥ 22,300      ¥ 15      ¥ 27      ¥ 22,288  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total domestic

     22,300        15        27        22,288  
  

 

 

    

 

 

    

 

 

    

 

 

 

Foreign:

           

Bonds issued by other governments and official institutions(2)

     39,949        231        —          40,180  

Other debt instruments

     1,964        —          —          1,964  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total foreign

     41,913        231        —          42,144  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 64,213      ¥ 246      ¥ 27      ¥ 64,432  
  

 

 

    

 

 

    

 

 

    

 

 

 

Debt instruments at fair value through other comprehensive income:

           

Domestic:

           

Japanese government bonds

   ¥ 10,292,725      ¥ 5,744      ¥ 9,150      ¥ 10,289,319  

Japanese municipal bonds

     513,514        803        362        513,955  

Japanese corporate bonds

     639,969        1,781        1,681        640,069  

Other debt instruments

     310        —          —          310  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total domestic

     11,446,518        8,328        11,193        11,443,653  
  

 

 

    

 

 

    

 

 

    

 

 

 

Foreign:

           

U.S. Treasury and other U.S. government agency bonds

     3,501,441        78,012        4,122        3,575,331  

Bonds issued by other governments and official institutions(2)

     3,045,331        18,479        10,619        3,053,191  

Mortgage-backed securities

     1,838,366        69,047        18        1,907,395  

Other debt instruments

     332,783        1,130        310        333,603  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total foreign

     8,717,921        166,668        15,069        8,869,520  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 20,164,439      ¥ 174,996      ¥ 26,262      ¥ 20,313,173  
  

 

 

    

 

 

    

 

 

    

 

 

 

Equity instruments at fair value through other comprehensive income:

           

Domestic

   ¥ 1,430,905      ¥ 2,123,825      ¥ 121,619      ¥ 3,433,111  

Foreign

     129,614        440,537        26,678        543,473  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 1,560,519      ¥ 2,564,362      ¥ 148,297      ¥ 3,976,584  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     At March 31, 2020  
     Amortized
cost(1)
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair value  
     (In millions)  

Debt instruments at amortized cost:

           

Domestic:

           

Japanese government bonds

   ¥ 260,079      ¥ 207      ¥ —        ¥ 260,286  

Japanese municipal bonds

     22,300        1        67        22,234  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total domestic

     282,379        208        67        282,520  
  

 

 

    

 

 

    

 

 

    

 

 

 

Foreign:

           

Bonds issued by other governments and official institutions(2)

     37,358        145        —          37,503  

Other debt instruments

     1,034        —          —          1,034  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total foreign

     38,392        145        —          38,537  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 320,771      ¥ 353      ¥ 67      ¥ 321,057  
  

 

 

    

 

 

    

 

 

    

 

 

 

Debt instruments at fair value through other comprehensive income:

           

Domestic:

           

Japanese government bonds

   ¥ 6,791,514      ¥ 5,725      ¥ 12,171      ¥ 6,785,068  

Japanese municipal bonds

     240,558        355        531        240,382  

Japanese corporate bonds

     579,508        1,655        1,870        579,293  

Other debt instruments

     310        —          —          310  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total domestic

     7,611,890        7,735        14,572        7,605,053  
  

 

 

    

 

 

    

 

 

    

 

 

 

Foreign:

           

U.S. Treasury and other U.S. government agency bonds

     4,347,608        147,078        —          4,494,686  

Bonds issued by other governments and official institutions(2)

     2,941,222        10,340        20,756        2,930,806  

Mortgage-backed securities

     2,708,432        99,481        100        2,807,813  

Other debt instruments

     216,738        593        1,525        215,806  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total foreign

     10,214,000        257,492        22,381        10,449,111  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 17,825,890      ¥ 265,227      ¥ 36,953      ¥ 18,054,164  
  

 

 

    

 

 

    

 

 

    

 

 

 

Equity instruments at fair value through other comprehensive income:

           

Domestic

   ¥ 1,460,380      ¥ 1,693,714      ¥ 129,363      ¥ 3,024,731  

Foreign

     131,056        361,501        27,837        464,720  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 1,591,436      ¥ 2,055,215      ¥ 157,200      ¥ 3,489,451  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Amortized cost for equity instruments at fair value through other comprehensive income represents the difference between the fair value and gross unrealized gains or losses.

(2)

Excludes U.S. Treasury and other U.S. government agency bonds.

 

28


Table of Contents

The following tables show the fair value and gross unrealized losses of our investment securities, aggregated by the length of time that the individual securities have been in a continuous unrealized loss position at September 30, 2020 and March 31, 2020.

 

    At September 30, 2020  
    Less than twelve months     Twelve months or more     Total  
    Fair value     Gross
unrealized
losses
    Fair value     Gross
unrealized
losses
    Fair value     Gross
unrealized
losses
 
    (In millions)  

Debt instruments at amortized cost:

           

Domestic:

           

Japanese municipal bonds

  ¥ 16,273     ¥ 27     ¥ —       ¥ —       ¥ 16,273     ¥ 27  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total domestic

    16,273       27       —         —         16,273       27  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreign:

           

Bonds issued by other governments and official institutions(1)

    —         —         —         —         —         —    

Other debt instruments

    —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total foreign

    —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 16,273     ¥ 27     ¥ —       ¥ —       ¥ 16,273     ¥ 27  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Debt instruments at fair value through other comprehensive income:

           

Domestic:

           

Japanese government bonds

  ¥ 3,903,512     ¥ 5,871     ¥ 90,904     ¥ 3,279     ¥ 3,994,416     ¥ 9,150  

Japanese municipal bonds

    185,850       268       47,359       94       233,209       362  

Japanese corporate bonds

    271,356       1,365       29,511       316       300,867       1,681  

Other debt instruments

    —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total domestic

    4,360,718       7,504       167,774       3,689       4,528,492       11,193  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreign:

           

U.S. Treasury and other U.S. government agency bonds

    574,672       4,122       —         —         574,672       4,122  

Bonds issued by other governments and official institutions(1)

    1,453,314       10,619       —         —         1,453,314       10,619  

Mortgage-backed securities

    693       1       2,929       17       3,622       18  

Other debt instruments

    140,568       226       10,494       84       151,062       310  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total foreign

    2,169,247       14,968       13,423       101       2,182,670       15,069  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 6,529,965     ¥ 22,472     ¥ 181,197     ¥ 3,790     ¥ 6,711,162     ¥ 26,262  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity instruments at fair value through other comprehensive income:

           

Domestic

  ¥ 166,917     ¥ 29,409     ¥ 130,569     ¥ 92,210     ¥ 297,486     ¥ 121,619  

Foreign

    2,940       546       15,281       26,132       18,221       26,678  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 169,857     ¥ 29,955     ¥ 145,850     ¥ 118,342     ¥ 315,707     ¥ 148,297  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

