ANNUAL REPORT

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2016

ANNUAL REPORT YEAR ENDED MARCH 31, 2016

This annual report conveys financial and non-financial information about the

Editorial Policy

overall picture, business strategy, and corporate infrastructure of Sumitomo Mitsui Financial Group (SMFG). It has been compiled with reference to the International Integrated Reporting Framework issued by the International Integrated Reporting Council (IIRC) in December 2013.

Scope of Report Period covered: Fiscal 2015 (April 2015 to March 2016) Some subsequent information is also included. Organizations covered: Sumitomo Mitsui Financial Group and its subsidiaries and affiliates

Published August 2016

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 us and our managements with respect to our 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 our securities portfolio; our ability to successfully implement our business strategy through our subsidiaries, affiliates and alliance partners; exposure to new risks as we expand the scope of our business; and incurrence of significant credit-related costs. 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. We undertake no obligation to update or revise any forward-looking statements. Please refer to our most recent disclosure documents such as our annual report or registration statement on Form 20-F and other documents submitted to the U.S. Securities and Exchange Commission, as well as our earnings press releases, for a more detailed description of the risks and uncertainties that may affect our financial conditions and our operating results, and investors’ decisions.

Contents

2

Financial and Non-Financial Highlights (Fiscal 2015)

46

Corporate Infrastructure

4

To Our Stakeholders

48

Corporate Governance

50

Special Feature:



14

SMFG Overview

14

SMFG’s History

16

SMFG Group Outline

18

SMFG’s Value Creation Process

Outside Director Interview

52

SMFG Directors and Corporate Auditors



54

Risk Management

58

Compliance

60

Internal Audit System

61

Customer Satisfaction (CS)

20

Business Strategy

21

Business Outline

22

Wholesale Banking Unit (SMBC)

62

Human Resources

24

Retail Banking Unit

64

Corporate Social

26

International Banking Unit (SMBC)

28

Treasury Unit (SMBC)

30

Sumitomo Mitsui Finance and Leasing

32

SMBC Nikko Securities

72

34

Consumer finance / Credit card



36

Services with Competitive Advantage,

73

Appendix I

New Businesses

115

Appendix II

38

and Quality Improvement

(SMBC)

Responsibility (CSR)

68

Financial Review

 Websites

Support for Mid-Sized Corporations and SMEs, Vitalization of Local Regions in Japan

40

Special Feature: BTPN—“Do Good and Do Well”

42

Special Feature: PRESTIA—the New Brand Launch

44

Special Feature: FinTech—Promoting Innovation with IT

2016 Annual Report

1

Financial and Non-Financial Highlights

(Fiscal 2015)

(SMFG consolidated basis unless stated otherwise)

Fiscal 2015 Performance Consolidated gross profit

Profit attributable to owners of parent

ROE*

¥2,904.0 billion ¥646.7 billion

8.9%

(Billions of yen)

(%)

4,000

20 2,904.0

3,000

15

2,000

1,000

0

8.9

10

5

646.7

’11

Gross profit 

’12

’13

’14

’15

0

(FY)

Profit attributable to owners of parent

’11

’12

’13

’14

’15

(FY)

* Calculated using stockholders’ equity as the denominator

Common Equity Tier 1 capital ratio*

Dividend per share

11.9%

¥150

(%)

(Yen) 20

200

15

10

100

5

50

0

’12

’13

’14

’15

Commemorative dividend

150

11.9

0

(FYE)

’11

’12

150

’13

’14

’15

(FY)

* Basel III fully-loaded basis, based on the definition applicable at March 31, 2019

Loan balance (SMBC non-consolidated)

Non-performing loan ratio

¥69.3 trillion

1.15% (SMBC non-consolidated: 0.78%)

(Trillions of yen)

(%)

80

3 69.3

60 2 40

1.15 1

20

0

0.78

’11

Domestic offices 

2 2016 Annual Report

’12

’13

’14

’15

(FYE)

Overseas offices and Japan offshore banking accounts

0

’11

SMFG consolidated 

’12

’13

’14

SMBC non-consolidated

’15

(FYE)

Domestic Business

Environment, Social, Governance (ESG)

Number of offices

Assessment Loans / Private Placement Bonds*

506 main office and branches 123 branches

(SMBC)

(SMBC Nikko Securities)

Number of ATMs (including partner ATMs)

Approx. 50,000 (SMBC)

Number of corporate loan clients

Approx. 90,000 (SMBC) Operating assets

Approx. ¥2.5 trillion

(Sumitomo Mitsui Finance and Leasing)

Number of retail banking accounts

Approx. 27 million (SMBC)

Approx. ¥1.6 trillion (SMBC)

Number of participants at financial and economic education programs organized by SMFG companies

Approx. 170,000 (cumulative number)

Number of staff participating in voluntary activities

Approx. 6,100 (cumulative number) Approx. 9% of the workforce

Number of directors and outside directors (As of June 30, 2016)

14 directors Of whom 5 are outside directors

(SMFG)

Number of brokerage accounts

* Cumulative, from commencement of financing to March 31, 2016

(SMBC Nikko Securities + SMBC Friend Securities)

Human Resources

Approx. 3 million Number of cardholders

Approx. 41 million

Number of employees

Number of consumer finance customers

Number and ratio of female managers

(Sumitomo Mitsui Card Company + Cedyna (cumulative number))

Approx. 1.6 million

(SMBC Consumer Finance consolidated)

International Business

Approx. 70,000

743 15.7%

(SMBC)

Male recipients of childcare leave

466

(SMBC)

Number of overseas offices

72 offices in 38 countries and regions (SMBC and others*)

* Includes SMBC's overseas offices and major overseas banking subsidiaries and affiliates, etc.

Overseas banking profit ratio

Approx. 35%

(Managerial accounting basis, net business profit)

Approx. 10 percentage point increase from fiscal 2013 2016 Annual Report

3

To our stakeholders

Koichi Miyata

Takeshi Kunibe

President Sumitomo Mitsui Financial Group, Inc.

President and CEO Sumitomo Mitsui Banking Corporation

We will become a global financial group that, by earning the highest trust of our customers, leads the growth of Japan and the Asian region

4 2016 Annual Report

We sincerely thank you for your continued support and patronage. The 2016 Annual Report summarizes our initiatives aimed at increasing corporate value, together with financial and non-financial information. We would like to explain about (a) the progress of the medium-term management plan and the financial results of fiscal 2015 (fiscal year ended March 2016), (b) the current business environment, (c) our management policy going forward and, (d) delivering value to stakeholders.

Progress of the medium-term management plan and financial results of fiscal 2015 As part of the current medium-term management plan (from fiscal 2014 to 2016), Sumitomo Mitsui Financial Group, Inc. (SMFG) and Sumitomo Mitsui Banking Corporation (SMBC) set four three-year management goals in order to realize our vision for the next decade: “We will become a global financial group that, by earning the highest trust of our customers, leads the growth of Japan and Asian region”. While we are making solid progress in many areas, adjustments need to be made in some areas due to changes in the business environment.

Vision for the next decade

We will become a global financial group that, by earning the highest trust of our customers, leads the growth of Japan and the Asian region We will become a truly Asia-centric institution

We will develop the best-in-class earnings base in Japan

We will realize true globalization and continue to evolve our business model

Three-year management goals (1) Develop and evolve client-centric business models for main domestic and international businesses (2) Build a platform for realizing Asia-centric operations and capture growth opportunities (3) Realize sustainable growth of top-line profit while maintaining soundness and profitability (4) Upgrade corporate infrastructure to support next stage of growth

2016 Annual Report

5

To our stakeholders

“While we are making solid progress in many areas, adjustments need to be made in some areas due to changes in the business environment.”

We will now go over the initiatives we have implemented in accordance with each of the three-year management goals.

(1) D  evelop and evolve client-centric business models for main domestic and international businesses

p.40 For more about BTPN, please see page 40.

First, as for developing and evolving client-centric business models, we have bolstered our capabilities as a group by strengthening collaboration and integration between our banking and securities businesses, domestic and international offices, and wholesale and retail operations to enhance our ability to meet our clients’ needs which are becoming more diverse and sophisticated. In the international business, we are promoting cross-selling of products and services, such as securities and transaction-related services, to our clients and making efforts to improve the profitability and diversity of our portfolio by increasing high-profit assets. These initiatives have led to an increase in (a) domestic loans, (b) individual clients’ assets under management, and (c) profits from our overseas securities operations as well as securing margins in our international businesses, which have steadily enhanced SMFG’s competitiveness.

(2) B  uild a platform for realizing Asia-centric operations and capture growth opportunities With the aim of realizing Asia-centric operations, we have strengthened our presence in Asia by opening new offices in the region and turning local banks such as the Bank of East Asia of Hong Kong and ACLEDA Bank of Cambodia into equity-method affiliates. In Indonesia, where we are aiming to create a new franchise in addition to our franchise in Japan, we are collaborating with PT Bank Tabungan Pensiunan Nasional (BTPN), a local bank and our equity-method affiliate, in the mobile banking business. We are making steady progress in becoming a leading financial group in Asia and establishing the reputation that we are the Asia experts.

6 2016 Annual Report

(3) R  ealize sustainable growth of top-line profit while maintaining soundness and profitability While we made a good start in the first year of the medium-term management plan, growth in our top-line profit slowed down in fiscal 2015, the second year of the plan. The main reason behind the slowdown was the deterioration of market conditions, especially in the second half of the fiscal year; for example declining stock prices and the yen’s appreciation. In addition, one-off factors such as provisions for losses on interest repayments at our consumer finance subsidiaries and an impairment loss on goodwill of investments in BTPN resulted in consolidated ordinary profit of ¥985.3 billion and consolidated net income*1 of ¥646.7 billion. We feel that the progress made against our financial targets, apart from financial soundness, were disappointing. As we will explain in more detail later on, we believe that it is important to place more focus on our bottom-line profit given the significant changes in our business environment since we developed the medium-term management plan.

p.68 For more about financial review, please see page 68.

*1 Profit attributable to owners of parent

Progress on financial targets

Growth

Profitability

Soundness

FY 3/15

FY 3/16

FY 3/17 Targets

Growth rate of Consolidated gross profit

+2.8%

+0.2%*2

around+15%*2

Consolidated ROE

11.2%

8.9%

around 10%

1.1%

0.97%

around 1%

Consolidated overhead ratio

55.7%

59.4%

in the mid 50%

Common Equity Tier 1 capital ratio*3

12.0%

11.9%

around 10%

Consolidated net income RORA

*2 Consolidated gross profit increase in comparison with FY 3/14 figure *3 Basel III fully-loaded basis. Based on the definition as of March 31, 2019

(4) Upgrade corporate infrastructure to support the next stage of growth We implemented various initiatives aimed at enhancing corporate governance and promoting diversity as part of our efforts to upgrade our corporate infrastructure. In May 2015 we established the “SMFG Corporate Governance Guideline”, which sets out SMFG’s principles and guidelines on corporate governance. We also increased the number of external board members in June 2015 with the aim of bringing more varied external perspectives into management. We believe that we have been able to establish a more effective corporate governance framework through these initiatives.

2016 Annual Report

7

To our stakeholders

In the promoting of diversity, we are continuously working to create an environment that enables women to actively participate in the workplace. For example, we established a “Diversity and Inclusion Committee” at SMBC chaired by the President and CEO to implement a variety of measures to support the career development of female employees. Such initiatives have led to solid results as the percentage of women in managerial positions increased from 10.5% as of March 31, 2014 to 15.7% as of March 31, 2016. We also introduced initiatives overseas to appoint locally hired officers to senior positions. The number of locally hired executive officers at SMBC has increased from two at the start of the medium-term management plan to seven as of June 30, 2016. We can confidently say that we have made steady progress in the diversification of human resources.

Current business environment When we turn our eyes to the current business environment, we see a lot of uncertainty in the global economy given the slowdown of emerging markets, including China, and resource exporting countries, in addition to the rise of geopolitical risks. Also, although maintaining a virtuous cycle, the Japanese economy lacks momentum due to the sluggish global economy and financial markets. Consequently, our business environment is becoming increasingly challenging. Moreover, we cannot ignore the tremendous pace at which IT is evolving. While the spread of IT in the finance industry has great potential to drastically improve client experience and reduce our costs, we must keep in mind that such trends may lead to intensifying competition between not only established industry players, but also with non-financial corporates. Furthermore, we are seeing uncertainty in the regulatory environment surrounding financial institutions. An international regulatory framework, referred to as “Basel III”, was introduced in fiscal 2012 in response to the global financial crisis of 2008 to 2009. There are now ongoing discussions on further tightening of regulations. While the regulations of financial institutions have a stabilizing affect on the financial system, introduction of excessive regulations may limit the financial intermediary function of such institutions. To this end, we will work with relevant authorities as well as other financial institutions, and voice our opinion when necessary. On the other hand, “change” brings opportunity. For example, one of the major changes that occurred in fiscal 2015 was the Bank of Japan introducing the negative interest rate policy. Although it may take some time for the policy to show effects on the real economy, as long as we fully address our clients’ needs, the policy should act as a tailwind in the “shift from savings to investments”, as we will explain in more detail later.

8 2016 Annual Report

Our management policy going forward Next, we will explain our management policy from the following three perspectives: “Business strategy”, “Enhancing corporate governance and business management framework” and, “Capital policy”.

Business strategy Although the business environment has changed since we announced our medium-term management plan, the set of medium- to long-term assumptions such as a maturing domestic market with an aging population, the shift from savings to investments, growth in Asia, and technological innovation have not changed. Consequently, our visions for the future such as “becoming a truly Asia-centric institution” and “developing the best-in-class earnings base in Japan” also remain unchanged. However, taking into consideration the current changes in the economic and regulatory environments, we believe it is necessary to become more risk sensitive and to strengthen our focus on bottom-line profit, instead of aggressively pursuing top-line growth. We will prioritize our efforts on further solidifying our strengths – profitability and efficiency. Specifically, we will work to expand non-interest income and secure margins both in our domestic and international businesses by continuing to focus on promoting collaboration and integrating operations within the group. Some examples of our domestic initiatives are (a) providing appropriate consulting services and investment products to individual clients who are having difficulty in investing under the current negative interest rate environment and (b) increasing loans that provide solutions such as cross-border M&A finance to Japanese corporate clients whose operations are increasingly becoming more global. The objective of the merger between SMBC Nikko Securities and SMBC Friend Securities, and the consolidation of Sumitomo Mitsui Asset Management Company, both announced in May 2016, was to enhance our ability to respond to our clients’ needs.

p.20 For more about business strategy, please see page 20.

“We will prioritize our efforts on further solidifying our strengths— profitability and efficiency.”

2016 Annual Report

9

To our stakeholders

In regards to our international business, our overall policy is to expand cross-selling to non-Japanese clients and improve the profitability of our asset portfolio, while paying close attention to credit and foreign currency liquidity risks given the current business environment. As for the Asia region, we will set priorities and allocate resources to capture Asia’s growth over the medium to long term as well as globally enhance the services we offer to our global clients by leveraging our strengths in the region. We will also make efforts to reduce expenses. In addition to our on-going efforts to control expenses on a group basis, we established a group-wide expense reduction committee this fiscal year to thoroughly review our medium- to long-term expense structure. We will review and eliminate redundant operations and functions in areas such as administration, systems, personnel and Corporate Real Estate (CRE) within the group. We will also share business infrastructure and further prioritize strategic areas. With regard to IT, we engaged in various new initiatives including the introduction of electronic loan contracts and the establishment of a joint venture with GMO Payment Gateway, a major E-Commerce payment services company. Moving forward, under the open innovation concept, we will continue to proactively utilize both internal and external expertise and resources, including forming cross-industrial alliances, so that we can provide cutting-edge services that address our clients’ changing needs in a timely manner. We believe that amendments to Japan’s Banking Act enacted in the Diet this year, which included provisions facilitating investments in FinTech companies by financial groups, will also boost SMFG’s initiatives.

p.48 For more about corporate governance, please see page 48.

10 2016 Annual Report

Enhancing corporate governance and business management framework The year 2015 is said to be year one for corporate governance in Japan. In June 2015, “Japan’s Corporate Governance Code” formulated by The Tokyo Stock Exchange became effective. We believe that robust corporate governance and business management framework play an extremely important role in increasing corporate value in the medium to long term. We will continue to make every effort to enhance these two areas. In order to further enhance our corporate governance framework, SMFG announced in May 2016 the transformation into a Company with Three Committees, subject to approval by its ordinary general meeting of shareholders scheduled in June 2017. While we already had been working to establish a robust corporate governance framework, we believe that this change will improve accountability towards our stakeholders, strengthen the supervisory function of the Board of Directors, and further expedite the execution of operations. We will continue our efforts to reinforce corporate governance as one of the Global Systemically Important Financial Institutions (“G-SIFIs”). In addition, we announced (a) the implementation of a CxO*4 system in which the CxO will oversee the respective planning and administrative functions of the group and (b) the setting up of group-wide business units, both of which will be introduced in April 2017. The objective is to implement an integrated business management framework, strategy planning and business promotion on a group-wide basis. We will strive to enhance the profitability and efficiency of our group by establishing a framework that is both highly effective and enables us to fully address our clients’ needs.

Moreover, we have implemented the Risk Appetite Framework (“RAF”) in order to secure an appropriate risk-return profile. RAF is a framework used to control risk on a group-wide basis, based on the proper understanding of the current business environment, by clarifying the category and quantity of risk (“risk appetite”) that will be taken to achieve profit growth, and managing these risk through the application of certain measures (risk appetite measures). RAF is becoming increasingly important amid the rapidly changing business environment and we will strive to achieve sustainable growth by continuously upgrading this framework.

p.54 For more about risk management initiatives, please see page 54.

*4 General term for group chief officers such as Chief Financial Officer and Chief Risk Officer

Capital policy Capital policy is an important factor that affects corporate value. As mentioned earlier, regulatory authorities are undertaking an ongoing review of international financial regulations which may affect the adequacy of financial institutions’ capital; however, the impact of such discussions is still unclear. Under such circumstances, we will continue to pay close attention to regulatory trends and implement a capital policy that strikes an appropriate balance between investments in growth opportunities, return to shareholders, and capital accumulation while working to secure financial soundness so that we can fulfill our role in society. We will strengthen shareholder returns by aiming to increase the dividend per share in a stable manner. For the fiscal year ending March 31, 2017, our dividend payout ratio forecast is 30.2% based on our earnings and dividend targets. We have stated that we are targeting a dividend payout ratio of 30% in the medium to long term, and we are honoring our commitment to our shareholders.

Dividend per share (JPY) 200

Commemorative dividends

150

10 100

100

110

140

150

150

3/16

3/17

120

50

0

3/12

3/13

3/14

3/15

(FY)

2016 Annual Report

11

To our stakeholders

From the standpoint of strengthening our capital base and corporate governance, we also view the reduction of strategic shareholdings as a key management issue. We will continue our efforts to reduce strategic shareholdings to a level appropriate for a G-SIFI in order to mitigate the impact of stock price fluctuations on our capital. As a first step, we aim to have the assurance of reducing the Ratio of Stocks*5-to-CET1 capital*6 from 28% at the end of September 2015 to 14% within approximately five years. We will also annually examine the rationale of individual strategic shareholdings for our major counterparties at the Board of Directors meeting. We feel that our clients are becoming more open to giving us consent on selling their shares as a result of the introduction and spread of the corporate governance code in Japan. *5 Domestic listed stocks held by the group *6 Basel III fully-loaded basis, excluding net unrealized gains on Other securities

Transition and reduction plan of strategic shareholdings (SMFG consolidated basis) (JPY tn) 8

6

6.55

6.40

6.09

33% 5.35

4

Reduction plan (announced Nov. 2015)

5.97

30%

Reduce the ratio by half Toward a level within approx. appropriate for G-SIFIs 5 years

28% 27%

2 1.79

1.78

1.80

1.79

Apr. 01

~ ~

to 14% by around 2020 0

Mar. 14

Mar. 15

Sep. 15

Mar. 16

CET1 (Basel III fully-loaded basis, excluding net unrealized gains on Other securities) Book value of domestic listed stocks within Other securities Ratio of Stocks-to-CET1 capital

Delivering value to stakeholders To achieve sustainable growth of our corporate value, it is important to deliver value not only to shareholders but also to various stakeholders including clients, society, and employees. “Our Mission” states, “We grow and prosper together with our customers, by providing services of greater value to them.” We also set forth “Customer First” as the first of the “Five Values” which are shared among our employees. Using such values as a basis, we will consistently and sincerely work with our clients to address their various needs. In March 2016, we announced “Our commitment to fiduciary duties” that describes our client oriented approach in our wealth management business. In accordance with this announcement, we will strive to further improve the quality of our services. Moreover, contributing to the sustainable growth of society is an essential mission for us. As for our Corporate Social Responsibility (CSR) initiatives, we have identified three priority themes, “Environment,” “Next Generation”, and “Community”, that we need to address. 12 2016 Annual Report

Based on the themes, we have implemented various initiatives such as using financial services to address global environmental issues and contributing to the development of a safe community in which the next generation can play an active part vigorously. In fiscal 2015, our eight major group companies obtained or renewed the ISO 14001 environmental certification and SMBC issued a green bond, which limits the use of funds to environmentally friendly projects. Furthermore, we are engaging in financial and economic education initiatives in response to the increasing needs of society for such education, and also playing an active part in supporting rebuilding efforts following the Great East Japan Earthquake and Kumamoto Earthquake. These efforts are made on a group-wide basis. From the standpoint of delivering value to employees, it is important to create a work environment in which a diversified workforce can fully demonstrate their characteristics and skills. This will lead to the enhancement of our competitiveness. In addition to implementing various measures supporting women’s career development, we announced numerical targets and action plans regarding the appointing of women to managerial positions in response to the Act to Advance Women's Success in their Working Life. We have also implemented initiatives to support the balancing of work with caring for elder parents, the reduction of excessive working hours, and the introduction of flexible working hours. We will continue to make every effort to ensure that such initiatives are maintained and strengthened.

p.64 For more about CSR, please see page 64.

p.62 For more about human resources strategy, please see page 62.

In closing Japan is now facing a crucial moment of whether it will be able to exit from its long-lasting deflation and return to sustainable growth. We believe it is our mission to support Japan revitalize its economy and beat deflation by supporting the growth of our clients and their innovation related initiatives by actively responding to changes in the business environment and firmly carrying out our responsibilities as a financial intermediary. Furthermore, we are supporting the Tokyo 2020 Olympic and Paralympic Games as a Gold Partner in the Banking category. We are further strengthening our will to “create a new Japan with you” before the upcoming nationwide major event. We will make every effort to create value for all our stakeholders while ensuring that the “Five Values” (Customer First, Proactive and Innovative, Speed, Quality, Team SMBC / SMFG) are shared by all SMFG members. We hope that we can earn your continued understanding and support. August 2016

Koichi Miyata

Takeshi Kunibe

President Sumitomo Mitsui Financial Group, Inc.

President and CEO Sumitomo Mitsui Banking Corporation

2016 Annual Report

13

SMFG OVERVIEW

SMFG’s History Our business can be traced back more than 400 years. 1590 • Riemon Soga (Brother-in-law of Masatomo Sumitomo) starts copper refining business

2002 • Sumitomo Mitsui Financial Group established

1895 • Sumitomo Bank established as a private enterprise

2001 • Sumitomo Mitsui Banking Corporation is formed

1673 • Takatoshi Mitsui opens Mitsui 1876 Echigoya Kimono Dealer • Mitsui Bank established as a private bank

2004 • Promise (Current SMBC Consumer Finance) becomes equity method affiliate Becomes wholly owned subsidiary in 2012

1992

1936

• Renamed to Sakura Bank

• Kobe Bank established

1990 • Mitsui Taiyo Kobe Bank formed

2003 • Sumitomo Mitsui Card Company, SMBC Leasing (Current Sumitomo Mitsui Finance and Leasing), and Japan Research Institute become wholly owned subsidiaries

1973 • Taiyo Kobe Bank formed

1940

1968

• Renamed to Taiyo Bank • Dai Nihon Mujin established

Key economic developments

2005

1996 • Japanese Big Bang

1973 • First oil shock

1999 • Bank of Japan introduces zero interest rate policy

1882

1979

• Bank of Japan established

• Second oil shock

Early 1950s to early 1970s Japan’s high growth period

14 2016 Annual Report

2000 • Financial Services Agency formed

Late 1980s to early 1990s Japan’s economic bubble and its implosion

• Blanket guarantee of deposits fully lifted

2006

2009

2010

• Public offering • Fully repaid public funds

• Public offering

• Public offering • Listed on New York Stock Exchange • Relocated Head Office

2006

2009

• SMBC Friend Securities becomes wholly owned subsidiary

• Nikko Cordial Securities (Current SMBC Nikko Securities) joins SMFG • Cedyna is formed (Equity method affiliate) Becomes wholly owned subsidiary in 2011

2013

2015

• Societe Generale Private Banking Japan joins SMFG (Current SMBC Trust Bank) • Bank Tabungan Pensiunan Nasional (BTPN), of Indonesia, becomes equity method affiliate

• Citibank Japan’s retail banking operations are integrated into SMBC Trust Bank (Current SMBC Trust Bank PRESTIA)

2007 • Sumitomo Mitsui Finance and Leasing is formed from merger of SMBC Leasing and Sumisho Lease

2012 2008 • Vietnam Exim Bank becomes equity method affiliate

• Royal Bank of Scotland’s aircraft leasing business is acquired and integrated into SMFG (Current SMBC Aviation Capital)

2007 • Subprime mortgage crisis

2006 • Bank of Japan rescinds zero interest rate policy

2008 • Financial crisis

2010

2013

2016

• European sovereign debt crisis • Dodd-Frank Act comes into force in U.S.

• Bank of Japan introduces quantitative and qualitative monetary easing

• Bank of Japan introduces negative interest rate policy

2016 Annual Report

15

SMFG OVERVIEW

SMFG Group Outline The companies of SMFG offer a wide range of financial services, centered on banking operations. Banking

Leasing

Securities

Consumer Finance and Credit Cards

System Development, Information Management

Strengthening our competitiveness as a financial services group (1) Merger of SMBC Nikko Securities and SMBC Friend Securities • SMBC Nikko Securities and SMBC Friend Securities are scheduled to merge with the aim of further strengthening SMFG’s securities business. We are targeting January 2018 for the merger after a process of consideration and discussions. • Prior to the merger, our plans call for the holding company SMFG to make SMBC Nikko Securities a direct wholly owned subsidiary in October 2016. SMFG 100%

SMFG 100%

SMBC

SMBC Friend Securities

100%

100%

SMBC Nikko Securities

SMBC

(Merger with SMBC Friend Securities)

100%

SMBC Nikko Securities

(2) Consolidation of Sumitomo Mitsui Asset Management • The holding company SMFG is to make Sumitomo Mitsui Asset Management a directly owned subsidiary. The conversion is scheduled for October 2016. In taking this step, we will reinforce efforts to fulfill our fiduciary duty to provide enhanced customer-oriented investment services. SMFG 100%

SMBC 40%

Sumitomo Mitsui Asset Management

16 2016 Annual Report

SMFG 100%

SMBC

60%

Sumitomo Mitsui Asset Management

SMBC Network (As of June 30, 2016) (1) Domestic network

506

32

main office and branches

107

sub-branches

171

Area Main Offices

Corporate Business Offices

(2) Overseas network* * Includes SMBC's overseas offices and major overseas banking subsidiaries and affiliates, etc. (excludes offices planned to be closed)

Europe, Middle East, Africa

20

Americas

Asia, Oceania

13

39

Total

72

SMBC overseas offices Branches17 Sub-branches17 Representative offices 3

Major overseas subsidiaries and affiliates, etc. Sumitomo Mitsui Banking Corporation Europe Limited 7 Sumitomo Mitsui Banking Corporation (China) Limited 16 Others12

2016 Annual Report

17

SMFG OVERVIEW

SMFG’s Value Creation Process SMFG, guided by “Our Mission,” strives to achieve sustainable corporate value growth.

Our Mission We grow and prosper together with our customers, by providing services of greater value to them. We aim to maximize our shareholders’ value through the continuous growth of our business. We create a work environment that encourages and rewards diligent and highly-motivated employees.

Sources of Value Creation Solid customer base

Domestic and international network

Specialized and wide-ranging know-how

Five Values Values shared by our staff and directors in Japan and overseas to guide us in our client-centric approach

Diverse, dedicated, and highly-motivated workforce

Customer First Proactive and Innovative

Long history and strong brand

Speed Quality Team SMBC / SMFG

18 2016 Annual Report

Stable financial base

Value We Create Value Creation Process Business Strategy

Greater value of services

p.20

Vision for the next decade* We will become a global financial group that, by earning the highest trust of our customers, leads the growth of Japan and the Asian region

Corporate Infrastructure p.46

Maximization of our shareholders’ value

Positive contribution to society as a good corporate citizen Work environment that allows employees to fully exert their ability

* Announced in May 2014

2016 Annual Report

19

Business Strategy

21

Business Outline

22

Wholesale Banking Unit (SMBC)

24

Retail Banking Unit (SMBC)

26

International Banking Unit (SMBC)

28

Treasury Unit (SMBC)

30

Sumitomo Mitsui Finance and Leasing

32

SMBC Nikko Securities

34

Consumer finance / Credit card

36

Competitive Advantage in Services, New Businesses

38

Support for Mid-Sized Corporations and SMEs, Vitalization of Local Regions in Japan

40

Special Feature: BTPN—“Do Good and Do Well”

42

Special Feature: PRESTIA—the New Brand Launch

44

Special Feature: FinTech—Promoting Innovation with IT

20 2016 Annual Report

BUSINESS STRATEGY

Business Outline Wholesale Banking Unit (SMBC) The Wholesale Banking Unit provides services primarily for large and mid-sized corporate clients in Japan. The services include financing, investment management, hedging, and settlement, in addition to a variety of solutions such as assisting overseas business development, M&A and advising on corporate turnarounds and restructuring.

Consolidated gross profit

¥721.2 billion

Consolidated net business profit

¥421.8 billion

Consolidated gross profit

¥481.5 billion

p.22

Retail Banking Unit (SMBC) The Retail Banking Unit provides loans, investment products, and insurance products primarily for individuals and SMEs in Japan in accordance with their financial needs. The unit also offers inheritance and business succession support.

Consolidated net business profit

¥98.3 billion

p.24

International Banking Unit (SMBC) The International Banking Unit is a growth driver for SMFG. The unit responds to the needs of international companies operating mainly outside of Japan and that are active in Japan by utilizing our global network.

Consolidated gross profit

¥644.8 billion

Consolidated net business profit

¥397.9 billion

Consolidated gross profit

¥325.6 billion

Consolidated net business profit

¥286.8 billion

Consolidated gross profit

¥142.8 billion

p.26

Treasury Unit (SMBC) The Treasury Unit offers services to meet the needs of clients for transactions in the money, foreign exchange, bond, and derivative markets. The unit also undertakes banking operations for balance sheet control and trading operations for trading marketable financial products.

p.28

Sumitomo Mitsui Finance and Leasing Sumitomo Mitsui Finance and Leasing is a leading, full-service leasing company in Japan providing financial products and services to assist domestic and overseas corporate clients cope with capital expenditure and financial issues.

Consolidated net business profit

¥80.7 billion

p.30

SMBC Nikko Securities SMBC Nikko Securities is a leading, full-service securities company in Japan providing sophisticated retail and wholesale services in collaboration with SMBC.

Consolidated gross profit Consolidated net business profit

¥318.0 billion ¥60.8 billion

p.32

Consumer finance / Credit card This business centers on Sumitomo Mitsui Card Company, Cedyna, and SMBC Consumer Finance, which undertake credit card, installment, and consumer finance businesses.

Consolidated gross profit

¥607.1 billion

Consolidated net business profit

¥221.0 billion

Note: Consolidated gross profit and consolidated net business profit stated in “Business Strategy” pages are on a SMFG managerial accounting basis. Also, year-on-year changes are adjusted for changes in interest rates and exchange rates, etc.

p.34

2016 Annual Report

21

BUSINESS STRATEGY

Wholesale Banking Unit

(SMBC)

Fiscal 2015 performance While the first half of fiscal 2015 showed strong results with favorable market conditions, the second half was effected by the significant change of business environment, including the shift of the market triggered by falling resource prices, slowdown of the Chinese economy, and the introduction of the negative interest policy in Japan. As a result, consolidated gross profit of the Wholesale Banking Unit declined by ¥1.5 billion from fiscal 2014, to ¥721.2 billion, and consolidated net business profit declined by ¥6.0 billion, to ¥421.8 billion. Masaki Tachibana Deputy President, Co-Head of Wholesale Banking Unit, Sumitomo Mitsui Banking Corporation

Business environment and strategy going forward Globalization is accelerating among large companies in particular and the value and number of M&A, including cross-border transactions, is on the rise. With a lot of growth companies emerging, the number of IPO transactions has reached a high level in recent years. These trends are expected to continue and the Wholesale Banking Unit will seek to provide solutions that are finely tuned to companies’ business content and growth stage amid diversification in client business strategies and issues. The unit aims to grow with its clients and contribute to development of the Japanese economy.

Lending in the Wholesale Banking Unit (SMBC non-consolidated)*1 *2 (Trillions of yen) 15

14

Fumiaki Kurahara Senior Managing Director, Co-Head of Wholesale Banking Unit, Sumitomo Mitsui Banking Corporation

13

0

1Q

2Q

3Q ’13

4Q

1Q

2Q

3Q

4Q

’14

1Q

2Q

3Q

4Q

(FY)

’15

Mid-sized corporations and SMEs (Corporate Banking Division) Large corporations (Global Corporate Banking Division) *1 Managerial accounting rules were revised. *2 Quarterly average

SMFG’s support system for start-up companies Support start-up companies throughout their growth stage on a Group basis Incubation investment IPO support

SMBC Venture Capital

Number of IPO lead manager deals (fiscal 2015)

Ranked No. 2

Loans

Ideation

Scale up

Growth / Expansion

Please see SMBC Nikko Securities on page 32 for SMFG’s wholesale securities business.

22 2016 Annual Report

Business matching In fiscal 2015, we arranged business matching for more than 10,000 businesses in response to client needs for sales channel expansion and collaboration. We also hosted an event on the themes of inbound business and aging society business, which are of great corporate interest. The event was well received by the many companies that participated.

Aging society business matching

SMBC inbound business matching

Assessment loans / Private Placement bonds SMBC provides assessment loans / bonds to support client involvement in social issues, such as environmental matters, the role of women workforces, natural disaster response, and food safety. As of March 2016, this funding amounted to ¥1.6 trillion. * Assessment loans / bonds are a product that provide assessment and consulting for our clients’ social initiatives. These are conducted through collaboration with external think tanks.

Year

2010

Name of launched products

Description

SMBC Environmental Friendliness Assessment Support for mid-sized corporation and SME Loans and Private Placement Bonds (Eco Value-up) environment management SMBC Food and Agriculture Assessment Loans and Private Placement Bonds

Evaluation of / support for food safety and food culture initiatives

SMBC Sustainable Building Assessment Loans and Private Placement Bonds

Evaluation of / support for buildings’ environmental performance and earthquake resistance

SMBC Business Sustainability Assessment Loans and Private Placement Bonds

Evaluation of / support for business continuity initiatives for such events as earthquakes and floods

2013

SMBC Sustainability Assessment Loans and Private Placement Bonds

Evaluation of / support for ESG (environment, society, governance) initiatives and the disclosure’s appropriateness

2015

SMBC Nadeshiko Loans and Private Placement Bonds

Evaluation of / support for clients’ initiatives to promote the role of women

2011

Support for overseas business development SMBC holds seminars to provide clients with information about global economic trends, the foreign exchange market, and investment conditions in individual countries. Clients considering starting a business overseas are encouraged to come to us at an early stage so that we can provide tailored information on local laws and regulations and on Japanese companies already present in the country. For clients who already have business overseas, our Japan and overseas business units collaborate to provide high-quality solutions in such areas as business expansion and reorganization. We also provide wide-ranging advice and practical seminars on foreign trade to support clients in foreign exchange transactions generally.

Nikkei and Nikko joint seminar

Southeast Asian subsidiary management seminar

2016 Annual Report

23

BUSINESS STRATEGY

Retail Banking Unit

(SMBC)

Fiscal 2015 performance Consolidated gross profit of the Retail Banking Unit increased by ¥4.4 billion from fiscal 2014, to ¥481.5 billion in fiscal 2015. This was a result of an increase in sales of investment products while spreads of mortgage loans declined. However, consolidated net business profit declined by ¥3.3 billion, to ¥98.3 billion, due to higher expenses.

Business environment and strategy going forward Yukihiko Onishi Senior Managing Director, Consumer Business Planning Dept., Consumer Finance & Transaction Business Dept., Sumitomo Mitsui Financial Group, Inc. Senior Managing Director, Head of Retail Banking Unit, Sumitomo Mitsui Banking Corporation

The business environment is changing, driven by factors such as a prolonged period of extremely low interest rates, an accelerating shift from saving to investments, the evolution of IoT, particularly rapid advances in digitization on the spread of smartphones, the advent of a major inheritance phase, and changes in lifestyle. We expect these trends to continue. The Retail Banking Unit is constantly refining its customer-oriented business model as it assesses change in the business environment with the aim of enhancing its level of service. The unit is working with SMFG companies, such as SMBC Nikko Securities and SMBC Trust Bank, to pinpoint the evolving needs of clients with the aim of becoming the mosttrusted and No. 1 comprehensive financial service institution.

Total net assets of publicly offered investment trusts (Trillions of yen) 100

94 82

80 60

57 11

0

47

’11

16

16

64 11

40 20

16

98

65

53

’12

’13

77

82

’14

’15

(CY)

Stock investment trusts  Bond investment trusts Source: The Investment Trusts Association, Japan

Transitions in household ownership rates for ICT devices (%) 100 90.5 80

75.7

60 40 20 0 ’10

’11

’12

PCs  Smartphones and tablets Source: Ministry of Internal Affairs and Communications

24 2016 Annual Report

’13

’14

(CY)

Asset growth driven by banking-securities collaboration SMBC and SMBC Nikko Securities are promoting a new business model (Banksecurities integration model) that fully leverages the specialties of the two companies in all of our branches, which is leading to an increase of assets under management.