29


Table of Contents
    At March 31, 2020  
    Less than twelve months     Twelve months or more     Total  
    Fair value     Gross
unrealized
losses
    Fair value     Gross
unrealized
losses
    Fair value     Gross
unrealized
losses
 
    (In millions)  

Debt instruments at amortized cost:

           

Domestic:

           

Japanese government bonds

  ¥ —       ¥ —       ¥ —       ¥ —       ¥ —       ¥ —    

Japanese municipal bonds

    18,532       67       —         —         18,532       67  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total domestic

    18,532       67       —         —         18,532       67  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreign:

           

Bonds issued by other governments and official institutions(1)

    —         —         —         —         —         —    

Other debt instruments

    —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total foreign

    —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 18,532     ¥ 67     ¥ —       ¥ —       ¥ 18,532     ¥ 67  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Debt instruments at fair value through other comprehensive income:

           

Domestic:

           

Japanese government bonds

  ¥ 4,367,384     ¥ 12,171     ¥ —       ¥ —       ¥ 4,367,384     ¥ 12,171  

Japanese municipal bonds

    153,889       527       9,556       4       163,445       531  

Japanese corporate bonds

    295,318       1,870       —         —         295,318       1,870  

Other debt instruments

    —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total domestic

    4,816,591       14,568       9,556       4       4,826,147       14,572  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreign:

           

U.S. Treasury and other U.S. government agency bonds

    32,089       —         —         —         32,089       —    

Bonds issued by other governments and official institutions(1)

    1,453,583       20,756       —         —         1,453,583       20,756  

Mortgage-backed securities

    1,800       6       6,268       94       8,068       100  

Other debt instruments

    88,192       1,228       10,584       297       98,776       1,525  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total foreign

    1,575,664       21,990       16,852       391       1,592,516       22,381  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 6,392,255     ¥ 36,558     ¥ 26,408     ¥ 395     ¥ 6,418,663     ¥ 36,953  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity instruments at fair value through other comprehensive income:

           

Domestic

  ¥ 144,382     ¥ 46,162     ¥ 139,484     ¥ 83,201     ¥ 283,866     ¥ 129,363  

Foreign

    45,541       1,216       15,024       26,621       60,565       27,837  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 189,923     ¥ 47,378     ¥ 154,508     ¥ 109,822     ¥ 344,431     ¥ 157,200  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Excludes U.S. Treasury and other U.S. government agency bonds.

 

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Table of Contents

Trading Assets

The following table shows our trading assets at September 30, 2020 and March 31, 2020. Our trading assets were ¥2,551,814 million at September 30, 2020, a decrease of ¥233,202 million from ¥2,785,016 million at March 31, 2020. The decrease was primarily due to a decrease in our holdings of Japanese government bonds.

 

     At September 30,
2020
    At March 31,
2020
 
     (In millions)  

Debt instruments

   ¥ 2,192,762     ¥ 2,545,703  

Equity instruments

     359,052       239,313  
  

 

 

   

 

 

 

Total trading assets

   ¥     2,551,814       ¥     2,785,016    
  

 

 

   

 

 

 

Financial Assets at Fair Value Through Profit or Loss

The following table shows the fair value of our financial assets at fair value through profit or loss at September 30, 2020 and March 31, 2020. The fair value was ¥1,119,531 million at September 30, 2020, a decrease of ¥358,825 million from ¥1,478,356 million at March 31, 2020. The decrease was primarily due to a decrease in our holdings of non-trading bonds.

 

     At September 30,
2020
    At March 31,
2020
 
     (In millions)  

Debt instruments

   ¥ 1,082,153     ¥ 1,454,387  

Equity instruments

     37,378       23,969  
  

 

 

   

 

 

 

Total financial assets at fair value through profit or loss

   ¥     1,119,531       ¥     1,478,356    
  

 

 

   

 

 

 

Liabilities

Our total liabilities increased by ¥6,171,902 million from ¥201,223,585 million at March 31, 2020 to ¥207,395,487 million at September 30, 2020, primarily due to an increase in deposits.

The following table shows our liabilities at September 30, 2020 and March 31, 2020.

 

     At September 30,
2020
    At March 31,
2020
 
     (In millions)  

Deposits

   ¥ 148,886,755     ¥ 138,431,418  

Call money and bills sold

     1,240,693       3,740,540  

Repurchase agreements and cash collateral on securities lent

     13,221,950       15,455,782  

Trading liabilities

     1,713,338       2,018,484  

Derivative financial instruments

     4,604,721       5,555,201  

Financial liabilities designated at fair value through profit or loss

     99,730       —    

Borrowings

     17,877,507       17,121,362  

Debt securities in issue

     11,868,264       10,985,048  

Provisions

     197,680       200,053  

Other liabilities

     7,435,224       7,601,355  

Current tax liabilities

     43,071       48,159  

Deferred tax liabilities

     206,554       66,183  
  

 

 

   

 

 

 

Total liabilities

   ¥ 207,395,487       ¥ 201,223,585    
  

 

 

   

 

 

 

 

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Table of Contents

Deposits

We offer a wide range of standard banking accounts through the offices of our banking subsidiaries in Japan, including non-interest-bearing demand deposits, interest-bearing demand deposits, deposits at notice, time deposits and negotiable certificates of deposit. Domestic deposits, approximately 78% of total deposits, are our principal source of funds for our domestic operations. The deposits in the domestic offices of our banking subsidiaries are principally from individuals and private corporations, governmental bodies (including municipal authorities) and financial institutions.

SMBC’s foreign offices accept deposits mainly in U.S. dollars, but also in yen and other currencies, and are active participants in the Euro-currency market as well as the United States domestic money market. Foreign deposits mainly consist of stable types of deposits, such as deposits at notice, time deposits and negotiable certificates of deposit.

Our deposit balances at September 30, 2020 were ¥148,886,755 million, an increase of ¥10,455,337 million from ¥138,431,418 million at March 31, 2020, primarily due to increases in demand deposits at domestic offices and deposits at notice at foreign offices. The demand deposits at domestic offices increased primarily due to an increase in deposits both from corporate customers proactively maintaining liquidity and from individual customers reflecting the provision of special cash payments to Japanese residents by the Japanese government as part of its economic measures to cope with the COVID-19 pandemic.

The following table shows a breakdown of our domestic and foreign offices’ deposits at September 30, 2020 and March 31, 2020.

 

     At September 30,
2020
    At March 31,
2020
 
     (In millions)  

Domestic offices:

    

Non-interest-bearing demand deposits

   ¥ 25,041,112     ¥ 23,804,054  

Interest-bearing demand deposits

     61,505,515       56,650,510  

Deposits at notice

     822,841       779,514  

Time deposits

     17,806,104       17,759,453  

Negotiable certificates of deposit

     3,169,722       4,081,741  

Others

     7,850,778       7,198,447  
  

 

 

   

 

 

 

Total domestic offices

     116,196,072       110,273,719  
  

 

 

   

 

 

 

Foreign offices:

    

Non-interest-bearing demand deposits

     1,628,799       1,503,721  

Interest-bearing demand deposits

     3,341,964       3,122,179  

Deposits at notice

     12,103,779       9,989,980  

Time deposits

     8,376,469       7,264,055  

Negotiable certificates of deposit

     7,067,970       6,098,695  

Others

     171,702       179,069  
  

 

 

   

 

 

 

Total foreign offices

     32,690,683       28,157,699  
  

 

 

   

 

 

 

Total deposits

   ¥  148,886,755       ¥ 138,431,418    
  

 

 

   

 

 

 

Borrowings

Borrowings include unsubordinated borrowings, subordinated borrowings, liabilities associated with securitization transactions of our own assets, and lease liabilities. At September 30, 2020, our borrowings were ¥17,877,507 million, an increase of ¥756,145 million, or 4%, from ¥17,121,362 million at March 31, 2020, primarily due to an increase in unsubordinated borrowings.

 

32


Table of Contents

The following table shows the balances with respect to our borrowings at September 30, 2020 and March 31, 2020.

 

     At September 30,
2020
    At March 31,
2020
 
     (In millions)  

Unsubordinated borrowings

   ¥ 16,032,412     ¥ 15,208,696  

Subordinated borrowings

     254,264       254,064  

Liabilities associated with securitization transactions

     1,221,760       1,272,714  

Lease liabilities

     369,071       385,888  
  

 

 

   

 

 

 

Total borrowings

   ¥   17,877,507       ¥   17,121,362    
  

 

 

   

 

 

 

Debt Securities in Issue

Debt securities in issue at September 30, 2020 were ¥11,868,264 million, an increase of ¥883,216 million, or 8%, from ¥10,985,048 million at March 31, 2020, primarily due to an increase in commercial paper.

 

     At September 30,
2020
    At March 31,
2020
 
     (In millions)  

Commercial paper

   ¥ 2,666,002     ¥ 1,736,702  

Unsubordinated bonds

     7,691,244       7,693,431  

Subordinated bonds

     1,511,018       1,554,915  
  

 

 

   

 

 

 

Total debt securities in issue

   ¥   11,868,264       ¥   10,985,048    
  

 

 

   

 

 

 

Total Equity

Our total equity increased by ¥653,703 million from ¥10,934,878 million at March 31, 2020 to ¥11,588,581 million at September 30, 2020, primarily due to increases in retained earnings, which mainly reflected our net profit, other reserves and equity attributable to other equity instruments holders. The increase in other reserves was primarily due to the financial instruments at fair value through other comprehensive income reserve reflecting a rise in the fair value of domestic equity instruments. The increase in equity attributable to other equity instruments holders was primarily due to the issuance of a perpetual subordinated bond qualified as Additional Tier 1 capital and classified as equity under IFRS. For more information, see Note 12 “Equity Attributable to Other Equity Instruments Holders” to our consolidated financial statements included elsewhere in this report.

 

     At September 30,
2020
    At March 31,
2020
 
     (In millions)  

Capital stock

   ¥ 2,341,274     ¥ 2,339,965  

Capital surplus

     728,171       728,551  

Retained earnings

     5,815,295       5,609,854  

Treasury stock

     (13,693     (13,984
  

 

 

   

 

 

 

Equity excluding other reserves

     8,871,047       8,664,386  

Other reserves

     1,869,435       1,525,720  
  

 

 

   

 

 

 

Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc.

     10,740,482       10,190,106  

Non-controlling interests

     63,477       60,296  

Equity attributable to other equity instruments holders

     784,622       684,476  
  

 

 

   

 

 

 

Total equity

   ¥   11,588,581       ¥   10,934,878    
  

 

 

   

 

 

 

 

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Table of Contents

Liquidity

We derive funding for our operations both from domestic and international sources. Our domestic funding is derived primarily from deposits placed with SMBC by its corporate and individual customers, and also from call money (inter-bank), bills sold (inter-bank promissory notes), repurchase agreements, borrowings, and negotiable certificates of deposit issued by SMBC to domestic and international customers. Our international sources of funds are principally from deposits from corporate customers and foreign central banks, negotiable certificates of deposit, bonds, commercial paper, and also from repurchase agreements and cash collateral on securities lent. We closely monitor maturity gaps and foreign exchange exposure in order to manage our liquidity profile.

As shown in the following table, total deposits increased by ¥10,455,337 million from ¥138,431,418 million at March 31, 2020 to ¥148,886,755 million at September 30, 2020. The balance of deposits at September 30, 2020 exceeded the balance of loans and advances by ¥52,928,324 million, primarily due to the stable deposit base in Japan. Our loan-to-deposit ratio (total loans and advances divided by total deposits) in the same period was 64%, which contributed greatly to the reduction of our liquidity risk. Our balances of large-denomination domestic yen time deposits are stable due to the historically high rollover rate of our corporate customers and individual depositors.

 

     At September 30,
2020
    At March 31,
2020
 
     (In millions)  

Loans and advances

   ¥   95,958,431       ¥   94,671,818    

Deposits

     148,886,755       138,431,418  

We have invested the excess balance of deposits against loans and advances primarily in marketable securities and other highly liquid assets, such as Japanese government bonds. SMBC’s Treasury Unit actively monitors the movement of interest rates and maturity profile of its bond portfolio as part of SMBC’s overall risk management. The bonds can be used to enhance liquidity. When needed, they can be used as collateral for call money or other money market funding or short-term borrowings from the BOJ.

Secondary sources of liquidity include short-term debts, such as call money, bills sold, and commercial paper issued at an inter-bank or other wholesale markets. We also issue long-term debts, including both senior and subordinated debts, as additional sources of liquidity. With short- and long-term debts, we can diversify our funding sources, effectively manage our funding costs and enhance our capital adequacy ratios when appropriate.

We source our funding in foreign currencies primarily from financial institutions, general corporations, and institutional investors, through short- and long-term financing. Even if we encounter declines in our credit quality or that of Japan in the future, we expect to be able to purchase foreign currencies in sufficient amounts using the yen funds raised through our domestic customer base. As further measures to support our foreign currency liquidity, we hold foreign debt securities, maintain credit lines and swap facilities denominated in foreign currencies, and pledge collateral to the U.S. Federal Reserve Bank.

We maintain management and control systems to support our ability to access liquidity on a stable and cost-effective basis.

We believe we are able to access such sources of liquidity on a stable and flexible basis by keeping credit ratings at a high level. The following table shows credit ratings assigned to the Company by Moody’s Japan K.K., (“Moody’s”), S&P Global Ratings Japan Inc. (“S&P”) and Fitch Ratings Japan Limited (“Fitch”) at November 30, 2020.