Increase balance of investment products* (Billions of yen) 1,000

Bank-securities retail integration Build up of financial assets

Investment and succession

Proactively meeting personal wealth management needs

750

500

250

0

Meeting the needs for asset and business succession ’14

’15

(FYE)

* The net value of SMBC investment product sales and maturities / cancellations plus SMBC Nikko Securities assets, including the assets of customers introduced by SMBC

Card loan growth (Unsecured) Card loans (unsecured) posted strong growth, reaching approximately ¥1.7 trillion as of March 31, 2016 (the aggregate of SMBC, SMBC Consumer Finance, and Mobit). We will continue to operate with a view to contribute for the sound development of the consumer finance market, seeking to enhance convenience for card loan customers while also protecting them. Appropriate response to customer needs is our underlying approach.

Card loan balance (Unsecured) (Billions of yen) 1,800

1,700

1,600

1,500 ~ ~ 0

’13

’14

’15

(FYE)

“SMBC” brand enhancements As part of raising brand awareness to the younger generation, SMBC opened an official account on LINE in September 2014 and now has more than 10 million friends. In tandem, we developed an image character called “Midosuke.” We have also worked on increasing convenience for customers by making our smartphone app screen friendlier, with an emphasis on simplicity and easy understanding.

Midosuke

SMBC smartphone app screen

LINE friends

More than

10 million (As of March 31, 2016)

2016 Annual Report

25

BUSINESS STRATEGY

International Banking Unit

(SMBC)

Fiscal 2015 performance International Banking Unit was a growth driver for SMFG in fiscal 2015, with consolidated gross profit increasing by ¥58.3 billion, to ¥644.8 billion, and consolidated net business profit by ¥28.1 billion, to ¥397.9 billion. This growth was achieved through expansion of M&A financing for clients and businesses other than loans, such as securities, deposits, and foreign exchange as well as the acquisition of LBO*1 assets in Europe from the General Electric Group (GE Group). Overseas deposits reached a record high, reflecting our constant efforts to increase deposits with a view to fleshing out stable foundations for foreign currency financing. Yasuyuki Kawasaki Senior Managing Director, Global Business Planning Dept., Sumitomo Mitsui Financial Group, Inc. Senior Managing Director, Co-Head of International Banking Unit (Planning Dept., International Banking Unit, Emerging Markets Business Division, Asia Pacific, East Asia), Sumitomo Mitsui Banking Corporation

Business environment and strategy going forward The business environment for financial institutions is characterized by worsening visibility and growing uncertainty due to such factors as U.S. monetary policy, China’s economy, resource price movement, and geopolitical risk. Against this backdrop, we will tighten controls for credit, liquidity, and other categories of risk. We will play our part fully as an SMFG growth driver, maintaining our “Asia-­ centric” efforts while clarifying priority segments in Asia. In this way, we aim to engage with Asian growth over the medium to long term and also expand our services for clients in Europe and the Americas on the basis of our advantage in Asia. We will step up cross-selling in securities, deposits, and foreign exchange, which are central to overseas banking, while working to increase the profitability and diversity of our portfolio in areas of SMFG strength. These areas include subscription finance*2, asset finance, such as aircraft and railcar leasing, and LBO assets (for example, the above mentioned assets in Europe acquired from the GE Group in fiscal 2015). *1 LBO (leveraged buyout): An M&A method used, for example, by private equity funds *2 Subscription finance: Bridge finance provided, for example, to real estate funds

Makoto Takashima Senior Managing Director, Co-Head of International Banking Unit (Europe, Middle East and Africa, Americas), Sumitomo Mitsui Banking Corporation

Overseas lending

Foreign deposits

(Billions of U.S. dollars)

(Billions of U.S. dollars)

300

300

240

195

200 172 47

100

54

181 45

62

206

210

108

121

’13

’14

200

52

72

100 153

0

Asia 

26 2016 Annual Report

70

74

71

’13

’14

’15

Americas 

EMEA

(FYE)

0

’15

(FYE)

Customer deposits (including central bank deposits) CD, CP (3 months upward) CD, CP (less than 3 months)

Expansion of our global network Our global network has increased to 72 offices in 38 countries and regions. In 2015, we added the Yangon Branch in Myanmar in April, the Manila Branch in the Philippines in September, and the Frankfurt Branch in Germany in December. In April 2016, we added the Dalian Branch in China. We will use our network to provide wide-ranging responses to the needs of clients developing business in all parts of the world. Note: In April 2016, we obtained approval to open a front office in the Thilawa Special Economic Zone in Myanmar. In May 2016, we received approval for a sub-branch in Mumbai in India.

Pursuit of inorganic growth We are pursuing inorganic growth to expand our business base and diversify and increase the profitability of our asset portfolio in the interests of sustainable growth.

Examples of inorganic growth in fiscal 2015 June 2015

Investment in Financiera de Desarrollo Nacional S.A., of Colombia

September 2015

Acquisition of LBO assets of non-Japanese, mid-sized corporations in Europe from the GE Group

September 2015

Purchase of additional shares of ACLEDA Bank Plc., of Cambodia, which became an equity method affiliate of SMBC

March 2016

Investment in Indonesian automotive finance companies PT Oto Multiartha and PT Summit Oto Finance, which became equity method affiliates of SMBC

Asset finance We are developing SMFG’s strength in asset finance centered on SMBC Aviation Capital, which has become a leading global aircraft leasing company, and SMBC Rail Services, the North American railcar leasing business we acquired in December 2013. SMBC Aviation Capital

Ranking for number of aircraft owned and managed*1: No. 3

SMBC Rail Services

North American railcar lease ranking*2: No. 6

*1 Sources: Ascend and Airline Business (as of December 2015) *2 Source: Progressive Railroading (as of July 2015)

Please see page 31 for details of aircraft leasing.

2016 Annual Report

27

BUSINESS STRATEGY

Treasury Unit

(SMBC)

Fiscal 2015 performance Consolidated gross profit of the Treasury Unit declined by ¥58.1 billion from fiscal 2014, to ¥325.6 billion, and consolidated net business profit declined by ¥60.6 billion, to ¥286.8 billion. Concerns over global economic slowdown and weakening commodity prices made financial markets unstable beginning in the summer, but we were able to secure steady profits through investments mainly in stock index funds.

Business environment and strategy going forward Seiichiro Takahashi Deputy President, Head of Treasury Unit, Sumitomo Mitsui Banking Corporation

We anticipate further heightened volatility in markets due to factors such as monetary policies in developed countries, economic trends in emerging countries, and geopolitical risks. We also expect global financial regulations to cause reduced market liquidity, making markets even more volatile. Under such market conditions, we will strengthen our global Asset Liability Management (ALM) by enhancing our funding capabilities as well as expanding our investment portfolio to steadily secure profits while retaining appropriate risk controls. We will also apply our expertise gained from dealing to offer solutions to the sophisticated and diversified needs of our clients.

USD / JPY, Nikkei Stock Average Index (Yen)(Yen) 150

22,000

130

18,000

110

14,000

90

10,000

70

’08

’09

USD / JPY (left axis) 

’10

’11

’12

’13

’14

’15

’16

6,000 (CY)

Nikkei Stock Average (right axis)

Long-term government bond yields in Japan, the United States, and Germany (%) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 –0.5 ’08

Japan 

28 2016 Annual Report

’09

United States 

’10

’11

Germany

’12

’13

’14

’15

’16

(CY)

Providing market-oriented solutions In the Treasury Unit, our global network provides robust hedging solutions to our clients based on their needs and global market conditions. We are continuously improving the functionality of our electronic foreign exchange execution platform, i-Deal, to further enhance our clients’ experience. We will remain committed to continually providing our clients with industry-leading services.

Market sensitive strategic portfolio rebalancing By conducting various scenario analyses by dealers around the globe, we strive to find opportunities to optimize our risk-rewards. We identify signs of market change to take advantage of opportunities through dynamic but well-calculated market operations.

Money Foreign exchange

Bonds

Identify market opportunities for profit-making

Equities

Derivatives

Sustainable ALM operation By diversifying our investment portfolio and enhancing our funding sources, we seek to maximize earnings even under constraints of ever strengthening financial regulations. Since April 2016, we have established new departments in both SMFG and SMBC in order to enhance group-wide ALM operations. While applying appropriate balance sheet controls in accordance with financial regulations, we are increasing our funding stability by issuing senior debt, including TLAC bonds*1.

Increasing sources of stable funding We will secure steady funding by catering to a broad range of investor needs.

Issuance record in fiscal 2015 • Green bonds*2 ���������������������� First issuer among Japanese megabanks • Formosa bonds*3 ������������������ First issuer among

Japanese megabanks

• Interbank Renminbi CD ��������� First issuer among

Japanese banks

• TLAC bonds

*1

*1 TLAC (Total Loss Absorbing Capacity) bonds: Bonds issued by holding company of Global Systemically Important Banks (G-SIBs), which covers losses if it defaults. *2 Green bonds: Bonds whose proceeds are mainly used for environmentally friendly projects. *3 Formosa bonds: Bonds issued in Taiwan but denominated in another currency other than the New Taiwanese dollar.

2016 Annual Report

29

BUSINESS STRATEGY

Sumitomo Mitsui Finance and Leasing Fiscal 2015 performance In fiscal 2015, leasing transactions at Sumitomo Mitsui Finance and Leasing (SMFL) amounted to ¥1,994.8 billion and year-end consolidated operating assets was ¥4,192.6 billion. Consolidated gross profit increased by ¥5.8 billion from fiscal 2014, to ¥142.8 billion, and consolidated net business profit increased by ¥0.1 billion, to ¥80.7 billion. In Japan, demand for capital expenditure was firm and led to brisk business in rental and installment sales. Overseas, our aircraft leasing business expanded, we also acquired majority ownership of a German sales finance company as we pursued diversification in the sales finance business. Yoshinori Kawamura President and Representative Director, Sumitomo Mitsui Finance and Leasing Company, Limited

Business environment and strategy going forward Outlook of the business environment has worsened due to weak recovery momentum in the Japanese economy and continuing concerns of economic slowdown overseas. Against this backdrop, SMFL acquired the General Electric Group’s Leasing Business in Japan on April 1, 2016. We will aim to reinforce our position as a leader in Japanese leasing by drawing on our respective expertise and resources to realize synergies. We are seeking business in growth areas including hydrogen and agriculture, and we will tighten risk management especially in our overseas business. In aircraft leasing, we will collaborate with SMFG group companies and the Sumitomo Corporation Group to offer solutions to airlines and investors in Japan and overseas.

Capital expenditure devoted to leasing* and SMFL’s lease contracts (Trillions of yen) 1.3

(Trillions of yen) 8.0

Average annual growth 6.7% Average annual growth 11.9%

1.1

0.9

0.7 ~ ~

’12

’13

’14

’15

(FY)

SMFL’s lease contracts (consolidated, left axis)  Capital expenditure devoted to leasing* (right axis) * Source: Japan Leasing Association (fiscal 2015 statistics)

SMFL consolidated operating assets

Impact of GE Japan GK becoming a subsidiary Approx. ¥520 billion addition*

(Trillions of yen) 5 4 3 2 1 0

’11

’12

’13

’14

’15

(FY)

* Aggregate of SMFL consolidated operating assets as of March 31, 2016, and the operating assets of GE Japan GK, which became a subsidiary on April 1, 2016.

30 2016 Annual Report

4.0

2.0

70

0

6.0

0

Collaboration with GE Japan GK to realize synergies SMFL and GE Japan GK will leverage their strengths and expertise to realize synergies in providing new value for an increased number of clients. Note: G  E Japan GK is scheduled to change its name to SMFL Capital Company, Limited, on September 5, 2016.

• Diverse financial services

• IT-based marketing

• Capability to provide a wide range of solutions

• Cutting-edge, automated credit review system

• Global network

• Sophisticated consulting capabilities

Involvement in growth sectors SMFL is pursuing business in hydrogen. We were responsible for the first mobile hydrogen fuel station lease in Japan and we are also involved in smart hydrogen station leasing. In agriculture, we have created the Agri Assist Program for leasing to farmers in support of their diversification into related sixth sector industrialization, the introduction of larger-scale farming, and the introduction of cutting-edge technology.

Involves in the hydrogen business

Creates a leasing program for farmers

Aircraft leasing SMBC Aviation Capital ranks third globally for the number of aircraft owned and managed. The company is working alongside SMFL and SMBC to harness the comprehensive power of SMFG in meeting the diverse needs of airlines and investors in Japan and overseas.

Airlines

Structuring Japanese operating lease

Aircraft operating lease

Debt finance

Sale of interest in Japanese operating lease

Sale of aircraft

Sale of Debt finance

Investors

2016 Annual Report

31

BUSINESS STRATEGY

SMBC Nikko Securities

(Scheduled to merge with SMBC Friend Securities in 2018)

Fiscal 2015 performance In fiscal 2015, consolidated gross profit declined by ¥31.7 billion from fiscal 2014, to ¥318.0 billion, and consolidated net business profit declined by ¥39.6 billion, to ¥60.8 billion. Earnings were strong in the first quarter, when markets were buoyant. However, markets started falling in August due to the impact from China’s slowing economy and we experienced a downturn in sales of investment products, such as investment trusts and bonds, and in our net trading income.

Business environment and strategy going forward Yoshihiko Shimizu President & CEO, SMBC Nikko Securities Inc.

Uncertain market conditions have persisted in fiscal 2016 due to such factors as concern over the global economic slowdown and the Bank of Japan’s negative interest rate policy. However, we see current conditions as an opportunity to demonstrate our true consulting abilities as we seek to provide optimal products and solutions for clients. In our retail operations, we have been conducting a strategic review of our staff allocation since April 2016 and we have moved a large number of staff to branches. In continuing our pursuit of retail banking-securities integration, we will pay even closer attention to our customers’ views and provide high-quality solutions. On the wholesale side, we expect negative interest rate conditions to increase the importance of the bond market and we will therefore strengthen our bond underwriting operations. We have also established the Investment Banking Group in the United States based on the prospects for growth driven by our tie-up with SMBC. We intend to strengthen our businesses in bonds and M&A as we globally offer various solutions with SMFG group. SMBC Nikko Securities is scheduled to merge with SMBC Friend Securities in 2018. We plan to leverage our respective strengths in realizing synergies and increasing our competitiveness.

M&A involving Japanese companies (Billions of U.S. dollars) 60

45

30

15

0

3Q

4Q ’13

1Q

2Q

3Q ’14

4Q

1Q

2Q

3Q

4Q

’15

Domestic  Outbound  Inbound Source: Thomson Reuters (Values are based on ranking dates and exclude share repurchasing and real estate acquisition.)

32 2016 Annual Report

(FY)

Strengthened inflow of client assets We are working as a company to increase client assets with the aim of achieving sustained, steady growth in our assets under management. In fiscal 2015, the sales unit’s inflow of client assets increased by 34% from fiscal 2014, to ¥1,161.0 billion.

Fiscal 2015 total

Sales unit’s inflow of client assets Fiscal 2014 total

(Billions of yen)

¥868.6 billion

400 300

¥1,161.0 billion

Fiscal 2013 total

¥387.4 billion

200 100 0 –100

1Q

2Q

3Q

4Q

1Q

’13

2Q

3Q

4Q

1Q

2Q

’14

3Q

4Q

(FY)

’15

League tables In fiscal 2015 also, we were able to become lead manager for several major equity and bond issues. The strengthening of our underwriting operations for IPOs resulted in the No. 2 ranking for the number of IPOs lead managed. We rose to No. 3 in the M&A league table, assisted by our joint position with Citigroup Global Markets Japan as financial advisor for the New Kansai International Airport.

Fiscal 2013

Fiscal 2014

Fiscal 2015

Equity-related (book runner, underwriter, by value)*1

No. 3

No. 2

No. 4

Yen bonds (lead manager, underwriter, by value)*2

No. 5

No. 5

No. 5

IPO (lead manager, by number of IPOs)*3

No. 2

No. 3

No. 2

M&A (financial advisor, by deal value)*4

No. 3

No. 13

No. 3

*1 Involving Japanese companies, includes overseas offices *2 Corporate bonds, FILP bonds, regional government bonds (lead manager), and samurai bonds *3 Excludes REITs *4 Announced deals involving Japanese firms, Group total Source: Thomson Reuters

Growth in overseas profit Our four key overseas operations—in the United Kingdom, the United States, Hong Kong, and Singapore—in aggregate, are sustaining steady profits. In fiscal 2015, their total profit increased by 22% from fiscal 2014, to ¥14.0 billion. Our ties with SMBC were particularly beneficial for our fixed income earnings in the United States.

Overseas profit (Aggregate of four overseas operations)* (Billions of yen) 15

14.0 11.5

10 6.8 5

0

1.5

1.9

’11

’12

’13

’14

’15

(FY)

* Aggregate of SMBC Nikko Capital Markets Limited, SMBC Nikko Securities America, Inc., SMBC Nikko Securities (Hong Kong) Limited, and SMBC Nikko Securities (Singapore) Pte. Ltd.

2016 Annual Report

33

BUSINESS STRATEGY

Consumer finance / Credit card Fiscal 2015 performance Sumitomo Mitsui Card Company’s growth in payment volume exceeded the market as the company captured opportunities in the expanding cashless market and demand from inbound tourists in Japan. Cedyna Financial Corporation focused on co-branded cards and also increased its consumer credit transactions. SMBC Consumer Finance’s loan guarantee amount reached the ¥1 trillion mark as a result of growth in card loans of partner banks. As a result, consolidated gross profit of the three companies increased by ¥30.9 billion from fiscal 2014, to ¥607.1 billion and consolidated net business profit increased by ¥8.6 billion to ¥221.0 billion. Ken Kubo President & CEO, Sumitomo Mitsui Card Company, Limited

Satoru Nakanishi President & CEO, Cedyna Financial Corporation

Business environment and strategy going forward The government and the private sector are united in providing infrastructure for cashless payment ready for the Tokyo 2020 Olympic and Paralympic Games. At the same time, the fusion of finance and information and communications technology (ICT) is accelerating. In this environment, Sumitomo Mitsui Card Company will work on providing high-convenience payment services, seeking to further strengthen its acquiring of merchants and contracting business for partners. Cedyna Financial Corporation will draw on its combined strengths in credit cards, consumer credit business, and financing solutions to continue building up its comprehensive payment business. As the decline in the unsecured card loan market levels out, SMBC Consumer Finance will seek to increase card loans in proprietary channels and to promote guarantee business using the channels of partner banks. The overall aim is to provide wide-ranging responses to customer needs and enhance the services it offers on a steady and sustained basis.

Cashless payment (market size) (Trillions of yen)

Ryoji Yukino President & CEO, SMBC Consumer Finance Co., Ltd.

34 2016 Annual Report

Consumer loans (market size)

(Trillions of yen)

(Trillions of yen)

60

6

12

50

5

10

40

4

8

30

3

6

20

2

4

10

1

2

0

0

0

’10

’11

’12

’13

’14

’15

(FYE)

Credit cards (left axis) Electronic money (right axis) Debit cards (right axis) Prepaid cards (right axis) Sources: Japan Consumer Credit Association, Bank of Japan, Japan Debit Card Promotion Association, and SMFG estimates

’10

’11

’12

’13

’14

’15

(FYE)

Consumer finance providers Banks, credit unions  Credit card companies Source: Yano Research Institute estimates

Sumitomo Mitsui Card Company Sumitomo Mitsui Card Company, a pioneer in bringing “Visa” into Japan has been in operation for more than 40 years. As a leader in the credit card industry, the company has been active in providing its traditional credit card services with new settlement services, such as smart phone payment utilizing FinTech and other cuttingedge technology.

Credit card payment volume (Trillions of yen) 12 11 10 9 8 7 0

’11

’12

’13

’14

’15

(FY)

’12*

’13

’14

’15

(FY)

Cedyna Financial Corporation Cedyna Financial Corporation is a comprehensive payment financing company offering a full range of payment methods to meet customers’ diverse needs, including credit cards for daily payments, installment payment for high-value products and services, and collection agency services and factoring for recurring payments.

Transaction volume (Trillions of yen) 14 12 10 8 6 4 0

’11

* Includes growth resulting from the conversion of SMBC Finance Service to a consolidated subsidiary

SMBC Consumer Finance SMBC Consumer Finance provides smallscale finance for consumers and loan guarantee services to business partner financial institutions. Leveraging the expertise gained in Japan in extending credit, managing debt, and marketing, the company is expanding its business, providing unsecured / unguaranteed small loans to local consumers in China and Thailand.

Loan balance of SMBC Consumer Finance’s subsidiaries overseas Promise Tianjin ¥2.4 billion

Opened March 2013 Promise Chengdu ¥3.5 billion

Opened December 2013

Promise Chongqing ¥1.5 billion

Opened September 2013 Promise Shenzhen ¥7.4 billion

Opened July 2010

Promise Shenyang ¥3.0 billion

Opened May 2011

Promise Shanghai ¥1.0 billion

Opened October 2014

Promise Wuhan ¥1.3 billion

Opened December 2013 Promise Hong Kong ¥35.2 billion

Opened July 1992

Promise Thailand ¥22.4 billion

Opened October 2005

Note: Loan values are as of March 31, 2016 (yen conversions from local currency).

2016 Annual Report

35

BUSINESS STRATEGY

Services with Competitive Advantage, New Businesses Services with competitive advantage SMFG is harnessing the combined strength of SMBC and other Group companies to provide solutions to the varied needs of its clients, such as fund raising, investment, M&A, and risk-hedging activities.

Non-interest income by product (SMBC non-consolidated) (Billions of yen) 120

1. Syndicated loan league table (Japan)*1 Rank

Proceeds (¥ billion)

2

6,961.7

Market share

Number of deals

28%

621

Mandated Arrangers, April 2015 to March 2016

2. Project finance league table (Global)*2 Rank

Proceeds (US$ million)

2

12,832

Market share

Number of deals

4.6%

108

Mandated Arrangers, January 2015 to December 2016

100

3. M&A financial advisor league table (number of deals)*3

80 60

Rank

Number of deals

Transaction volume (¥ billion)

40

2

164

5,397.4

20 0

’13

’14

’15

(FY)

Announced deals involving Japanese companies, April 2015 to March 2016 *1,3 Sources: Thomson Reuters *2 Project Finance International published by Thomson Reuters

Loan syndication related fees  Structured finance related fees Asset finance related fees  Fees on sales of derivatives products

New endeavors in growth areas The Growth Industry Cluster Department of SMBC provides financial support for growing industries, thereby contributing to the development and growth of our clients and the Japanese economy at large.

Customer base

Financial expertise Growth Industry Cluster Department

Privatepublic sector ties

In the “Robotics” sector, SMBC formed a business alliance with Silicon Valley Robotics (SVR) in May 2015. SMBC is also taking measures to address the aging society by providing financial assistance for the provision of care facilities via a healthcare REIT.

Growth sectors Healthcare New energy Environment, Emissions credits

SMFG

Infrastructure, Water, Value chain Natural resources

Internalexternal ties

Agriculture Robotics Business alliance with SVR

Fund for raising corporate value SMBC, Mitsui & Co., Ltd., and the Development Bank of Japan Inc. jointly established a private equity fund in October 2015. Named MSD Fund, it is aimed at resolving management issues and raising corporate value for mid-sized

corporations and SMEs in Japan. Also, in November 2015, SMBC invested in SPARX Group’s Mirai Creation fund* with Toyota Motor.

* Mirai means “future” in Japanese and the fund’s investment aim is to support the spread of advanced technologies for the future generation. Core target fields for the fund will include AI (artificial intelligence), robotics, and technologies to help realize a hydrogen-fueled society.

36 2016 Annual Report

Transaction business overview SMBC has the Transaction Business Division, which crosses business units and is working on providing new, highvalue-added services that foresee the needs of clients in Japan and overseas, without being caught up in traditional business models. One such example is the establishment of SMBC GMO Payment, a joint venture with GMO Payment Gateway, in November 2015.

Domestic-overseas integrated framework for promotion in the Transaction Business Division Domestic settlement business

Foreign exchange and trade transactions

Overseas transaction business

Advisory services for overseas business development

Proposal of solutions related to domestic settlement

Support for trade operations

Proposals for cash management and streamlining in each country

Call centers for electronic banking services and consultation services for foreign exchange Global cash management services Settlement finance programs Cooperation

BPO* and other services in cooperation with Group companies * BPO: Business Process Outsourcing

Transaction business in Japan To meet corporate client needs for payment and cash management in Japan, SMBC offers “PC Bank Web21” for domestic bank transfers and balance inquiries, “SMBC Densai Net,” and online overseas remittance services. Constant addition of new functions is leading to increasing numbers of customers subscribing to these services.

Number of “PC Bank Web21” subscribers

Number of “SMBC Densai Net” subscribers

(Thousands of subscribers)

(Thousands of subscribers)

210

50

200

40

190

30

180

20

170

10

0

’13

’14

’15

(FYE)

0

’13

’14

’15

(FYE)

Transaction business overseas The number of subscribers to SMBC’s online overseas banking services, such as “SMAR&TS” and “E-Moneyger,” is increasing in response to growing requirements for the enhancement of cash management and internal controls among overseas subsidiaries of Japanese companies. These services enable clients to create a global cash-monitoring system and to streamline settlement operations at the subsidiaries.

SMAR&TS Treasury Financial management tool

SMAR&TS

E-Moneyger

Asia cash management service

Europe, Americas cash management service

Number of corporate subscribers to online banking for overseas operations (Thousands of subscribers) 20

15

10

0

’13

’14

’15

(FYE)

2016 Annual Report

37

BUSINESS STRATEGY

Support for Mid-Sized Corporations and SMEs, Vitalization of Local Regions in Japan Support capabilities and policy for mid-sized corporations and SMEs

Support for new ventures, new business development, and growth companies

In April 2014, SMBC established its Area Main Offices to more fully address the wholesale-retail integral needs of mid-sized corporations and SME clients, including the aspect of business succession. Area Main Offices enable us to offer integrated corporate and personal consulting and draw on SMFG company networks to provide specialist services. In addition to providing business loans, SMFG companies offer tailored support, including consultation on overseas business development, business matching, business succession, and internal company reforms, alongside consultation on personal asset management, loans, inheritance, and asset succession. Mid-sized corporations and SMEs are a key support for the Japanese economy and SMBC will maintain its endeavors to meet their and their clients’ wide-ranging needs.

SMBC offers support in accordance with clients’ stage of growth; SMBC Venture Capital provides incubation investment, SMBC provides growth assessment financing through the “Growth Potential Evaluation Loan,” and SMBC Nikko Securities and SMBC Friend Securities provide support for public share offerings. Taking account of the growing need for alliances between venture businesses and large corporates, we host such events as the Open Innovation Meetup for exchanging ideas and technology. Events have also included the Mirai 2016 business pitch competition arranged by the cross-industry Triple I consortium. At the same time, we aim to assist in the creation of a venture creation ecosystem in Japan by promoting ties with leading venture capital providers, universities, and research institutes.

Operational support structure for mid-sized corporations and SMEs SMBC

Mid-sized corporations, SMEs, and retail customers

• Corporate Business Office • New borrowing • Management consultation • Management support

38 2016 Annual Report

•A  rea Main Office • Branch, etc.

Affiliation

•D  epartments of the head office

•E  xternal organizations Affiliation

•E  xternal experts / professionals

Support for management improvements, business regeneration, and business conversion Along with its efforts to fulfill its intermediary function smoothly, SMBC seeks to provide solutions to management issues, putting itself in the position of the client to devise optimum proposals based on the nature of the issues and the client’s stage in life. Ample time is spent on the provision of support, and in this respect we are making increasing use of consultation. Examples include offering a full range of loan products devised to meet funding needs and address management issues. We also provide solutions in such areas as business matching, overseas business development, and business succession. Our assistance in business operating improvements and regeneration involves links with external experts / professionals*1 and external organizations*2 to provide support in drawing up plans for improvement and advice in such areas as cost cutting and asset sales. For clients that have suffered damage in natural disasters, we propose optimal solutions and effect help in rebuilding lives and business. *1 SMBC Consulting, certified tax accountants, certified public accountants, etc. *2 Council supporting revitalization of SMEs, Regional Economy Vitalization Corporation of Japan, etc.

Involvement in regional stimulus Change in the Japanese economy is leading to more diverse roles for local government entities and regional financial institutions and raising expectations for support for local industrial development and overseas business development. Local government entities and regional financial institutions need to have extensive networks encompassing countries overseas and to collect accurate and up-to-date information. To serve such needs, SMFG is linking with local government entities and regional financial institutions to provide services that draw on its network in Japan and overseas. Vitalization of local regions in Japan is a key theme for the Japanese government. Related “regional comprehensive strategy” plans drawn up by local government entities are moving to their implementation stage. SMBC has entered into cooperation agreements with local government and other entities as part of its efforts to assist in local industrial development, and in May 2016 it added an industrial development cooperation agreement with the city of Kobe. We will continue to work with local government entities and regional financial institutions across Japan, drawing on the SMBC network to contribute to local economies.

Measures for finance facilitation SMBC’s “Basic Policy for Finance Facilitation” underlies efforts to be diligent and thorough in the provision of funding and consultation. “Basic Policy for Finance Facilitation” 1. Conduct appropriate review of applications submitted for a new loan or requests to modify loan conditions 2. Provide appropriate management consultation and guidance for clients and appropriate support for management improvements

5. Respond appropriately and adequately to client inquiries regarding new loan and modification consultations and applications and to consulting requests or complaints

3. Strive to improve the ability to assess the value of a client’s business appropriately

6. Liaise closely with other financial institutions involved in applications for modifying loan conditions or other applications

4. Provide appropriate and thorough explanations to clients in consultations and applications for new loans or modification of loan conditions

7. Respond appropriately in respect of business manager guarantees in accordance with the “Guidelines for Guarantees for Business Managers”

2016 Annual Report

39

SPECIAL FEATURE

BTPN—“Do Good and Do Well” In May 2013, SMBC acquired the initial stake in Indonesia’s PT Bank Tabungan Pensiunan Nasional Tbk (hereinafter, BTPN). In March 2014, SMBC carried out additional investment in BTPN and established a platform for full-fledged cooperation between SMBC and BTPN. To highlight the concrete cooperation efforts and the company's aim, this section provides an interview with Mr. Jerry Ng, BTPN’s President Director.

Snapshot of BTPN Establishment

Total Assets

1958

Number of Employees

27,247

JPY 713.1 billion IDR 81,040 billion Business Locations

SMBC’s Investment

40%

1,317

Jerry Ng

BTPN, which was established in 1958 to only serve retired military personnel, now offers a wide range of financial services with primary focus on the mass market. Listed on the Indonesia Stock Exchange (IDX ticker: BTPN)

President Director

(As of December 31, 2015)

PT Bank Tabungan Pensiunan Nasional Tbk

Q

Would you tell me about Indonesia’s market situation? And the business strategy of BTPN?

Driven by its large and young population of more than 250 million people, Indonesia is poised for a sustainable and quality growth over the next 10-15 years. In general, the market can be divided into two large segments: the rising middle-consuming class and the under-served mass market segment. It is estimated that 60% of adults in Indonesia are yet to have access to banking services, which in turn provides a tremendous mass market banking opportunity. The rest of the population then forms the middle-consuming class who are gaining sophistication and becoming comfortable in the new world of digital economy. BTPN, which has been one of the leading banks focusing on the mass market segments, will continue to do so by building this mass market mobile banking platform called BTPN Wow! This platform is designed by using the mobile phone as a means to deliver financial services and products to the mass market in a very cost-effective way. The reach to the 40 2016 Annual Report

mass market customers is greatly enhanced by the Agent Bank networks which BTPN started building since last year. Meanwhile, to cater for the rising consumer class, BTPN is building one of its kind digital banking platform. We believe that the two platforms will provide BTPN with a unique proposition in serving the two large segments of the Indonesian population.

Q

Would you tell me about the vision of BTPN?

We have been known as one of the more innovative banks in Indonesia. We believe that to stay ahead we should continue to embrace next new technologies and launch innovative business models and find relevant ways to serve our customers. Over the years, we have pioneered and introduced new ways to better serve and engage with our customers. Just to name a few examples, (i) we introduced the use of psychometric data to underwrite micro businesses which are considered unbankable by most banks; (ii) we reconfigured

SMBC’s Collaboration with BTPN Pension business

Purpose of investment

Serves pensioners and pre-pensioners by offering loans both for business and personal use

• Considering market size, competitiveness, and potential growth, SMBC aims to expand our businesses in emerging countries and grow to become a globally active diversified financial services group with Asia as our home market. Indonesia is one of our target countries. • By investing in BTPN and leveraging on SMBC’s Indonesian platform, SMBC aims to provide full-fledged financial services, from corporate transaction to retail banking business. • Starting from long-term funding support and technical support, SMBC will collaborate with BTPN to further promote building a strong business platform in Indonesia such as developing a branchless retail banking model.

Micro / SME business Offers business loans to micro traders and Small Medium Enterprises (SME), mainly located in local traditional markets and tier-1 and tier-2 cities

Syariah business Provides financial services to lower income communities in rural areas utilizing islamic financing scheme

and redesigned our branches serving pensioners to become community centers, opening at 5:30 in the morning, and even operating medical clinics in those branches as part of the added value to our customers; and (iii) we launched combined package of financial products and capacity building by providing various practical trainings to help our micro and SME customers improve the ways they run their businesses. The core of our business philosophy is to grow together with our customers and their communities – “Do Good and Do Well”. In Indonesia, we may not be one of the largest banks, but we would like to be known as a bank which remains relevant and provides cutting edge solutions through technology and added value services to the customer segments we serve.

Q

Would you describe your collaboration with SMBC? Why is SMBC a strategic partner for BTPN?

we have benefited tangibly through the upgrade of our rating to an AAA-rating*. I believe this reflects the level of confidence of our rating agency has on having SMBC as a strategic shareholder of BTPN. We then received a sizable long-term structured funding facility from SMBC, which enables BTPN to further diversify our sources of funding. SMBC has been instrumental in assisting BTPN as we move to become a foreign-­ exchange bank. We also embarked on strategic projects by jointly combining our resources to design new digital banking platforms for the future. Our vision is that at the right time we will expand into other markets in the ASEAN region together with SMBC. I believe that the combination of SMBC / SMFG's networks and resources with BTPN's innovation and agility in business building capabilities, there are clear opportunities to expand into other markets with similar characteristics. * Fitch ratings, Indonesian domestic ratings

SMBC is a large global bank with lots of strengths and resources. Since SMBC became our major shareholder, 2016 Annual Report

41

SPECIAL FEATURE

PRESTIA—the New Brand Launch SMBC Trust Bank Ltd. (hereinafter SMBC Trust) integrated the retail banking business of Citibank Japan Ltd. (hereinafter Citibank Japan) on November 1, 2015. Since the integration, SMBC Trust has been operating the retail banking business under the new brand, PRESTIA, to retain the distinctive consumer business features developed by Citibank Japan and ensure clear differentiation from SMBC Trust’s existing products and services.

From November 1, 2015, PRESTIA, the bank that knows the world At the time of the integration, PRESTIA’s share of individual foreign currency deposits was approximately 20%*1, which gives testimony to PRESTIA’s responsiveness to customers’ foreign currency asset needs. *1 Estimation based on the market’s size of the deposits in foreign currencies as of September 30, 2015. Calculated using the balance of foreign currency deposits held by households from “Amounts Outstanding of Deposits by Depositor (Domestically Licensed Banks)” by the Bank of Japan

Strength in Foreign Currency Transactions • Top-class level of foreign currency balances in Japan

Multi-Channel Deployment • Branch network encompassing Japan’s major cities • Manned call centers accessible from Japan and overseas 24 hours a day, 365 days a year • Convenient overseas remittances and online banking for yen and foreign currency transactions and settlement

42 2016 Annual Report

• Wide foreign currency product lineup for customers interested in foreign currency investments or those not aware of their foreign currency needs • Full range of settlement services in foreign currencies to support the lifestyle of customers with global access

Unsurpassed Consultation • Consultation proposing asset management plans in line with customer needs and lifestyles, providing swift analysis and a wide variety of information

Exclusive Services Offered to Selected Customers The PRESTIA GOLD and PRESTIA GOLD PREMIUM programs offer preferential fees in accordance with account balances, asset management consultations with dedicated consultants, and a variety of special services. PRESTIA GOLD • PRESTIA GOLD Executives to support customers in asset management • Preferential service fees PRESTIA GOLD PREMIUM • Relationship Managers to support customers in asset management • Free or discounted service fees • Exclusive products for PRESTIA GOLD PREMIUM customers (Mutual Funds, Bonds, and Loans)

Distinctive Service Lineup  oreign currencies’ settlement services, such as cash F cards that can be used overseas and overseas remittance Banking Card • Local currency withdrawals from Yen Savings Accounts available from over two million CDs and ATMs in more than 200 countries and regions PRESTIA Gaika Cash Card • U.S. Dollar withdrawals from U.S. Dollar Savings Accounts available from CDs and ATMs throughout the United States Overseas Remittance • Choice of channels: branches and mini branches, PRESTIA Phone Banking / PRESTIA Online  ide variety of foreign currency products (Deposits, W Mutual Funds, Insurance, and Intermediation of financial products) • Foreign Currency Deposits (10 major currencies)

Market information from expert analysts Information provided to assist customers in their asset management and foreign exchange transactions includes PRESTIA Insight, a publication containing views of financial markets by experienced analysts, and PRESTIA Global Research Monthly Digest, which describes SMBC Trust’s outlook and economic and market trends. Affiliate services PRESTIA GOLD customers can directly contact PRESTIA GOLD dedicated operators in Japan from as many as 39 different countries and regions without being charged for the call. Citigold lounges at Citibank branches overseas are also available for their use. New affiliated credit cards were launched in February 2016, PRESTIA Visa GOLD CARD and PRESTIA Visa PLATINUM CARD, as part of the business partnership with Sumitomo Mitsui Card Company Ltd.

• Cross Currency Transactions*2 • Structured Deposits with FX Option (Deposits can be made in foreign currencies.) • Mutual Funds and Insurance in foreign currencies *2 Transactions in which customers convert one foreign currency into another, for example, U.S. Dollar to Euro or Australian Dollar to British Pound

2016 Annual Report

43

SPECIAL FEATURE

FinTech—Promoting Innovation with IT FinTech, the fusion of finance and technology, is a new business model that is attracting great attention. At SMFG, our efforts on this front are led by the IT Innovation Department, which in 2015 took over the functions of the project team we formed in 2012. Our new IT Innovation Department

Ties with companies and institutions outside Japan

In October 2015, holding company SMFG and SMBC formed the IT Innovation Department to strengthen FinTechrelated efforts across the Group. The project team formed in 2012 was designed to use IT and the Internet for investigative research into new services and their commercialization. Our new arrangement is designed to accelerate the original project team’s work. We position the department as the innovation hub for activities across all Group companies. The new department is based on a concept of open innovation, with an emphasis on making active use of external knowledge and pursuing new business models through alliances with non-financial companies. Agile development, another key concept, relates to speeding up our planning and prototyping / testing cycles for new financial services.

SMBC and Sumitomo Mitsui Card Company spearhead our efforts to study the latest trends and to find partners by sending staff to Silicon Valley to network with leadingedge start-ups and IT vendors and hence expand the SMFG network. As a means to cultivate ties with high-quality venture companies in FinTech in particular, we have ties with Plug and Play Tech Center, which is renowned for incubation, and we make strategic investments in local venture capital funds.

Plug and Play Tech Center (Santa Clara, U.S.)

IT Innovation Department—Our innovation hub

SMFG

IT Innovation Department Active use of external knowledge Pursuit of new business models through alliances with non-financial companies Agile development concept

Open innovation culture

44 2016 Annual Report

Ties with Japanese ventures To create ties with venture businesses, we host such events as the Open Innovation Meetup and the Mirai 2016 business pitch competition arranged by the cross-industry Triple I consortium. We draw on our resulting venture network in our promotion of innovation.

Final screening at Mirai 2016

Examples of our activities We are working with other companies in such areas as the introduction and testing of leading-edge services and technologies. At the same time, we are seeking to promote design thinking with help from outside experts to create ideas from our customers’ perspective.

Higher levels of convenience

Machine learning and neuroscience

We are collaborating on biometric identification with leading venture companies. One example is a project to test identification using veins in the palm with an ordinary smartphone camera.

SMBC is testing IBM’s Watson in its contact centers. Watson is able to respond to customer inquiries with optimum answers, and we see it as a tool for raising the quality of our response to customers. We have embarked on a project with a major IT vendor on neuroscience applications in financial services. We are looking at the use of neuroscience to provide optimum asset management assistance to customers. Palm authentication testing

Blockchain We have commenced joint research on blockchain technology with the National Institute of Informatics and Kinki University. Reflecting this technology’s significant influence on financial infrastructure, we are also collaborating with expert companies in the field on technology testing for financial services.

Watson trial in a contact center

Design thinking We have begun working with Tokyo Institute of Technology on design thinking, which is an approach for creating ideas from our customers’ perspective. Regular sessions are held to reflect on the image we should aim for as a financial institution and create new business ideas.

Design thinking session

Vision produced at a design thinking session

2016 Annual Report

45

Corporate Infrastructure

48

Corporate Governance

50

Special Feature: Outside Director Interview

52

SMFG Directors and Corporate Auditors

54

Risk Management Initiatives

58

Compliance

60

Internal Audit System

61

Customer Satisfaction (CS) and Quality Improvement

62

Human Resources

64

Corporate Social Responsibility (CSR)

68

46 2016 Annual Report

Financial Review

2016 Annual Report

47

CORPORATE INFRASTRUCTURE

Corporate Governance Our basic position on corporate governance We are working to improve the effectiveness of corporate governance as we consider the strengthening and enhancement of corporate governance to be one of our top priorities in realizing “Our mission.” Further, SMFG has established its “SMFG Corporate Governance Guideline” as its principles and guidelines to be referred to for corporate governance. Please follow the link below for the SMFG Corporate

The Board has established four discretionary internal committees: the Nominating Committee, the Compensation Committee, the Auditing Committee, and the Risk Committee. Outside directors are appointed to all the committees to promote objective deliberations outside the sphere of business execution. The Nominating Committee, the Compensation Committee, and the Auditing Committee are chaired by outside directors for the purpose of further strengthening the governance function.

Governance Guideline. http://www.smfg.co.jp/english/aboutus/pdf/cg_guideline_e.pdf

SMFG’s corporate governance system As a holding company with a board of corporate auditors, SMFG has the following system in place.

Corporate auditors and Board of Corporate Auditors SMFG has a corporate auditor system whereby independent auditors audit directors’ performance in carrying out their duties in accordance with the policies established by the Board of Corporate Auditors, to which all the auditors belong. Three of the six corporate auditors are outside auditors.

Board of Directors The Board of Directors makes key decisions on company business execution and oversees the executive officers responsible for execution as they carry out their duties. The chairman of SMFG serves as the chairman of the Board of Directors. The role of the chairman is clearly separated from that of the president, who oversees the overall business operations. The Board has 14 members, of whom five are outside directors (as of June 30, 2016).

Management Committee The Management Committee is set up under the Board to serve as the top decision-making body. The Management Committee is chaired by the president of SMFG and the directors are appointed by the president. The committee members consider important management issues based on policies set by the Board of Directors, and the president has the authority to make the final decision after considering the committee’s recommendations.

Internal committee composition (all committees discretionary) : Chairman   : Member Nominating Committee Compensation Committee (1 inside director, (3 inside directors, 5 outside directors) 5 outside directors)

Yoshinori Yokoyama

Outside director

Kuniaki Nomura

Outside director

Arthur M. Mitchell

Outside director

Masaharu Kono

Outside director

Eriko Sakurai

Outside director

Masayuki Oku

Chairman of the Board

Koichi Miyata

President

Takeshi Kunibe

Director

Kozo Ogino

Director

Hirohide Yamaguchi*

Outside expert

* Chairman of the Advisory Board of Nikko Research Center, Inc., former Deputy Governor of the Bank of Japan

48 2016 Annual Report

Auditing Committee (4 inside directors, 3 outside directors)

Risk Committee (3 inside directors, 4 outside directors)

SMBC’s corporate governance system

directors are outside directors and three of SMBC’s six corporate auditors are outside auditors. The oversight of business operations as a whole, which is the role of the president at SMFG, is the role of the SMBC president and CEO.

The corporate governance system of SMBC is almost the same as holding company SMFG’s except that the Board of Directors has no internal committees. Three of SMBC’s 17

Conversion to a Company with Three Committees To date, SMFG has established a solid corporate governance system as a holding company with a board of corporate auditors. In order to further enhance this solid framework, SMFG decided to convert to a Company with Three Committees, subject to approval at the ordinary general meeting of shareholders scheduled for June 2017. This framework is globally recognized and is aligned with international banking regulations and supervision. Board of Directors Business execution decisions + Oversight of directors’ execution of duties

Board of Directors

Board of Corporate Auditors

Focus on supervision of executive officers’ execution of duties

Internal committees (Discretionary) Nominating Committee (1 inside director, 5 outside directors)

Compensation Committee (3 inside directors, 5 outside directors)

Risk Committee (3 inside directors, 4 outside directors)

Auditing Committee (4 inside directors, 3 outside directors)

Internal Committees (Mandatory)

June 2017

Management Committee (Inside directors + Executive officers)

Nomination Committee (Outside directors in the majority)

Compensation Committee (Outside directors in the majority)

(Discretionary) Risk Committee

Auditing Committee (Outside directors in the majority)

Reporting line (including personnel right of consent)

Management Committee Business execution decisions* Link

Departments

Audit Department

Departments

Audit Department

* Excludes areas designated by laws and ordinances as the jurisdiction of the Board of Directors

2016 Annual Report

49

SPECIAL FEATURE

Outside Director Interview We asked Mr. Arthur M. Mitchell, who became an outside director of SMFG in fiscal 2015, about corporate governance at SMFG and issues going forward. (Interview date: May 2016) Bio 1976 New York State Bar (current position) 2003 General Counsel of the Asian Development Bank 2007 Joined White & Case LLP 2008 Foreign Attorney in Japan registration (current position)

White & Case LLP



Registered Foreign Attorney in Japan (current position)

2015 SMFG Outside Director (current position)

Arthur M. Mitchell Director, Sumitomo Mitsui Financial Group, Inc. Registered attorney admitted in New York State Registered Foreign Attorney in Japan

Q “I feel strongly that SMFG is making serious efforts to make corporate governance better on a company-wide basis.”

50 2016 Annual Report

How do you feel about corporate governance at SMFG after a year as an outside director?

There have been significant changes in Japan’s corporate governance framework; the Stewardship Code and the Corporate Governance Code have been introduced and the Companies Act has been amended. However, the new rules only provide principles. It is up to companies themselves to decide how to respond and how to increase their corporate value over the medium to long term. I feel strongly that SMFG is making serious efforts to make corporate governance better on a company-wide basis. In addition to increasing the number of outside directors in fiscal 2015 and drawing up the SMFG Corporate Governance Guideline, SMFG has created opportunities for outside directors to have a dialogue with both external auditors and corporate auditors, so that outside directors can gather information without their independence being impacted. I feel that such dialogue is very meaningful. Also, the Board of Directors’ meeting has an atmosphere that encourages active discussion among directors. And when outside directors ask questions

or make suggestions, the director in charge and people from related departments are quick and diligent in responding. This is another factor that shows how much the company intends to utilize outsiders’ perspectives in its management. SMFG announced its intention to convert to a Company with Three Committees, subject to approval by the ordinary general meeting of shareholders scheduled in June 2017. I think the role of outside directors will become even more important when SMFG has legally sanctioned internal committees where outside directors hold majority.

Q

What do you think is needed to increase SMFG’s corporate value? And what role would you like to play in this?

I think it comes down to realizing its vision for the next decade which says, “We will become a global financial group that, by earning the highest trust of our customers, leads the growth of Japan and the Asian region.” SMFG is seeking to become a truly Asia-centric institution, expanding its network of offices in Asia, promoting ties with Asian banks, and strengthening its business in Asia to become a leading financial group in the region. Amid the general globalization of Japanese companies, I do not think the globalization trend at SMFG will change and I therefore think it is necessary to push ahead with further globalization in human resources and other areas of the corporate infrastructure. On the other hand, I do not think the importance of SMFG’s domestic business will change. When I talk with people from outside of Japan, they often tell me that they look to SMFG for contributions to the Japanese economy. Finance is an economy’s lifeblood, and SMFG must fulfill its mission of keeping the Japanese economy’s blood circulating to promote healthy growth. The recent amendments of the Japanese Banking Act have relaxed the conditions for financial groups investing in FinTech companies, and I think that the fusion of IT and finance will make further advances. I also think adaptation to such changes in business holds the key to SMFG’s future growth. Based on this awareness, in my position as an independent outside director I will draw on my experience as an attorney in Japan and overseas to point out risks and make suggestions regarding new business opportunities to SMFG’s management and contribute to increasing SMFG’s corporate value as a global financial group.

“I think it comes down to realizing its vision for the next decade which says, ‘We will become a global financial group that, by earning the highest trust of our customers, leads the growth of Japan and the Asian region.’”

2016 Annual Report

51

CORPORATE INFRASTRUCTURE

SMFG Directors and Corporate Auditors

(As of June 30, 2016)

Directors

Koichi Miyata Masayuki Oku Chairman of the Board

Takeshi Kunibe

President (Representative Director) Director at SMBC

Yujiro Ito

Director President and CEO (Representative Director) at SMBC

Director (Representative Director) Deputy President (Representative Director) at SMBC

Kozo Ogino

Jun Ohta

Director Senior Managing Director at SMBC

Director Senior Managing Director at SMBC

Katsunori Tanizaki

Koichi Noda

Director Senior Managing Director at SMBC

Director Senior Managing Director at SMBC

Tetsuya Kubo Director Chairman of the Board (Representative Director) at SMBC Nikko Securities Inc.

52 2016 Annual Report

Yoshinori Yokoyama*1 Director

Kuniaki Nomura*1

Arthur M. Mitchell*1

Director

Director

Masaharu Kohno*1

Eriko Sakurai*1

Director

Director

Corporate Auditors

Toshiyuki Teramoto Corporate Auditor Corporate Auditor at SMBC

Kazuhiko Nakao

Toru Mikami

Ikuo Uno*2

Corporate Auditor

Corporate Auditor

Satoshi Itoh*2

Rokuro Tsuruta*2

Corporate Auditor

Corporate Auditor

Corporate Auditor

*1 Messrs. and Ms. Yokoyama, Nomura, Mitchell, Kohno and Sakurai satisfy the requirements for an “outside director” under the Companies Act. *2 Messrs. Uno, Itoh and Tsuruta satisfy the requirements for an “outside corporate auditor” under the Companies Act.

Please see page 100 for SMBC directors and corporate auditors. 2016 Annual Report

53

CORPORATE INFRASTRUCTURE

Risk Management Our basic position

Risk appetite

Major change in the business environment for financial institutions, including economic, financial, and regulatory conditions, has increased the importance of promoting appropriate risk-taking practices at a diversified financial services company like SMFG as we have developed our businesses and pursue our management and financial targets. We need to be accurate in our perception of the business environment and risk and rigorous in our risk analysis and management. Business and risk view is shared across the SMFG Group, and we have an overarching Risk Appetite Framework (RAF) for systematic management of risk. RAF guides us in conducting business by clarifying the type and amount of risk we should take to expand earnings.

At SMFG, we have a Risk Appetite Statement that provides a qualitative explanation of our approach to risk taking and risk management for such categories as soundness, profitability, and liquidity. We also have quantitative Risk Appetite Measures that function as benchmarks for risks that we are considering taking and for risk / return. As an illustration, for the soundness category, our Risk Appetite Statement has “maintain a sufficient level of capital to support sustainable growth” as the overall policy. It also includes specific policies for the fiscal year in question based on our view of the environment and risk. The Risk Appetite Measures are numerous and include the common equity Tier 1 (CET1) ratio.

SMFG’s Risk Appetite Framework

Operation of Risk Appetite Framework

Within the SMFG Group’s overall exercise of risk controls, we seek to secure appropriate risk / return by clarifying the types and levels of risk that we are willing to take on or prepared to tolerate for profit growth (risk appetite). Risk Appetite Framework (RAF) plays a key role in SMFG’s realization of sustainable growth, and we position RAF and business strategy as the two pivots of our business management. Our basic position and risk appetite specifics are set out in an internal document for group-wide use.

The process of setting risk appetite for each fiscal year begins with discussions on the current and future business environment and risks by the Management Committee and the Board of Directors. Based on their shared view of risks, they select Top Risks, that is to say the risks that may have a material impact on SMFG. Risk appetite is then decided on the basis of stress test results and other risk analysis that illustrates impact if risks should be realized. Business strategy and policies for the conduct of business are drawn up on the basis of the risk appetite decisions.

Risk Appetite Framework Positioning

Risk Appetite Composition

Environment / Risk View

Profitability

events and Top Risks

and monitoring • Risk capital management

Categories

• Risk appetite establishment

Business Strategy

Liquidity Credit Market

• Medium-term

management plan • Business plan

Operational Others*1

Established for each category

• Shared company risk

Risk Appetite Framework

Risk Appetite Statement

Soundness

• Written description of risk appetite by clarifying appropriate risk taking and risk management

Risk Appetite Measures • Quantitative Risk Appetite Measures that

function as benchmarks for risk taking that is under consideration, risk tolerance, and risk / return*2 Monitoring based on three risk management levels set in accordance with the extent of deviation from assumptions at the start of the fiscal year

• Verification through

stress tests

Two pivots of our business management

54 2016 Annual Report

*1 Items related to compliance, processing risk, system risk, and others *2 Separately, measures are established for use in predicting change in Risk Appetite Measures and understanding the current risk situation. Monitoring is conducted based on these measures.

Views of the environment and risks, including Top Risks, are continuously updated in the course of the fiscal year’s business and the risk appetite situation is monitored regularly through the medium of Risk Appetite Measures and other controls. The results are reported to the Management Committee and the Board of Directors. If risk appetite monitoring reveals notable deviation from the measures set at the start of the fiscal year, consideration is given to revising risk appetite and business strategy as required.

Comprehensive risk management Risk is managed systematically at SMFG. Thorough assessments of the environment and risk, including Top Risks, are carried out to ensure effective operation of RAF, and there is a framework for risk analysis (stress tests) and risk capital management.

Our basic position At SMFG, we classify group-wide risk into credit risk, market risk, liquidity risk, and operational risk, and we manage each risk according to its particular characteristics. Holding company SMFG provides guidance to Group companies in identifying categories of risk they need to address

for their particular businesses. These risk categories are continuously reviewed and new risks are added when they arise due to changes in the operating environment.

Top Risks We select the risks that may have a material impact on business management, mainly from the potential risks for the next 12 months, and label these Top Risks. The selection of Top Risks involves a wide-range screening for candidates, an evaluation of each risk’s potential impact and probability of occurrence, and full discussion by the Risk Committee (see page 57), the Management Committee, and the Board of Directors. Environment and risk views are shared across the Group by means of this process, and we seek to refine our risk management by continually checking on the status of our responses to each Top Risk. Cyber risk is one of our selections for Top Risk. Based on the growing sophistication and variety of cyber­ attacks and the scale of their social impact in case they cause information systems to crash, we have made reinforcement for attacks a top management priority.

Risk Management Categories Risk Management Framework

Categories

Credit Risk

Credit risk is the possibility of a loss arising from a credit event, such as deterioration in the financial condition of a borrower, that causes an asset (including off-balance sheet transactions) to lose value or become worthless.

Market Risk

Market risk is the possibility that fluctuations in interest rates, foreign exchange rates, stock prices, or other market prices will change the market value of financial products, leading to a loss. (Categories include banking risk, trading risk, and strategic equity investment risk.)

Operational Risk

Operational risk is the possibility of losses arising from inadequate or failed internal processes, people, and systems or from external events. (Categories include processing risk and system risk.)

ALM / Funding Gap

Liquidity Risk

Liquidity risk is defined as uncertainty around the ability of the firm to meet debt obligations without incurring unacceptably large losses. Examples of such risk include the possible inability to meet current and future cash flow / collateral needs, both expected and unexpected. In such cases, the firm may be required to raise funds at less than favorable rates or be unable to raise sufficient funds for settlement.

Management by Risk Type

Other Risks (Settlement Risk and Others)

Risk Capital-Based Management



2016 Annual Report

55

Risk Management

Stress testing

Risk capital management

Financial institutions’ business environment is constantly changing and can sometimes impact heavily on operations. At SMFG, we use stress testing for forward-looking risk management, seeking to analyze and comprehend the effect on SMFG’s soundness if such risks as recession or market turbulence should materialize. In our stress tests, we use the previously explained Top Risks as well as multiple scenarios produced in discussions with experts and related business units and departments. For business strategy, we use stress tests to assess risktaking capabilities at SMFG and verify the appropriateness of strategies based on whether adequate soundness can be maintained under stress.

In managing the risk categories shared by the SMFG Group as a whole, we apply a uniform standard, risk capital*1 based on VaR (value at risk)*2. This measurement is applied to credit, market, and operational risk, taking account of each risk’s particular characteristics and individual Group company business characteristics, and used to set upper limits within the scope of our resources (capital). Risk capital is also used in optimizing capital allocation on a Group consolidated basis. *1 Risk capital: The amount of capital required to cover the theoretical maximum potential loss arising from risks of business operations. *2 VaR: The maximum loss expectation for a portfolio of financial assets for a given probability.

Stress Testing Process

(1) Scenario design

Scenarios are designed based on the Corporate Risk Management Department’s summation of Top Risks discussed by the Risk Committee, the Management Committee, and the Board of Directors and the views of related departments on such factors as future global trends. Trend scenario (economic forecast)

Downside scenario (within the bounds of possibility)

Stress scenario (once in 10 years)

Severe stress scenario (once in 25 years)

(2) Scenario finalization

Scenarios are revised as necessary based on the outcome of discussions between specialists and related departments.

(3) Calculation of impact

The scenario’s impact on each financial item is estimated and aggregated for analysis of the impact on such factors as the common equity Tier 1 ratio.

(4) C  onfirmation by the Management Committee and the Board of Directors

56 2016 Annual Report

The impact on the common equity Tier 1 ratio etc., (3), from the scenario set in (2) is reported to the Management Committee and the Board of Directors for verification of the appropriateness of business strategy.

SMFG’s risk management system Risk management system Reflecting the importance of risk management, top management plays an active role in the process. The group-wide basic policies for risk management are determined by the Management Committee before being authorized by the Board of Directors. In line with SMFG’s group-wide basic policies for risk management, the functions for managing major risks are consolidated at the Corporate Risk Management Department, and we seek to refine our risk management system by such means as cross-the-board reviews for each risk category. In addition, the Internal Audit Unit audits risk management to verify whether the system is working properly. Risk management systems are in place at the individual Group companies for their particular businesses in

accordance with the basic policies. At SMBC, for example, specific departments have been appointed for risks associated with settlement in addition to the overall handling of such categories as credit and market risk. Each risk category is managed in accordance with its particular characteristics.

Risk Committee The Risk Committee is an internal committee of the Board of Directors, composed of outside directors as well as inside and outside experts. The Risk Committee meets regularly to discuss a wide range of risk management and compliance topics, including Top Risks and RAF, from a specialist viewpoint. The results are reported to the Management Committee and the Board of Directors for reflection in SMFG Group operations.

SMFG’s Risk Management System

Board of Directors Risk Committee Corporate Auditors, Board of Corporate Auditors Management Committee External Audit

SMBC Trust Bank Guidance in drafting basic policies

Internal Audit Department

Management Committee

Credit Risk Management Committee

Market Risk Management Committee

SMBC Nikko Securities

Sumitomo Mitsui Finance and Leasing

Designated Board Members

Board Member in Charge of Risk Management Unit

Corporate Auditors, Board of Corporate Auditors External Audit

Internal Audit Department

SMBC Friend Securities Credit Risk Market Risk Liquidity Risk Operational Risk General Affairs Department IT Planning Department

Processing Risk

System Risk

Sumitomo Mitsui Card

Corporate Planning Department Corporate Risk Management Department

Cedyna

Credit & Investment Planning Department Corporate Risk Management Department

Credit Risk

Comprehensive risk management

Market Risk

Corporate Planning Department

Liquidity Risk Operational Risk

Monitoring SMBC Consumer Finance

Japan Research Institute

Operations Planning Department

Processing Risk

IT Planning Department

System Risk

Other Departments

Other Risks

Settlement Risk

Corporate Risk Management Department

Comprehensive risk management

Risk Management Unit

Holding Company SMFG

Designated Board Members

Board of Directors

SMBC

Corporate Risk Management Department

2016 Annual Report

57

CORPORATE INFRASTRUCTURE

Compliance Compliance Systems at SMFG Basic compliance policies Management positions the strengthening of compliance as a key issue in enabling SMFG to fulfill its public mission and social responsibilities as a global financial group. We are increasing our efforts to ensure that compliance policies are followed properly as we aim to become a truly outstanding global group.

Group management from the compliance perspective As a financial holding company, SMFG seeks to maintain a compliance system that provides appropriate instructions, guidance, and monitoring for Group company compliance to maintain sound and proper business operations across the Group as a whole. Specifically, SMFG manages and monitors the self-­ sustaining compliance functions of individual Group companies through regular meetings attended by all Group companies and meetings with individual companies.

Reporting system for inappropriate accounting and auditing activities The SMFG Group Alarm Line is intended to promote selfcleansing through early detection and rectification of actions that may violate laws and regulations. All Group company employees can use this internal means of reporting from inside and outside their company. The SMFG Accounting and Auditing Hotline is aimed at strengthening the Group’s self-cleansing function by encouraging early detection and rectification of improper actions relating to accounting, accounting internal controls, and auditing at holding company SMFG and its consolidated subsidiaries. The hotline can be used from inside or outside the Group to report accounting and auditing irregularities. For more about the SMFG Accounting and Auditing Hotline, please see page 93.

Compliance Systems at SMFG Holding Company SMFG Corporate Auditors / Board of Corporate

Audit

Board of Directors Management Committee

Report

Audit Dept.

Directions

Audit Audit / Monitoring Group Company

Audit / Monitoring

Report

Compliance Committee

General Affairs Dept. Compliance System Oversight Report and Guidelines

Departments and Offices General Managers responsible for compliance Compliance Officers to assist and monitor General Managers Management Report

Group Companies SMBC, SMBC Trust Bank, Sumitomo Mitsui Finance and Leasing, SMBC Nikko Securities, SMBC Friend Securities, Sumitomo Mitsui Card, Cedyna, SMBC Consumer Finance, and JRI

58 2016 Annual Report

Compliance Systems at SMBC Strengthening of the compliance system It is generally required for all corporations to be in compliance with laws, regulations, and other social standards. It is essential for banks to be fully in compliance to fulfill their public missions and corporate social responsibilities as financial institutions. In accordance with the basic policies of SMFG, SMBC requires its management and staff to give utmost consideration to people’s trust in the bank, abide by laws and regulations, maintain high ethical standards, and act fairly and sincerely. Therefore, SMBC considers that being fully compliant with laws and regulations is one of the most critical issues for management to deal with such as issues related to the Banking Law, the Financial Instruments and Exchange Act, compliance with any other related ordinances, and the elimination of anti-social organizations.

Compliance system and its management The basic structure of SMBC’s compliance system is a dual structure whereby, firstly, each department and office will be individually responsible for making preliminary decisions to ensure that its conduct is in compliance with laws and regulations and, secondly, an independent Internal Audit Unit will conduct impartial audits of observance of the compliance system by individual departments and offices. In order for the basic dual structure to be maintained and to effectively function, the Compliance Unit, consisting of the General Affairs Department and the Legal Department, will, at the direction of management, plan and promote systems to ensure observance of the compliance system. The Compliance Unit will issue instructions to and monitor the conduct of each department and office in SMBC and assist such departments and offices to make appropriate judgments regarding their observance of the compliance system. SMBC commits to the following operations for the said compliance structure to work effectively.

Preparation of the compliance manual SMBC has prepared its Compliance Manual by stating its objectives, guiding rules, and 60 rules of action in order to assist management and staff in selecting optimal actions. This manual has been approved by its Board of Directors.

Development of a compliance program The SMBC Board of Directors develops the detailed annual

plan for compliance-related activities for each fiscal year, including amendments to the rules and regulations as well as training, for the effective operation of the compliance system for SMBC and its consolidated subsidiaries. In fiscal 2016, our efforts to strengthen the compliance system are focused on the five areas of money laundering prevention and management of terrorism financing countermeasures, bribery prevention, customer information management, management of conflicts of interest, and Banking Law management.

Appointment of compliance officers In addition to appointing compliance officers to each branch and department of the bank, “Area Compliance Officers,” operating independently from areas of business promotion, are appointed to the branches and offices of the Wholesale Banking Unit and the Retail Banking Unit to directly supervise and manage compliance activities.

Set up of the Compliance Committee The Compliance Committee, which consists of cross-departmental compliance members, chaired by the director in charge of compliance, has been created in order to comprehensively review and discuss compliance related issues. To enhance fair and objective deliberations by the Compliance Committee, outside members are also invited to participate in Compliance Committee meetings. For the handling of any complaints received from and conflicts with our clients, SMBC has executed agreements, respectively, with the Japanese Bankers Association, a designated dispute resolution agency under the Banking Act; the Trust Companies Association of Japan, a Designated Dispute Resolution Organization under the Trust Business Act and Act on Provision, etc. of Trust Business by Financial Institutions; and the specified non-profit organization of “Financial Instruments Mediation Assistance Center,” one of the “Designated Dispute Resolution Agencies” under the Financial Instruments and Exchange Act.

For more about designated dispute resolution agencies and organizations, please see page 93. 2016 Annual Report

59

CORPORATE INFRASTRUCTURE

Internal Audit System Outline of the group’s internal audit system At SMFG, in addition to the Auditing Committee of the Board of Directors, the Internal Auditing Committee is established as part of the Management Committee, where the members discuss important auditing matters reported by the relevant departments. Under such a structure, the Audit Department is established as an internal auditing function, which is independent of business units. The Audit Department conducts internal audits for each unit and department to verify the soundness and effectiveness of internal control systems, including compliance and risk management. It is also responsible for the overall supervision of internal audit functions at Group companies, and it verifies the appropriateness and effectiveness of their internal control systems by monitoring the performance of internal audit activities and conducting group-wide audits on common subjects. On the basis of its monitoring and groupwide audit, the Audit Department provides recommendation and guidance to the business units and departments as well as to Group companies. Also, the department is working to strengthen cooperation with corporate auditors and accounting auditors through frequent exchanges of information for appropriate audit practices. SMBC has similar internal audit systems to those of SMFG, where the Internal Audit Unit is established and the Internal Auditing Committee is convened for discussions and reporting. The Internal Audit Unit conducts audits of operations at both domestic and overseas head offices, branches, and

SMBC Group companies in order to verify compliance and risk management systems. It also carries out “theme audit,” which focuses on a particular business or specific risk management issue to test cross-organizational conditions of internal control. Each audit practice is not limited to simple inspection of deficiency but points out issues and makes suggestions for future improvement on the basis of rootcause analysis. Internal audit units are also established in other group companies according to their respective business characteristics.

Enhancing the quality and efficiency of internal audit The SMFG Audit Department has adopted auditing methods in accordance with the standards of the Institute of Internal Auditors (IIA)*. The department conducts risk-based audits and expands the same approach to group companies as well. It seeks to enhance the expertise of internal auditors in Group companies as it gathers up-to-date information on internal audits and offers that information to Group companies, organizes training programs, and promotes the obtaining of international certification as an auditor. Moreover, it is proactively working on a group-wide quality assessment of internal audits based on the IIA standards. * The Institute of Internal Auditors, Inc. (IIA), was founded in 1941 in the United States as an organization dedicated to helping raise the level of specialization and the status of professionalism of internal auditing staff. Its main activity is to hold examinations and approve licenses for Certified Internal Auditor (CIA), which is an internationally recognized qualification in both theoretical and practical knowledge for internal auditor.

Internal Audit System at SMFG and SMBC Holding Company SMFG Shareholders’ Meeting Board of Directors Nominating Committee

Compensation Committee

Group Strategy Committee

Risk Committee

Management Committee

Auditing Committee

Internal Auditing Committee

SMBC Corporate Auditors / Board of Corporate Auditors Office of Corporate Auditors

Shareholders’ Meeting Board of Directors Management Committee

Internal Audit Audits Department

Internal Audits

Internal Audit Unit Internal Audit Department Credit Review Department

Auditing

60 2016 Annual Report

Office of Corporate Auditors Monitoring

All Departments

Internal Auditing Committee

Business units subject to auditing

Head Office / Business Units

Business units subject to auditing

Corporate Auditors / Board of Corporate Auditors

CORPORATE INFRASTRUCTURE

Customer Satisfaction (CS) and Quality Improvement Our basic position

Measures taken by SMBC

SMFG group companies are united in their efforts for customer satisfaction and quality improvement in line with “Our Mission” that states “We grow and prosper together with our customers, by providing services of greater value to them.”

SMBC takes active steps to utilize customer feedback in its operations.

Our system SMFG has the Group CS Committee to promote cooperation across the group and holds regular meetings where group companies can exchange information on feedback from customers and exchange ideas on measures for promoting customer satisfaction. As such, the whole group is involved in customer satisfaction and quality improvement.

Group CS Committee SMFG Group company CS departments

Customer

Group CS Committee Information gathering

Analysis

Feedback

Improvement activities

Fiduciary Duty Declaration SMFG has made a policy declaration for customer orientation in the asset management and asset formation business. For more about the Fiduciary Duty Declaration, please see page 94.

Responding to customers’ opinions and requests Customers’ opinions and requests are entered into the “Voice of the Customers” (VOC) database and shared widely across the bank. The data are analyzed by all departments of the bank and channeled into enhancing our response to customers through use in improving products and services and in staff training. The Quality Management Department is responsible for developing plans, proposals, and systems for the improvement of customer satisfaction and quality. In addition, this department hosts meetings of the CS and Quality Improvement Committee, which is chaired by the president, to discuss appropriate cross-departmental measures for the entire bank to enable us to provide services that enhance customer satisfaction.

Clients always come first SMBC sets forth detailed action principles under the “Clients always come first” of the Compliance Manual, along with “Our Mission” mentioned earlier, in order to enforce “Clients always come first” (CCF) marketing attitude. Furthermore, the bank raises awareness of the CCF attitude among all employees through Group training seminars and study sessions conducted at branches. During such training seminars and study sessions, the bank specifically incorporates clients’ opinions and requests for the implementation of the CCF attitude into daily business activities.

Measures to improve Customer Satisfaction (CS) and Quality of SMBC Toll-free telephone service (domestic calls only), CS surveys and questionnaires

Customers

Input

Opinions Branches and other offices Response

Voice of the Customers (VOC) Database

Head office departments

CS and Quality Improvement Committee

Reports

Analysis

Guidance at the branch Improvement of products and services Management Principles / Compliance Manual

Quality Management Dept.

Directives

Training seminars and study sessions

2016 Annual Report

61

CORPORATE INFRASTRUCTURE

Human Resources Human resources development that embodies our Five Values Initiatives to promote our Five Values

Initiatives to foster a Team SMFG spirit

To enable our Five Values to permeate group-wide, we have SMFG joint training seminars where new hires across group companies come together and a joint SMFG management program for Group company managers to engage in discussions about SMFG’s future.

To foster a Team SMFG spirit, we arrange for interchanges between employees of different Group companies and seek to promote Group ties through human resources strategies, such as joint activities for new hires.

SMFG joint company briefing SMFG joint program for new hires

Five Values Values shared by our staff and directors in Japan and overseas to guide us in our client-centric approach • Customer First • Proactive and Innovative • Speed • Quality • Team SMBC / SMFG

Initiatives to promote “Proactive & Innovative” SMBC has set its sights on becoming a “Proactive & Innovative head office” where high sensitivity to change in the environment feeds into early response in effecting measures and producing ideas. In fiscal 2016, the expectations of main office staff are being symbolized as an “Aggressively Proactive and Innovative head office,” creating a platform for thinking with unprecedented freedom and working in a spirit of positive challenge and tireless enthusiasm. In tandem with this initiative, SMFG is building an in-house Poster for employees body of knowledge and increasing its hiring and utilization of external personnel.

Added value for customers from a workforce instilled with the Five Values SMFG’s success in increasing its capability as a global financial group year by year is the result not only of our wide-ranging products and services but also of growth in the number of colleagues who provide us with “intelligence” we can utilize in resolving customer problems based on the use of diverse information. The Five Values are the summation of this “intelligence” expressed as an ethic and action plan. As each one of us practices the Five Values, we believe we can provide added value that exceeds our clients’ expectations by orchestrating “intelligence” through Group company or cross-border collaboration.

62 2016 Annual Report

Takeshi Kunibe President and CEO, Sumitomo Mitsui Banking Corporation

A business environment where diversity is a strength Initiatives to promote female participation

Reforms to working practices

We hold SMFG joint women’s career forums each year for young female employees with the aim of giving them a clear focus in their work at an early stage. The Group is also united in its response to the Act concerning Promotion of Women's Career Activities, with each company having set targets for its female manager ratio.

To provide an environment for participation by employees working limited hours, we have introduced awareness training and telecommuting and we are seeking to rectify long working hours and introduce flextime.

Promotion of globalization At SMFG, we are working on staff development to support the rapid globalization of our business. SMBC offers a variety of global training programs in which staff from all over the world participate, including a program jointly developed with a world-leading business school. We are also promoting staff exchanges between Japan and overseas to encourage mutual understanding. By creating an environment where employees from different backgrounds work together and inspire each other, we seek to provide services of greater value Global Leadership Program to our customers.

SMFG joint women’s career forum

Message from an outside expert As the female participation situation at SMBC varies widely from department to department, SMBC has set challenges on an individual department basis. The SMBC President and CEO is watching with close interest, which has fostered a positive spirit of competition among departments. SMBC has also commenced group-wide initiatives and I am looking to results from the mutual stimulus they provide.

Outside member of Diversity and Inclusion Committee* at SMBC

Jobs for those with disabilities

Kimie Iwata

SMBC Nikko Securities employs athletes with disabilities, and it has set up Nikko MiRun, a company that provides jobs for people with disabilities. In March 2016, its efforts were recognized by the Ministry of the Environment as Good Practice in accordance with the ministry’s Principles for Financial Action for the 21st Century.

President, Japan Institute for Women’s Empowerment & Diversity Management

* The Diversity and Inclusion Committee was formed in May 2014 to speed up the promotion of diversity at SMBC as a whole. It is chaired by the SMBC President and members include a deputy president, general managers, and outside experts. The committee is promoting multiple initiatives to assist women in their careers and reform working practices for all employees.

Promotion of the role of women In July 2015, SMBC made changes to its personnel system to provide more career positions for women. Under the revised system, careers can be advanced in stages in accordance with the individual’s growth, thus providing a rewarding workplace for long-term participation.

Reforms to the Personnel System Supervisor

Before

10 years after joining the bank

No title

Deputy Supervisor Leader

No title New

Supervisor

20.0

(People)

(Target)

1,000

(%)

20

15.7 750 500

After Career advancement in stages in accordance with growth

Number and Ratio of Female Managers

12.2

15 743 10

567

250 0

5

’14

’15

’20

0 (FY)

Number of female managers (left axis)  Ratio of female managers (right axis) Note: Figures are for SMBC.

2016 Annual Report

63

CORPORATE INFRASTRUCTURE

Corporate Social Responsibility (CSR) Aiming to contribute to the sustained development of society as a whole

Basic CSR policies

Society today is confronting numerous and wide-ranging issues, including global warming, rapid population growth, growth in poverty, and low birthrates and aging populations in developed countries. As a global financial group, at SMFG we regard it as our social responsibility to remind ourselves of our role and play our part in addressing such issues.