 

At November 30, 2020

Moody’s

 

S&P

 

Fitch

Long-term

 

Outlook

 

Short-term

 

Long-term

 

Outlook

 

Short-term

 

Long-term

 

Outlook

 

Short-term

A1

  S   P-1   A-   S     A   N   F1

 

34


Table of Contents

The following table shows credit ratings assigned to SMBC by Moody’s, S&P and Fitch at November 30, 2020.

 

At November 30, 2020

Moody’s

 

S&P

 

Fitch

Long-term

 

Outlook

 

Short-term

 

Long-term

 

Outlook

 

Short-term

 

Long-term

 

Outlook

 

Short-term

A1

  S   P-1   A   S   A-1   A   N   F1

We are assigned credit ratings by major domestic and international credit rating agencies. Credit ratings do not constitute recommendations to purchase, sell or hold a security, and rating agencies may review or indicate an intention to review ratings at any time. While the methodology and rating system vary among rating agencies, credit ratings are generally based on information provided by us or independent sources, and can be influenced by the credit ratings of Japanese government bonds and broader views of the Japanese financial system. Any downgrade in or withdrawal of these credit ratings, or any adverse change in these ratings relative to other financial institutions, could increase our borrowing costs, reduce our access to the capital markets and otherwise negatively affect our ability to raise funds, which in turn could have a negative impact on our liquidity position.

The guidelines published by the Financial Services Agency of Japan (“FSA”) for liquidity coverage ratio (“LCR”) applicable to banks and bank holding companies with international operations are based on the full text of the LCR standard issued by the Basel Committee on Banking Supervision (“BCBS”) in January 2013. Under these guidelines, banks and bank holding companies with international operations must maintain LCR of at least 100% on both a consolidated basis and a nonconsolidated basis. The following table shows the LCRs of the Company and SMBC for the three months ended September 30, 2020. Each figure is calculated based on our financial statements prepared in accordance with Japanese GAAP, as required by the FSA’s LCR guidelines.

 

     For the three months
ended September 30,
2020(1)
 

SMFG (consolidated)

     136.0

SMBC (consolidated)

     141.0

SMBC (nonconsolidated)

     146.7

 

(1)

Under the FSA’s LCR guidelines, LCR is set as the three-month average of the daily LCRs for the three months ended September 30, 2020, which is calculated by dividing the balance of high-quality liquid assets by the total net cash outflows on a daily basis for the same three months.

For further information, see “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity—Liquidity Requirement” of our annual report on Form 20-F for the fiscal year ended March 31, 2020.

Capital Management

With regard to capital management, we strictly abide by the capital adequacy guidelines set by the FSA. Japan’s capital adequacy guidelines are based on the Basel Capital Accord, which was proposed by the BCBS for uniform application to all banks which have international operations in industrialized countries. Japan’s capital adequacy guidelines may be different from those of central banks or supervisory bodies of other countries because they have been designed by the FSA to suit the Japanese banking environment. Our banking subsidiaries outside of Japan are also subject to the local capital ratio requirements.

Each figure for the FSA capital adequacy guidelines is calculated based on our financial statements prepared under Japanese GAAP.

The FSA capital adequacy guidelines permit Japanese banks to choose from the standardized approach, the foundation internal rating-based (“IRB”) approach and the advanced IRB approach for credit risk, and the basic indicator approach, the standardized approach (“TSA”) and the advanced measurement approach (“AMA”) for

 

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operational risk. To be eligible to adopt the foundation IRB approach or the advanced IRB approach for credit risk, and the TSA or the AMA for operational risk, a Japanese bank must establish advanced risk management systems and receive prior approval from the FSA.

We and SMBC have adopted the advanced IRB approach since March 2009 and the AMA since March 2008.

In December 2010, the BCBS published the new Basel III rules text to implement the Basel III framework, which sets out higher and better-quality capital, better risk coverage, the introduction of a leverage ratio as a backstop to the risk-based requirement, measures to promote the build-up of capital that can be drawn down in periods of stress, and the introduction of two global liquidity standards. The main measures of the minimum capital requirements in the Basel III framework began in January 2013 and have been fully applied from January 2019. The minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 4.5%, 6% and 8%, respectively, since January 2015. Moreover, banks have been required to hold a capital conservation buffer of 2.5% to withstand future periods of stress since January 2019. As a result, taking the capital conservation buffer into account, the minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 7%, 8.5% and 10.5%, respectively, since January 2019. Furthermore, a countercyclical buffer within a range of 0% to 2.5% of common equity or other fully loss-absorbing capital has been implemented according to national circumstances.

In addition to the above-mentioned minimum capital requirements and capital buffer requirements under Basel III, organizations identified by the FSB as G-SIBs, which includes us, are required to maintain an additional 1% to 2% of Common Equity Tier 1 capital as a percentage of risk-weighted assets based on the organization’s size, interconnectedness, substitutability, complexity and cross-jurisdictional activity as determined by the FSB. The amount of G-SIB capital surcharge that applies to us based on the FSB’s determination is 1%. The FSB updates its list of G-SIBs on an annual basis.

To reflect the Basel III framework, the FSA changed its capital adequacy guidelines. The minimum Common Equity Tier 1 capital requirement, Tier 1 capital requirement, and total capital requirement have been 4.5%, 6% and 8%, respectively, since March 2015. The capital conservation buffer, countercyclical buffer and the G-SIB capital surcharge started to be phased in from March 2016 and have been fully applied from March 2019 under the FSA capital adequacy guidelines.

In December 2017, the Group of Central Bank Governors and Heads of Supervision endorsed the outstanding Basel III regulatory reforms. For further details regarding the finalized Basel III reforms, see “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity—Capital Adequacy Requirement” of our annual report on Form 20-F for the fiscal year ended March 31, 2020.

In March 2015, the FSA published its leverage ratio guidelines, which have been applied from March 31, 2015, to help ensure broad and adequate capture of both on- and off-balance sheet sources of leverage for internationally active banks. The FSA’s leverage ratio guidelines are based on the text of the leverage ratio framework and disclosure requirements issued by the BCBS in January 2014.

In December 2017, the definition and requirements of the leverage ratio were revised as part of the finalized Basel III reforms, under which the leverage ratio is based on a Tier 1 definition of capital and with the minimum leverage ratio of 3%. Under the finalized Basel III reforms, G-SIBs are required to meet a leverage ratio buffer, which will take the form of a Tier 1 capital buffer set at 50% of the applicable G-SIB capital surcharge. Various refinements were also made to the definition of the leverage ratio exposure measure. The leverage ratio requirements under the definition based on the framework issued by the BCBS in January 2014 were implemented as a Pillar 1 measurement from January 2018, and those under the revised definition and the leverage ratio buffer requirement for G-SIBs will be implemented as a Pillar 1 measurement from January 1, 2023.