SMFG has a CSR definition and CSR “business ethics” to make the position of CSR clear and promote CSR effectively. Please follow the link to read about our CSR “business ethics.” http://www.smfg.co.jp/english/responsibility/smfgcsr/csr.html

SMFG’s definition of CSR In the conduct of its business activities, SMFG fulfills its social responsibilities by contributing to the sustainable development of society as a whole through offering higher added value to customers; shareholders and the market; the environment and society; and employees.

Priority issues (Materiality) that SMFG should address SMFG has designated “Environment,” “Next Generation,” and “Community” as its three priority issues (Materiality) for the medium to long term.

Environment

Next Generation

Community

Toward a sustainable world that all can share

Toward a vibrant society that balances maturity and growth

Toward a healthy and distinctive community in which everyone can participate

Where we want to be ten years from now

Where we want to be ten years from now

Where we want to be ten years from now

A financial services group that takes the lead in tackling global environmental issues

A financial services group that helps create a society where the next generation can also play an active part vigorously

A financial services group that contributes to the creation and further development of safe communities, which are the bedrock of Japanese society as a whole

Issues we should address • Promotion of environmental management integrated with business • Reducing environmental impact • Managing environmental risks • Promotion of environmental businesses • Environment-related social contribution activities

Issues we should address • Support for next generation asset inheritance and business succession • Contributing as a financial institution to emerging countries • Contribution to raising the level of financial literacy

• Reconstruction for the Great East Japan Earthquake • Contribute to achieving and developing safe and secure communities

• Global HR development

• Community-based activities led by officers and employees

• Work-life balance and workplace with diversity

• Efforts to solve social issues by collaborating with NGOs and NPOs

Endorsement of initiatives in Japan and overseas As a global corporate citizen, SMFG is fully aware of the social influence of financial institutions, and it endorses the following initiatives in Japan and overseas (action guidelines and principles for corporate activities).

64 2016 Annual Report

Issues we should address

Please follow the link to read about initiatives endorsed by SMFG.  http://www.smfg.co.jp/english/responsibility/smfgcsr/structure.

html

Environment Our basic position SMFG recognizes the environment as one of its most important management issues. We are implementing initiatives to harmonize environmental preservation with corporate activities based on our Group Environmental Policy.

Managing environmental risk

Please follow the link to read about our Group Environmental Policy.

SMBC East Tower’s CO2 emissions to be approximately 35% lower than an average office building. SMFG organized an “SMFG Clean-Up Day” in which approximately 1,400 employees and their families participated in four locations.

http://www.smfg.co.jp/english/responsibility/environment/ index.html

Environmental Management System (EMS) based on ISO 14001 certification In 1998, SMBC became the first Japanese bank to obtain ISO 14001* certification. This certification is now held by holding company SMFG and eight major Group companies.

SMBC’s Credit Policy, which sets out universal and basic philosophies, guidelines, and rules for credit operations, makes explicit reference to environmental risk in credit assessment. In addition, in its environmental and risk assessment, SMBC follows the Equator Principles, which provide privatesector financial institutions a framework for environmental and social risk in financing large-scale development projects.

* International standard for environmental management systems

Three pillars of the Group’s activities The three pillars of our environmental action plan are: “Reduction of impacts on environment,” “Management of environmental risks,” and “Promotion of environmental businesses.” We have set environmental objectives for each environmental activity and follow the procedures of Plan, Do, Check, and Act (PDCA) in conducting such activities.

Reducing environmental impact SMFG sets objectives for reducing electricity and other energy consumption each year and seeks to be proactive in reaching its goals. The SMBC East Tower, which opened in summer 2015 in Tokyo’s Marunouchi district, pays heed to nature conservation and utilization; the installation and use of highly efficient systems; the reduction of adverse effects on the environment; and the creation and maintenance of a sustainable building. As a result of the utilization of diverse energy-saving technologies, we expect the

Equator Principles

Promoting environmental businesses SMFG positions environmental businesses as a means to preserve and improve the global environment through its core business operations. SMFG’s commitment extends from the global environment to individual countries’ economic development. Examples include the SMBC Environmental Assessment Loan / Private Placement Bond to assist clients in promoting their environmental management, support for environmental infrastructure improvement projects in emerging countries, and support for renewable energy projects in emerging countries. Additionally, in 2015 SMBC became the first private-sector Japanese bank to issue green bonds.

SMBC East Tower

2016 Annual Report

65

Corporate Social Responsibility

Next Generation Our basic position

Global human resources development

SMFG draws on its financial functions to the full in the development of industries and personnel that will support the next generation. It is also engaged in the improvement of financial literacy and the development of markets that support healthy economic growth in emerging countries. We seek to make use of our financial functions and financial knowledge to assist in the creation of a vibrant society where the next generation can flourish.

The SMBC Foundation for International Cooperation provides scholarships every year to 7 or 8 students coming from Asia to attend graduate schools in Japan. The objectives of the scholarships are the development of human resources that may contribute to the economic development of emerging countries and international exchange. The foundation also provides subsidies to research institutes and researchers that undertake projects contributing to economic development in emerging countries. The SMBC Global Foundation, based in the United States, has provided scholarships to more than 6,000 university students in Asian countries since its establishment in 1994. In the United States, it supports educational trips to Japan organized by a high school in Harlem, New York City, and participation in school beautification programs by volunteers from SMBC. The foundation also matches donations from employees.

Improvements to financial literacy SMFG Group companies each provide financial and economic education in accordance with their category of business. SMBC and SMBC Nikko Securities accept visits to their branches by students from elementary to high school. SMBC Consumer Finance organizes financial and economic seminars for college students and those who have entered the workforce. SMBC is the publisher of What Does a Bank Do?, a book for elementary school students, and JUNIOR SAFE, a children’s magazine about the environment. Its activities also include the co-sponsorship of the KidZania work experience theme park and support for the Finance Park economic educational program for middle school students.

Natsuyasumi Kodomo Ginko Tankentai workplace experience for elementary school students organized by SMBC

66 2016 Annual Report

Event for foreign students in Japan

Community Our basic position In addition to the social contribution of its daily business, SMFG strives to be a good corporate citizen and fulfill its social responsibilities by undertaking a wide variety of activities to help society prosper.

Support for areas affected by natural disasters As of March 2016, more than 890 SMFG executives, employees, and members of their families had participated in voluntary activities in areas affected by the Great East Japan Earthquake. The Group has donated approximately ¥80 million for the Kumamoto Earthquake, which occurred in April 2016, and executives and employees are also volunteering of their own accord. SMBC has housing loans with special rates and a special corporate fund for clients affected by the earthquake. SMBC has also organized a special summer schedule for job applicant screening for students affected by the earthquake in addition to its usual selection process.

Social event at post-quake housing in Ishinomaki

Volunteering with NPOs

Initiatives to assist the elderly and people with cognitive impairment and disabilities As of March 2016, SMFG had trained approximately 9,100 staff to assist people with cognitive impairment. SMBC has training programs, such as Universal Manner, for the assistance of the elderly and people with disabilities.

Initiatives targeted at social issues in Asia In March 2015, SMBC and PT Bank Sumitomo Mitsui Indonesia signed a memorandum of understanding with the Indonesian major Djarum Group’s Djarum Foundation for the promotion of CSR activities in Indonesia. In the sphere of education, equipment has been donated to vocational schools. In July 2015, SMBC became the first Japanese company to sign a memorandum of understanding with the Japan Committee for UNICEF. The agreement concerns a training program for elementary and middle school teachers in Myanmar that gives SMBC the opportunity to contribute to development in Myanmar over the next three years.

Resolution of social issues in conjunction with NGOs and NPOs Approximately 10,000 executives and employees participate in SMBC’s voluntary scheme for deductions from salary for donations to charitable organizations. In fiscal 2015, donations were made to 30 organizations working on the resolution of social issues in Japan and overseas. Many executives and employees of other Group companies are also enrolled in volunteer funds that contribute to welfare and environmental activities. SMFG arranges volunteer activities for staff in collaboration with organizations engaged in social problem solving, primarily recipients of volunteer funds. In fiscal 2015, approximately 2,600 executives, employees, and members of their families participated.

Marine vocational school in Indonesia

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67

CORPORATE INFRASTRUCTURE

Financial Review Operating Results

Consolidated net business profit

Income Summary (SMFG consolidated) Year ended March 31

(Billions of yen)

2015 (A)

Increase (decrease) (B) – (A)

2016 (B)

Consolidated gross profit

2,980.4

2,904.0

76.4

General and administrative expenses

1,659.3

1,724.8

65.5

10.6

36.2

25.6

1,310.5

1,142.9

167.5

7.8

102.8

95.0

66.7

69.0

+2.3

Equity in gains (losses) of affiliates Consolidated net business profit Total credit cost Gains (losses) on stocks

48.2

123.9

75.7

1,321.2

985.3

335.9

753.6

646.7

106.9

Others Ordinary profit Profit attributable to owners of parent

(Reference) Income Summary (SMBC non-consolidated) (Billions of yen) Year ended March 31

2015 (A)

Gross banking profit

Increase (decrease) (B) – (A)

2016 (B)

1,634.3

1,534.3

791.2

805.5

14.3

843.1

728.8

114.3 76.9

Expenses*1 Banking profit*2

100.0

Credit cost

80.1

3.2

Gains (losses) on stocks

52.6

35.3

17.3

Others

19.8

19.4

+0.4

Ordinary profit

956.0

747.9

208.1

Net income

643.0

609.2

33.8

*1 Excluding non-recurring losses *2 Before provision for general reserve for possible loan losses

Consolidated gross profit / Consolidated net business profit / Profit attributable to owners of parent (SMFG Consolidated)

Despite an increase in revenue from credit card operations at Sumitomo Mitsui Card Company, consolidated gross profit decreased by ¥76.4 billion year-on-year to ¥2,904.0 billion. The primary reasons for the decrease were the fall in net interest income at SMBC due to decreases in interest on loans and discounts, interest and dividends on securities, and an increase in interest on deposits. Sluggish growth in sales of foreign bonds and investment trusts at SMBC Nikko Securities was also a critical factor behind the said decrease. General and administrative expenses increased by ¥65.5 billion year-on-year to ¥1,724.8 billion mainly due to ongoing investments by SMBC and other subsidiaries to enhance top-line growth. Equity in gains (losses) of affiliates decreased by ¥25.6 billion year-on-year to loss of ¥36.2 billion primarily due to a goodwill impairment loss of investments in PT Bank Tabungan Pensiunan Nasional Tbk (BTPN) resulting from a decline in its share price, offsetting contribution of earnings of The Bank of East Asia, which had become an equity method affiliate in March 2015. As a result, consolidated net business profit decreased by ¥167.5 billion year-on-year to ¥1,142.9 billion.

Credit cost Total credit cost increased by ¥95.0 billion year-on-year to ¥102.8 billion. This increase was mainly due to a decrease in gains on reversal of reserve for possible loan losses recognized and for other reasons by SMBC.

Gains (losses) on stocks Gains (losses) on stocks increased by ¥2.3 billion year-onyear to ¥69.0 billion.

(Trillions of yen) 4

3

2.79

2.59

Ordinary profit

2.98

2.90

Ordinary profit decreased by ¥335.9 billion year-on-year to ¥985.3 billion. This decrease was mainly due to the provisions for losses on interest repayments and for other reasons.

2.90

2

1

1.01 0.52

0

’11

1.17 0.79 ’12

1.24 0.84 ’13

1.31 0.75 ’14

Consolidated gross profit   Consolidated net business profit Profit attributable to owners of parent

68 2016 Annual Report

1.14

Profit attributable to owners of parent

0.65 ’15

(FY)

Profit attributable to owners of parent decreased by ¥106.9 billion year-on-year to ¥646.7 billion, after adjustments of ordinary profit for extraordinary gains and losses and income taxes.

Financial Position

Loans and bills discounted

Consolidated Balance Sheet (SMFG consolidated)

Increase (decrease) (B) – (A)

March 31

2015 (A)

Assets

183,442.6

186,585.8

+3,143.3

Loans and bills discounted

73,068.2

75,066.1

+1,997.8

Securities

29,633.7

25,264.4

4,369.2

172,746.3

176,138.2

+3,391.9

101,047.9

110,668.8

+9,620.9

13,825.9

14,250.4

+424.5

10,696.3

10,447.7

248.6

Liabilities Deposits Negotiable certificates of deposit Net assets

2016 (B)

(Billions of yen)

NPLs based on the Financial Reconstruction Act (SMFG consolidated) March 31

2015 (A)

NPLs based on the Financial Reconstruction Act (A)

2016 (B)

(Billions of yen) Increase (decrease) (B) – (A)

992.7

182.0

Normal assets

83,475.6

85,579.4

+2,103.8

Total (B)

84,650.3

86,572.2

+1,921.8

1.39%

1.15%

0.24%

Unrealized Gains (Losses) on Other Securities (SMFG consolidated) 2015

March 31

Consolidated balance sheet amount

Consolidated balance sheet amount

Deposits increased by ¥9,620.9 billion year-on-year to ¥110,668.8 billion. This increase was mainly due to increases in both individual and corporate deposits in Japan and to an increase in overseas deposits resulting from business expansion overseas. Negotiable certificates of deposit increased by ¥424.5 billion year-on-year to ¥14,250.4 billion.

NPLs based on the Financial Reconstruction Act decreased by ¥182.0 billion year-on-year to ¥992.7 billion. As a result, NPL ratio decreased by 0.24 percentage points year-on-year to 1.15%.

Securities Securities decreased by ¥4,369.2 billion year-on-year to ¥25,264.4 billion. Net unrealized gains on other securities decreased by ¥697.5 billion year-on-year to ¥1,907.5 billion.

(Billions of yen) Increase (decrease)

2016 Net unrealized gains (losses) (A)

Deposits

NPLs based on the Financial Reconstruction Act

1,174.8

NPL ratio (A/B)

Loans and bills discounted increased by ¥1,997.8 billion year-on-year to ¥75,066.1 billion. This increase was mainly due to increases in domestic corporate loans and overseas loans, primarily in the Americas, by SMBC.

Net unrealized gains (losses) (B)

Consolidated Balance Sheet (SMFG consolidated) (Trillions of yen)

Net unrealized gains (losses) (B) – (A)

Stocks

4,066.0

2,054.3

3,511.9

1,573.0

481.3

Bonds

13,699.6

50.0

10,893.1

109.2

+59.2

Others

8,497.9

500.6

8,728.5

225.3

275.3

26,263.4

2,605.0

23,133.4

1,907.5

697.5

Consolidated total assets 183.4

Cash and due from banks 42.8

Cash and due from banks 39.7 Loans and bills discounted 73.1

Deposits 101.0

13.8

Total

Note: The figures above include unrealized gains (losses) on negotiable certificates of deposit in “Cash and due from banks” and “Deposits with banks” and beneficiary claims on loan trusts in “Monetary claims bought,” etc.

Securities 29.6

Consolidated total assets 186.6

Negotiable certificates of deposit

Others 57.9

10.7

Securities 25.3 Others 43.5

Others 41.0

March 31, 2015

Loans and bills discounted 75.1

Net assets

Deposits 110.7

14.3

Negotiable certificates of deposit

Others 51.2 10.4

Net assets

March 31, 2016

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69

Financial Review

Capital

Capital

Consolidated capital ratio (international standard) (SMFG consolidated) March 31

2015 (A)

2016 (B)

(Billions of yen) Increase (decrease) (B) – (A)

Common equity Tier 1 capital

7,476.5

7,796.5

+320.0

Additional Tier 1 capital

1,052.1

1,235.2

+183.1

Tier 1 capital

8,528.6

9,031.7

+503.1

Tier 2 capital

2,437.3

2,204.3

233.0

Total capital

10,965.9

11,235.9

+270.0

Risk weighted assets

66,136.8

66,011.6

125.2

Common equity Tier 1 capital ratio

11.30%

11.81%

+0.51%

Tier 1 capital ratio

12.89%

13.68%

+0.79%

Total capital ratio

16.58%

17.02%

+0.44%

Basel III fully-loaded basis (Based on the definition as of March 31, 2019) Common equity Tier 1 capital Common equity Tier 1 capital ratio (Excludes net unrealized gains (losses) on other securities)

7,917.7

7,901.0

167

12.0%

11.9%

0.1%

9.0%

9.9%

+0.9%

Common equity Tier 1 capital increased by ¥320.0 billion year-on-year to ¥7,796.5 billion, and total capital increased by ¥270.0 billion year-on-year to ¥11,235.9 billion, due to an increase in profit attributable to owners of parent.

Risk weighted assets Risk weighted assets decreased by ¥125.2 billion year-onyear to ¥66,011.6 billion. The decrease was mainly due to an influence of yen appreciation, despite assets investments in the Americas and Europe by the International Banking Unit.

Capital ratio The common equity Tier 1 ratio increased by 0.51 percentage points year-on-year to 11.81%, and the total capital ratio increased by 0.44 percentage points year-on-year to 17.02%. Calculated on a Basel III fully-loaded basis (based on the definition as of March 31, 2019), the common equity Tier 1 ratio decreased by 0.1 percentage points year-on-year to 11.9%

Common equity Tier 1 ratio (Fully-loaded basis, SMFG consolidated) (Trillions of yen)

12.0

10

(%)

11.9

12

10.3 7.5

7.92

8.6

7.90 1.35 9

1.79

6.37 0.95

5.37 0.76

5

6

2.5

0

3

’12

’13

’14

’15

(FYE)

Common equity Tier 1 capital ( of which, net unrealized gains (losses) on other securities) (left axis) Common equity Tier 1 ratio (right axis)

70 2016 Annual Report

0

Dividend Our basic policy is to achieve a sustainable increase in shareholder value and raise dividend per share in a stable manner by realizing higher profitability and growth through growth investments with the focus on efficiency of our capital, while enhancing retained earnings to maintain financial soundness. In line with this policy, SMFG decides the ordinary dividend per share on common stock was ¥150 in fiscal 2015, a yearon-year increase of ¥10.

Ordinary dividend per share (Yen)(%) 200

60

Commemorative dividend

150

100

100

120 10

120

0

’11

150

45

32.7 30

26.8 50

140

26.2 21.3*

20.3

’12

’13

15

’14

’15

(FY)

0

Dividend per share (left axis)  Dividend payout ratio (right axis) * Dividend payout ratio including commemorative dividend (¥10 per share)

2016 Annual Report

71

Websites SMFG Home Page

IR Information

Corporate Social Responsibility

http://www.smfg.co.jp/ (Japanese) http://www.smfg.co.jp/english/ (English)

http://www.smfg.co.jp/investor/ (Japanese) http://www.smfg.co.jp/english/investor/ (English)

http://www.smfg.co.jp/responsibility/ (Japanese) http://www.smfg.co.jp/english/responsibility/ (English)

SMBC Global Site

About SMBC

http://www.smbc.co.jp/global/

http://www.smbc.co.jp/aboutus/english/

72 2016 Annual Report

Appendix I CONTENTS Group Companies............................................. 74

Corporate Data.................................................. 99

Risk Management.............................................. 79

Sumitomo Mitsui Financial Group, Inc.

SMFG Accounting and Auditing Hotline/ Designated Dispute Resolution Agencies......... 93

Board of Directors, Corporate Auditors and Executive Officers................................... 99

SMFG Fiduciary Duty Declaration...................... 94

SMFG Organization....................................... 99

Employees.......................................................... 95

Sumitomo Mitsui Banking Corporation

Main Work-Life Balance Support System........... 98

Board of Directors, Corporate Auditors and Executive Officers................................. 100 SMBC Organization..................................... 102 Principal Subsidiaries and Affiliates................. 104 Principal Domestic Subsidiaries.................. 104 Principal Overseas Subsidiaries.................. 105

Principal Affiliates......................................... 106

International Directory..................................... 107

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73

Group Companies

(as of March 31, 2016)

www.smfg.co.jp/english/ The companies of the Sumitomo Mitsui Financial Group (SMFG) primarily conduct commercial banking through the following financial services: leasing, securities, consumer finance, system development and data processing.

Business Mission

• We grow and prosper together with our customers, • •

by providing services of greater value to them. We aim to maximize our shareholders’ value through the continuous growth of our business. We create a work environment that encourages and rewards diligent and highly-motivated employees.

Company Name: Sumitomo Mitsui Financial Group, Inc. Business Description: Management of banking subsidiaries (under the stipulations of Japan’s Banking Act) and of non-bank subsidiaries, as well as the performance of ancillary functions Establishment: December 2, 2002 Head Office: 1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo, Japan Chairman of the Board: Masayuki Oku President: Koichi Miyata (Concurrent Director at Sumitomo Mitsui Banking Corporation) Capital: ¥2,337.8 billion Stock Exchange Listings: Tokyo Stock Exchange (First Section) Nagoya Stock Exchange (First Section) Note: American Depositary Receipts (ADRs) are listed on the New York Stock Exchange.

SUMITOMO MITSUI Banking Corporation Sumitomo Mitsui Banking Corporation (“SMBC”) was established in April 2001 through the merger of two leading banks of The Sakura Bank, Limited and The Sumitomo Bank, Limited. Sumitomo Mitsui Financial Group, Inc. was established in December 2002 as a bank holding company through the share transfer, and SMBC became a wholly owned subsidiary of SMFG. In March 2003, SMBC merged with The Wakashio Bank, Ltd. SMBC’s competitive advantages include its solid and extensive client base, the expeditious implementation of strategies, and also the service providing capability of its predominant Group companies. SMBC, as a core member of SMFG, integrally work with other Group companies to provide highly sophisticated and comprehensive financial services to clients.

74 2016 Annual Report

www.smbc.co.jp/global/index.html

Company Name: Sumitomo Mitsui Banking Corporation Business Profile: Commercial banking Establishment: June 6, 1996 Head Office: 1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo, Japan President and CEO: Takeshi Kunibe (Concurrent Director at Sumitomo Mitsui Financial Group) Number of Employees: 28,002 Number of branches and other business locations: 2,080* In Japan: Branches: 506





(Including 46 specialized deposit account branches)

Sub-branches: 469 Banking agencies: 2 Offices handling non-banking business: 24 Automated service centers: 1,079 Overseas: 38 Branches: 17 Sub-branches: 17 Representative offices: 4

number of domestic branches excludes ATMs located *Tatheretail convenience stores. The number of overseas branches excludes branches to be closing and locallyincorporated companies in overseas.

Credit Ratings (as of June 30, 2016) Moody’s Standard & Poor’s Fitch Ratings R&I JCR

Long-term

Short-term

A1 A A AA– AA

P–1 A–1 F1 a–1+ J–1+

Financial Information (Consolidated basis, years ended March 31) Billions of yen 2016 2015 2014 2013 For the Year: Ordinary income...... ¥  3,059.0 ¥  3,199.4 ¥  3,105.9 ¥  2,810.6 Ordinary profit ........ 930.3 1,198.9 1,298.7 928.7 Net income.............. 680.1 736.9 785.6 734.5 At Year-End: Net assets............... ¥  9,446.1 ¥ 10,036.0 ¥  8,640.7 ¥  8,257.0 Total assets............. 180,408.6 177,559.1 155,824.1 143,203.1

www.smbctb.co.jp/en SMBC Trust Bank was founded in February 1986. As well as our corporate trust operations, we have worked to develop personalized retail banking and asset management operations that utilize trust systems and functions. SMBC Trust Bank became part of the Sumitomo Mitsui Financial Group in October 2013. We are now making a fresh start following the integration of the retail banking operations of Citibank Japan Ltd. under the new PRESTIA brand in November 2015. SMBC Trust Bank service will be offered to a customer by combining our high-level expertise and experience in trust services, built up through our track record in this area, with the extensive information capabilities and solid organizational skills of the Sumitomo Mitsui Financial Group.

Company Name: SMBC Trust Bank Ltd. Business Profile: Commercial banking and Trust Banking Establishment: February 25, 1986 Head Office: 1-3-1, Nishi-Shimbashi, Minato-ku, Tokyo President & CEO: Hidetoshi Furukawa Number of Employees: 2,041 Number of branches: In Japan: 36 (Including Internet Branch and Sub-Branches)

Financial Information (Years ended March 31) Billions of yen 2016 2015 2014 For the Year: ¥  7.3 ¥  5.6 Ordinary income........................ ¥   20.5 Ordinary profit (loss).................. (9.5) (1.1) (0.9) Net income (loss)....................... (10.8) (1.3) (0.9) At Year-End: ¥224.2 ¥187.4 Total assets............................... ¥2,517.2

www.smfl.co.jp/english/ Sumitomo Mitsui Finance and Leasing (“SMFL”) is a leading Japanese leasing company with an extensive history going back to its origination of the leasing business in 1968. SMFL provides financial solutions and services appropriate to diversifying needs of clients by taking advantage of its abundant experiences and past performance results accumulated over the years. SMFL proactively works on the areas with high social needs such as environment/ energy, medical/nursing care, leasing, or sale of secondhand machines, while appropriately responding to the globalization of capital expenditures and sales activities in overseas. SMFL develops along with its clients by being swift to provide them with diverse products and services that address their management issues.

Company Name: Sumitomo Mitsui Finance and Leasing Company, Limited Business Profile: Leasing Establishment: February 4, 1963 Head Office: Tokyo Head Office: 3-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo, Japan Osaka Head Office: 3-10-19, Minami-Semba, Chuo-ku, Osaka President & CEO: Yoshinori Kawamura Number of Employees: 2,481

Credit Ratings (as of June 30, 2016) Long-term

R&I JCR

A+ AA–

Short-term

a–1 J–1+

Financial Information (Consolidated basis, years ended March 31) Billions of yen 2016 2015 2014 2013 For the Year: Leasing transaction volume..................... ¥1,994.8 ¥1,865.8 ¥1,767.0 ¥1,335.4 Operating revenue..... 1,147.8 1,152.0 1,037.2 992.2 Operating profit......... 79.6 84.8 75.6 57.6

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www.smbcnikko.co.jp/en SMBC Nikko Securities Inc. (formerly Nikko Cordial Securities Inc.), is approaching its centenary in 2018. During its almost 100 years in business, it has built strong relationships founded on trust with individual and corporate clients. Since bringing its long experience and solid customer base into the SMFG Group in October 2009, the company has pursued banking-securities collaboration with SMBC in its role as core Group member, seeking to leverage on collective strengths to provide financial services of the highest quality. ‘Share the Future’ is the brand slogan as SMBC Nikko Securities strives to be a leading Japanese full-line securities company capable of offering high quality financial products and services globally.

Company Name: SMBC Nikko Securities Inc. Business Profile: Securities Establishment: June 15, 2009 Head Office: 3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo President & CEO: Yoshihiko Shimizu (Appointed on April 1, 2016) Number of Employees: 8,363

Credit Ratings (as of June 30, 2016) Long-term

Moody’s Standard & Poor’s R&I JCR

A1 A AA– AA

Financial Information (Years ended March 31) Billions of yen 2016 2015 2014 For the Year: Operating revenue.... ¥297.9 ¥332.6 ¥333.4 Operating income.... 46.9 89.1 96.6

Short-term

P–1 A–1 a–1+ —

2013 ¥280.5 72.7

www.smbc-friend.co.jp (Japanese only)

SMBC Friend Securities Co., Ltd. is a securities company with one of the best financial foundations and efficient operations in the industry, and provides a full range of securities services focusing mainly on retail clients. SMBC Friend Securities provides highly efficient nationwide network operations offering services closely tailored to the needs of its clients and the communities while operating a new business model of online financial consulting services. SMBC Friend Securities will continue to develop consistently toward its goal of becoming “the securities company especially appreciated by clients,” offering high-quality products and services accommodating the needs of its clients and building trust for its clients.

76 2016 Annual Report

Company Name: SMBC Friend Securities Co., Ltd. Business Profile: Securities Establishment: March 2, 1948 Head Office: 7-12, Nihonbashi Kabuto-cho, Chuo-ku, Tokyo President & CEO: Koichi Danno Number of Employees: 1,890

Financial Information (Years ended March 31) Billions of yen 2016 2015 2014 For the Year: Operating revenue.... ¥43.0 ¥50.0 ¥57.7 Operating profit....... 4.1 9.8 15.0

2013 ¥59.6 18.0

www.smbc-card.com (Japanese only)

As the pioneer in the issuance of the Visa Card in Japan and a leader in the domestic credit card industry, Sumitomo Mitsui Card Company, Limited, enjoys the strong support of its many customers and plays a major role as one of the strategic businesses of SMFG. Leveraging its strong brand image and its excellent capabilities across a wide range of card-related services, the company provides settlement and financing services focused around providing credit services that meet customer needs. Through its credit card business operations, the company aims to actively contribute to the realization of comfortable and affluent consumer lifestyles and make further dramatic advances as a leading brand in its industry sector.

Company Name: Sumitomo Mitsui Card Company, Limited Business Profile: Credit card Establishment: December 26, 1967 Head Office: Tokyo Head Office: 1-2-20, Kaigan, Minato-ku, Tokyo Osaka Head Office: 4-5-15, Imab­­ashi, Chuo-ku, Osaka President & CEO: Ken Kubo Number of Employees: 2,440

Credit Ratings (as of June 30, 2016) R&I JCR

Long-term

Short-term

AA– AA–

a–1+ J–1+

Financial Information (Years ended March 31) Billions of yen 2016 2015 2014 For the Year: Revenue from credit card operations......... ¥11,360.6 ¥10,091.0 ¥9,131.5 Operating revenue....... 210.1 198.4 191.4 Operating profit........... 40.5 41.9 43.6 At Year-End: Number of cardholders (in thousands)............ 24,239 23,490 22,994

2013 ¥8,194.6 185.6 44.7 22,400

www.cedyna.co.jp/english/ Cedyna Financial Corporation was formed in April 2009 as a result of the merger of OMC Card, Inc., Central Finance Co., Ltd. and QUOQ Inc., consolidating their client bases, marketing capabilities and expert knowledge. As a member of SMFG, it strives to become “the number one credit card business entity in Japan” by closely working with Sumitomo Mitsui Card. Cedyna strives to become SMFG’s comprehensive payment finance company in the consumer finance business by integrating the credit card, consumer credit and financing solution core businesses, and providing individual clients with secure and convenient payment methods means for making payments.

Company Name: Cedyna Financial Corporation Business Profile: Credit card and installment Establishment: September 11, 1950 Head Office: Head Office: 3-23-20, Marunouchi, Naka-ku, Nagoya Tokyo Head Office: 2-16-4, Konan, Minato-ku, Tokyo President & CEO: Satoru Nakanishi Number of Employees: 3,283

Financial Information (Years ended March 31) Billions of yen 2016 2015 2014 For the Year: ¥149.8 ¥160.0 Operating revenue....... ¥149.9 Operating profit........... 0.4 1.0 10.7 At Year-End: Number of cardholders (in thousands)............ 17,020 17,633 18,412

2013 ¥164.0 13.4 19,480

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www.smbc-cf.com/english/ Since its establishment in 1962, with the original goal of striving to be the best in offering innovative financial ser vices for consumers, Promise Co., Ltd., currently known as SMBC Consumer Finance Co., Ltd., has developed convenient loan products for individuals to accommodate to the changing times and has created an appropriate system for offering loan consultation services and executing loan agreements. SMBC Consumer Finance strives to become the kind of global consumer finance company which “would be able to earn the utmost trust of clients” by consistently and sincerely working with clients as an expert in the consumer finance business.

Company Name: SMBC Consumer Finance Co., Ltd. Cooperation: Business Profile: Consumer lending SHOCHIKU Co., Ltd., Kabuki-za Co., Ltd. Establishment: March 20, 1962 Credit Ratings (as of June 30, 2016) Head Office: 4-12-15, Ginza, Chuo-ku, Tokyo President & CEO: Ryoji Yukino R&I Number of Employees: 2,240 JCR

Long-term

A A–

Financial Information (Years ended March 31) Billions of yen 2016 2015 2014 For the Year: Operating revenue..... ¥178.3 ¥168.6 ¥164.7 Operating profit (loss).... (72.3) 3.7 15.9

Short-term

— —

2013 ¥164.6 42.3

www.jri.co.jp/english/ The Japan Research Institute, Limited (JRI) is a comprehensive information services company with information systems, consulting, and think-tank functions. In addition to providing IT-based strategic data systems planning and development and outsourcing services, JRI offers consultation in areas such as management strategy and admin reforms. It also engages in activities ranging from economic research and analysis on Japan and other countries and policy recommendation to business incubation.

78 2016 Annual Report

Company Name: The Japan Research Institute, Limited Business Profile: System development, data processing, management consulting and economic research Establishment: November 1, 2002 Head Office: Tokyo Head Office: 2-18-1, Higashi-Gotanda, Shinagawa-ku, Tokyo Osaka Head Office: 2-2-4, Tosabori, Nishi-ku, Osaka President & CEO: Masahiro Fuchizaki Number of Employees: 2,349

Financial Information (Years ended March 31) Billions of yen 2016 2015 2014 For the Year: Operating revenue..... ¥125.0 ¥111.1 ¥106.0 Operating profit......... 2.2 1.7 1.7

2013 ¥96.2 1.8

Risk Management

Basic Approach

Risk Management System

As risks in the financial services increase in diversity and complexity,

Reflecting the importance of risk management, top management

risk management—identifying, measuring, and controlling risk—has

plays an active role in the process. The “Principal Policy on Group

never been more important in the management of a financial hold-

Risk Management” is determined by the Management Committee

ing company.

before being authorized by the Board. In addition, the Board has



SMFG has established the basic principles of group-wide

a risk committee that meets regularly to review and discuss a wide

risk management in the “Policies on Comprehensive Risk

range of topics related to risk management and compliance issues

Management.” In the policies, we identify the location and the type

in the aim of continuously raising the level of risk governance at

of risk to be managed in accordance with strategic goals and busi-

SMFG (see page 57).

ness structures. We have set forth the fundamental principles for comprehensive risk management as shown in the Table below and

Implementation of Basel Capital Accord

manage each risk appropriately according to its characteristics. We

The Basel III regulatory framework consists of capital, leverage, and

share the principles internally to foster a sound risk culture.

liquidity ratios designed to maintain sound operating standards for



In addition, SMFG has established the “Principal Policy on

internationally active banks. SMFG calculates its ratios in accordance

Group Risk Management” which sets forth the specific operational

with the standards for Japanese banks.Risk assets subject to the

policies for appropriately conducting risk management in line with

Basel Capital Accord totaled ¥66,011.6 billion as of March 31, 2016,

the basic principles across all companies. The Principal Policy is

down ¥125.2 billion from March 31, 2015. The main factors behind

reviewed regularly and as necessary (see page 57).

the decrease in risk-weighted assets were a decrease in the balance of equity and fund investment (credit risk), a decrease in trading positions

■Fundamental Principles on Comprehensive Risk Management (Excerpt major principles) Basic Principles Risk management on a consolidated basis

Risk management based on quantification

(market risk), and a revision in the methodology for risk quantification of tangible asset damages from earthquakes (operational risk).

Capital ratio and other regulations are currently under review by

Description

the Basel Committee on Banking Supervision (BCBS). SMFG plans

Various risks taken at the SMFG and the Group companies to be managed on a consolidated basis according to the business and importance in conformity with the relevant laws and regulations.

to respond appropriately to revisions after conducting comprehen-

The risks subject to control to be quantitatively managed according to the relevant risk characteristics after specifying the scope of quantification.

capital ratio requirement (for the current bucket, 1.0%).

sive impact analysis.

As of March 31, 2016, SMFG was designated a Global System-

atically Important Bank (G-SIB) by the Financial Stability Board (FSB) and SMFG is subject to the phase in of the add-on to the minimum

■Risk-Weighted Assets as of March 31, 2016

(Trillions of yen)

Ensuring consistency Risk management to be consistent with the business strategy with the business strategy. System for check and balance

The risk management framework to be developed to ensure effective check and balance function for business operations.

Measures for emergencies Necessary measures to be developed and critical situations by assuming situations, scenarios etc. as to materialization of risk which would have a significant impact on the business and financial management of SMFG Verification of the actual situation

The actual risk management process to be verified by the Internal Audit Unit.

Comprehensive Risk Management Based on the Principal Policy, SMFG takes a comprehensive and systematic approach to risk management, with risk analysis by stress testing and risk capital management following ascertainment of environment and risk view, including top risks (see page 55).

Credit risk Market risk Operational risk Total

March 31, 2015

March 31, 2016

Increase (decrease)

61.3 2.0 2.8 66.1

61.2 1.5 3.3 66.0

(0.1) (0.5) +0.5 (0.1)

■Risk Assets at Individual Departments (Trillions of yen)

Wholesale Credit risk

Sumitomo Mitsui Financial Group Credit risk Market risk Operational risk

61.2 1.5 3.3

15.9 15.6 7.2

Retail

7.0

Credit risk International Credit risk

18.1 17.1 24.9

Other Credit risk

21.5

Note: Other includes Treasury Unit, Investment Banking Unit and Group companies.

2016 Annual Report

79

Credit Risk

the corresponding losses on operations can be overwhelming.

1. Basic Approach to Credit Risk Management (1) Definition of Credit Risk Credit risk is the possibility of a loss arising from a credit event, such as deterioration in the financial condition of a borrower, that causes an asset (including off-balance sheet transactions) to lose value or become worthless.

Overseas credits also include an element of country risk, which

is closely related to credit risk. This is the risk of loss caused by changes in foreign exchange, or political or economic situations.

(2) Fundamental Principles for Credit Risk Management All Group companies follow the fundamental principles established by SMFG to assess and manage credit risk on a group-wide basis and further raise the level of accuracy and comprehensiveness of group-wide credit risk management. Each Group company must comprehensively manage credit risk according to the nature of its business, and assess and manage credit risk of individual loans and credit portfolios quantitatively and using consistent standards.

The purpose of credit risk management is to keep credit risk

exposure to a permissible level relative to capital, to maintain the

Credit risk is the most significant risk to which SMFG is

exposed. Without effective credit risk management, the impact of

soundness of group-wide assets, and to ensure returns commensurate with risk. This leads to a loan portfolio that achieves high returns on capital and assets.

(3) Credit Policy SMFG’s Group credit policy comprises clearly stated universal and basic operating concepts, policies, and standards for credit operations, in accordance with our business mission and rules of conduct. SMFG is promoting the understanding of and strict adherence to its Group credit policy among all its managers and employees. By fostering a culture of appropriate levels of risk-taking, and by providing still high-value-added financial services, SMFG aims to enhance shareholder value and play a key contributory role in the community.

2. Credit Risk Management System At SMBC, the Credit & Investment Planning Department within the Risk Management Unit is responsible for the comprehensive management of credit risk. This department drafts and administers credit policies, the internal rating system, credit authority guidelines,

■SMBC’s Credit Risk Management System Shareholders’ Meeting Board of Directors Management Committee

Corporate Auditors/ Board of Corporate Auditors Office of Corporate Auditors

Risk Management Unit

Internal Audit Unit

Designated Board Members

Designated Board Members

•Supervises risk management

Internal Audit Dept. •Audits credit risk management

•Plans and proposes risk quantification methods

Credit Review Dept. •Audits asset audit management system

Corporate Risk •Aggregates risk for comprehensive management Management Dept.

•Audits credit risk evaluation management

•Aggregates credit risk for unified management Credit & Investment •Plans and proposes basic credit policies Planning Dept. •Plans and proposes credit policies for

particular risk assets

Credit Portfolio Management Dept. •Undertakes active portfolio management

Business Units Retail Banking Unit

Wholesale Banking Unit

International Banking Unit

Officer in charge Deputy head

Officer in charge Deputy head

Officer in charge Deputy head Division head Division head

Credit Dept.

Credit Dept. I & II

Individuals and SMEs

Small and Medium-Sized Enterprises

Corporate Credit Dept. Large Domestic Corporations

Structured Finance Credit Dept.

Structured Finance (Investment Banking Unit, Japan)

Credit Administration Dept.

Credit Management Dept.

Credit Dept., Asia Pacific Div.

Credit Dept., Americas Div.

Credit Dept., Europe Div.

Management of problem loans (prepare and implement plans to dispose or restructure, sell off)

Overseas Banks International Dept. Credit Management

Non-Japanese companies (Asia and Asia Pacific excluding clients of the International Banking Unit)

Overseas Corporations (Americas)

Overseas Corporations (Europe)

Deputy head in charge Corporate Research Dept.

80 2016 Annual Report

Division head

•Industry trend research •Credit assessment of major industry players, clients under observation and clients whose credit rating is to be revised, etc.

Credit Dept., East Asia International Banking Unit

Global Aircraft Credit Dept.

Non-Japanese companies (Japan and East Asia)

Aircraft related (Overseas)

and credit application guidelines, and manages non-performing

companies, individuals for business purposes (domestic only), sover-

loans (NPLs) and other aspects of credit portfolio management. The

eigns, public-sector entities, and financial institutions are assigned an

department also cooperates with the Corporate Risk Management

“obligor grade,” which indicates the borrower’s creditworthiness, and/

Department in quantifying credit risk (risk capital and risk-weighted

or “facility grade,” which indicates the collectibility of assets taking

assets) and controls the bank’s entire credit risk. Further, the Credit

into account transaction conditions such as guarantee/collateral, and

Portfolio Management Department within the Credit & Investment

tenor. An obligor grade is determined by first assigning a financial

Planning Department has been strengthening its active portfolio

grade using a financial strength grading model and data obtained

management function for stable credit portfolios mainly through

from the obligor’s financial statements. The financial grade is then

credit derivatives and the sales of loans.

adjusted taking into account the actual state of the obligor’s balance



The Credit Departments within each business unit conduct

sheet and qualitative factors to derive the obligor grade. In the event

credit risk management, along with the branches, for loans handled

that the borrower is domiciled overseas, internal ratings for credit are

by their units and manage their units’ portfolios. The credit approval

made after taking into consideration country rank, which represents

authority is determined based on the credit amount and internal

an assessment of the credit quality of each country, based on its polit-

grades, while credit departments focus on the analysis and manage-

ical and economic situation, as well as its current account balance

ment of customers and transactions with relatively high credit risk.

and external debt. Self-assessment is the obligor grading process



for assigning lower grades, and the borrower categories used in self-

The Credit Administration Department is responsible for han-

dling NPLs of borrowers classified as potentially bankrupt or lower,

assessment are consistent with the obligor grade categories.

and draws up plans for their workouts, including write-offs. It works



to efficiently reduce the amount of NPLs through Group company

whenever necessary, such as when there are changes in the credit

SMBC Servicer Co., Ltd., which engages in related services, and by

situation.

such means as the sell-off of claims.





ect finance and other structured finance tailored according to the risk

Through industrial and sector-specific surveys, and studies of

individual companies, the Corporate Research Department works to

Obligor grades and facility grades are reviewed once a year, and,

There are also grading systems for loans to individuals, and proj-

characteristics of these types of assets.

form an accurate idea of the circumstances of borrower companies and quickly identify those with potentially

■ SMBC’s Obligor Grading System

troubled credit positions as well as promising growth companies.

The Internal Audit Unit, operating independently

of the business units, audits asset quality, accuracy of gradings and self-assessment, and state of credit risk

Obligor Grade Domestic Overseas (C&I), etc. (C&I), etc.

Definition

J1

G1

Very high certainty of debt repayment

J2

G2

High certainty of debt repayment

J3

G3

Satisfactory certainty of debt repayment

J4

G4

Debt repayment is likely but this could change in cases of significant changes in economic trends or business environment

J5

G5

No problem with debt repayment over the short term, but not satisfactory over the mid to long term and the situation could change in cases of significant changes in economic trends or business environment

J6

G6

Currently no problem with debt repayment, but there are unstable business and financial factors that could lead to debt repayment problems

J7

G7

Close monitoring is required due to problems in meeting loan terms and conditions, sluggish/unstable business, or financial problems

J7R

G7R

Borrower Category

Financial Reconstruction Act Based Disclosure Category (Domestic)

management, and reports the results directly to the Board of Directors and the Management Committee.

SMBC has established the Credit Risk Committee,

as a consultative body, to round out its oversight system for undertaking flexible and efficient control of credit risk, and ensuring the overall soundness of the bank’s loan operations.

3. Credit Risk Management Methods (1) Credit Risk Assessment and Quantification At SMBC, to effectively manage the risk involved in individual loans as well as the credit portfolio as a whole, we first acknowledge that every loan entails credit risks, assess the credit risk posed by each borrower and loan

(Of which Substandard Borrowers)

Normal Borrowers

Borrowers Requiring Caution Substandard Borrowers

using an internal rating system, and quantify that risk for

J8

G8

control purposes. (a) Internal Rating System

Currently not bankrupt, but experiencing business difficulties, making insufficient progress in restructuring, and highly likely to go bankrupt

J9

G9

Though not yet legally or formally bankrupt, has serious business difficulties and rehabilitation is unlikely; thus, effectively bankrupt

Effectively Bankrupt Borrowers

J10

G10

Legally or formally bankrupt

Bankrupt Borrowers

There is an internal rating system for each asset control category set according to portfolio characteristics. For example, credits to commercial and industrial (C&I)

Normal Assets

Potentially Bankrupt Borrowers

Substandard Loans Doubtful Assets

Bankrupt and Quasi-Bankrupt Assets

2016 Annual Report

81

The Credit & Investment Planning Department centrally manages

quantitative measures, when combined with qualitative analyses of

the internal rating systems, and properly designs, operates, supervises,

industrial trends, the enterprise’s R&D capabilities, the competitive-

and validates the grading models. It validates the grading models

ness of its products or services, and its management caliber, result in

(including statistical validation) of main assets following the procedures

a comprehensive credit assessment. The loan application is analyzed

manual once a year, to ensure their effectiveness and suitability.

in terms of the intended utilization of the funds and the repayment

(b) Quantification of Credit Risk

schedule. Thus, SMBC is able to arrive at an accurate and fair credit

Credit risk quantification refers to the process of estimating the degree

decision based on an objective examination of all relevant factors.

of credit risk of a portfolio or individual loan taking into account not



just the obligor’s Probability of Default (PD), but also the concentration

and approval standards for specific borrowing purposes and loan

of risk in a specific customer or industry and the loss impact of fluc-

categories is a part of SMBC’s ongoing review of lending practices,

tuations in the value of collateral, such as real estate and securities.

which includes the revision of loan contract forms with the chief aim



of clarifying lending conditions utilizing financial covenants.



Specifically, first, the PD by grade, Loss Given Default (LGD),

Increasing the understandability to customers of loan conditions

credit quality correlation among obligors, and other parameter values



are estimated using historical data of obligors and facilities stored in

assessment process. To respond proactively and promptly to cus-

a database to calculate the credit risk. Then, based on these param-

tomers’ funding needs—particularly those of SMEs—we employ a

eters, we run a simulation of simultaneous default using the Monte

standardized credit risk assessment process for SMEs that uses a

Carlo method to calculate our maximum loss exposure to the esti-

credit-scoring model. With this process, we are building a regime for

mated amount of the maximum losses that may be incurred. Based

efficiently marketing our Business Select Loan and other SME loans.

SMBC is also making steady progress in streamlining its credit

on these quantitative results, we allocate risk capital.





Risk quantification is also executed for purposes such as to

assessment model based on credit data amassed and analyzed

determine the portfolio’s risk concentration, or to simulate economic

by SMBC over many years. This model enables our loan officers to

movements (stress tests), and the results are used for making

efficiently make rational decisions on housing loan applications, and

optimal decisions across the whole range of business operations,

to reply to the customers without delay. It also facilitates the effective

including formulating business plans and providing a standard

management of credit risk, as well as the flexible setting of interest rates.

against which individual credit applications are assessed.



(2) Framework for Managing Individual Loans

such as apartments. The loan applications are subjected to a precise

(a) Credit Assessment

credit risk assessment process utilizing a risk assessment model

At SMBC, credit assessment of corporate loans involves a variety

that factors in the projected revenue from the rental business. The

of financial analyses, including cash flow, to predict an enterprise’s

process is also used to provide advice to such customers on how to

capability of loan repayment and its growth prospects. These

revise their business plans.

In the field of housing loans for individuals, we employ a credit

We also provide loans to individuals who rent out properties

■ SMBC’s Credit Monitoring System Obligor Information Processing

Flow of Obligor Grading/Grading Outlook/Credit Policies/Action Plans/Facility Grading Assignment Grading Outlook Assessment Nonconsolidated Financial Grade

Registration of Financial Statements/ Creation and Revision of Corporate Card

Consolidated Financial Grade

Performance Trends

Not Flagged

Flagging According to SelfAssessment Criteria

Self-Assessment Logic Quantitative Assessment Financial Assessment

Effective Financial Grade

82 2016 Annual Report

Normal Borrowers

Flagged

Credit Status Qualitative Assessment

Borrowers Requiring Caution Potentially Bankrupt Borrowers Effectively Bankrupt Borrowers

Bankrupt Borrowers

Final Obligor Grade

+

Qualitative Risk Factors

•Positive •Flat •Negative

Determination of Credit Policies

Credit Policy Segment

Policy for Handling Each Individual Company

Action Plan Formulation Restructuring Feasibility

Basic Approach

Specific Action Plan

Facility Grading Assignment

(b) Credit Monitoring System

criteria based on the Financial Inspection Manual of the Financial

At SMBC, in addition to analyzing loans at the application stage,

Services Agency and the Practical Guideline published by the

the Credit Monitoring System is utilized to reassess obligor grades

Japanese Institute of Certified Public Accountants. Self-assessment

and review self-assessment and credit policies so that problems

is the latter stage of the obligor grading process for determining the

can be detected at an early stage, and quick and effective action

borrower’s ability to fulfill debt obligations, and the obligor grade

can be taken. The system includes periodic monitoring carried out

criteria are consistent with the categories used in self-assessment.

each time an obligor enterprise discloses financial results, as well



as continuous monitoring performed each time credit conditions

ensuring SMBC’s asset quality and calculating the appropriate level

change, as indicated in the diagram on page 82.

of write-offs and provisions. Each asset is assessed individually for

(3) Framework for Credit Portfolio Management

its security and collectibility. Depending on the borrower’s current

In addition to managing individual loans, SMBC applies the follow-

situation, the borrower is assigned to one of five categories: Normal

ing basic policies to the management of the entire credit portfolio to

Borrowers, Borrowers Requiring Caution, Potentially Bankrupt

maintain and improve its soundness and profitability over the mid to

Borrowers, Effectively Bankrupt Borrowers, and Bankrupt

long term. (a) Risk-Taking within the Scope of Capital

Borrowers. Based on the borrower’s category, claims on the bor-

To keep credit risk exposure to a permissible level relative to capital,

to their default and impairment risk levels, taking into account such

SMBC sets a credit risk capital limit for internal control purposes.

factors as collateral and guarantees. As part of our efforts to bolster

Under this limit, sub-limits are set for each business unit. Regular

risk management throughout the Group, our consolidated subsidiar-

monitoring is conducted to make sure that these limits are being fol-

ies carry out self-assessment in substantially the same manner.

At the same time, self-assessment is a preparatory task for

rower are classified into Classification I, II, III, and IV assets according

lowed, thus ensuring appropriate overall management of credit risk. (b) Controlling Concentration Risk As the equity capital of the bank may be materially impaired in the

Borrower Categories, Defined Normal Borrowers

Borrowers with good earnings performances and no significant financial problems

implements measures to manage credit towards an industrial sector

Borrowers Requiring Caution

Borrowers identified for close monitoring

with excessive risk concentration, introduces large exposure limit lines

Potentially Bankrupt Borrowers

Borrowers perceived to have a high risk of falling into bankruptcy

Effectively Bankrupt Borrowers

Borrowers that may not have legally or formally declared bankruptcy but are essentially bankrupt

Bankrupt Borrowers

Borrowers that have been legally or formally declared bankrupt

event that the credit concentration risk becomes apparent, SMBC

and conducts intensive loan review for obligors with large exposure.

To manage country risk, SMBC also has credit limit guidelines

based on each country’s creditworthiness. (c) Researching Borrowers More Rigorously and Balancing Risk and Returns Against a backdrop of drastic change in the business environment, SMBC rigorously researches borrower companies’ actual conditions. It runs credit operations on the basic principle of earning returns that are commensurate with the credit risk involved, and makes every effort to reduce credit and capital costs as well as

Asset Classifications, Defined Classification I

Assets not classified under Classifications II, III, or IV

Classification II

Assets perceived to have an above-average risk of uncollectibility

Classification III

Assets for which final collection or asset value is very doubtful and which pose a high risk of incurring a loss

Classification IV

Assets assessed as uncollectible or worthless

general and administrative expenses. (d) Prevention and Reduction of Non-Performing Loans

(b) Asset Write-Offs and Provisions

On NPLs and potential NPLs, SMBC carries out regular loan

In cases where claims have been determined to be uncollectible,

reviews to clarify handling policies and action plans, enabling it to

or deemed to be uncollectible, write-offs signify the recognition of

swiftly implement measures to prevent deterioration of borrowers’

losses on the account books with respect to such claims. Write-

business situations, support business recoveries, collect on loans,

offs can be made either in the form of loss recognition by offsetting

and enhance loan security. (e) Toward Active Portfolio Management

uncollectible amounts against corresponding balance sheet items,

SMBC makes active use of credit derivatives, loan asset sales, and

loss provision on a contra-asset account in the amount deemed

other instruments to proactively and flexibly manage its portfolio to

uncollectible, referred to as an indirect write-off. Recognition of

stabilize credit risk.

indirect write-offs is generally known as provision for the reserve for

(4) Self-Assessment, Asset Write-Offs and Provisions, and Disclosure of Problem Assets

possible loan losses.

(a) Self-Assessment

borrower category are shown in the next page. As part of our over-

SMBC conducts rigorous self-assessment of asset quality using

all measures to strengthen risk management throughout the Group,

referred to as a direct write-off, or else by recognition of a loan



SMBC’s write-off and provision criteria for each self-assessment

2016 Annual Report

83

all consolidated subsidiaries use substantially the same standards

are referred to as “problem assets”). Problem assets are classified

as SMBC for write-offs and provisions.

based on the borrower categories assigned during self-assessment. For detailed information on results of self-assessments, asset write-

Self-Assessment Borrower Categories Normal Borrowers

Borrowers Requiring Caution

Potentially Bankrupt Borrowers

Effectively Bankrupt/ Bankrupt Borrowers

Standards for Write-Offs and Provisions The expected loss amount for the next 12 months is calculated for each grade based on the grade’s historical bankruptcy rate, and the total amount is recorded as “provision for the general reserve for possible loan losses.” These assets are divided into groups according to the level of default risk. Amounts are recorded as provisions for the general reserve in proportion to the expected losses based on the historical bankruptcy rate of each group. The groups are “claims on Substandard Borrowers” and “claims on other Borrowers Requiring Caution.” The latter group is further subdivided according to the borrower’s financial position, credit situation, and other factors. Further, when cash flows can be estimated reasonably accurately, the discounted cash flow (DCF) method is applied mainly to large claims for calculating the provision amount. A provision for the specific reserve for possible loan losses is made for the portion of Classification III assets (calculated for each borrower) not secured by collateral, guarantee, or other means. Further, when cash flows can be estimated reasonably accurately, the DCF method is applied mainly to large claims for calculating the provision amount. Classification III asset and Classification IV asset amounts for each borrower are calculated, and the full amount of Classification IV assets (deemed to be uncollectible or of no value) is written off in principle and provision for the specific reserve is made for the full amount of Classification III assets.

General reserve

Provisions made in accordance with general inherent default risk of loans, unrelated to specific individual loans or other claims

Specific reserve

Provisions made for claims that have been found uncollectible in part or in total (individually evaluated claims)

Notes

offs and provisions, and disclosure of problem assets at March 31, 2016, please refer to page 263.

4. Risk Management of Marketable Credit Transactions Financial products, such as investments in funds, securitized products, and credit derivatives, that bear indirect risk arising from underlying assets such as bonds and loan obligations, are considered to be exposed to both credit risk from the underlying assets as well as “market risk” and “liquidity risk” that arise from their trading as financial products. This is referred to as marketable credit risk.

For these types of products, we manage credit risk analyzing

and assessing the characteristics of the underlying assets, but, for the sake of complete risk management, we also apply the methods for management of market and liquidity risks.

In addition, we have established guidelines based on the char-

acteristics of these types of risk and appropriately manage the risk of losses.

Market and Liquidity Risks 1. Basic Approach to Market and Liquidity Risk Management (1) Definitions of Market and Liquidity Risks Market risk is the possibility that fluctuations in interest rates, foreign exchange rates, stock prices, or other market prices will change the

Discounted Cash Flow Method SMBC uses the discounted cash flow (DCF) method to calculate the provision amounts for large claims on Substandard Borrowers and Potentially Bankrupt Borrowers when the cash flow from repayment of principal and interest received can be estimated reasonably accurately. SMBC then makes provisions equivalent to the excess of the book value of the claims over the said cash inflow discounted by the initial contractual interest rate or the effective interest rate at the time of origination. One of the major advantages of the DCF method over conventional methods of calculating the provision amount is that it enables effective evaluation of each individual borrower. However, as the provision amount depends on the future cash flow estimated on the basis of the borrower’s business reconstruction plan and the DCF formula input values, such as the discount rate and the probability of the borrower going into bankruptcy, SMBC makes every effort to utilize up-to-date and correct data to realize the most accurate estimates possible.

(c) Disclosure of Problem Assets Problem assets are loans and other claims of which recovery of either principal or interest appears doubtful, and are disclosed in accordance with the Banking Act (in which they are referred to as “riskmonitored loans”) and the Financial Reconstruction Act (where they

84 2016 Annual Report

market value of financial products, leading to a loss.

Liquidity risk is defined as the uncertainty around the ability of

the firm to meet debt obligations without incurring unacceptably large losses. Examples of such risk include the possible inability to meet current and future cash flow/collateral needs, both expected and unexpected. In such cases, the firm may be required to raise funds at less than favorable rates or be unable to raise sufficient funds for settlement.

(2) F undamental Principles for Market and Liquidity Risk Management SMFG is working to further enhance the effectiveness of its quantitative management of market and liquidity risks across the entire Group by setting allowable risk limits; ensuring the transparency of the risk management process; clearly separating front-office, middle-office and back-office operations; and establishing a highly efficient system of mutual checks and balances.

2. Market and Liquidity Risk Management System On the basis of SMFG’s group-wide basic policies for risk management, SMBC’s Board of Directors authorizes important matters relating to the management of market and liquidity risks, such as basic policies and risk limits, which are decided by the

Management Committee. Additionally, at SMBC, the Corporate Risk

Department not only monitors the current risk situations, but also

Management Department, which is the planning department of the

reports regularly to the Management Committee and the Board

Risk Management Unit, an independent of the business units that

of Directors. Furthermore, SMBC’s ALM Committee meets on a

directly handle market transactions, manages market and liquidity

monthly basis to examine reports on the state of observance of

risks in an integrated manner. The Corporate Risk Management

SMBC’s limits on market and liquidity risks, and to review and discuss the SMBC’s ALM operation.

■SMBC’s Market Risk and Liquidity Risk Management System



To prevent unforeseen processing errors as well as fraudulent

transactions, it is important to establish a system of checks on the business units (front office). At SMBC, both the processing departments (back office) and the administrative departments (middle office) conduct the checks. In addition, the Internal Audit Unit of

Board of Directors

SMBC periodically performs comprehensive internal audits to verify that the risk management framework is functioning properly.

Market Risk Management

Management Committee Market Risk Management Committee

ALM Committee

Liquidity Risk Management

Corporate Auditors

Board Member in Charge of Risk Management Unit

Policy

3. Market and Liquidity Risk Management Methods

External Audit (auditing firm)

Internal Audit Dept.

Reporting

(1) Market Risk Management SMBC manages market risk by setting maximum limits for VaR and maximum loss. These limits are set within the “risk capital limit” which is determined taking into account the bank’s shareholders’ equity and other principal indicators of the bank’s financial position and management resources.

Back Office

Middle Office

(Back offices of Japan and overseas branches)

Inspection and verification of transactions

Market risk can be divided into various factors: foreign

exchange rates, interest rates, equity prices and option risks. SMBC manages each of these risk categories by employing the VaR

(Corporate Risk Management Dept.)

method as well as supplemental indicators suitable for managing

Final approval and Management of Model, new products and risk limits

Managing Depts.

the risk of each risk factor, such as the BPV.

Please note that, in the case of interest rate fluctuation risk, the

methods for recognizing the dates for maturity of demand deposits (current accounts and ordinary deposit accounts that can be

Other marketrelated operations

Market operations

Market operations

Market operations

(Treasury Unit)

(International Banking Unit)

(Group companies)

Front/Middle/Back Offices

Front Office

withdrawn at any time) and the method for estimating the time of cancellation prior to maturity of time deposits and consumer loans differ substantially. At SMBC, the maturity of demand deposits that are expected to be left with the bank for a prolonged period is regarded to be five years (2.5 years on average). The cancellation prior to maturity of time deposits and consumer loans is estimated based on historical data.

■VaR for Trading Activities (Billions of yen)

SMFG (consolidated) Interest rates Foreign exchange Equities, commodities, etc. SMBC (consolidated) SMBC (non-consolidated)

March 31, 2016 11.0 8.1 1.1 2.5

September 30, 2015 15.6 13.0 1.1 2.3

fiscal 2015 Maximum 22.5 16.5 3.7 7.9

10.4

14.9

21.4

8.6

13.3

13.8

1.3

1.8

6.2

0.8

2.4

1.7

Minimum 9.6 7.0 0.3 1.6

Average 14.2 10.6 1.4 3.2

March 31, 2015 14.5 7.2 1.3 6.9

Note: VaR for a one-day holding period with a one-sided confidence interval of 99.0% [computed daily using the historical simulation method (based on four years of historical observations)].

2016 Annual Report

85

(a) Market Risks

(b) Market Risk Volume Calculation Model

a. Trading activities

a. Presuppositions and limits of model

Trading activities are market operations which gain profits by taking

In SMBC’s internal VaR model, various market fluctuation scenarios

advantage of fluctuations of market prices in the short-term or price

are drawn up on the basis of past data, and the historical simulation

differences among markets. At SMFG, we assess and manage the

method is used to run profit-and-loss movement simulations that

market risk of trading activities on a daily basis, by utilizing VaR and

enable us to forecast probable maximum losses. The appropriate-

other tools.

ness of the model is later verified through back-testing.

The table on the previous page shows the VaR results of the



However, as back-testing cannot take into account major

Group’s trading activities during fiscal 2015. Because of the nature

market fluctuations that have not actually occurred historically, we

of trading, the VaR fluctuated sharply during fiscal 2015, in line with

supplement this method with the use of stress testing.

changes in our investment positions.



b. Banking activities

auditing by an independent auditing firm to ensure that it operates

This internal model employed by SMBC undergoes regular

Banking activities are market operations which gain profits by con-

appropriately.

trolling interest rates and term period for assets (loans, bonds, etc.)

b. Validity verification process

and liabilities (deposits, etc.). At SMFG, in the same way as in the

i Outline of validity verification

case of trading activities, we assess and manage the market risk of

SMBC uses back-testing as a method for verification of the valid-

banking activities on a daily basis, utilizing VaR and other tools.

ity of the internal model. VaR figures calculated by the internal



The following table shows the VaR results of the Group’s bank-

model are compared with actual portfolio profit-and-loss figures

ing activities during fiscal 2015. The VaR of the Group decreased

on a given day, to compute an appropriate VaR level and confirm

on March 31, 2016 compared with on March 31, 2015 primarily

the adequacy of risk capital management.

reflecting an decreased position in equities.

ii Back-testing results The results of back-testing on SMBC’s trading book conducted in fiscal 2015 are shown below. A data point under the diagonal line indicates a loss exceeding VaR for that day. Five such data points were observed and SMBC is accordingly making conservative amendments to VaR values.

■VaR for Banking Activities (Billions of yen)

SMFG (consolidated) Interest rates Equities, etc.

March 31, 2016 34.0 18.7 27.5

September 30, 2015 40.4 21.1 28.9

fiscal 2015 Maximum 48.9 26.9 34.6

SMBC (consolidated)

33.6

39.5

48.0

23.1

37.8

37.8

SMBC (non-consolidated)

29.0

35.2

43.4

19.3

33.9

34.9

Minimum 23.5 14.1 17.5

Average 38.7 20.8 28.7

March 31, 2015 39.0 18.0 31.1

Notes: 1. VaR for a one-day holding period with a one-sided confidence interval of 99.0% [computed daily using the historical simulation method (based on four years of historical observations)]. 2. The above category of “Equities” does not include stocks held for long-term strategic purposes.

■ Back-Testing Results (Trading Book) SMFG (consolidated)

SMBC (consolidated)

Actual Profit or Loss (¥ billion)

8.0

SMBC (non-consolidated)

Actual Profit or Loss (¥ billion)

8.0

6.0

6.0

6.0

4.0

4.0

4.0

2.0

2.0

2.0

0

0

0

–2.0

–2.0

–2.0

–4.0

–4.0

–4.0

–6.0

–6.0

0

2.0

86 2016 Annual Report

4.0

6.0

8.0

VaR (¥ billion)

0

2.0

4.0

Actual Profit or Loss (¥ billion)

8.0

6.0

8.0

VaR (¥ billion)

–6.0

0

2.0

4.0

6.0

8.0

VaR (¥ billion)

iii Reasons for losses exceeding the VaR

(CET1) ratio of 14% over approximately five years from September

In all cases, these were the result of significant fluctuations on the

2015, when the level was 28%.

foreign exchange and interest rate and stock markets.

*1: Holdings refers to Group holdings of stocks listed in Japan. *2: Based on full implementation under the Basel III framework

c. Indicators substitute for the back-testing method SMFG employs, as a method substitute for the back-testing method, the VaR wherein presumption for the model such as observation period changes.

(2) Liquidity Risk Management At SMBC, liquidity risk is regarded as one of the major risks. SMBC’s liquidity risk management is based on a framework consisting of “setting upper limits for funding gaps,” “maintaining supplementary

d. Changes in model from previous fiscal year The model in use remains unchanged from that employed in the previous fiscal year. (c) Stress Testing

liquidity,” and “establishing contingency plans.”

A funding gap is defined as the maturity mismatch between

source of funds and use of funds, and shows forthcoming funding

The market occasionally undergoes extreme fluctuations that exceed projections. To manage market risk, therefore, it is important to run simulations of unforeseen situations that may occur in financial mar-

requirements. SMBC manages this funding gap properly by setting limits on the size of the gap and limiting reliance on short-term funding. These limits are set in place on both a bank-wide basis

kets (stress testing). SMBC conducts stress tests regularly, assuming

and individual branch basis, and take into account funding status,

various scenarios, and has measures in place for irregular events. (d) Outlier Framework

currency characteristics and other factors. Additionally, funding gap

In the event the economic value of a bank declines by more than 20% of total capital as a result of interest rate shocks, that bank would fall into the category of “outlier bank,” as stipulated under the Pillar 2 of Basel Framework.

Decline in economic value as of March 31, 2016 was around

cash management planning, economic environments, and individual limits are set for individual currencies if necessary. SMBC monitors the funding gap on a daily basis.

Further, stress tests are regularly carried out by simulating

the impact triggered, for example, by deposit outflows or difficulties in money market funding, in order to appraise and man-

2% of total capital, substantially below the 20% criterion. (e) Management of Stocks Held for Strategic Purposes

age the amount of funding required when liquidity risk is realized.

SMBC establishes risk allowance limits on stocks held for strategic

such as U.S. government bonds, which can be immediately con-

purposes and monitors the observance of these limits in order to

verted to cash, or establishing borrowing facilities to be used as

control stock price fluctuation risk appropriately. More specifically,

supplementary funding sources in an emergency, in order to raise

VaR (1 year holding period) computed from profit and loss simula-

the required funds smoothly even during market disruption.

tions based on historical market fluctuation data and aggregated



fluctuation in market price from the beginning of the fiscal year are

the liquidity risk when being realized, by creating detailed action

subject to the risk capital limit management and monitored on a

plans such as lowering the upper limit for the funding gap, depend-

daily basis.

ing on the existing situation (i.e. normal, concerned, or critical) and



the respective circumstances.

Additionally, supplementary liquidity is maintained by holding assets,

To diminish the impact of stock price movement on capital,

SMBC has drawn up plans for reducing equity holdings. In accordance with these plans, which were announced in November 2015, SMBC is seeking to reduce its holdings*1 to a common equity Tier 1

■Decline in Economic Value Based on Outlier Framework (Billions of yen)

SMBC (consolidated)

SMBC (non-consolidated)

March 31, 2015 March 31, 2016 March 31, 2015 March 31, 2016 132.6

215.0

117.9

193.4

21.2

48.0

17.3

43.9

57.4

109.7

52.6

99.6

25.5

40.1

24.5

38.7

Percentage of total capital

1.3%

2.1%

1.2%

2.0%

Note: “Decline in economic value” is the decline of present value after interest rate shocks (1st and 99th percentile of observed interest rate changes using a 1-year holding period and 5 years of observations).

■Composition, by Industry, of Listed Equity Portfolio (%) 25 20

(March 31, 2016) SMBC Portfolio TOPIX Nikkei Average

15 10 5 0

Services Real Estate Other Financial Insurance Securities/Commodity/Futures Trading Banking Retail Wholesale Telecommunications Warehousing/Distribution Air Transport Marine Transport Overland Transport Electricity/Gas Utilities Other Products Precision Machinery Transport Machinery Electric Machinery Machinery Metal Products Nonferrous Metals Steel Glass/Minerals Rubber Products Petroleum/Coal Pharmaceuticals Chemicals Pulp/Paper Textiles Food Products Construction Mining Fisheries/Farming/Forestry

Total Impact of Yen interest rates Impact of U.S. dollar interest rates Impact of Euro interest rates

Furthermore, contingency plans are developed to respond to

2016 Annual Report

87

Operational Risk 1. Basic Approach to Operational Risk Management

2. Operational Risk Management System

(1) Definition of Operational Risk

SMFG has designed and implemented an operational risk manage-

Operational risk is the risk of loss resulting from inadequate or failed

ment framework for group-wide basic policies for risk management.

internal processes, people and systems or from external events.



Specifically, Basel Capital Accord—which, in addition to process-

important matters such as basic policies for operational risk man-

ing risk and system risk, also covers legal risk, personnel risk, and

agement, and these decisions are authorized by the SMBC’s Board

physical asset risk—defines the following seven types of events

of Directors. In addition, SMBC has established the system to com-

that may lead to the risk of loss: (1) internal fraud, (2) external fraud,

prehensively manage operational risks by setting up the Corporate

(3) employment practices and workplace safety, (4) clients, products

Risk Management Department to oversee overall management of

and business practices, (5) damage to physical assets, (6) busi-

operational risks together with other departments responsible for

ness disruption and system failures, and (7) execution, delivery, and

processing risks and system risks.

process management.



(2) F  undamental Principles for Operational Risk Management

analyzing internal loss data occurred at each department or branch

SMFG and SMBC have set forth the Regulations on Operational Risk Management to define the basic rules to be observed in the conduct of operational risk management across the entire Group. Under these regulations, SMFG and SMBC have been working to enhance the operational risk management framework across the whole Group by establishing an effective system for identification, assessment, controlling, and monitoring of material operational risks and a system for executing contingency and business continuity plans. Based on the framework of Basel Capital Accord, SMFG has been continuously pursuing sophisticated quantification of operational risks and advanced group-wide management.

At SMBC, the Management Committee makes decisions on

As a brief overview, this system operates by collecting and

as well as comprehensively specifying scenarios involving operational risks based on the operational procedures of each branch on regular-basis and estimating the loss amount and frequency of the occurrence of such losses based on each scenario. Risk severities are quantified for each scenario and for those scenarios having high severities the risk mitigation plan will be developed by the relevant department and the status on the progress of such risk mitigation plan will be followed up by the Corporate Risk Management Department. Furthermore, operational risks are quantified, and quantitatively managed by utilizing the collected internal loss data and scenarios.

■ SMBC’s Operational Risk Management System Corporate Auditors

Board of Directors

External Audit (Auditing Firm)

Management Committee

Internal Audit Dept.

Direction Audit

Reporting Operational Risk Committee

Board Member in Charge of Risk Management Unit Direction

Feedback of measurement results related to operational risk Monitoring of progress in risk mitigation plans

Reporting

Corporate Risk Management Dept. Supervisor of overall operational risk management Measurement of operational risk Reporting Generation of scenarios and development of risk mitigation actions

Reporting Reflection of internal loss data, external loss data and BEICFs in scenarios

Internal loss data

Head Office departments Retail Banking

88 2016 Annual Report

Wholesale Banking

International Banking

Treasury

Investment Banking



These occurrences of internal loss data, severity of scenarios

(2) External Loss Data

and status on risk mitigation are regularly reported to the director in

External loss data are defined as “the information for events which

charge of the Corporate Risk Management Department. In addition,

other banks, etc. incur losses due to operational risks.”

there is the Operational Risk Committee, comprising all relevant units of the bank, where operational risk information is reported and

(3) Business Environment and Internal Control Factors (BEICFs)

risk mitigation plans are discussed. In this way, we realize a highly

BEICFs are defined as “factors affecting operational risks which are

effective operational risk management framework. The operational

associated with conditions of business environment and internal

risk situation is also reported to the Management Committee and

control of SMFG.”

the Board of Directors on a regular basis, for review of the basic

(4) Scenario Analysis

policies on operational risk management. Moreover, the bank’s independent Internal Audit Department conducts periodic audits to ensure that the operational risk management system is functioning properly.

3. Operational Risk Management Methodology As previously defined, operational risks cover a wide-range of cases, including the risks of losses due to errors in operation, system failures, and natural disasters. Also, operational risk events can occur virtually anywhere and everywhere. Thus, it is essential to check whether material operational risks have been overlooked, monitor the overall status of risks, and manage/control them. To this end, it is necessary to be able to quantify risks using a measurement methodology that can be applied to all types of operational risks, and to comprehensively and comparatively capture the status of and changes in potential operational risks of business processes. Also, from the viewpoint of internal control, the measurement methodology used to create a risk mitigation plan must be such that the implementation of the plan quantitatively reduces operational risks.

At the end of March 2008, SMFG and SMBC adopted the

Advanced Measurement Approach (AMA) set forth by Basel Capital Accord for calculation of operational risk equivalent amount. The approach has been utilized for the management of operational risks since then.

The basic framework for quantifying operational risks consists

of internal loss data, external loss data, Business Environment and Internal Control Factors (BEICFs) and scenario analysis. Out of the above-mentioned four factors, internal loss data and the results of scenario analysis (hereinafter, the “assumption data”) are input

Scenario analysis is defined as a “methodology which identifies assumed cases involving any material operational risks and describe them in terms of risk scenario, and estimate the frequency and severity of risk scenarios.” SMFG’s principal business operations are applicable for this methodology.

The purposes of scenario analysis are to identify any potential

risks underlying in our business operations; to measure risks based on the possibility of occurrence of the said potential risks; and to review and execute any required measures. Furthermore, another purpose of the scenario analysis is to estimate the frequency of low frequency and high-severity events for each scenario (which may be difficult to estimate using internal loss data alone).

(5) Measurement Using the Quantification Model The quantification model produces the distribution of loss frequency and loss severity based on the internal loss data and scenario data; and it also produces the loss distribution based on the said distribution of loss frequency (distribution of losses in a year) and the distribution of loss severity (distribution of loss amount per case) by making scenarios of the various combination of frequencies and amount of losses according to the Monte Carlo simulations; and it calculates the maximum amount of loss expected, due to operational risks, based on the assumption of one-sided confidence interval of 99.9% and the holding period of one year. Regarding the Consumer finance of a certain subsidiary, expected losses are excluded in calculating the operational risk equivalent amount of the repayment of excess interest.