 

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In March 2019, the FSA published its guidelines for the leverage ratio applicable to banks with international operations, which have been applied from March 2019. Under the FSA’s guidelines for the leverage ratio, banks with international operations must maintain a leverage ratio of at least 3% on both a consolidated basis and a nonconsolidated basis from March 2019. On June 30, 2020, in light of the increasing impact of the COVID-19 pandemic, the FSA published amendments to its guidelines for the leverage ratio, which mainly exclude deposits with the BOJ from the denominator for the calculation of the leverage ratio in order to maintain harmonization with the monetary policy implemented by the BOJ and the prudential regulations for banks and other financial institutions. These amendments have been applied from June 30, 2020 and will extend to March 31, 2021.

The table below presents our risk-weighted capital ratios, total capital, risk-weighted assets and leverage ratio under Japanese GAAP at September 30, 2020 and March 31, 2020, based on the Basel III rules.

 

     At September 30,
2020
    At March 31,
2020
 
     (In billions, except percentages)  

SMFG Consolidated:

  

Total risk-weighted capital ratio

     19.28     18.75

Tier 1 risk-weighted capital ratio

     17.25     16.63

Common Equity Tier 1 risk-weighted capital ratio

     16.02     15.55

Total capital
(Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)

   ¥ 12,028.0     ¥ 11,552.0  

Tier 1 capital
(Common Equity Tier 1 capital + Additional Tier 1 capital)

     10,763.8       10,249.9  

Common Equity Tier 1 capital

     9,994.2       9,581.3  

Risk-weighted assets

     62,379.2       61,599.1  

The amount of minimum total capital requirements(1)

     4,990.3       4,927.9  

Leverage ratio

     5.85     4.31

 

(1)

The amount of minimum total capital requirements is calculated by multiplying risk-weighted assets by 8%.

Common Equity Tier 1 capital consists primarily of capital stock, capital surplus and retained earnings relating to common shares, and non-controlling interests that meet the criteria set forth in the FSA capital adequacy guidelines for inclusion in Common Equity Tier 1 capital.

Non-controlling interests arising from the issue of common shares by a fully consolidated subsidiary of a bank may receive recognition in Common Equity Tier 1 capital only if: (1) the instrument giving rise to the non-controlling interest would, if issued by the bank, meet all of the criteria set forth in the FSA capital adequacy guidelines for classification as common shares for regulatory capital purposes; and (2) the subsidiary that issued the instrument is itself a bank or other financial institution subject to similar capital adequacy guidelines.

Regulatory adjustments such as goodwill and other intangibles, deferred tax assets, investment in the common equity capital of banking, financial and insurance entities and defined benefit pension fund assets and liabilities are applied mainly to the calculation of Common Equity Tier 1 capital in the form of a deduction.

Additional Tier 1 capital consists primarily of perpetual subordinated bonds.

Tier 2 capital consists primarily of subordinated debt securities.

Capital instruments such as subordinated debt issued on or after March 31, 2013 must meet the new requirements to be included in regulatory capital. Capital instruments issued prior to March 31, 2013 that do not meet the requirements set forth in the FSA capital adequacy guidelines no longer qualify as Additional Tier 1 or Tier 2 capital. However, if those capital instruments meet the requirements for transitional arrangements set forth in such guidelines, they can qualify as Additional Tier 1 or Tier 2 capital during the phase-out period beginning

 

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March 31, 2013. The remaining balance of those non-qualifying capital instruments recognized as Additional Tier 1 or Tier 2 capital are being reduced in annual 10% increments and will be fully phased out by March 31, 2022.

Our capital position and SMBC’s capital position depend in part on the fair market value of our investment securities portfolio, since unrealized gains and losses are included in the amount of regulatory capital. At March 31, 2013, unrealized gains and losses were counted as Tier 2 capital and Additional Tier 1 capital, respectively, but started to be counted as Common Equity Tier 1 capital from March 31, 2014 by increments of 20% and have been fully counted as Common Equity Tier 1 capital since March 31, 2018. Since our other securities (including money held in trust) with a readily ascertainable market value included unrealized gains and losses, substantial fluctuations in the Japanese stock markets may affect our capital position and the capital position of SMBC.

Set forth below is a table of risk-weighted capital ratios, total capital, risk-weighted assets and leverage ratio of SMBC at September 30, 2020 and March 31, 2020 on a consolidated and nonconsolidated basis.

 

     At September 30,
2020
    At March 31,
2020
 
     (In billions, except percentages)  

SMBC Consolidated:

  

Total risk-weighted capital ratio

     18.16     18.06

Tier 1 risk-weighted capital ratio

     15.97     15.80

Common Equity Tier 1 risk-weighted capital ratio

     13.73     13.70

Total capital
(Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)

   ¥ 10,335.9     ¥ 10,107.2  

Tier 1 capital
(Common Equity Tier 1 capital + Additional Tier 1 capital)

     9,087.3       8,842.3  

Common Equity Tier 1 capital

     7,814.8       7,669.2  

Risk-weighted assets

     56,887.1       55,953.8  

The amount of minimum total capital requirements(1)

     4,551.0       4,476.3  

Leverage ratio

     5.32     3.97

SMBC Nonconsolidated:

  

Total risk-weighted capital ratio

     17.63     17.61

Tier 1 risk-weighted capital ratio

     15.36     15.23

Common Equity Tier 1 risk-weighted capital ratio

     13.01     13.01

Total capital
(Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)

   ¥ 9,447.6     ¥ 9,202.0  

Tier 1 capital
(Common Equity Tier 1 capital + Additional Tier 1 capital)

     8,229.5       7,959.8  

Common Equity Tier 1 capital

     6,970.0       6,800.3  

Risk-weighted assets

     53,570.8       52,248.9  

The amount of minimum total capital requirements(1)

     4,285.7       4,179.9  

 

(1)

The amount of minimum total capital requirements is calculated by multiplying risk-weighted assets by 8%.

Our securities subsidiary in Japan, SMBC Nikko Securities is also subject to capital adequacy requirements under the Financial Instruments and Exchange Act of Japan. At September 30, 2020, the capital adequacy ratio was 322.4% for SMBC Nikko Securities, and sufficiently above 140%, below which level it would be required to file daily reports with the Commissioner of the FSA.

 

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FINANCIAL RISK MANAGEMENT

Risk Management System

Our risk management system is described in the “Quantitative and Qualitative Information about Risk Management” section within Item 11, “Quantitative and Qualitative Disclosures about Credit, Market and Other Risk,” of our annual report on Form 20-F for the fiscal year ended March 31, 2020. There were no material changes in our risk management system for the six months ended September 30, 2020.

Credit Risk

Our credit risk management system is described in the “Credit Risk” section within Item 11 of our annual report on Form 20-F for the fiscal year ended March 31, 2020. There were no material changes in our credit risk management system for the six months ended September 30, 2020.

Market Risk

Our market risk management system is described in the “Market Risk and Liquidity Risk” section within Item 11 of our annual report on Form 20-F for the fiscal year ended March 31, 2020.

Our market risk can be divided into various factors: interest rates, foreign exchange rates, equity prices and option risks. We manage each of these risks by employing the value at risk (“VaR”) method as well as supplemental indicators suitable for managing each risk, such as the basis point value (“BPV”).

VaR is the largest predicted loss that is possible given a fixed confidence interval. For example, our VaR indicates the largest loss that is possible for a holding period of one day and a confidence interval of 99.0%. BPV is the amount of change in assessed value as a result of a one-basis-point (0.01%) movement in interest rates.

The principal SMBC Group companies’ internal VaR model makes use of historical data to prepare scenarios for market fluctuations and, by conducting simulations of gains and losses on a net position basis, the model estimates the maximum losses that may occur. The VaR calculation method we employ for both trading and non-trading activities is based mainly on the following:

 

   

the historical simulation method;

 

   

a one-sided confidence interval of 99.0%;

 

   

a one-day holding period (a one-year holding period for the strategic shareholding investment portfolio); and

 

   

an observation period of four years (ten years for the strategic shareholding investment portfolio).

This method is reviewed periodically and refined, if necessary.

 

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VaR Summary

The following tables set forth our VaR for trading activities and non-trading activities by risk categories for the six months ended September 30, 2020.

VaR for Trading Activities

 

      Interest rate  
risk
    Foreign
exchange risk
    Equities and
commodities
risk
        Others             Total(1)      
    (In billions)  

For the six months ended September 30, 2020:

         

SMBC Consolidated

         

Maximum

  ¥ 6.1     ¥ 8.8     ¥ 1.0     ¥ 3.7     ¥ 8.1  

Minimum

    4.6       6.8       0.0       2.6       6.0  

Daily average

    5.4       7.7       0.3       3.2       6.7  

At September 30, 2020

    5.4       7.4       0.1       3.7       7.0  

At March 31, 2020

    5.4       8.9       0.0       2.6       6.4  

SMFG Consolidated

         

Maximum

  ¥ 14.7     ¥ 9.9     ¥ 5.3     ¥ 3.7     ¥ 19.6  

Minimum

    11.9       7.4       1.9       2.6       15.6  

Daily average

    12.8       8.8       2.9       3.2       17.5  

At September 30, 2020

    12.8       8.2       3.3       3.7       18.1  

At March 31, 2020

    12.6       9.5       2.4       2.6       16.2  

 

(1)

Total for “Maximum,” “Minimum” and “Daily average” represent the maximum, minimum and daily average of the total of the trading book. For certain subsidiaries, we employ the standardized method and/or the historical simulation method for the VaR calculation method.

VaR for Non-Trading Activities

• Banking

 

      Interest rate  
risk
    Foreign
exchange risk
    Equities and
commodities
risk
        Others             Total(1)      
    (In billions)  

For the six months ended September 30, 2020:

         

SMBC Consolidated

         

Maximum

  ¥ 53.0     ¥ 0.6     ¥ 19.0     ¥ 0.0     ¥ 56.3  

Minimum

    43.1       0.0       7.5       0.0       45.5  

Daily average

    47.9       0.1       11.9       0.0       50.6  

At September 30, 2020

    44.6       0.5       7.7       0.0       47.2  

At March 31, 2020

    45.4       0.0       15.4       0.0       49.6  

SMFG Consolidated

         

Maximum

  ¥ 53.6     ¥ 0.6     ¥ 19.0     ¥ 0.0     ¥ 56.9  

Minimum

    43.9       0.0       7.5       0.0       46.2  

Daily average

    48.6       0.1       11.9       0.0       51.3  

At September 30, 2020

    45.2       0.5       7.7       0.0       47.8  

At March 31, 2020

    46.2       0.0       15.4       0.0       50.5  

 

(1)

Total for “Maximum,” “Minimum” and “Daily average” represent the maximum, minimum and daily average of the total of the banking book.

 

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• Strategic Shareholding Investment

 

     Equities risk  
     (In billions)  

For the six months ended September 30, 2020:

  

SMBC Consolidated

  

Maximum

   ¥ 977.7  

Minimum

     784.1  

Daily average

     894.1  

At September 30, 2020

     908.3  

At March 31, 2020

     808.2  

SMFG Consolidated

  

Maximum

   ¥ 1,145.0  

Minimum

     911.2  

Daily average

     1,046.5  

At September 30, 2020

     1,063.3  

At March 31, 2020

     942.4  

Back-testing

The relationship between the VaR calculated with the model and the profit and loss data is back-tested periodically. There were no significant excess losses in the back-testing results including the trading accounts.

Stress Tests

To prepare for unexpected market swings, we perform stress tests on a monthly basis based on various scenarios.

Interest Rate Risk

To supplement the above limitations of VaR methodologies, the SMBC Group adopts various indices to measure and monitor the sensitivity of interest rates, including delta, gamma and vega risks. The SMBC Group considers BPV as one of the most significant indices to manage interest rate risk. BPV is the amount of change in the value to the banking and trading book as a result of a one-basis-point (0.01%) movement in interest rates. The principal SMBC Group companies use BPV to monitor interest rate risk, not only on a net basis, but also by term to prevent the concentration of interest rate risk in a specific period. In addition, as previously addressed, the SMBC Group enhances the risk management methods of VaR and BPV by using them in combination with back-testing and stress tests.

Interest rate risk substantially changes depending on the method used for recognizing the expected maturity dates of demand deposits that can be withdrawn at any time or the method used for estimating the timing of cancellation prior to maturity of time deposits and consumer housing loans. At SMBC, the maturity of demand deposits that are expected to be left with SMBC for a prolonged period is regarded to be at the longest five years (2.5 years on average), and the cancellation prior to maturity of time deposits and consumer housing loans is estimated based on historical data.

Based on the standards for interest rate risk in the banking book issued by the BCBS in April 2016, the FSA revised the related regulatory guidelines pertaining to monitoring of interest rate risks in the banking book in December 2017. The revised disclosure requirements with respect to the changes in economic value of equity (“DEVE”) and changes in net interest income (“DNII”) in the banking book as a result of interest rate shocks have been applied from March 31, 2018. The tables below present DEVE and DNII of SMBC and SMFG on a consolidated basis at September 30, 2020 and March 31, 2020, respectively.

 

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DEVE is defined as a decline in economic value as a result of an interest rate shock. It is calculated by multiplying the interest rate sensitivity (excluding credit spread) and interest rate change. The FSA implements a “materiality test” to identify banks taking excessive interest rate risks. Under the materiality test, the FSA monitors the ratio of DEVE to Tier 1 capital based on a set of prescribed interest rate shock scenarios. The threshold applied by the FSA is 15%, and the ratios for SMBC on a consolidated basis at September 30, 2020 and March 31, 2020 were 10.2% and 11.1%, respectively and those for SMFG on a consolidated basis at September 30, 2020 and March 31, 2020 were 8.6% and 9.6%, respectively.