Operational risk equivalent amount in respect of the “tangible

asset damages” that occurred by earthquakes are measured using

into the internal measurement system (hereinafter, the “quantification model”) developed by SMBC; and operational risk equivalent amount and risk asset (operational risk equivalent amount is divided

■Basic Framework of Operational Risk Measurement

by 8%) is calculated. In addition, external loss data and BEICFs along with internal loss data are used for verifying the assessment

Internal Loss Data Data input

of scenarios to increase objectivity, accuracy and completeness. SMFG, including the Group companies to which the AMA is applied, collect the four elements.

External Loss Data

Verification

Scenario Data

This is outlined as follows.

(1) Internal Loss Data

Calculation of Operational Risk Equivalent Amount Using Quantification Model

BEICFs

Internal loss data are defined as “the information for events which SMFG incur losses due to operational risks.”

Risk Mitigation Initiatives

2016 Annual Report

89

the probability data of earthquake occurrence in each part of

4. Processing Risk Management

Japan and the distribution of loss amount by those earthquake

Processing risk is the possibility of losses arising from negligent

occurrences.

processing by employees, accidents, or unauthorized activities.



The measurement units are SMFG consolidated basis, SMBC



SMFG recognizes that all operations entail processing risk.

consolidated basis and SMBC non-consolidated basis. The opera-

We are, therefore, working to raise the level of sophistication of

tional risk equivalent amount based on AMA is calculated as the

our management of processing risk across the whole Group by

simple aggregate of the amount of the seven event types set forth

ensuring that each branch conducts its own regular investigations

by the Basel Capital Accord and of the “tangible asset damages”

of processing risk; minimizing losses in the event of processing

by earthquakes. However, in the case of SMFG consolidated basis,

errors or negligence by drafting exhaustive contingency plans; and

the risk of losses on repayment of excess interest is added on. The

carrying out thorough quantification of the risk under management.

measurement accuracy is ensured by implementing the regularly



conducted verifications of the quantification models pre- and

group-wide basic policies for risk management, the basic admin-

post-measurement.

istrative regulations are defined as “comprehending the risks and



Meanwhile, as for the operational risk equivalent amount of

costs of administration and transaction processing, and managing

other Group companies not applicable for AMA and in preparation

them accordingly,” and “seeking to raise the quality of administration

to become applicable for AMA, it is calculated according to the

to deliver high-quality service to customers.” Adding new policies or

Basic Indicator Approach (BIA), and the operational risk equivalent

making major revisions to existing ones for processing risk manage-

amount for SMFG consolidated basis and SMBC consolidated

ment requires the approval of both the Management Committee and

basis are calculated by consolidating such amount calculated

the Board of Directors.

In the administrative regulations of SMBC, in line with SMFG’s

based on BIA with the operational risk equivalent amount calculated



based on AMA.

cific rules for processing risk management. The rules allocate pro-

(6) Risk Mitigation Initiatives

cessing risk management tasks among six types of departments:

To mitigate risks using the quantitative results of the AMA, SMFG

operations planning departments, compliance departments, opera-

and SMBC implement risk mitigation measures for high severity

tions departments, transaction execution departments (primarily

scenarios. Furthermore, the risk assets calculated by quantification

front-office departments, branches, and branch service offices),

are allocated to each business unit of SMBC and other Group com-

internal audit departments, and the customer support departments.

panies for increasing awareness of operational risks internally in the

In addition, there is a specialized group within the Operations

Group companies, improving the effectiveness of their operational

Planning Department to strengthen administrative procedures

risk management and mitigating operational risks of the entire Group.

throughout the Group.

In the administrative regulations, SMBC has also defined spe-

■ Measurement Using the Quantification Model Distribution of Loss Frequency 0.15 0.10

Aggregated Loss Distribution

0.05 0 0

5

10

15

20

25

Number of incidents/year

30

Calculate aggregated annual loss amount (e.g., 450)

Distribution of Loss Severity Probability of occurrence (frequency)

Total

0.30 0.25 0.20 0.15 0.10 0.05 0 0

2

90 2016 Annual Report

4

6

Loss per incident

8

10

Sampling of the amounts of losses corresponding to the above number of losses from the distribution of losses (e.g., 50, 100, 80, 150, 70)

Frequency x Severity Probability of occurrence (frequency)

Probability of occurrence (frequency)

Repeat (e.g., 1 million times)

Sampling of the number of losses from the distribution (e.g., 5 incidents)

0.20

0.4 0.3 0.2 0.1

99.9%

0

Aggregated annual loss amount

5. System Risk Management

Settlement Risk

System risk is the risk of loss arising from the failure, malfunction, or

Settlement risk is the possibility of a loss arising from a transaction

unauthorized use of information systems.

SMFG recognizes that the IT revolution makes reliable infor-

mation systems essential for the effective implementation of management strategy. We strive to minimize system risk by drafting regulations and specific management standards, including a security policy. We also have contingency plans targeted at minimizing losses in the event of a system failure. This risk management system is designed to ensure that the Group as a whole is undertaking adequate risk management.

At SMBC, safety measures are strengthened according to risk

assessment based on the Financial Services Agency’s Financial Inspection Manual, and the Security Guidelines published by the

that cannot be settled as planned. As this risk crosses over numerous risks, including credit, liquidity, processing and system risks, it is required to appropriately manage according to characteristics of such risks.

At SMBC, the Corporate Risk Management Department is in

overall charge of settlement risk, while settlement risk included within the various other risk categories is managed by the respective department in charge: the Credit & Investment Planning Department for credit risk, the Corporate Risk Management Department for liquidity risk, the Operations Planning Department for processing risk, and the IT Planning Department for system risk.

Center for Financial Industry Information Systems (FISC). Systems trouble at financial institutions has the potential to impact heavily on society as system risk diversifies owing to advances in IT and financial institutions expand their fields of business. We have numerous measures in place for system breakdown prevention, including constant maintenance to ensure stable and uninterrupted operation, duplication of the various system categories and infrastructure, and a disaster-prevention system consisting of computer centers in eastern and western Japan. To maintain the confidentiality of customer data and prevent leaks of information, sensitive information is encrypted, unauthorized external access is blocked, and all possible measures are taken to secure data. We also have contingency plans and hold training sessions as necessary to ensure full preparedness in the event of an emergency. To maintain security, we will continue to revise countermeasures as new technologies and usage formats emerge.

Taking into account the growing sophistication and diversification

of cyberattacks globally, the increasing social impact from damage inflicted by such attacks, and the risk to our reputation and credit standing, we deploy governance and technologies for identification, protection, and detection and we are continuously tightening this cyber security management in preparedness for attacks.

2016 Annual Report

91

Glossary ALM Abbreviation for Asset Liability Management Method for comprehensive management of assets and liabilities, with appropriate controls on market risk (interest rates, exchange rates, etc.). Advanced Measurement Approach (AMA) Based on the operational risk measurement methods used in the internal management of financial institutions, this is a method for obtaining the operational risk equivalent amount by calculating the maximum amount of operational risk loss expected over a period of one year, with a one-sided confidence interval of 99.9%. Back-testing Method of verifying the validity of models by comparing the model value and actual value. For instance, in the case of VaR, comparing and verifying the value of VaR and the profit or loss amount. Basel III The Basel Capital Accord, an international agreement, was amended in December 2010 for ensuring the soundness of banks (minimum capital requirements) for the purpose of enhancing the capabilities of appropriately responding to any financial and economic crisis and reducing risks which may have originated from financial sector to adversely affect the actual economy. It has been implemented incrementally since 2013. Basic Indicator Approach (BIA) A calculation approach in which an average value for the most recent three years derived by multiplying gross profit for the financial institution as a whole by certain level (15%) is deemed to be the operational risk equivalent amount. BPV Abbreviation for Basis Point Value Potential change in present value of financial product corresponding to 0.01-percentage-point increase in interest rates. Credit cost Average losses expected to occur during the coming year. Historical simulation method Method of simulating future fluctuations without the use of random numbers, by using historical data for risk factors. LGD Abbreviation for Loss Given Default Percentage of loss assumed in the event of default by obligor; ratio of uncollectible amount of the exposure owned in the event of default. Monte Carlo simulation method General term used for a simulation method which uses random numbers. Outlier framework Monitoring standard for interest rate risk in the banking book, as set forth in the Pillar 2 of the Basel Capital Accord.

92 2016 Annual Report

Operational risk equivalent amount Operational risk capital requirements under the Basel Capital Accord capital adequacy regulations. PD Abbreviation for Probability of Default Probability of becoming default by obligor during one year. Present value A future amount of money that has been discounted to reflect its current value taking into account the interest rate and the extent of credit risk. Risk appetite Types and levels of risk that SMFG is willing to take on or tolerate to drive earnings growth. Risk appetite framework A framework in which SMFG’s risk appetite is clarified and appropriately applied to its business operation. Risk capital The amount of capital required to cover the theoretical maximum potential loss arising from operational risk. It differs from the minimum regulatory capital requirements, and it is being used in the risk management framework voluntarily developed by financial institutions for the purpose of internal management. Risk factor Anything which may become a factor for risk. In the case of market risk, it would be the share price or interest rate; in the case of credit risk, it would be the default rate or economic environment. Risk-weighted assets • Credit risk Total assets (lending exposures, including credit equivalent amount of off-balance sheet transactions, etc.) which is reevaluated according to the level of credit risk. • Operational risk Amount derived by dividing the operational risk equivalent amount by 8%. Sound risk culture Business culture in which SMFG seeks to achieve the appropriate balance between risk and return after determining the degree of risk that is acceptable. Underlying assets General term used for assets which serve as the source of payments for principal and interest for securitization exposures, etc. VaR Abbreviation for Value at Risk The maximum loss expectation for a portfolio of financial assets for a given probability.

SMFG Accounting and Auditing Hotline/ Designated Dispute Resolution Agencies SMFG Accounting and Auditing Hotline Reports may be submitted by regular mail or e-mail to the following addresses.

Mailing address: SMFG Accounting and Auditing Hotline Iwata Godo Attorneys and Counselors at Law 10th floor, Marunouchi Building 2-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-6310 E-mail address: [email protected] * The hotline accepts any alerts of inappropriate activities concerning accounting and auditing at SMFG or its consolidated subsidiaries. * Anonymous reports are also accepted; however, if possible, providing personal information such as your name and contact information would be appreciated and helpful. * Please provide as much detail as possible for such inappropriate activities. An investigation may not be feasible if adequate information is not provided. * Personal information will not be disclosed to any third parties without your consent, unless such disclosure is required by law.

Designated Dispute Resolution Agencies For the handling of any complaints received from and conflicts with our clients, SMBC has executed agreements, respectively, with the Japanese Bankers Association, a designated dispute resolution agency under the Banking Act, and the Trust Companies Association of Japan, a Designated Dispute Resolution Organization under the Trust Business Act and Act on Provision, etc. of Trust Business by Financial Institutions and the specified non-profit organization of “Financial Instruments Mediation Assistance Center,” one of “Designated Dispute Resolution Agencies” under the Financial Instruments and Exchange Act. Japanese Bankers Association: Contact information: Consultation office, Japanese Bankers Association Telephone numbers: (Japan) 0570-017109 or 03-5252-3772 Business hours: Mondays through Fridays (except public and bank holidays) 9:00 am to 5:00 pm Trust Companies Association of Japan: Contact information: Consultation office, Trust Companies Association of Japan Telephone numbers: (Japan) 0120-817335 or 03-6206-3988 Business hours: Mondays through Fridays (except public and bank holidays) 9:00 am to 5:15 pm Financial Instruments Mediation Assistance Center Contact information: Financial Instruments Mediation Assistance Center Telephone numbers: (Japan) 0120-64-5005 Fax:

(Japan) 03-3669-9833

Business hours: Mondays through Fridays (except public and bank holidays) 9:00 am to 5:00 pm

2016 Annual Report

93

SMFG Fiduciary Duty Declaration

Based on the Customer First management principle, SMFG Group companies* make the following undertakings as best partner to clients in asset management and formation.

1. Develop a range of products that is closely aligned with client requirements • Develop products that are based on accurate perception of clients’ needs and meet high global standards, and assemble a range of products from a wide selection of investment management and insurance companies that takes account of economic conditions and market trends and meets client requirements. • Work toward ensuring appropriate product development and selection. 2. Increase the information provided and its understandability • Increase the information the company provides to clients on product characteristics, risks, commissions, and economic conditions and market trends. • Provide product information in ways that are easy to understand and follow up closely with clients after sales. • Create a fee structure that is easy to understand from a client’s viewpoint. 3. Develop a client-oriented sales approach • Use training and other means to make sure the customer orientation that is one of the management principles permeates throughout the company and reflect this in the performance evaluation structure and other aspects of sales. • After careful inquiry into client requirements, seek to obtain client understanding of appropriate products based on the clients’ knowledge, investment experience, financial asset situation, and objectives. • Respond as a group to client needs, including introductions to SMFG Group companies if necessary. 4. Work constantly toward providing the highest levels of service to clients • Structure business so that customer views are reflected in improvements to service. • Seek to increase convenience by expanding access channels. • In addition to investment products, offer services and products that are appropriate to the clients’ stage in life. • Use training and other means to build a professional team, deploy new technologies, and review internal company arrangements based on the PDCA (Plan, Do, Check, and Act) procedures. SMFG Group companies will deploy these efforts in contributing to Japan’s shift from saving to investment. * The SMFG Group companies that are parties to this declaration are Sumitomo Mitsui Banking Corporation, SMBC Trust Bank Ltd., SMBC Nikko Securities Inc., SMBC Friend Securities Co., Ltd., The Minato Bank, Ltd., and Kansai Urban Banking Corporation.

94 2016 Annual Report

Employees

ώώ SMBC

ώώ Sumitomo 2014 23,926 12,493 52.22% 11,433 47.78% 37 yrs 1 mos. 40 yrs 3 mos. 33 yrs 8 mos. 14 yrs 0 mos. 16 yrs 7 mos. 11 yrs 2 mos.

March 31

2015 25,963 13,087 50.41% 12,876 49.59% 37 yrs 6 mos. 41 yrs 1 mos. 33 yrs 11 mos. 13 yrs 3 mos. 16 yrs 0 mos. 10 yrs 7 mos.

2016 26,950 13,196 48.96% 13,754 51.04% 37 yrs 4 mos. 40 yrs 11 mos. 33 yrs 10 mos. 13 yrs 2 mos. 15 yrs 11 mos. 10 yrs 6 mos.

Number of employees* Male Percentage of total Female Percentage of total Average age Male Female Average years of service Male Female Number of women in 480 567 743 managerial positions Ratio of employees with 2.10% 2.07% 2.14% disabilities (% of total)** * The number of full-time employees, including employees seconded to other companies and organizations. The following list of employees is deducted from the total number of employees: executive officers, employees on short-term contracts, part-time employees, employees of temporary employment agencies, and national staff at overseas branches. ** As of March 1 of respective years 2014

April 1

2015

2016

652 787 893 Number of new hires 231 256 225 Number of newly employed female graduates*** Ratio of newly employed females to total new employees 35.4% 32.5% 25.2% *** Including Sogoshoku staff and Sogoshoku (retail course) employees. Excluding Business Career employees. 2013 2014 2015 1,127 1,513 2,188 <30> <85> <466> 26 88 153

Fiscal

Number of employees taking parental leave Number of career hires

March 31

March 31

Trust Bank 2016

1,786 Number of employees* 719 Male 40.26% Percentage of total 1,067 Female 59.74% Percentage of total 41 yrs 1 mos. Average age 42 yrs 5 mos. Male 40 yrs 2 mos. Female 9 yrs 2 mos. Average years of service 9 yrs 6 mos. Male 8 yrs 11 mos. Female Number of women in 89 managerial positions * The number of full-time employees, including employees seconded to other companies and organizations. The number excludes employees seconded from other companies and organizations, directors, employees on short-term contracts, part-time employees, and employees of temporary employment agencies. April 1

2016

Number of new hires Number of newly employed female graduates*** Ratio of newly employed females to total new employees Fiscal

24 13 54.2% 2015

106 Number of employees taking parental leave <1> 60 Number of career hires Note: Numbers are shown from fiscal 2015 as there were changes due to the integration of Citibank Japan’s retail banking business in November 2015.

2014

2015

2016

1,606 1,618 1,677 Number of employees* 1,019 1,034 1,069 Male 63.45% 63.91% 63.74% Percentage of total 587 584 608 Female 36.55% 36.09% 36.26% Percentage of total 39 yrs 8 mos. 40 yrs 5 mos. 40 yrs 9 mos. Average age 41 yrs 11 mos. 42 yrs 5 mos. 42 yrs 9 mos. Male 35 yrs 10 mos. 36 yrs 10 mos. 37 yrs 4 mos. Female 14 yrs 9 mos. 15 yrs 2 mos. 15 yrs 4 mos. Average years of service 16 yrs 9 mos. 17 yrs 0 mos. 17 yrs 3 mos. Male 11 yrs 2 mos. 11 yrs 11 mos. 12 yrs 0 mos. Female Number of women in 24 29 41 managerial positions Ratio of employees with 2.14% 2.22% 2.18% disabilities (% of total)** * The number of full-time employees, including employees seconded to other companies and organizations. The following list of employees is deducted from the total number of employees: employees seconded from other companies and organizations, executive officers, employees on short-term contracts, parttime employees, employees of temporary employment agencies, and full-time employees of affiliates (including overseas subsidiaries). ** As of March 1 of respective years 2014

April 1

2015

2016

24 41 43 Number of new hires 6 11 16 Number of newly employed female graduates Ratio of newly employed females to total new employees 25.0% 26.8% 37.2% Fiscal

Number of employees taking parental leave ώώ SMBC March 31

ώώ SMBC

Mitsui Finance and Leasing

2013 2014 2015 51 58 68 <0> <0> <0>

Nikko Securities 2014

2015

2016

7,764 8,188 8,522 Number of employees* 4,939 5,166 5,347 Male 63.61% 63.09% 62.74% Percentage of total 2,825 3,022 3,175 Female 36.39% 36.91% 37.26% Percentage of total 39 yrs 9 mos. 39 yrs 7 mos. 39 yrs 7 mos. Average age 40 yrs 9 mos. 40 yrs 8 mos. 40 yrs 7 mos. Male 37 yrs 11 mos. 37 yrs 10 mos. 37 yrs 9 mos. Female 12 yrs 9 mos. 12 yrs 9 mos. 12 yrs 11 mos. Average years of service 12 yrs 11 mos. 13 yrs 0 mos. 13 yrs 1 mos. Male 12 yrs 6 mos. 12 yrs 5 mos. 12 yrs 7 mos. Female Number of women in 75 114 139 managerial positions Ratio of employees with 2.00% 1.94% 2.24% disabilities (% of total)** * The number of full-time employees. The following list of employees is deducted from the total number of employees: executive officers, part-time employees, employees of temporary employment agencies, and national staff at overseas branches. ** As of March 1 of respective years April 1

2014

2015

2016

516 617 593 Number of new hires*** 224 285 270 Number of newly employed female graduates Ratio of newly employed females to total new employees 43.4% 46.2% 45.5% *** Professional employees (Classes I–II), FA, and specialists Fiscal

Number of employees taking parental leave

2013 2014 2015 287 289 316 <3> <12> <15>

2016 Annual Report

95

ώώ SMBC

Friend Securities 2014 1,855 1,316 70.94% 539 29.06% 38 yrs 11 mos. 41 yrs 1 mos. 33 yrs 8 mos. 15 yrs 3 mos. 17 yrs 1 mos. 10 yrs 6 mos.

March 31

ώώ Cedyna 2015 1,862 1,321 70.95% 541 29.05% 37 yrs 10 mos. 39 yrs 10 mos. 32 yrs 11 mos. 14 yrs 11 mos. 15 yrs 11 mos. 9 yrs 8 mos.

2016 1,769 1,261 71.28% 508 28.72% 38 yrs 10 mos. 40 yrs 5 mos. 33 yrs 9 mos. 14 yrs 8 mos. 16 yrs 4 mos. 10 yrs 6 mos.

Number of employees* Male Percentage of total Female Percentage of total Average age Male Female Average years of service Male Female * The number of full-time employees, including employees seconded to other companies and organizations. The following list of employees is deducted from the total number of employees: executive officers, employees on short-term contracts, part-time employees, employees of temporary employment agencies, and national staff at overseas branches. 2014

April 1

2015

2016

245 180 239 Number of new hires 95 71 116 Number of newly employed female graduates** Ratio of newly employed females to total new employees 38.8% 39.4% 48.5% ** Both non-area specified and area specified staff Fiscal

Number of employees taking parental leave ώώ Sumitomo

2013 2014 2015 21 28 48 <0> <0> <6>

2014

2015

2016

2,367 2,402 2,447 Number of employees* 1,176 1,190 1,210 Male 49.68% 49.54% 49.45% Percentage of total 1,191 1,212 1,237 Female 50.32% 50.46% 50.55% Percentage of total 38 yrs 1 mos. 39 yrs 1 mos. 39 yrs 5 mos. Average age 40 yrs 11 mos. 41 yrs 9 mos. 41 yrs 11 mos. Male 35 yrs 4 mos. 36 yrs 5 mos. 36 yrs 11 mos. Female 12 yrs 8 mos. 13 yrs 4 mos. 13 yrs 8 mos. Average years of service 13 yrs 7 mos. 14 yrs 0 mos. 14 yrs 4 mos. Male 11 yrs 10 mos. 12 yrs 7 mos. 13 yrs 1 mos. Female Number of women in 26 26 30 managerial positions** Ratio of employees with 2.30% 2.24% 2.30% disabilities (% of total)*** * The number of full-time employees. This excludes directors, consultants, advisors, part-time employees, affiliated companies (including employees seconded from other companies and organizations), and national staff at overseas branches. ** Total of senior staff and group managers (including credit officers) *** Computed based on single month of March April 1

2014

2015

2016

59 72 78 Number of new hires 32 39 45 Number of newly employed female graduates Ratio of newly employed females to total new employees 54.2% 54.2% 57.7% Fiscal

Number of employees taking parental leave Number of career hires

2014

2015

2013 2014 2015 65 71 88 <9> <13> <14> 16 24 147

2014

April 1

2015

2016

69 87 114 Number of new hires 45 54 68 Number of newly employed female graduates Ratio of newly employed females to total new employees 65.2% 62.1% 59.6% 2013

2014

2015

89 94 89 Number of employees taking parental leave**** <4> <1> <2> 27 24 35 Number of career hires **** Including employees on short-term childcare leave. Retroactive revisions have been made to previous fiscal years due to change in calculation methodology.

ώώ SMBC March 31

Consumer Finance 2014

2015

2016

2,531 2,582 2,682 Number of employees* 1,426 1,445 1,485 Male 56.34% 55.96% 55.37% Percentage of total 1,105 1,137 1,197 Female 43.66% 44.04% 44.63% Percentage of total 38 yrs 2 mos. 38 yrs 5 mos. 38 yrs 11 mos. Average age 39 yrs 11 mos. 40 yrs 3 mos. 40 yrs 10 mos. Male 36 yrs 2 mos. 36 yrs 5 mos. 36 yrs 8 mos. Female 11 yrs 4 mos. 11 yrs 7 mos. 12 yrs 0 mos. Average years of service 14 yrs 1 mos. 14 yrs 6 mos. 14 yrs 11 mos. Male 7 yrs 8 mos. 7 yrs 11 mos. 8 yrs 3 mos. Female Number of women in 39 49 76 managerial positions Ratio of employees with 1.86% 2.09% 2.12% disabilities (% of total)** * The number of full-time employees on a non-consolidated basis, including employees seconded to other companies and organizations. The following list of employees is deducted from the total number of employees: employees seconded from other companies, national staff at overseas branches, executive officers, part-time employees, and employees of temporary employment agencies. ** As of March 1 of respective years April 1

2014

2015

2016

40 49 55 Number of new hires 26 30 31 Number of newly employed female graduates Ratio of newly employed females to total new employees 65.0% 61.2% 56.4% Fiscal

96 2016 Annual Report

2016

3,192 3,213 3,258 Number of employees* 1,967 1,962 1,966 Male 61.62% 61.06% 60.34% Percentage of total 1,225 1,251 1,292 Female 38.38% 38.94% 39.66% Percentage of total 41 yrs 2 mos. 41 yrs 7 mos. 41 yrs 9 mos. Average age 43 yrs 4 mos. 43 yrs 9 mos. 44 yrs 0 mos. Male 37 yrs 6 mos. 38 yrs 0 mos. 38 yrs 4 mos. Female 17 yrs 5 mos. 17 yrs 9 mos. 18 yrs 0 mos. Average years of service** 19 yrs 5 mos. 19 yrs 10 mos. 20 yrs 1 mos. Male 14 yrs 2 mos. 14 yrs 6 mos. 14 yrs 9 mos. Female Number of women in 29 38 48 managerial positions Ratio of employees with 1.81% 2.06% 2.10% disabilities (% of total)*** * Excluding employees seconded from other companies, employees on shortterm contracts and part-time employees. ** Retroactive revisions have been made to previous fiscal years due to change in calculation methodology. *** As of March 1 of respective years

Fiscal

Mitsui Card

March 31

March 31

Number of employees taking parental leave*** Number of career hires *** Including employees who retired during the fiscal year

2013 2014 2015 68 66 81 <1> <1> <1> 5 3 8

ώώ Japan

Research Institute

March 31

2014 2,247 1,705 75.88% 542 24.12% 40 yrs 3 mos. 41 yrs 0 mos. 38 yrs 1 mos. 11 yrs 3 mos. 11 yrs 7 mos. 10 yrs 0 mos.

ώώ Kansai 2015 2,288 1,722 75.26% 566 24.74% 40 yrs 6 mos. 41 yrs 2 mos. 38 yrs 7 mos. 11 yrs 5 mos. 11 yrs 10 mos. 10 yrs 4 mos.

2016 2,397 1,796 74.93% 601 25.07% 40 yrs 6 mos. 41 yrs 1 mos. 38 yrs 10 mos. 11 yrs 5 mos. 11 yrs 9 mos. 10 yrs 6 mos.

Number of employees* Male Percentage of total Female Percentage of total Average age Male Female Average years of service Male Female Ratio of employees with 1.98% 2.00% 2.14% disabilities (% of total)** * The number of full-time employees, including employees seconded to other companies and organizations. The following list of employees is deducted from the total number of employees: executive officers, employees on short-term contracts, part-time employees, employees of temporary employment agencies, and national staff at overseas branches. ** As of March 31 of respective years 2014

April 1

2015

2016

68 86 118 Number of new hires 17 23 41 Number of newly employed female graduates*** Ratio of newly employed females to total new employees 25.0% 26.7% 34.7% *** Including only Sogoshoku employees. Ippanshoku employees are excluded. Fiscal

Number of employees taking parental leave ώώ THE

2013 2014 2015 35 49 53 <7> <12> <10>

2014

2015

2016

1,928 1,949 1,960 Number of employees* 1,215 1,211 1,180 Male 63.02% 62.13% 60.20% Percentage of total 713 738 780 Female 36.98% 37.87% 39.80% Percentage of total 40 yrs 11 mos. 40 yrs 11 mos. 40 yrs 11 mos. Average age 44 yrs 1 mos. 43 yrs 11 mos. 44 yrs 0 mos. Male 35 yrs 7 mos. 36 yrs 0 mos. 36 yrs 4 mos. Female 16 yrs 7 mos. 16 yrs 7 mos. 16 yrs 6 mos. Average years of service 19 yrs 8 mos. 19 yrs 8 mos. 19 yrs 9 mos. Male 11 yrs 3 mos. 11 yrs 5 mos. 11 yrs 6 mos. Female Number of women in 91 97 109 managerial positions** * The number of full-time employees including employees seconded to other companies or organizations. The following list of employee is deducted from the total number of employees: executive officers, employees on short-term contracts, and part-time employees. ** As of March 31. Number of employees from supervisor level upwards. April 1

Urban Banking 2014

2014

2015

2015

2016

2,567 2,513 2,546 Number of employees* 1,701 1,628 1,603 Male 66.26% 64.78% 62.96% Percentage of total 866 885 943 Female 33.74% 35.22% 37.04% Percentage of total 40 yrs 2 mos. 40 yrs 0 mos. 39 yrs 10 mos. Average age 43 yrs 3 mos. 42 yrs 11 mos. 42 yrs 10 mos. Male 34 yrs 3 mos. 34 yrs 8 mos. 34 yrs 9 mos. Female 16 yrs 11 mos. 16 yrs 8 mos. 16 yrs 6 mos. Average years of service 19 yrs 5 mos. 19 yrs 2 mos. 19 yrs 5 mos. Male 11 yrs 9 mos. 12 yrs 2 mos. 12 yrs 2 mos. Female Number of women in 138 150 164 managerial positions** Ratio of employees with 1.68% 1.85% 2.22% disabilities (% of total)*** * The number of full-time employees, including employees seconded to other companies and organizations. The following list of employee is deducted from the total number of employees: executive officers, employees on short-term contracts, part-time employees, and employees of temporary employment agencies. ** As of March 31; however, it is applicable only to those employees with deputy positions or any other positions higher than deputy position *** As of March 1 of respective years April 1

2014

2015

2016

118 169 194 Number of new hires 70 105 119 Number of newly employed female graduates Ratio of newly employed females to total new employees 59.3% 62.1% 61.3% Fiscal

MINATO BANK

March 31

March 31

Number of employees taking parental leave

2013 2014 2015 91 99 101 <0> <1> <0>

* The combined employment ratio for persons with disabilities for the above 11 companies was 2.11% as of March 2016.

2016

88 111 130 Number of new hires 41 64 71 Number of newly employed female graduates Ratio of newly employed females to total new employees 46.6% 57.7% 54.6% Fiscal

2013

2014

2015

69 84 108 Number of employees taking parental leave*** <0> <0> <15> *** Retroactive revisions have been made to previous fiscal years due to change in calculation methodology.

2016 Annual Report

97

Main Work-Life Balance Support System (Employee Support Program)

SMBC

Parental leave

Leave for taking care of sick children

18 months or maximum of 2 years in case of inability to place in daycare center

Until March 31 of the 6th grade (10 days per annum per child; 20 days for two or more children)

Employees can choose shorter Until March 31 of the Until March 31 of the working hours for each day or 6th grade 6th grade fewer days worked per week, both applicable until March 31 of the 6th grade

1 year or maximum of 18 months in case of inability to place in daycare center

Until the entry into elementary school (5 days per annum per child; 10 days for two or more children)

Until 3 years of age Until the entry into Employees can set working elementary school hours at a minimum 6 hours per day and a minimum 60% of the standard working hours per week

Until the entry into elementary school

1 year or maximum of

Until the entry into elementary school (5 days per annum per child; 10 days for two or more children) *May be extended as needed Until the entry into elementary school (5 days per annum per child; 10 days for two or more children)

Employees can reduce daily working hours to a minimum of 5 hours 30 minutes until March 31 of the 6th grade

Until the entry into elementary school

SMBC Trust Bank

Sumitomo Mitsui 18 months in case of inability to place in Finance and daycare center Leasing Until 3 years of age

SMBC Nikko Securities

SMBC Friend Securities

Sumitomo Mitsui Card

18 months or maximum of 2 years in case of inability to place in daycare center

Shorter working hours

Until March 31 of the 3rd grade (5 days per annum per child; 10 days for two or more children)

Until 3 years of age

Until March 31 of the 6th Until March 31 of the 3rd grade (5 days per annum per grade (Employees can choose child; 10 days for two or more to work 5, 6, or 7 hours a day). children)

1 year or maximum of 18 months in case of inability to place in daycare center

Until the entry into elementary school (5 days per annum per child; 10 days for two or more children)

Until March 31 of the 3rd grade Employees can reduce daily working hours to a minimum of 6 hours (and a maximum of 8 hours), by taking off 30-minute blocks

SMBC Consumer Finance

Japan Research Institute

18 months or maximum Until March 31 of the 6th of 2 years in case of grade (5 days per annum per inability to place in child; no upper limit) daycare center

Until 3 years of age

Employees can choose to work 4, 5, 6 or 7 hours per day until March 31 of the 3rd grade (this system can be combined with flextime).

Employees may select either of shorter working hours for each day of the week (employees may select to work for either 6, THE MINATO BANK 6.5 or 7 hours per day), or working 4 days per week; both cases are applicable until March 31 of the 6th grade 18 months or maximum Until the entry into elementary Employees may select either of 2 years in case of school (5 days per annum per of shorter working hours for inability to place in child; 10 days for two or more each day of the week Kansai Urban daycare center children) (employees may select to work for 6 or 7 hours per day), or Banking fewer working days per week; both cases are applicable until March 31 of the 1st grade

98 2016 Annual Report

Until March 31 of the 6th grade (5 days per annum per child; 10 days for two or more children)

Until the entry into elementary school

Exemption from late-night work

Employees may reduce daily Until March 31 of the Until March 31 of the working hours in increments 6th grade 6th grade of 30 minutes up to 2.5 hours until March 31 of the 6th grade

Employees can reduce daily working hours to between 6 hours and 6 hours 50 minutes until March 31 of the 3rd grade 18 months or maximum Until March 31 of the 6th Employees can choose shorter of 2 years in case of grade (5 days per annum per working hours for each day or inability to place in child; 10 days for two or more fewer days worked per week, daycare center children) both applicable until March 31 of the 3rd grade

Cedyna

Restrictions on overtime

Until March 31 of the Until March 31 of the 3rd grade 3rd grade

Until March 31 of the Until March 31 of the 3rd grade 3rd grade

Other principal systems • Short-term childcare leave • Work relocations • Childcare subsidies • Leave for nursing care • Shorter working hours allowed for nursing care • System for rehiring former employees • Flextime System • Flexibility in working hours • Flexibility in the work place • Nursing time • Paternity leave (3 days) • Half-day paid leave • Nursing Leave • Shorter working hours allowed for nursing care • Nursing care leave • Babysitter services provided • Work relocations • System for rehiring former employees • Short-term childcare leave • Leave for nursing care • Shorter working hours allowed for nursing care • Short-term childcare leave • Discounted rates for contracted daycare service • Nursing care leave • Special days off for nursing care • Shorter working hours allowed for nursing care • Short-term leave for nursing care • Staggered working hours (working in shifts) • Rehiring former employees • Leave for nursing care • Shorter working hours allowed for nursing care • System for rehiring former employees

• Work relocations • Childcare subsidies • Nursing care leave, days off for nursing care • Shorter working hours for nursing care • Rehiring former employees • Special leave (for spouse’s childbirth) Until the entry into Until the entry into • Maternity leave and work elementary school elementary school • Short-term childcare leave • Leave for nursing care • Shorter working hours allowed for nursing care • System for rehiring former employees • Maternity leave (for men) Until the entry into Until the entry into • Personnel system being employed under the elementary school elementary school regional system of no possibility of transfers with movings • Rehiring retirees • A grace period for job rotation • Leave for nursing care • Shorter working hours allowed for nursing care • Paid leave by the hour • Half-day paid leave • Leave before and after maternity • Childcare leave (2 days) • School-visiting day (2 days a year) • Rehiring of former employees who quit for childcare or care-giving reasons • Husband’s maternity leave (3 days) Until the entry into For employees who are • Childcare subsidies elementary school pregnant or have given • Nursing care leave birth within previous • Shorter working hours (for nursing care, etc.) 12 months • Time off and shorter working hours • Days off for nursing care • Special leave (for spouse’s childbirth) • Paid leave for initial 15 days of childcare Until March 31 of the Until March 31 of the • 10 days paid childcare leave 6th grade 6th grade • Maternity leave (for assisting spouse) • Nursing care leave • Shorter working hours allowed for nursing care • Childcare allowance • Rehiring former employees • Support for early return to work after childcare leave Until the entry into Until the entry into • Paid leave for initial 5 days of childcare elementary school elementary school • Rehiring former employees • Nursing care leave • Shorter working hours for nursing care • Provision of home helpers • Counseling service on childcare • Paternity and special childcare leave (5 days)

Corporate Data Sumitomo Mitsui Financial Group, Inc. ■ Board of Directors, Corporate Auditors and Executive Officers

(as of June 30, 2016)

Eriko Sakurai(1)

BOARD OF DIRECTORS

Masayuki Oku

Director

(1) Messrs. and Ms. Yokoyama, Nomura, Mitchell, Kohno and Sakurai satisfy the requirements for an “outside director” under the Companies Act.

Chairman of the Board

Koichi Miyata President

CORPORATE AUDITORS

Takeshi Kunibe

Toshiyuki Teramoto

Director

Corporate Auditor

Yujiro Ito Director General Affairs Dept., Human Resources Dept.

Kozo Ogino

Kazuhiko Nakao Corporate Auditor

Toru Mikami

Director Audit Dept.

Corporate Auditor

Jun Ohta Director Public Relations Dept., Corporate Planning Dept., Financial Accounting Dept., Subsidiaries & Affiliates Dept., IT Innovation Dept., Transaction Business Planning Dept. Data Management Dept.

Katsunori Tanizaki Director IT Planning Dept., Data Management Dept. IT Innovation Dept.

Ikuo Uno(2) Corporate Auditor

Satoshi Itoh(2) Corporate Auditor

Rokuro Tsuruta(2) Corporate Auditor

(2) Messrs. Uno, Itoh and Tsuruta satisfy the requirements for an “outside corporate auditor” under the Companies Act.

EXECUTIVE OFFICERS

Koichi Noda Director Corporate Risk Management Dept.

Tetsuya Kubo

Nobuaki Kurumatani Deputy President Securities Business Dept.

Yasuyuki Kawasaki

Director

Yoshinori Yokoyama(1)

Senior Managing Director Global Business Planning Dept.

Yukihiko Onishi

Director

Kuniaki Nomura(1)

Senior Managing Director Consumer Business Planning Dept., Consumer Finance & Transaction Business Dept.

Director

Arthur M. Mitchell(1)

Toshikazu Yaku

Director

Managing Director General Affairs Dept. Olympic and Paralympic Dept.

Masaharu Kohno

(1)

Director

Haruyuki Nagata Managing Director Financial Accounting Dept.