DNII is defined as a decline in interest income over a 12-month period as a result of an interest rate shock. It is calculated assuming a constant balance sheet over a forward-looking 12-month period.

 

     At September 30, 2020     At March 31, 2020  
     DEVE      DNII     DEVE      DNII  
     (In billions)  

SMBC Consolidated

          

Parallel shock up

   ¥ 923.7      ¥ (325.8   ¥ 982.1      ¥ (242.6

Parallel shock down

     0.3        502.9       0.0        415.0  

Steepener shock

     293.2        —         284.9        —    

Flattener shock

     118.9        —         164.0        —    

Short rate shock up

     291.7        —         329.6        —    

Short rate shock down

     0.6        —         6.6        —    

Maximum

     923.7        502.9       982.1        415.0  
     At September 30, 2020     At March 31, 2020  
     (In billions)  

Tier 1 Capital

   ¥        9,087.3     ¥        8,842.3  
     At September 30, 2020     At March 31, 2020  
     DEVE      DNII     DEVE      DNII  
     (In billions)  

SMFG Consolidated

          

Parallel shock up

   ¥ 923.7      ¥ (325.8   ¥ 982.1      ¥ (242.6

Parallel shock down

     0.3        502.9       0.0        415.0  

Steepener shock

     293.2        —         284.9        —    

Flattener shock

     118.9        —         164.0        —    

Short rate shock up

     291.7        —         329.6        —    

Short rate shock down

     0.6        —         6.6        —    

Maximum

     923.7        502.9       982.1        415.0  
     At September 30, 2020     At March 31, 2020  
     (In billions)  

Tier 1 Capital

   ¥        10,763.8     ¥        10,249.9  

 

 

Note:

DEVE and DNII are calculated by currency at the SMBC consolidated level and the results are aggregated across the various currencies. For DNII, only Japanese yen and U.S. dollars are included in the calculation. These are the material currencies where interest rate sensitive assets and liabilities are more than 5% of total assets and liabilities.

 

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INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

 

     Page  

Consolidated Statements of Financial Position (Unaudited)

     F-2  

Consolidated Income Statements (Unaudited)

     F-3  

Consolidated Statements of Comprehensive Income (Unaudited)

     F-4  

Consolidated Statements of Changes in Equity (Unaudited)

     F-5  

Consolidated Statements of Cash Flows (Unaudited)

     F-6  

Notes to Consolidated Financial Statements (Unaudited)

     F-7  
    1    General Information      F-7  
    2    Summary of Significant Accounting Policies      F-7  
    3    Critical Accounting Estimates and Judgments      F-10  
    4    Segment Analysis      F-10  
    5    Derivative Financial Instruments and Hedge Accounting      F-12  
    6    Investment Securities      F-16  
    7    Loans and Advances      F-17  
    8    Borrowings      F-19  
    9    Debt Securities in Issue      F-19  
    10    Provisions      F-20  
    11    Shareholders’ Equity      F-21  
    12    Equity Attributable to Other Equity Instruments Holders      F-21  
    13    Fee and Commission Income      F-22  
    14    Impairment Charges on Financial Assets      F-22  
    15    Other Expenses      F-23  
    16    Earnings Per Share      F-23  
    17    Dividends Per Share      F-24  
    18    Contingency and Capital Commitments      F-24  
    19    Fair Value of Financial Assets and Liabilities      F-25  

 

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Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Consolidated Statements of Financial Position (Unaudited)

 

                                                              
    Note      At September 30,
2020
    At March 31,
2020
 
           (In millions)  

Assets:

      

Cash and deposits with banks

     ¥ 69,315,682     ¥ 62,471,453  

Call loans and bills bought

       2,347,828       898,256  

Reverse repurchase agreements and cash collateral on securities borrowed

       9,265,268       13,745,996  

Trading assets

       2,551,814       2,785,016  

Derivative financial instruments

    5        5,458,185       6,279,801  

Financial assets at fair value through profit or loss

       1,119,531       1,478,356  

Investment securities

    6        24,353,970       21,864,386  

Loans and advances

    7        95,958,431       94,671,818  

Investments in associates and joint ventures

       798,825       826,736  

Property, plant and equipment

       1,729,799       1,764,611  

Intangible assets

       834,990       835,477  

Other assets

       5,193,805       4,272,630  

Current tax assets

       24,344       161,729  

Deferred tax assets

       31,596       102,198  
    

 

 

   

 

 

 

Total assets

     ¥ 218,984,068     ¥ 212,158,463  
    

 

 

   

 

 

 

Liabilities:

      

Deposits

     ¥ 148,886,755     ¥ 138,431,418  

Call money and bills sold

       1,240,693       3,740,540  

Repurchase agreements and cash collateral on securities lent

       13,221,950       15,455,782  

Trading liabilities

       1,713,338       2,018,484  

Derivative financial instruments

    5        4,604,721       5,555,201  

Financial liabilities designated at fair value through profit or loss

       99,730       —    

Borrowings

    8        17,877,507       17,121,362  

Debt securities in issue

    9        11,868,264       10,985,048  

Provisions

    10        197,680       200,053  

Other liabilities

       7,435,224       7,601,355  

Current tax liabilities

       43,071       48,159  

Deferred tax liabilities

       206,554       66,183  
    

 

 

   

 

 

 

Total liabilities

       207,395,487       201,223,585  
    

 

 

   

 

 

 

Equity:

      

Capital stock

    11        2,341,274       2,339,965  

Capital surplus

       728,171       728,551  

Retained earnings

       5,815,295       5,609,854  

Treasury stock

    11        (13,693     (13,984
    

 

 

   

 

 

 

Equity excluding other reserves

       8,871,047       8,664,386  

Other reserves

       1,869,435       1,525,720  
    

 

 

   

 

 

 

Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc.

       10,740,482       10,190,106  

Non-controlling interests

       63,477       60,296  

Equity attributable to other equity instruments holders

    12        784,622       684,476  
    

 

 

   

 

 

 

Total equity

       11,588,581       10,934,878  
    

 

 

   

 

 

 

Total equity and liabilities

     ¥ 218,984,068     ¥ 212,158,463  
    

 

 

   

 

 

 

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

F-2


Table of Contents

Consolidated Income Statements (Unaudited)

 

                                                              
           For the six months ended
September 30,
 
    Note      2020      2019  
           (In millions, except per share data)  

Interest income

     ¥ 939,921      ¥ 1,236,043   

Interest expense

       242,059        584,973  
    

 

 

    

 

 

 

Net interest income

       697,862        651,070  
    

 

 

    

 

 

 

Fee and commission income

    13        542,388        562,875  

Fee and commission expense

       99,774        104,620  
    

 

 

    

 

 

 

Net fee and commission income

       442,614        458,255  
    

 

 

    

 

 

 

Net trading income

       114,571        86,323  

Net income from financial assets and liabilities at fair value through profit or loss

       107,224        29,678  

Net investment income

       135,721        131,683  

Other income

       63,636        89,635  
    

 

 

    

 

 

 

Total operating income

       1,561,628        1,446,644  
    

 

 

    

 

 

 

Impairment charges on financial assets

    14        245,319        48,634  
    

 

 

    

 

 

 

Net operating income

       1,316,309        1,398,010  
    

 

 

    

 

 

 

General and administrative expenses

       799,242        835,880  

Other expenses

    15        92,269        196,647  
    

 

 

    

 

 

 

Operating expenses

       891,511        1,032,527  
    

 

 

    

 

 

 

Share of post-tax profit of associates and joint ventures

       9,393        13,697  
    

 

 

    

 

 

 

Profit before tax

       434,191        379,180  
    

 

 

    

 

 

 

Income tax expense

       108,814        111,714  
    

 

 

    

 

 

 

Net profit

     ¥ 325,377      ¥ 267,466  
    

 

 

    

 

 

 

Profit attributable to:

       

Shareholders of Sumitomo Mitsui Financial Group, Inc.

     ¥ 316,382      ¥ 249,415  

Non-controlling interests

       2,566        12,076  

Other equity instruments holders

       6,429        5,975  

Earnings per share:

       

Basic

    16      ¥ 230.94      ¥ 180.64  

Diluted

    16        230.82        180.52  

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

F-3


Table of Contents

Consolidated Statements of Comprehensive Income (Unaudited)

 

                                         
    For the six months ended
September 30,
 
    2020     2019  
    (In millions)  

Net profit

  ¥ 325,377     ¥ 267,466  

Other comprehensive income:

   

Items that will not be reclassified to profit or loss:

   

Remeasurements of defined benefit plans:

   

Gains (losses) arising during the period, before tax

    168,202       10,624  

Equity instruments at fair value through other comprehensive income:

   

Gains (losses) arising during the period, before tax

    530,585       (46,517

Own credit on financial liabilities designated at fair value through profit or loss:

   

Gains (losses) arising during the period, before tax

    (782     —    

Share of other comprehensive income (loss) of associates and joint ventures

    2,828       762  

Income tax relating to items that will not be reclassified

    (213,008     11,026  
 

 

 

   

 

 

 

Total items that will not be reclassified to profit or loss, net of tax

    487,825       (24,105

Items that may be reclassified subsequently to profit or loss:

   

Debt instruments at fair value through other comprehensive income:

   

Gains (losses) arising during the period, before tax

    24,652       176,477  

Reclassification adjustments for (gains) losses included in net profit, before tax

    (104,141     (92,317

Exchange differences on translating foreign operations:

   

Gains (losses) arising during the period, before tax

    (55,848     (70,015

Reclassification adjustments for (gains) losses included in net profit, before tax

    1,313       —    

Share of other comprehensive income (loss) of associates and joint ventures

    (8,110     (2,707

Income tax relating to items that may be reclassified

    24,290       (24,688
 

 

 

   

 

 

 

Total items that may be reclassified subsequently to profit or loss, net of tax

    (117,844     (13,250
 

 

 

   

 

 

 

Other comprehensive income (loss), net of tax

    369,981       (37,355
 

 

 

   

 

 

 

Total comprehensive income

  ¥ 695,358     ¥ 230,111  
 

 

 

   

 

 

 

Total comprehensive income attributable to:

   

Shareholders of Sumitomo Mitsui Financial Group, Inc.

  ¥ 686,159     ¥ 212,732  

Non-controlling interests

    2,770       11,404  

Other equity instruments holders

    6,429       5,975  

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

F-4


Table of Contents

Consolidated Statements of Changes in Equity (Unaudited)

 

    Equity excluding other reserves     Other reserves                          
    Capital
stock
    Capital
surplus
    Retained
earnings
    Treasury
stock
    Remeasure-
ments of
defined
benefit
plans
reserve
    Financial
instruments at
fair value
through other
comprehensive
income reserve
    Own credit
on financial
liabilities
designated
at fair value
through
profit or loss
reserve
    Exchange
differences
on
translating
foreign
operations
reserve
    Equity
attributable
to SMFG’s
shareholders
    Non-
controlling
interests
    Equity
attributable
to other
equity
instruments
holders
    Total
equity
 
    (In millions)        

Balance at April 1, 2019

  ¥ 2,339,443     ¥ 726,012     ¥ 5,715,101     ¥ (16,302   ¥ 72,425     ¥ 1,730,607     ¥ —       ¥ 113,334     ¥ 10,680,620     ¥ 494,123     ¥ 598,703     ¥  11,773,446  

Comprehensive income:

                       

Net profit

    —         —         249,415       —         —         —         —         —         249,415       12,076       5,975       267,466  

Other comprehensive income

    —         —         —         —         7,977       30,979       —         (75,639     (36,683     (672     —         (37,355
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    —         —         249,415       —         7,977       30,979       —         (75,639     212,732       11,404       5,975       230,111  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of shares under share-based payment transactions

    522       522       —         —         —         —         —         —         1,044       —         —         1,044  

Issuance of other equity instruments

    —         —         —         —         —         —         —         —         —         —         84,951       84,951  

Acquisition and disposal of subsidiaries and businesses-net

    —         —         —         —         —         —         —         —         —         5,886       —         5,886  

Transaction with non-controlling interest shareholders

    —         480       —         —         —         —         —         —         480       (205     —         275  

Dividends to shareholders

    —         —         (132,582     —         —         —         —         —         (132,582     (11,160     —         (143,742

Coupons on other equity instruments

    —         —         —         —         —         —         —         —         —         —         (5,975     (5,975

Redemption of preferred securities

    —         —         —         —         —         —         —         —         —         (173,000     —         (173,000

Purchase of treasury stock

    —         —         —         (100,040     —         —         —         —         (100,040     —         —         (100,040

Sale of treasury stock

    —         —         —         478       —         —         —         —         478       —         —         478  

Loss on sale of treasury stock

    —         —         (148     —         —         —         —         —         (148     —         —         (148

Cancellation of treasury stock

    —         —         (101,674     101,674       —         —         —         —         —         —         —         —    

Share-based payment transactions

    —         (168     —         —         —         —         —         —         (168     —         —         (168

Transfer from other reserves to retained earnings

    —         —         47,760       —         (6,347     (41,413     —         —         —         —         —         —    

Others

    —         (47     1       —         —         —         —         —         (46     —         1,025       979  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2019

  ¥ 2,339,965     ¥ 726,799     ¥ 5,777,873     ¥ (14,190   ¥ 74,055     ¥ 1,720,173     ¥  —       ¥ 37,695     ¥ 10,662,370     ¥ 327,048     ¥ 684,679     ¥ 11,674,097