■ SMFG Organization

(as of June 30, 2016) Board of Directors Auditing Committee

Shareholders’ Meeting

Group Strategy Committee

Risk Committee

Corporate Auditors/ Board of Corporate Auditors

Investor Relations Dept. Group CSR Dept. Olympic and Paralympic Dept.

Financial Accounting Dept.

Compensation Committee Nominating Committee

Public Relations Dept. Corporate Planning Dept.

Equity Portfolio Management Dept.

Management Committee

IT Planning Dept. System Risk Planning Dept.

Human Resources Dept. General Affairs Dept. Group Cost Control Dept.

Corporate Risk Management Dept. Risk Management Information Dept.

Subsidiaries & Affiliates Dept. Securities Business Dept. IT Innovation Dept.

Office of Corporate Auditors

Data Management Dept. Transaction Business Planning Dept. Consumer Finance & Transaction Business Dept. Consumer Business Planning Dept. Global Business Planning Dept. Audit Dept.

2016 Annual Report

99

Sumitomo Mitsui Banking Corporation ■ Board of Directors, Corporate Auditors and Executive Officers BOARD OF DIRECTORS ­­­Chairman of the Board

Teisuke Kitayama President and CEO

Takeshi Kunibe* Director

Koichi Miyata Vice Chairman of the Board

Shuichi Kageyama Located at Osaka

Deputy Presidents

Yujiro Ito* Human Resources Dept., Human Resources Development Dept., Quality Management Dept., General Affairs Dept., Legal Dept., Administrative Services Dept.

Seiichiro Takahashi* Head of Treasury Unit

Nobuaki Kurumatani* Head of Investment Banking Unit Securities Business Dept.

Masaki Tachibana* Co-Head of Wholesale Banking Unit (Planning Dept., Wholesale Banking Unit, Strategic Corporate Business Dept., Public & Financial Institutions Banking Dept., Wholesale Banking Unit) Head of Corporate Banking Division

Senior Managing Directors

(as of June 30, 2016)

Hiroshi Takahashi(2) Katsuyoshi Shinbo(2) Masaaki Oka(2) Toshiyuki Teramoto (2) Messrs. Takahashi, Shinbo and Oka satisfy the requirements for an “outside corporate auditor” under the Companies Act.

EXECUTIVE OFFICERS Senior Managing Directors

Atsuhiko Inoue Deputy Head of Wholesale Banking Unit (Credit Administration Dept., Corporate Credit Dept.) Corporate Research Dept. Deputy Head of Investment Banking Unit (Trust Services Dept.)

Manabu Narita Head of Corporate Advisory Division Deputy Head of Wholesale banking Unit (Strategic Corporate Business Dept.) Private Advisory Division Global Advisory Dept.

Fumiaki Kurahara Co-Head of Wholesale Banking Unit Head of Global Corporate Banking Division

Makoto Takashima Co-Head of International Banking Unit (Europe, Middle East and Africa, Americas)

Managing Directors

Hitoshi Ishii Deputy Head of Wholesale Banking Unit (in charge of East Japan)

Kozo Ogino*

Gotaro Michihiro

Internal Audit Dept., Credit Review Dept. Human Resources Dept., Human Resources Development Dept.

Tokyo Corporate Banking Division (Tokyo Corporate Banking Depts. I, V, VII and VIII)

Jun Ohta*

Shosuke Mori

Public Relations Dept., Corporate Planning Dept., Financial Accounting Dept., Subsidiaries & Affiliates Dept., IT Innovation Dept. Transaction Business Division. Data Management Dept.

Yasuyuki Kawasaki* Co-Head of International Banking Unit (Planning Dept., International Banking Unit, Emerging Markets Business Division, Asia Pacific, East Asia)

Katsunori Tanizaki* IT Planning Dept., Data Management Dept., Operations Planning Dept., Operations Support Dept., Inter-Market Settlement Dept. IT Innovation Dept.

Yukihiko Onishi* Head of Retail Banking Unit

Koichi Noda* Risk Management Unit (Corporate Risk Management Dept., Credit & Investment Planning Dept.)

Directors

Shigeru Iwamoto(1) Masayuki Matsumoto(1) Yuko Nakahira(1) * Executive Officers (1) Messrs. and Ms. Iwamoto, Matsumoto and Nakahira satisfy the requirements for an “outside director” under the Companies Act.

CORPORATE AUDITORS ­­­Corporate Auditors

Mitsuru Ono Yuichi Shimane

Head of The Asia Pacific Division and Emerging Markets Business Division

Masahiko Oshima Head of Europe, Middle East and Africa Division CEO of Sumitomo Mitsui Banking Corporation Europe Limited

Naoki Ono Tokyo Corporate Banking Division (Tokyo Corporate Banking Depts. IV, VI, IX and XI)

Kimio Matsuura Deputy Head of Wholesale Banking Unit (in charge of West Japan)

Toshikazu Yaku General Affairs Dept., Legal Dept., Administrative Services Dept., Quality Management Dept. Olympic and Paralympic Dept.

Ryohei Kaneko Deputy Head of Retail Banking Unit (in charge of East Japan)

Hisanori Kokuga Deputy Head of International Banking Unit, Wholesale Banking Unit (in charge of East Asia) Head of East Asia Division Global Advisory Dept. Chairman of Sumitomo Mitsui Banking Corporation (China) Limited

Atsushi Oku Deputy Head of Retail Banking Unit (in charge of West Japan)

Naoki Tamura Public Relations Dept., Corporate Planning Dept., Subsidiaries & Affiliates Dept.

Toshihiro Isshiki General Manager, Operations Planning Dept.

Haruyuki Nagata Financial Accounting Dept.

100 2016 Annual Report

Ryuji Nishisaki

Takashi Arima

Deputy Head of Emerging Markets Business Division

Head of Kyoto Hokuriku Middle Market Banking Division and General Manager, Kyoto Corporate Business Office-I

Akihiro Fukutome Nagoya Corporate Banking Division (Nagoya Corporate Banking Dept.) Head of Nagoya Middle Market Banking Division

Hiroshi Munemasa Deputy Head of Treasury Unit

Toshikazu Takeichi Head of Kobe Middle Market Banking Division

Keiji Kakumoto Osaka Corporate Banking Division (Osaka Corporate Banking Depts. I, II and III)

Kenichi Hosomi

Iwao Kawaharada Head of Kyushu Middle Market Banking Division and General Manager, Fukuoka Corporate Business Office

Fumiharu Kozuka General Manager, Corporate Credit Dept.

Hiroyoshi Korosue Country Head of Thailand and General Manager, Bangkok Branch

Masaaki Sasai General Manager, Structured Finance Dept.

Eiichi Sekiguchi

General Manager, Planning Dept., International Banking Unit

General Manager, Planning Dept., Wholesale Banking Unit

Hitoshi Minami

Reiji Domoto

Tokyo Corporate Banking Division (Tokyo Corporate Banking Depts. II, III, X and XII)

General Manager, Osaka Corporate Banking Dept. l

Nobuyuki Kawabata

General Manager, Tokyo Corporate Banking Dept. VII

Head of The Americas Division

Toru Sawada

Yusuke Hirako Narumitsu Yoshioka

General Manager, General Affairs Dept.

General Manager, Seoul Branch and Global Korea Corporate Banking Department

Toru Nakashima

Rie Asayama

General Manager, Corporate Planning Dept.

General Manager, Quality Management Dept.

CHOW Ying Hoong

Akira Ueda

Deputy Head of Emerging Markets Business Division and The Asia Pacific Division

General Manager, Tokyo Corporate Banking Dept. IV

Directors

General Manager, Human Resources Dept.

Muneo Kanamaru

Takashi Inagaki

Masamichi Koike

Deputy Head of Wholesale Banking Unit (Credit Dept. I, Wholesale Banking Unit) Deputy Head of Retail Banking Unit (Credit Dept., Retail Banking Unit)

General Manager, International Treasury Dept.

Hideo Goto

Atsushi Takada

Toshihiro Sato

Head of Higashinihon Daiichi Middle Market Banking Division

Akio Koizumi Head of Shibuya Middle Market Banking Division and Yokohama Middle Market Banking Division

Eiji Omori Head of Higashinihon Daini Middle Market Banking Division

Noburu Kato Deputy Head of Investment Banking Unit

Toshiyuki Tatsuta

General Manager, Planning Dept., Investment Banking Unit General Manager, Planning Dept., Treasury Unit

Rajeev Kannan General Manager, Investment Banking Dept., Asia

Isaac Deutsch General Manager, Specialized Finance Dept., Americas Division

John Ferreira Deputy Head of The Asia Pacific Division

Etsunori Sakai

President of Sumitomo Mitsui Banking Corporation (China) Limited

Head of Shinjuku Middle Market Banking Division and Saitama Ikebukuro Middle Market Banking Division

Tetsuro Imaeda

Hiroyuki Miyajima

(Director without portfolio)

Kengo Nakagawa Head of Osaka Daiichi Middle Market Banking Division and Chushikoku Middle Market Banking Division

Teiko Kudo Unit Leader, Growth Industry Cluster Dept.

William Karl General Manager, Real Estate Finance Dept., Americas Division

Stanislas Roger Deputy Head of Europe, Middle East and Africa Division and Co-General Manager, Global Aviation and Maritime Finance Department

Kiyoshi Kageyama Deputy Head of Wholesale Banking Unit (Credit Dept. II, Wholesale Banking Unit) Deputy Head of Retail Banking Unit (Credit Dept., Retail Banking Unit)

General Manager, Tokyo Corporate Banking Dept. V

Masataka Asagami Head of Tokyo Toshin Middle Market Banking Division and Tokyo Higashi Middle Market Banking Division

Shoji Masuda General Manager, IT Planning Dept.

Yukiko Yoritaka General Manager, Training Institute, Human Resources Dept.

Hiroshi Irie General Manager, Singapore Branch

Takaki Ono General Manager, Shinjuku Corporate Business Office-I

Kotaro Hagiwara General Manager, Subsidiaries & Affiliates Dept.

Yozo Takigawa

Yoshihiro Hyakutome

Deputy Head of International Banking Unit (Credit Depts., Americas Division, Europe, Middle East and Africa Division and Asia Pacific Division, Credit Management Dept., International Banking Unit)

General Manager, Emerging Markets Business Division

Takeshi Mikami

Ryo Suzuki

Takashi Yamashita

Deputy Head of The Americas Division and General Manager, Finance Strategy Dept., Americas Division

Toshiaki Nakai General Manager, Credit & Investment Planning Dept.

General Manager, Financial Accounting Dept. General Manager, Planning Dept., Retail Banking Unit

Antony Yates Chairman of SMBC Capital Markets, Inc. and President of SMBC Nikko Capital Markets Limited

2016 Annual Report

101

Internal Audit Unit Internal Audit Dept. Credit Review Dept.

SMBC Organization (as of June 30, 2016)

Retail Banking Unit Corporate Staff Unit

Shareholders’ Meeting

Board of Directors

Public Relations Dept. Corporate Planning Dept. Financial Research Dept. CSR Dept. Olympic and Paralympic Dept. Financial Accounting Dept. Equity Portfolio Management Dept. Subsidiaries & Affiliates Dept. IT Planning Dept. System Risk Planning Dept. Human Resources Dept. Training Institute Counseling Dept. Diversity and Inclusion Dept. Global Human Resources Dept. Human Resources Development Dept. Quality Management Dept. Customer Relations Dept. Securities Business Dept. IT Innovation Dept. Data Management Dept.

Wholesale Banking Unit

Risk Management Unit

International Banking Unit

Management Committee Corporate Risk Management Dept. Risk Management Information Dept. Credit & Investment Planning Dept. Credit Portfolio Management Dept.

Corporate Auditors/ Board of Corporate Auditors

Compliance Unit

Treasury Unit

General Affairs Dept. Financial Crime Prevention Dept. AML Planning Dept. Legal Dept.

Office of Corporate Auditors

Corporate Services Unit Administrative Services Dept. Secretariat Corporate Real Estate Management Dept. Operations Planning Dept. Operations Support Dept. Inter-Market Settlement Dept.

102 2016 Annual Report

Investment Banking Unit

Small and Medium Enterprises Banking Division

Planning Dept., Retail Banking Unit Retail Compliance Dept. Next W-ing Project Dept. Retail Facilitating Financing Dept. Retail Human Resources Dept. Business Promotion Dept., Retail Banking Unit Small and Medium Enterprises Planning Dept. Financial Consulting Dept., Retail Banking Unit Area Support Dept. Retail Marketing Dept., Retail Banking Unit IT Strategy Dept. Area Support Dept. Loan Business Dept. Consumer Finance & Transaction Business Dept., Retail Banking Unit. Credit Dept., Retail Banking Unit

Area Main Office

Strategic Corporate Business Dept.

Planning Dept., Wholesale Banking Unit Middle Market Facilitating Financing Dept. Global Corporate Banking Dept. Public & Financial Institutions Banking Dept., Wholesale Banking Unit Real Estate Finance Dept.*1 Corporate Credit Dept. Structured Finance Credit Dept. Credit Dept. I, Wholesale Banking Unit Credit Dept. II, Wholesale Banking Unit Credit Administration Dept.

Business Promotion Office

*5

*4

Corporate Banking Division

Middle Market Banking Division

Corporate Business Office Financial Development Office Credit Business Office Real Estate Corporate Business Office Public Institutions Business Office Global Transaction Office*7 E-Transaction Business Center*7

Global Corporate Banking Division

Tokyo Corporate Banking Division Osaka Corporate Banking Division Nagoya Corporate Banking Division

Corporate Banking Dept.

East Asia Division

Branches/Representative Offices in East Asia

Americas Division Europe, Middle East and Africa Division Asia Pacific Division

Global FIG Dept. Institutional Client Dept., Asia Global Client Business Dept. Global Corporate Investment Dept. Global Trade Finance Dept. Global Supply Chain Finance Dept. Global Aviation and Maritime Finance Dept. Departments of Americas Division Departments of Europe, Middle East and Africa Division Branches/Representative Offices in Asia Pacific Division Global Transaction Office*7 E-Transaction Business Center*7

*6

Planning Dept., East Asia Division Greater China Dept. Planning Dept., International Banking Unit IT & Business Administration Planning Dept. Aviation & Maritime Strategy Dept. Global Portfolio Strategy Dept. Planning Dept., Americas Division Information Control Dept., Americas Division Credit Dept., Americas Division Risk Management Dept., Americas Division Compliance Dept., Americas Division Planning Dept., Europe, Middle East and Africa Division Legal and Compliance Dept., Europe, Middle East and Africa Division Credit Dept., Europe, Middle East and Africa Division Asset Finance Credit Dept. Risk Management Dept., Middle East and Africa Division Planning Dept., Asia Pacific Division Legal and Compliance Dept., Asia Pacific Division Asia Pacific Training Dept. Credit Dept., Asia Pacific Division Risk Management Dept., Asia Pacific Division Emerging Markets Business Division Corporate Solutions Dept., Asia*3 Credit Management Dept., International Banking Unit Credit Dept., East Asia, International Banking Unit Environment Analysis Dept., International Banking Unit Planning Dept., Treasury Unit ALM Planning Dept. Treasury Dept. International Treasury Dept. Trading Dept. Treasury Marketing Dept. Treasury Dept., Asia Pacific Division Planning Dept., Investment Banking Unit Structured Finance Dept. Shipping Finance Dept. Debt Finance Dept. Investment Banking Services Dept. Real Estate Finance Dept.*1 M&A Advisory Services Dept. Merchant Banking Dept. Financial Products Dept. Securities Direct Sales Dept. Distribution Dept. Financial Solution Dept. Growth Industry Cluster Dept.*2 Trust Services Dept. Trust Business Operations Dept. Investment Banking Dept., Asia Corporate Solutions Dept., Asia *3

Branch Consumer Loan Promotion Office Loan Promotion Office Loan Support Office Business Support Office Private Banking Dept. Remote Marketing Dept. Call Center Consumer Finance Promotion Office Global Transaction Office*7 E-Transaction Business Center*7

Belongs to both Investment Banking Unit and Wholesale Banking Unit. Belongs to both Investment Banking Unit and Corporate Advisory Division. Belongs to both International Banking Unit and Investment Banking Unit • Corporate Advisory Division • Advisory Dept. I • Advisory Dept. II • Advisory Dept. III • Corporate Research Dept. • Growth Industry Cluster Dept.*2 *5 • Private Advisory Division • Private Advisory Business Dept. • Testamentary Trust Dept. • Private Banking Planning Dept. • Corporate Employees Business Dept. • Defined Contribution Dept. *6 • Transaction Business Division • Transaction Business Planning Dept. • Asset Finance Dept. • Transaction Banking Dept. • Global Transaction Banking Dept. • Global Advisory Dept. • Global Business Promotion Dept. • Global Transaction Support Dept. • Foreign Exchange Insourcing Business Dept. 7 • Belongs to Retail Banking Unit, Wholesale Banking Unit and International Banking Unit. * *1 *2 *3 *4

Branch Service Office Head/Main Service Office Public Institutions Operations Office Souzoku-office Sub-Branch

2016 Annual Report

103

Principal Subsidiaries and Affiliates

(as of March 31, 2016)

All companies shown hereunder are consolidated subsidiaries or affiliates of Sumitomo Mitsui Financial Group, Inc. Those printed in green ink are consolidated subsidiaries or affiliates of Sumitomo Mitsui Banking Corporation.

■ Principal Domestic Subsidiaries Company Name

Sumitomo Mitsui Banking Corporation

Note: Figures in parentheses ( ) in the voting rights columns indicate voting rights held indirectly via subsidiaries and affiliates. Issued Capital (Millions of Yen)

Percentage of SMFG’s Voting Rights (%)

1,770,996

100

SMBC Trust Bank Ltd.

27,550

Sumitomo Mitsui Finance and Leasing Company, Limited

15,000

SMBC Nikko Securities Inc.

10,000

SMBC Friend Securities Co., Ltd.

27,270

Sumitomo Mitsui Card Company, Limited

34,000

0

Cedyna Financial Corporation

82,843

0

SMBC Consumer Finance Co., Ltd.

Percentage of SMBC’s Voting Rights (%) —

Jun. 6, 1996

Commercial banking

Feb. 25, 1986

Trust service and commercial banking



Feb. 4, 1963

Leasing

100

Jun. 15, 2009

Securities



Mar. 2, 1948

Securities

(65.99)



Dec. 26, 1967

Credit card services

(100)



Sep. 11, 1950

Credit card services, Installment



Mar. 20, 1962

Consumer loans



Nov. 1, 2002

System engineering, data processing, management consulting, and economic research

Sep. 6, 1949

Commercial banking

Jul. 1, 1922

Commercial banking

(100) 60 (100) 100

140,737

100

The Japan Research Institute, Limited

10,000

THE MINATO BANK, LTD.

27,484

0

(46.43)

45.09 (1.33)

47,039

0

(60.15)

49.36 (0.35)

187,720

0

(100)

Kansai Urban Banking Corporation SMBC Guarantee Co., Ltd. SMFG Card & Credit, Inc.

49,859

SAKURA CARD CO., LTD.

7,438

SMM Auto Finance, Inc.

100

0

(99.99)

100 0

Main Business

100

0

0

Date of Establishment or Investment

(100)

Jul. 14, 1976

Credit guarantee



Oct. 1, 2008

Business management

100

Feb. 23, 1983

Credit card services Automotive financing

7,700

0

(51)

41

Sep. 17, 1993

SMBC Finance Service Co., Ltd.

71,705

0

(100)



Dec. 5, 1972

Collecting agent and factoring

Mobit Co., Ltd.

20,000

0

(100)



May 17, 2000

Consumer lending

2,054

0

(50.21)

28.52 (4.01)

Mar. 29, 1969

System engineering and data processing

450

0

(100)



Oct. 16, 1990

System engineering and data processing Data processing service and e-trading consulting

SAKURA KCS Corporation JAIS, Limited Financial Link Co., Ltd.

10

0

(100)

100

Apr. 1, 2004

SMBC GMO PAYMENT, Inc.

312

0

(80)

80

Nov, 2, 2015

Settlement agent

SMBC Venture Capital Co., Ltd.

500

0

(40)

0

(40)

Sep. 22, 2005

Venture capital

1,100

0

(100)

50

(1.63)

May 1, 1981

Management consulting and seminar organizer

SMBC Consulting Co., Ltd. Japan Pension Navigator Co., Ltd. SMBC Loan Business Planning Co., Ltd. SMBC Servicer Co., Ltd.

1,600

0

(69.71)

69.71

Sep. 21, 2000

100,010

0

(100)

100

Apr. 1, 2004

Defined contribution plan administrator Management support services

1,000

0

(100)

100

Mar. 11, 1999

Servicer

SMBC Electronic Monetary Claims Recording Co., Ltd.

500

0

(100)

100

Apr. 16, 2009

Electronic monetary claims recording

SMBC Principal Finance Co., Ltd.

100

0

(100)

100

Mar. 8, 2010

Investments for corporate revitalization and other related investments

SMBC Staff Service Co., Ltd.

90

0

(100)

100

Jul. 15, 1982

Banking clerical work

SMBC Learning Support Co., Ltd.

10

0

(100)

100

May 27, 1998

Seminar organizer

SMBC PERSONNEL SUPPORT CO., LTD.

10

0

(100)

100

Apr. 15, 2002

Banking clerical work

SMBC Center Service Co., Ltd. SMBC Delivery Service Co., Ltd.

100

0

(100)

100

Oct. 16, 1995

Banking clerical work

30

0

(100)

100

Jan. 31, 1996

Banking clerical work

SMBC Green Service Co., Ltd.

30

0

(100)

100

Mar. 15, 1990

Banking clerical work

SMBC International Business Co., Ltd.

20

0

(100)

100

Sep. 28, 1983

Banking clerical work

SMBC Loan Business Service Co., Ltd.

70

0

(100)

100

Sep. 24, 1976

Banking clerical work

SMBC Loan Administration and Operations Service Co., Ltd.

10

0

(100)

100

Feb. 3, 2003

Banking clerical work

SMBC Property Research Service Co., Ltd.

30

0

(100)

100

Feb. 1, 1984

Banking clerical work

104 2016 Annual Report

■ Principal Overseas Subsidiaries Company Name

Country

Sumitomo Mitsui Banking Corporation Europe Limited

U.K.

Sumitomo Mitsui Banking Corporation (China) Limited

Issued Capital

Percentage of SMFG’s Voting Rights (%)

Percentage of SMBC’s Voting Rights (%)

Date of Establishment or Investment

Main Business

US$3,200 million

0

(100)

100

Mar. 5, 2003

Commercial banking

China

CNY10.0 billion

0

(100)

100

Apr. 27, 2009

Commercial banking

Manufacturers Bank

U.S.A.

US$80.786 million

0

(100)

100

Jun. 26, 1962

Commercial banking

Sumitomo Mitsui Banking Corporation of Canada

Canada

C$344 million

0

(100)

100

Apr. 1, 2001

Commercial banking

Banco Sumitomo Mitsui Brasileiro S.A.

Brazil

R$667.806 million

0

(100)

100

Oct. 6, 1958

Commercial banking

JSC Sumitomo Mitsui Rus Bank

Russia

RUB6.4 billion

0

(100)

May 8, 2009

Commercial banking

PT Bank Sumitomo Mitsui Indonesia

Indonesia

Rp2,873.9 billion

0

(98.47)

98.47

Aug. 22, 1989

Commercial banking

Sumitomo Mitsui Banking Corporation Malaysia Berhad

Malaysia

MYR1,575 million

0

(100)

100

Dec. 22, 2010

Commercial banking

SMBC Leasing and Finance, Inc.

U.S.A.

US$4,350

0

(100)

94.89 (3.81)

Nov. 9, 1990

Leasing, investments

SMBC Aviation Capital Limited

Ireland

US$187 million

0

(90)

30

Aug. 14, 1997

Leasing

SMBC Rail Services LLC

U.S.A.

US$40.911 million

0

(100)

May 11, 2011

Leasing

SMBC Nikko Securities America, Inc.

U.S.A.

US$388

0

(100)

SMBC Nikko Capital Markets Limited

U.K.

SMBC Capital Markets, Inc.

U.S.A.

99

(1)

0

(100)

77.65 (22.35)

Aug. 8, 1990

Securities, investments Derivatives and investments, securities services

US$1,139 million

0

(100)

85

(15)

Mar. 13, 1990

US$100

0

(100)

90

(10)

Dec. 4, 1986

Derivatives and investments

SMBC Financial Services, Inc.

U.S.A.

US$300

0

(100)

100

Aug. 8, 1990

Investments, investment advisor

SMBC Cayman LC Limited*

Cayman Islands

US$500

0

(100)

100

Feb. 7, 2003

Credit guarantee, bond investment

SMBC MVI SPC

Cayman Islands

US$195 million

0

(100)

100

Sep. 9, 2004

Loans, buying/ selling of monetary claims

SMBC DIP Limited

Cayman Islands

US$8 million

0

(100)

100

Mar. 16, 2005

Loans, buying/ selling of monetary claims

SFVI Limited

British Virgin Islands

US$3,000

0

(100)

100

Jul. 30, 1997

Investments

SMBC, S.A.P.I. DE C.V., SOFOM, E.N.R.

Mexico

MXN360 million

0

(100)

100

Sep. 18, 2014

Money lending business

SMBC International Finance N.V.

Curaçao

US$200,000

0

(100)

SMFG Preferred Capital USD 1 Limited

Cayman Islands

100

Jun. 25, 1990

Finance

US$649.491 million

100



Nov. 28, 2006

Finance Finance

SMFG Preferred Capital GBP 1 Limited

Cayman Islands

£73.676 million

100



Nov. 28, 2006

SMFG Preferred Capital JPY 1 Limited

Cayman Islands

¥135,000 million

100



Jan. 11, 2008

Finance

SMFG Preferred Capital USD 3 Limited

Cayman Islands

US$1,350 million

100



Jul. 8, 2008

Finance

SMFG Preferred Capital GBP 2 Limited

Cayman Islands

£250 million

100



Oct. 25, 2007

Finance

SMFG Preferred Capital JPY 2 Limited

Cayman Islands

¥286,000 million

100



Nov. 3, 2008

Finance

SMFG Preferred Capital JPY 3 Limited

Cayman Islands

¥268,400 million

100



Aug. 12, 2009

Finance

SMBC Preferred Capital USD 1 Limited

Cayman Islands

US$662.647 million

0

(100)

100

Nov. 28, 2006

Finance

SMBC Preferred Capital GBP 1 Limited

Cayman Islands

£78.121 million

0

(100)

100

Nov. 28, 2006

Finance

SMBC Preferred Capital JPY 1 Limited

Cayman Islands

¥137,000 million

0

(100)

100

Jan. 11, 2008

Finance

* SMBC Cayman LC Limited, like other subsidiaries of SMBC, is a separate corporate entity with its own separate creditors and the claims of such creditors are prior to the claims of SMBC, as the direct or indirect holder of the equity in such subsidiary.

2016 Annual Report

105

Company Name

Country

Percentage of SMBC’s Voting Rights (%)

Percentage of SMFG’s Voting Rights (%)

Issued Capital

Date of Establishment or Investment

Main Business

SMBC Preferred Capital USD 3 Limited

Cayman Islands

US$1,358 million

0

(100)

100

Jul. 8, 2008

Finance

SMBC Preferred Capital GBP 2 Limited

Cayman Islands

£251.5 million

0

(100)

100

Oct. 25, 2007

Finance

SMBC Preferred Capital JPY 2 Limited

Cayman Islands

¥293,600 million

0

(100)

100

Nov. 19, 2008

Finance

US$18 million

0

(100)

100

Sep. 19, 1989

Finance

US$65.5 million

0

(100)

100

Oct. 17, 1977

Investments

Rs400 million

0

(100)

99.99 (0.00)

Apr. 3, 2008

Advisory services

Sumitomo Mitsui Finance Dublin Limited Ireland Sakura Finance Asia Limited

Hong Kong

SMBC Capital India Private Limited

India

SMBC Leasing Investment LLC

U.S.A.

US$490.5 million

0

(100)

SMBC Capital Partners LLC

U.S.A.

US$10,000

0

(100)

SMBC Derivative Products Limited

U.K.

US$200 million

0

(100)

0

(100) 100

0

(100)

Apr. 7, 2003

Investments in leasing

Dec. 18, 2003

Holding and trading securities

Apr. 18, 1995

Derivatives and investments

■ Principal Affiliates Company Name

The Japan Net Bank, Limited PT Bank Tabungan Pensiunan Nasional Tbk PT Oto Multiartha PT Summit Oto Finance Vietnam Export Import Commercial Joint Stock Bank ACLEDA Bank Plc. The Bank of East Asia, Limited Sumitomo Mitsui Auto Service Company, Limited POCKET CARD CO., LTD. JSOL CORPORATION Sakura Information Systems Co., Ltd.

Percentage of SMFG’s Voting Rights (%)

Issued Capital (Millions of Yen)

Percentage of SMBC’s Voting Rights (%)

Date of Establishment or Investment

Main Business

37,250

0

(41.16)

41.16

Sep. 19, 2000

Commercial banking

Rp116,805 million

0

(40.45)

40.45

Feb. 5, 1958

Commercial banking

Rp928,707 million

0

(35.10)

35.10

Mar. 28, 1994

Automotive financing

Rp 2,442,060 million

0

(35.10)

35.10

Sep. 20, 1990

Motorcycle financing Commercial banking

VND12,526.947 billion

0

(15.07)

15.07

May 24, 1989

US$ 266 million

0

(18.25)

18.25

Dec. 1, 2003

Commercial banking

HKD33,815 million

0

(18.10)

18.10

Nov. 14, 1918

Commercial banking



Feb. 21, 1981

Leasing

35.54

May 25, 1982

6,950 14,374

33.99 0

(35.54)

Credit card services

5,000

0

(50)



Jul. 3, 2006

System engineering and data processing

600

0

(49)

49

Nov. 29, 1972

System engineering and data processing



Apr. 1, 1999

Investment advisory and investment trust management

Daiwa SB Investments Ltd.

2,000

Sumitomo Mitsui Asset Management Company, Limited

2,000

0

(40)

40

Dec. 1, 2002

Investment advisory and investment trust management

CNY300 million

0

(24)

24

Apr. 24, 2012

Investment management

100

0

(40)

40

Feb. 1, 2010

Investments, fund management

China Post & Capital Fund Management Co., Ltd. Daiwa Securities SMBC Principal Investments Co., Ltd.

106 2016 Annual Report

43.96

International Directory Asia and Oceania SMBC Branches and Representative Offices

H ­­­­ ong Kong Branch

7th & 8th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong Special Administrative Region, The People’s Republic of China Tel: 852-2206-2000

Taipei Branch

(as of June 30, 2016)

Chonburi Branch

SMBC Principal Subsidiaries/ Affiliates SMFG Network

Harbor Office 14th Floor, 4/222 Moo. 10 Sukhumvit Road, Tungsukla, Sriracha, Chonburi 20230, Thailand Tel: 66 (38) 400-700

S ­­­­ umitomo Mitsui Banking Corporation (China) Limited Head Office (Shanghai)

Ho Chi Minh City Branch

15th Floor, Times Square Building, 22-36 Nguyen Hue Street, District 1, Ho Chi Minh City, Vietnam Tel: 84 (8) 3520-2525

Hanoi Branch

3F, Walsin Lihwa Xinyi Building, No. 1 Songzhi Road, Xinyi District, Taipei 110, Taiwan Tel: 886 (2) 2720-8100

Unit 1201, 12th Floor, Lotte Center Hanoi, 54 Lieu Giai Street, Cong Vi Ward, Ba Dinh District, Hanoi, Vietnam Tel: 84 (4) 3946-1100

Seoul Branch

Manila Branch

12F, Mirae Asset CENTER1 Bldg. West Tower, 26, Eulji-ro 5-gil, Jung-gu Seoul, 04539, The Republic of Korea Tel: 82 (2) 6364-7000

Singapore Branch

3 Temasek Avenue #06-01, Centennial Tower, Singapore 039190, Republic of Singapore Tel: 65-6882-0001

Sydney Branch

Level 35, The Chifley Tower, 2 Chifley Square, Sydney, NSW 2000, Australia Tel: 61 (2) 9376-1800

Perth Branch

Level 19, Exchange Tower, 2 The Esplanade, Perth, Western Australia 6000, Australia Tel: 61 (8) 9492-4900

New Delhi Branch

13th Floor, Hindustan Times House, 18-20, Kasturba Gandhi Marg, New Delhi 110001, India Tel: 91 (11) 4768-9111

Bangkok Branch

8th-10th Floor, Q.House Lumpini Building, 1 South Sathorn Road, Tungmahamek, Sathorn, Bangkok 10120, Thailand Tel: 66 (2) 353-8000

21st Floor, Tower One & Exchange Plaza, Ayala Triangle, Ayala Avenue, Makati City, The Philippines 1226 Tel: 63 (2) 8807100

11F, Shanghai World Financial Center, 100 Century Avenue, Pudong New Area, Shanghai 200120, The People’s Republic of China Tel: 86 (21) 3860-9000

Sumitomo Mitsui Banking Corporation (China) Limited Guangzhou Branch

12F, International Finance Place, No.8 Huaxia Road, Tianhe District, Guangzhou 510623, The People’s Republic of China Tel: 86 (20) 3819-1888

Sumitomo Mitsui Banking Corporation (China) Limited Hangzhou Branch

Yangon Branch

5F, Offices At Kerry Centre, 385 Yan An Road, Xia Cheng District, Hangzhou, Zhejiang Province, The People's Republic of China* Tel: 86 (571) 2889-1111

Labuan Branch

Sumitomo Mitsui Banking Corporation (China) Limited Chongqing Branch

Level #5 Strand Square, No.53 Strand Road, Pabedan Township, Yangon, Myanmar Tel: 95 (1) 2307380 Level 12 (B&C), Main Office Tower, Financial Park Labuan, Jalan Merdeka, 87000 Labuan, Federal Territory, Malaysia Tel: 60 (87) 410955

Unit 2, 34F, Tower1, River International, 22 Nanbin Road, Nan’an District, Chongqing 400060, The People’s Republic of China Tel: 86 (23) 8812-5300

Labuan Branch Kuala Lumpur Office

Suite 22-03, Level 22, Integra Tower, The Intermark, 348, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia Tel: 60 (3) 2176-1700

Ulaanbaatar Representative Office Unit 1011, 10F, Central Tower, 2 Chinggis Square, 8th Khoroo, Sukhbaatar District, Ulaanbaatar, 14200, Mongolia Tel: 976-7011-8950

Phnom Penh Representative Office Phnom Penh Tower (13 Floor) No.445, Preah Monivong Blvd corner with Street 232, Sangkat Boeung Pralit, Khan 7 Makara, Phnom Penh, Cambodia Tel: 855 (23) 964-080

Sumitomo Mitsui Banking Corporation (China) Limited Shenzhen Branch

23/F, Tower Two, Kerry Plaza, 1 Zhongxinsi Road, Futian District, Shenzhen 518048, The People’s Republic of China Tel: 86 (755) 2383-0980

Sumitomo Mitsui Banking Corporation (China) Limited Shenyang Branch

1606, 1 Building, Forum 66, No.1 Qingnian Street, Shenhe District, Shenyang, Liaoning Province, The People's Republic of China Tel: 86 (24) 3128-7000

* SMBCCN Hangzhou Branch was relocated on July 11, 2016.

2016 Annual Report

107

Sumitomo Mitsui Banking Corporation (China) Limited Suzhou Branch

12F, SND International Commerce Tower, No.28 Shishan Road, Suzhou New District, Suzhou, Jiangsu 215011, The People’s Republic of China Tel: 86 (512) 6606-6500

Sumitomo Mitsui Banking Corporation (China) Limited Dalian Branch

Senmao Building 4F-A, 147 Zhongshan Road, Xigang District, Dalian, The People's Republic of China Tel: 86 (411) 3905-8500

Sumitomo Mitsui Banking Corporation (China) Limited Tianjin Branch

12F, The Exchange Tower 2, 189 Nanjing Road, Heping District, Tianjin 300051, The People’s Republic of China Tel: 86 (22) 2330-6677

Sumitomo Mitsui Banking Corporation (China) Limited Beijing Branch

Unit1601,16F, North Tower, Beijing Kerry Centre, No.1, Guang Hua Road, Chao Yang District, Beijing 100020, The People’s Republic of China Tel: 86 (10) 5920-4500

Sumitomo Mitsui Banking Corporation (China) Limited Kunshan Sub-Branch

Sumitomo Mitsui Banking Corporation (China) Limited Shanghai Puxi Sub-Branch

1, 12, 13, 12F, Maxdo Center, 8 Xingyi Road, Changning District, Shanghai, The People’s Republic of China Tel: 86 (21) 2219-8000

Sumitomo Mitsui Banking Corporation (China) Limited Changshu Sub-Branch

8F, Science Innovation Building (Kechuang Building), No.333 Dongnan Road, Changshu Southeast Economic Development Zone of Jiangsu, Changshu, Jiangsu, The People’s Republic of China Tel: 86 (512) 5235-5553

Sumitomo Mitsui Banking Corporation (China) Limited Suzhou Industrial Park Sub-Branch 16F, International Building, No.2, Suzhou Avenue West, Suzhou Industrial Park, Jiangsu 215021, The People’s Republic of China Tel: 86 (512) 6288-5018

Sumitomo Mitsui Banking Corporation (China) Limited Tianjin Binhai Sub-Branch

8F, E2B, Binhai Financial Street, No.20, Guangchang East Road, TEDA, Tianjin 300457, The People’s Republic of China Tel: 86 (22) 6622-6677

PT Bank Sumitomo Mitsui Indonesia

Room 2001-2005, Taiwan Business Association International Plaza, No. 399 Qianjin East Road, Kunshan, Jiangsu 215300, The People’s Republic of China Tel: 86 (512) 3687-0588

Summitmas II, 10th Floor, JI. Jend. Sudirman Kav. 61-62, Jakarta 12190, Indonesia Tel: 62 (21) 522-7011

Sumitomo Mitsui Banking Corporation (China) Limited Shanghai Pilot Free Trade Zone Sub-Branch

Suite 22-03, Level 22, Integra Tower, The Intermark, 348, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia Tel: 60 (3) 2176-1500

1F 7, 8 Building, No. 88, Ma Ji Road, China (Shanghai) Pilot Free Trade Zone, Shanghai 200131, The People’s Republic of China Tel: 86 (21) 2067-0200

108 2016 Annual Report

Sumitomo Mitsui Banking Corporation Malaysia Berhad

SMBC Capital Markets (Asia) Limited

7th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong Special Administrative Region, The People’s Republic of China Tel: 852-2532-8500

SMBC Nikko Capital Markets Limited (Sydney Office)

Level 35, The Chifley Tower, 2 Chifley Square, Sydney, NSW 2000, Australia Tel: 61 (2) 9376-1895

SBCS Co., Limited

16th Floor, Q.House Lumpini Building, 1 South Sathorn Road, Tungmahamek, Sathorn, Bangkok 10120, Thailand Tel: 66 (2) 677-7270~5

PT. SBCS Indonesia

Summitmas II, 19th Floor, Jl. Jend. Sudirman Kav. 61-62, Jakarta 12190, Indonesia Tel: 62 (21) 252-3711

BSL Leasing Co., Ltd.

19th Floor, Sathorn City Tower, 175 South Sathorn Road, Thungmahamek, Sathorn, Bangkok, 10120, Thailand Tel: 66 (2) 670-4700

SMBC SSC Sdn. Bhd.

Level 21, Integra Tower, The Intermark, 348, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia Tel: 60 (3) 2176-1600

SMBC Metro Investment Corporation

20th Floor, Rufino Pacific Tower, 6784 Ayala Avenue, Makati City, Metro Manila, The Philippines Tel: 63 (2) 811-0845

The Bank of East Asia, Limited 10 Des Voeux Road, Central, Hong Kong Tel: 852-3608-3608

Vietnam Export Import Commercial Joint Stock Bank

8th Floor, Vincom Center Building, 72 Le Thanh Ton Street, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam Tel: 84 (8) 3821-0056

PT Bank Tabungan Pensiunan Nasional Tbk

Menara BTPN, CBD Mega Kuningan Jl. Dr. Ide Anak Agung Gde Agung, Kav 5.5-5.6 Jakarta 12950, Indonesia Tel: 62 (21) 300-26200

PT Oto Multiartha

Summitmas II, 18th floor, Jl. Jend. Sudirman Kav. 61-62, Jakarta 12190, Indonesia Tel: 62 (21) 522-6410

PT Summit Oto Finance

Summitmas II, 8th floor, Jl. Jend. Sudirman Kav. 61-62, Jakarta 12190, Indonesia Tel: 62 (21) 252-2788

ACLEDA Bank Plc.

#61, Preah Monivong Blvd., Sangkat Srah Chork, Khan Daun Penh, Phnom Penh, Kingdom of Cambodia Tel: 855 (23) 998-777

The Japan Research Institute (Shanghai) Solution Co., Ltd.

Unit 141, 18F, Hang Seng Bank Tower, 1000 Lujiazui Ring Road, Pudong New Area, Shanghai, 200120, The People’s Republic of China Tel: 86 (21) 6841-2788

The Japan Research Institute (Shanghai) Consulting Co., Ltd. Unit 41, 18F, Hang Seng Bank Tower, 1000 Lujiazui Ring Road, Pudong New Area, Shanghai, 200120, The People’s Republic of China Tel: 86 (21) 6841-1288

The Japan Research Institute (Shanghai) Consulting Co., Ltd. Beijing Branch

Unit 906, 9F, Kerry Centre, 1 Guanghua Street, Chaoyang Area, Beijing 100020, The People’s Republic of China Tel: 86 (10) 8529-8141

Sumitomo Mitsui Finance and Leasing (Singapore) Pte. Ltd. 152 Beach Road, 21-05 Gateway East, Singapore 189721 Tel: 65-6224-2955

Sumitomo Mitsui Finance and Leasing (Hong Kong) Ltd.

Unit 4206-8,42/F, Sunlight Tower, 248 Queen’s Road East, Wanchai, Hong Kong Tel: 852-2523-4155

SMFL Leasing (Thailand) Co., Ltd. 30th Floor, Q. House Lumpini Building, 1 South Sathorn Road, Tungmahamek, Sathorn, Bangkok 10120, Thailand Tel: 66 (2) 677-7400

Sumitomo Mitsui Finance and Leasing (China) Co., Ltd.

Unit 2302, TaiKoo Hui Tower 1, 385 Tianhe Road, Tianhe District, Guangzhou, The People’s Republic of China Tel: 86 (20) 8755-0021

Shanghai Sumitomo Mitsui General Finance and Leasing Co., Ltd. 18th Floor, Shanghai Times Square, 93 Middle Huaihai Road, Huangpu District, Shanghai, The People’s Republic of China Tel: 86 (21) 5396-5522

Shanghai Sumitomo Mitsui Finance and Leasing Co., Ltd.

Room 723, 7/F, No. 6 Ji Long Rd, China (Shanghai) Pilot Free Trade Zone, Shanghai 200131, The People’s Republic of China Tel: 86 (21) 5065-6052

Sumitomo Mitsui Finance and Leasing (China) Co., Ltd. Beijing Branch

Unit 3001-3007, 30F, North Tower, Beijing Kerry Centre, 1 Guanghua Road, Chaoyang District, Beijing, The People's Republic of China Tel: 86 (10) 8529-7887

Shanghai Sumitomo Mitsui General Finance and Leasing Co., Ltd. Chengdu Branch

Sumitomo Mitsui Auto Leasing & Service (Thailand) Co., Ltd.

161, Nantawan Building, 17th Floor, Rajdamri Road, Lumpinee, Pathumwan, Bangkok 10330, Thailand Tel: 66-2252-9511

Summit Auto Lease Australia Pty Ltd. Unit 7, 38-46 South Street Rydalmere, NSW 2116 Australia Tel: 61 (2) 9638-7833

SMAS Auto Leasing India Private Limited Office No. 406, 4th Floor, Worldmark-2, Asset area no.8, Aerocity Hospitality District, New Delhi-110037, India Tel: 91 (11) 4828-8300

PROMISE (HONG KONG) CO., LTD.

14th Floor, Luk Kwok Centre, 72 Gloucester Road, Wanchai, Hong Kong Special Administrative Region, The People’s Republic of China Tel: 852 (3199) 1000

Liang Jing Co., Ltd.

8FI, No.6, Sec 3, Min Chuan E. Rd., Taipei, Taiwan 10477, R.O.C. Tel: 886 (2) 2515-1598

PROMISE (THAILAND) CO., LTD. 12th, 15th, 22nd Floor, Capital Tower, All Seasons Place, 87/1 Wireless Road, Lumpini, Phatumwan, Bangkok 10330, Thailand Tel: 66 (2) 655-8574

PROMISE (SHENZHEN) CO., LTD.

Room 1305, YanLord Landmark, No.1, Section 2, Renmin South Road, Chengdu, The People's Republic of China Tel: 86 (28) 8691-7181

1001, 10/F, Tower A, Kingkey 100 Building, No. 5016 Shennan East Road, Luohu District, Shenzhen 518000, The People’s Republic of China Tel: 86 (755) 2396-6200

SMFL Leasing (Malaysia) Sdn. Bhd.

PROMISE (SHENYANG) CO., LTD.

Letter Box No.58, 11th Floor, UBN Tower, 10, Jalan P. Ramlee, 50250 Kuala Lumpur, Malaysia Tel: 60 (3) 2026-2619

5F, No.1 Yuebin Street, Shenhe District, Shenyang, Liaoning Province 110013, The People’s Republic of China Tel: 86 (24) 2250-6200

PT. SMFL Leasing Indonesia

Summitmas II, 12th Floor, Jl. Jend. Sudirman Kav. 61-62 Jakarta Selatan 12190, Indonesia Tel: 62 (21) 520-2083 2016 Annual Report

109

Promise Consulting Service (Shenzhen) Co., Ltd.

1003, 10/F, Tower A, Kingkey 100 Building, No. 5016 Shennan East Road, Luohu District, Shenzhen 518000, The People’s Republic of China Tel: 86 (755) 3698-5100

PROMISE (TIANJIN) CO., LTD.

Room H-I-K 17th Floor, TEDA Building No. 256, Jie-Fang Nan Road, Hexi District, Tianjin 300042, The People’s Republic of China Tel: 86 (22) 5877-8700

PROMISE (CHONGQING) CO., LTD.

The Americas SMBC Branches and Representative Offices

N ­­­­ ew York Branch

277 Park Avenue, New York, NY 10172, U.S.A. Tel: 1 (212) 224-4000

Cayman Branch

P.O. Box 694, Edward Street, George Town, Grand Cayman, Cayman Islands

Los Angeles Branch

38F, Xinhua International Mansion, No.27, Minquan Road, Yuzhong District, Chongqing, 400010, The People’s Republic of China Tel: 86 (23) 6037-5200

601 South Figueroa Street, Suite 1800, Los Angeles, CA 90017, U.S.A. Tel: 1 (213) 452-7800

PROMISE (CHENGDU) CO., LTD.

555 California Street, Suite 3350, San Francisco, CA 94104, U.S.A. Tel: 1 (415) 616-3000

Level 18, Minyoun Financial Plaza, No.35 Zidong Section Dongda Street, Jinjiang District, Chengdu, 610061, The People’s Republic of China Tel: 86 (28) 6528-5000

PROMISE (WUHAN) CO., LTD.

14F, Block A, Pingan International Financial Building, 216 Gongzheng Road, Wuchang, Wuhan, Hubei, 430000, The People’s Republic of China Tel: 86 (27) 8711-6300

PROMISE (SHANGHAI) CO., LTD.

Room 03-10, Floor 14, China Insurance Building No.166, East Lujiazui Road, Pudong New Area, Shanghai 200120, The People’s Republic of China Tel: 86 (21) 2066-6262

PROMISE ASSET MANAGEMENT (TAIWAN) CO., LTD.

8F No.6, Sec 3, Min Chuan E. Rd., Taipei, Taiwan 10477, R.O.C. Tel: 886 (2) 2515-6369

SMCC Consulting (Shanghai) Co., Ltd.

Room 5135, 51F Raffles City Centre, 268 Xi Zang Middle Road, Huang Pu District, Shanghai 200001, The People’s Republic of China Tel: 86 (21) 2312-7632

110 2016 Annual Report

San Francisco Branch

Houston Representative Office

Two Allen Center, 1200 Smith Street, Suite 1140, Houston, Texas 77002, U.S.A. Tel: 1 (713) 277-3500

Mexico City Representative Office Torre Altiva Boulevard Manuel Avila Camacho 138 Piso 2, Loc. B Lomas de Chapultepec, 11000 Mexico, D.F., Mexico Tel: 52 (55) 2623-0200

Bogota Representative Office

Carrera 9 #113-52, Oficina 808, Bogotá D.C., Colombia Tel: 57 (1) 619-7200

Lima Representative Office

Avenida Canaval y Moreyra 380, Oficina 702, San Isidro, Lima 27, Peru Tel: 51 (1) 200-3600

Santiago Representative Office Av. El Golf 82, Of. 1001, Las Condes, Santiago, Chile Tel: 56 (2) 2896-8440

SMBC Principal Subsidiaries/ Affiliates SMFG Network

M ­­­­ anufacturers Bank

515 South Figueroa Street, Los Angeles, CA 90071, U.S.A. Tel: 1 (213) 489-6200

Sumitomo Mitsui Banking Corporation of Canada

Ernst & Young Tower, Toronto Dominion Centre, Suite 1400, P.O. Box 172, 222 Bay Street, Toronto, Ontario M5K 1H6, Canada Tel: 1 (416) 368-4766

Banco Sumitomo Mitsui Brasileiro S.A. Avenida Paulista, 37-11 e 12 andar Sao Paulo-SP-CEP 01311902, Brazil Tel: 55 (11) 3178-8000

Banco Sumitomo Mitsui Brasileiro S. A. Cayman Branch 11 Dr. Roy’s Drive, George Town, Grand Cayman, Cayman Islands

SMBC Capital Markets, Inc.

277 Park Avenue, New York, NY 10172, U.S.A. Tel: 1 (212) 224-5100

SMBC Leasing and Finance, Inc. 277 Park Avenue, New York, NY 10172, U.S.A. Tel: 1 (212) 224-5200

SMBC Rail Services LLC

300 S. Riverside Plaza, Suite 1925, Chicago, IL 60606, U.S.A. Tel: 1 (312) 559-4800

SMBC, S.A.P.I. DE C.V., SOFOM, E.N.R. Torre Altiva Boulevard Manuel Avila Camacho 138 Piso 2, Loc. B Lomas de Chapultepec, 11000 Mexico, D.F., Mexico Tel: 52 (55) 2623-1373

SMBC Nikko Securities America, Inc. 277 Park Avenue, New York, NY 10172, U.S.A. Tel: 1 (212) 224-5300

JRI America, Inc.

277 Park Avenue, New York, NY 10172, U.S.A. Tel: 1 (212) 224-4200

Sumitomo Mitsui Finance and Leasing Company, Limited New York Branch 277 Park Avenue, New York, NY 10172, U.S.A. Tel: 1 (212) 224-4844

Europe, Middle-East and Africa SMBC Branches and Representative Offices

Düsseldorf Branch

Prinzenallee 7, 40549 Düsseldorf, Germany Tel: 49 (211) 36190

Frankfurt Branch

Opernturm, 16th Floor, Bockenheimer Landstrasse 2-4, 60306, Frankfurt am Main, Germany Tel: 49 (69) 667748-245

Brussels Branch

Neo Building, Rue Montoyer 51, Box 6, 1000 Brussels, Belgium Tel: 32 (2) 551-5000

Dubai Branch

Building One, 5th Floor, Gate Precinct, Dubai International Financial Centre, PO Box 506559 Dubai, United Arab Emirates Tel: 971 (4) 428-8000

Abu Dhabi Representative Office Office No.801, Makeen Tower, Al Zahiyah, Abu Dhabi, United Arab Emirates Tel: 971 (2) 495-4000

Istanbul Representative Office

Bahrain Representative Office No.406 & 407 (Entrance 3, 4th Floor) Manama Centre, Government Road, Manama, State of Bahrain Tel: 973-17223211

Johannesburg Representative Office Building Four, First Floor, Commerce Square, 39 Rivonia Road, Sandhurst, Sandton 2196, South Africa Tel: 27 (11) 219-5300

Cairo Representative Office

23rd Floor, Nile City Towers, North Tower, 2005C, Cornish El Nile, Ramlet Boulak, Cairo, Egypt Tel: 20 (2) 2461-9566

Tehran Representative Office First Floor, No. 17, Haghani Expressway (north side), Between Modarres & Africa, Tehran 1518858136, Islamic Republic of Iran Tel: 98 (21) 8888-4301/4302

SMBC Principal Subsidiaries/ Affiliates SMFG Network

Sumitomo Mitsui Banking Corporation Europe Limited Head Office

99 Queen Victoria Street, London EC4V 4EH, U.K. Tel: 44 (20) 7786-1000

Sumitomo Mitsui Banking Corporation Europe Limited Amsterdam Branch

World Trade Center, Tower D, Level 12, Strawinskylaan 1733, 1077 XX Amsterdam, The Netherlands Tel: 31 (20) 718-3888

Metrocity Is Merkezi, Kirgulu Sokak No:4 Kat:7/A D Blok, Esentepe Mahallesi, Sisli 34394, Istanbul, Republic of Turkey Tel: 90 (212) 371-5900

Sumitomo Mitsui Banking Corporation Europe Limited Dublin Branch

Doha QFC Office

Sumitomo Mitsui Banking Corporation Europe Limited Paris Branch

Office 1901, 19th Floor, Qatar Financial Centre Tower, Diplomatic Area-West bay, Doha, Qatar, P.O.Box 23769 Tel: 974-4496-7572

IFSC House, IFSC, Dublin 1, Ireland Tel: 353 (1) 859-9300

Sumitomo Mitsui Banking Corporation Europe Limited Prague Branch

International Business Centre, Pobrezni 3 186 00 Prague 8, Czech Republic Tel: 420 (295) 565-800

Sumitomo Mitsui Banking Corporation Europe Limited Madrid Branch

Calle Pedro Teixeira 8, Edificio Iberia Mart I, planta 4a., 28020 Madrid, Spain Tel: 34 (91) 312-7300

Sumitomo Mitsui Banking Corporation Europe Limited Milan Branch

Via della Spiga 30/ Via Senato 25, 20121 Milan, Italy Tel: 39 (02) 7636-1700

JSC Sumitomo Mitsui Rus Bank Presnenskaya naberezhnaya, house 10, block C, Moscow, 123317 Russian Federation Tel: 7 (495) 287-8200

SMBC Nikko Capital Markets Limited

One New Change, London EC4M 9AF, U.K. Tel: 44 (20) 3527-7000

SMBC Derivative Products Limited One New Change, London EC4M 9AF, U.K. Tel: 44 (20) 3527-7000

Sumitomo Mitsui Finance Dublin Limited La Touche House, I.F.S.C., Custom House Docks, Dublin 1, Ireland Tel: 353 (1) 670-0066

JRI Europe, Limited

99 Queen Victoria Street, London EC4V 4EH, U.K. Tel: 44 (20) 7406-2700

SMBC Aviation Capital Limited

IFSC House, IFSC, Dublin 1, Ireland Tel: 353 (1) 859-9000

1/3/5 rue Paul Cézanne, 75008, Paris, France Tel: 33 (1) 44 (90) 48-00 2016 Annual Report

111

*SMBCE:Sumitomo Mitsui Banking Corporation Europe Limited

SMBCE* Dublin Branch Sumitomo Mitsui Finance Dublin Limited SMBC Aviation Capital Limited SMBCE* Amsterdam JSC Sumitomo Mitsui Rus Bank Sumitomo Mitsui Branch Banking Corporation Brussels Branch Europe Limited Frankfurt Branch SMBC Nikko Capital SMBCE* Prague Branch Markets Limited Düsseldorf Branch SMBCE* Paris Branch SMBCE* Milan Branch

Ulaanbaatar Representative Office

Istanbul Representative Office

SMBCE* Madrid Branch

Tehran Representative Office Cairo Representative Office Bahrain Representative Office

Dubai Branch

Doha QFC Office

Abu Dhabi Representative Office

New Delhi Branch

Johannesburg Representative Office Perth Branch

GLOBAL NETWORK

Sydney Branch

SMBC Nikko Capital Markets Limited (Sydney Office)

Asia and Oceania

■ Sumitomo Mitsui Banking Corporation (China) Limited Head Office (Shanghai) ■ Sumitomo Mitsui Banking Corporation (China) Limited Guangzhou Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Hangzhou Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Chongqing Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Shenzhen Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Shenyang Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Suzhou Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Dalian Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Tianjin Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Beijing Branch

112 2016 Annual Report

■ Sumitomo Mitsui Banking Corporation (China) Limited Kunshan Sub-Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Shanghai Pilot Free Trade Zone Sub-Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Shanghai Puxi Sub-Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Changshu Sub-Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Suzhou Industrial Park Sub-Branch ■ Sumitomo Mitsui Banking Corporation (China) Limited Tianjin Binhai Sub-Branch ■ PT Bank Sumitomo Mitsui Indonesia ■ Sumitomo Mitsui Banking Corporation Malaysia Berhad ■ Hong Kong Branch ■ Taipei Branch ■ Seoul Branch ■ Singapore Branch ■ Sydney Branch ■ Perth Branch ■ New Delhi Branch

■ Bangkok Branch ■ Chonburi Branch ■ Ho Chi Minh City Branch ■ Hanoi Branch ■ Manila Branch ■ Yangon Branch ■ Labuan Branch ■ Labuan Branch Kuala Lumpur Office ■ Ulaanbaatar Representative Office ■ Phnom Penh Representative Office ■ SMBC Capital Markets (Asia) Limited ■ SMBC Nikko Capital Markets Limited (Sydney Office) ■ SBCS Co., Limited ■ PT. SBCS Indonesia ■ SMBC SSC Sdn. Bhd. ■ SMBC Metro Investment Corporation ■ The Bank of East Asia, Limited ■ Vietnam Export Import Commercial Joint Stock Bank ■ PT Bank Tabungan Pensiunan Nasional Tbk ■ ACLEDA Bank Plc.

Overseas service network (as of June 30, 2016) Total: 72 (including banking subsidiaries and their branches/ sub-branches/rep. offices) Also showing principal overseas subsidiaries

Los Angeles Branch San Francisco Branch Sumitomo Mitsui Banking Corporation of Canada Shenyang Branch

Manufacturers Bank

Beijing Branch Dalian Branch

Tianjin Branch Tianjin Binhai Sub-Branch Suzhou Branch Suzhou Industrial Park Sub-Branch Changshu Sub-Branch Chongqing Branch

Hanoi Branch

Hangzhou Branch

Houston Representative Office

Seoul Branch Kunshan Sub-Branch Head Office (Shanghai) Shanghai Puxi Sub-Branch Shanghai Pilot Free Trade Zone Sub-Branch

Guangzhou Taipei Branch Branch Shenzhen Branch The Bank of East Asia, Limited

Cayman Branch Banco Sumitomo Mitsui Brasileiro S.A. Cayman Branch Mexico City Representative Office SMBC, S.A.P.I. DE C.V., SOFOM, E.N.R. Bogota Representative Office

Hong Kong Branch SMBC Capital Markets (Asia) Limited

Yangon Branch

New York Branch SMBC Capital Markets, Inc. SMBC Leasing and Finance, Inc. SMBC Nikko Securities America, Inc.

SMBC Rail Services LLC

SMBC Metro Investment Corp. Manila Branch

Bangkok Branch SBCS Co., Limited Chonburi Branch Sumitomo Mitsui Banking Corporation Malaysia Berhad Labuan Branch Kuala Lumpur Office SMBC SSC Sdn. Bhd.

Phnom Penh Representative Office ACLEDA Bank Plc. Ho Chi Minh City Branch Vietnam Export Import Commercial Joint Stock Bank Labuan Branch

Lima Representative Office

Banco Sumitomo Mitsui Brasileiro S.A.

Singapore Branch Santiago Representative Office PT Bank Sumitomo Mitsui Indonesia PT. SBCS Indonesia PT Bank Tabungan Pensiunan Nasional Tbk Indicates branch or sub-branch of Sumitomo Mitsui Banking Corporation (China) Limited

The Americas

Europe, Middle East and Africa

■ New York Branch ■ San Francisco Branch ■ Los Angeles Branch ■ Cayman Branch ■ Houston Representative Office ■ Mexico City Representative Office ■ Santiago Representative Office ■ Bogota Representative Office ■ Lima Representative Office ■ Manufacturers Bank ■ Sumitomo Mitsui Banking Corporation of Canada ■ Banco Sumitomo Mitsui Brasileiro S.A. ■ Banco Sumitomo Mitsui Brasileiro S.A. Cayman Branch ■ SMBC Capital Markets, Inc. ■ SMBC Nikko Securities America, Inc. ■ SMBC Leasing and Finance, Inc. ■ SMBC Rail Services LLC ■ SMBC, S.A.P.I. DE C.V., SOFOM, E.N.R.

■ Sumitomo Mitsui Banking Corporation Europe Limited Head Office ■ Sumitomo Mitsui Banking Corporation Europe Limited Amsterdam Branch ■ Sumitomo Mitsui Banking Corporation Europe Limited Dublin Branch ■ Sumitomo Mitsui Banking Corporation Europe Limited Paris Branch ■ Sumitomo Mitsui Banking Corporation Europe Limited Prague Branch ■ Sumitomo Mitsui Banking Corporation Europe Limited Madrid Branch ■ Sumitomo Mitsui Banking Corporation Europe Limited Milan Branch ■ Düsseldorf Branch ■ Frankfurt Branch ■ Brussels Branch

■ Dubai Branch ■ Abu Dhabi Representative Office ■ Istanbul Representative Office ■ Doha QFC Office ■ Bahrain Representative Office ■ Johannesburg Representative Office ■ Cairo Representative Office ■ Tehran Representative Office ■ JSC Sumitomo Mitsui Rus Bank ■ SMBC Nikko Capital Markets Limited ■ Sumitomo Mitsui Finance Dublin Limited ■ SMBC Aviation Capital Limited

2016 Annual Report

113

114 2016 Annual Report

Appendix II CONTENTS Financial Data SMBC

SMFG Financial Highlights 

116

Financial Highlights 

247

Consolidated Balance Sheets 

117

Income Analysis (Consolidated) 

248

Consolidated Statements of Income 

119

Assets and Liabilities (Consolidated) 

251

Consolidated Statements of Comprehensive Income 

121

Income Analysis (Non-consolidated) 

253

Consolidated Statements of Changes in Net Assets 

Deposits (Non-consolidated) 

257

122

Loans (Non-consolidated) 

259

Consolidated Statements of Cash Flows 

125

Securities (Non-consolidated) 

264

Notes to Consolidated Financial Statements 

127

Ratios (Non-consolidated) 

266

Independent Auditor’s Report 

193

Capital (Non-consolidated) 

268

Others (Non-consolidated) 

269

SMBC Supplemental Information 

194

Trust Assets and Liabilities (Non-consolidated)  271

SMFG Income Analysis (Consolidated) 

200

Assets and Liabilities (Consolidated) 

203

Capital (Non-consolidated) 

206

Basel III Information

Basel III Information

SMFG

SMBC

Capital Ratio Information (Consolidated) 

209

Capital Ratio Information (Consolidated) 

272

Leverage Ratio Information (Consolidated)  243

Leverage Ratio Information (Consolidated)  279

Liquidity Risk Information (Consolidated) 

Liquidity Risk Information (Consolidated) 

244

Indicators for assessing Global Systemically Important Banks (G-SIBs)  246

280

Capital Ratio Information (Non-consolidated)  282 Liquidity Risk Information (Non-consolidated) 

290

Compensation SMBC

SMFG Compensation (Consolidated) 

294

Compensation 

297

2016 Annual Report

115

SMFG

Financial Highlights Sumitomo Mitsui Financial Group (Consolidated) Year ended March 31 For the Year: Ordinary income����������������������������������������������������������� Ordinary profit�������������������������������������������������������������� Profit attributable to owners of parent������������������������� Comprehensive income����������������������������������������������� At Year-End: Total net assets������������������������������������������������������������ Total assets������������������������������������������������������������������ Capital ratio������������������������������������������������������������������ Total capital ratio (International Standard)������������������� Tier 1 capital ratio (International Standard)������������������ Common equity Tier 1 capital ratio (International Standard)��������������������������������������������� Number of employees��������������������������������������������������

2016 ¥

4,772,100 985,284 646,687 178,328

2015 ¥

4,851,202 1,321,156 753,610 2,063,510

¥ 10,447,669 186,585,842 / 17.02% 13.68%

¥ 10,696,271 183,442,585 / 16.58% 12.89%

11.81% 73,652

11.30% 68,739

Millions of yen 2014

2013

2012

¥

4,641,880 1,432,332 835,357 1,303,295

¥

4,326,424 1,073,745 794,059 1,458,107

¥

3,945,282 935,571 518,536 665,232

¥

9,005,019 161,534,387 / 15.51% 12.19%

¥

8,443,218 148,696,800 / 14.71% 10.93%

¥

7,254,976 143,040,672 16.93% / /

10.63% 66,475

9.38% 64,635

/ 64,225

Note: “Number of employees” has been reported on the basis of full-time workers. “Number of employees” includes locally hired overseas staff members but excludes contract employees and temporary staff.

116 2016 Annual Report

SMFG

Consolidated Balance Sheets Sumitomo Mitsui Financial Group, Inc. and Subsidiaries Millions of U.S. dollars

Millions of yen March 31

2015

Assets: Cash and due from banks....................................... *8 Call loans and bills bought ..................................... *8 Receivables under resale agreements.................... Receivables under securities borrowing transactions........................................................... Monetary claims bought ......................................... *8 Trading assets ........................................................ *8 Money held in trust ................................................. Securities ................................................................ *1, *2, *8, *15 Loans and bills discounted..................................... *3, *4, *5, *6, *7, *8, *9

Foreign exchanges ................................................. *7 Lease receivables and investment assets .............. *8 Other assets ........................................................... *8 Tangible fixed assets............................................... *8, *10, *11, *12 Assets for rent.................................................... Buildings............................................................. Land................................................................... Lease assets...................................................... Construction in progress.................................... Other tangible fixed assets................................ Intangible fixed assets............................................. Software............................................................. Goodwill............................................................. Lease assets...................................................... Other intangible fixed assets.............................. Net defined benefit asset........................................ Deferred tax assets................................................. Customers’ liabilities for acceptances and guarantees............................................................. Reserve for possible loan losses............................. Total assets..............................................................

2016

¥ 39,748,979 1,326,965 746,431 6,477,063 4,286,592 7,483,681 7,087 29,633,667 73,068,240 1,907,667 1,909,143 6,156,091 2,770,853 1,790,787 313,381 469,167 8,368 76,413 112,735 819,560 359,216 351,966 307 108,070 376,255 127,841 7,267,713 (671,248) ¥183,442,585

*8 *8

*8 *8 *1, *2, *8, *15 *3, *4, *5, *6, *7, *8, *9 *7 *8 *8 *8, *10, *11, *12

2016

¥ 42,789,236 1,291,365 494,949

$ 379,943 11,467 4,395

7,972,918 4,350,012 8,063,281 5,163 25,264,445

70,795 38,626 71,597 46 224,334

75,066,080 1,577,167 1,987,034 6,702,774 2,919,424 1,884,778 386,222 489,144 7,558 27,188 124,531 878,265 408,272 339,185 268 130,538 203,274 125,832

666,543 14,004 17,644 59,517 25,923 16,736 3,429 4,343 67 241 1,106 7,798 3,625 3,012 2 1,159 1,805 1,117

7,519,635 (625,019) ¥186,585,842

66,770 (5,550) $1,656,774

2016 Annual Report

117

SMFG

Consolidated Balance Sheets

(Continued) Millions of U.S. dollars

Millions of yen March 31

Liabilities and net assets: Liabilities: Deposits ................................................................. Negotiable certificates of deposit........................... Call money and bills sold........................................ Payables under repurchase agreements ................ Payables under securities lending transactions .......................................................... Commercial paper................................................... Trading liabilities...................................................... Borrowed money .................................................... Foreign exchanges ................................................. Short-term bonds ................................................... Bonds ..................................................................... Due to trust account ............................................... Other liabilities ........................................................ Reserve for employee bonuses............................... Reserve for executive bonuses............................... Net defined benefit liability ..................................... Reserve for executive retirement benefits............... Reserve for point service program.......................... Reserve for reimbursement of deposits.................. Reserve for losses on interest repayment............... Reserves under the special laws............................. Deferred tax liabilities ............................................. Deferred tax liabilities for land revaluation ............. Acceptances and guarantees ................................. Total liabilities.......................................................... Net assets : Capital stock........................................................... Capital surplus........................................................ Retained earnings................................................... Treasury stock......................................................... Total stockholders’ equity....................................... Net unrealized gains (losses) on other securities ............................................................. Net deferred gains (losses) on hedges.................... Land revaluation excess.......................................... Foreign currency translation adjustments............... Accumulated remeasurements of defined benefit plans.......................................................... Total accumulated other comprehensive income................................................................... Stock acquisition rights .......................................... Non-controlling interests......................................... Total net assets....................................................... Total liabilities and net assets..................................

118 2016 Annual Report

2015

*8 *8 *8 *8 *8 *8, *13

*14 *8

*10 *8

*10

2016

¥101,047,918 13,825,898 5,873,123 991,860

*8

7,833,219 3,351,459 5,664,688 9,778,095 1,110,822 1,370,800 6,222,918 718,133 6,728,951 73,359 3,344 38,096 2,128 19,050 20,870 166,793 1,124 601,393 34,550 7,267,713 172,746,314

*8

2016

¥110,668,828 14,250,434 1,220,455 1,761,822

$  982,675 126,536 10,837 15,644

5,309,003 3,017,404 6,112,667 8,571,227 1,083,450 1,271,300 7,006,357 944,542 6,632,027 68,476 2,446 48,570 2,202 19,706 16,979 228,741 1,498 348,190 32,203 7,519,635 176,138,173

47,141 26,793 54,277 76,108 9,620 11,288 62,212 8,387 58,889 608 22 431 20 175 151 2,031 13 3,092 286 66,770 1,564,004

2,337,895 757,329 4,098,425 (175,261) 7,018,389

2,337,895 757,306 4,534,472 (175,381) 7,454,294

20,759 6,724 40,263 (1,557) 66,190

1,791,049 (30,180) 39,014 156,309

1,347,689 55,130 39,416 87,042

11,967 490 350 773

47,667

(69,811)

(620)

2,003,859 2,284 1,671,738 10,696,271 ¥183,442,585

1,459,467 2,884 1,531,022 10,447,669 ¥186,585,842

12,959 26 13,595 92,769 $1,656,774

*8

*8 *8, *13

*14 *8

*10 *8

*10

SMFG

Consolidated Statements of Income Sumitomo Mitsui Financial Group, Inc. and Subsidiaries Millions of U.S. dollars

Millions of yen

2015

Year ended March 31

Ordinary income....................................................................................... Interest income.................................................................................... Interest on loans and discounts..................................................... Interest and dividends on securities.............................................. Interest on call loans and bills bought........................................... Interest on receivables under resale agreements.......................... Interest on receivables under securities borrowing transactions... Interest on deposits with banks..................................................... Interest on lease transactions........................................................ Other interest income..................................................................... Trust fees............................................................................................. Fees and commissions....................................................................... Trading income.................................................................................... Other operating income...................................................................... Lease-related income..................................................................... Installment-related income............................................................. Other.............................................................................................. Other income....................................................................................... Gains on reversal of reserve for possible loan losses.................... Recoveries of written-off claims..................................................... Other.............................................................................................. Ordinary expenses................................................................................... Interest expenses................................................................................ Interest on deposits....................................................................... Interest on negotiable certificates of deposit................................. Interest on call money and bills sold.............................................. Interest on payables under repurchase agreements...................... Interest on payables under securities lending transactions........... Interest on commercial paper........................................................ Interest on borrowed money.......................................................... Interest on short-term bonds......................................................... Interest on bonds .......................................................................... Other interest expenses................................................................. Fees and commissions payments....................................................... Trading losses..................................................................................... Other operating expenses................................................................... Lease-related expenses................................................................. Installment-related expenses......................................................... Other.............................................................................................. General and administrative expenses................................................. Other expenses................................................................................... Provision for reserve for possible loan losses................................ Other.............................................................................................. Ordinary profit..........................................................................................

*1

*2

*3

¥4,851,202 1,891,932 1,312,629 336,345 19,599 9,640 7,826 43,147 62,097 100,645 2,890 1,126,285 252,976 1,359,109 189,261 692,151 477,695 218,008 61,158 15,979 140,870 3,530,046 386,753 126,371 43,904 4,201 4,921 5,036 8,047 34,814 1,393 110,461 47,602 129,609 57,856 1,078,570 89,310 650,913 338,346 1,659,341 217,914 — 217,914 1,321,156

2016

*1

*2

*3

¥4,772,100 1,868,313 1,326,402 303,132 20,457 10,100 10,747 37,537 59,366 100,567 3,681 1,134,463 225,481 1,342,665 197,699 743,815 401,150 197,494 — 19,735 177,759 3,786,815 445,385 140,633 49,319 5,360 8,077 6,726 10,415 39,825 1,400 129,295 54,331 130,625 — 1,094,630 91,017 698,904 304,708 1,724,836 391,338 34,842 356,495 985,284

2016 $42,373 16,590 11,778 2,692 182 90 95 333 527 893 33 10,073 2,002 11,922 1,755 6,605 3,562 1,754 — 175 1,578 33,625 3,955 1,249 438 48 72 60 92 354 12 1,148 482 1,160 — 9,720 808 6,206 2,706 15,316 3,475 309 3,165 8,749

2016 Annual Report

119

SMFG

Consolidated Statements of Income

(Continued) Millions of U.S. dollars

Millions of yen

2015

Year ended March 31

Extraordinary gains................................................................................... Gains on disposal of fixed assets....................................................... Gains on negative goodwill................................................................. Reversal of reserve for eventual future operating losses from financial instruments transactions..................................................... Other extraordinary gains.................................................................... Extraordinary losses................................................................................. Losses on disposal of fixed assets..................................................... Losses on impairment of fixed assets................................................. Provision for reserve for eventual future operating losses from financial instruments transactions..................................................... Income before income taxes.................................................................... Income taxes-current............................................................................... Income taxes-deferred............................................................................. Income taxes............................................................................................ Profit......................................................................................................... Profit attributable to non-controlling interests.......................................... Profit attributable to owners of parent.....................................................

120 2016 Annual Report

*4

2016

2016

¥ 538 538 —

¥ 3,911 3,714 138

$ 35 33 1

— — 12,316 6,853 5,109

0 58 9,026 4,289 4,362

0 1 80 38 39

374 980,170 244,223 (19,175) 225,047 755,123 108,435 ¥ 646,687

3 8,703 2,169 (170) 1,998 6,705 963 $ 5,742

353 1,309,377 325,341 116,020 441,362 868,015 114,405 ¥ 753,610

*4

SMFG

Consolidated Statements of Comprehensive Income Sumitomo Mitsui Financial Group, Inc. and Subsidiaries Millions of U.S. dollars

Millions of yen

2015

Year ended March 31

Profit......................................................................................................... Other comprehensive income (losses)..................................................... Net unrealized gains (losses) on other securities................................ Net deferred gains (losses) on hedges................................................ Land revaluation excess...................................................................... Foreign currency translation adjustments........................................... Remeasurements of defined benefit plans.......................................... Share of other comprehensive income of affiliates............................. Total comprehensive income.................................................................... Comprehensive income attributable to owners of parent................... Comprehensive income attributable to non-controlling interests.......

*1

¥  868,015 1,195,494 864,496 29,458 3,604 175,840 122,552 (458) 2,063,510 1,879,838 183,672

2016 *1

¥ 755,123 (576,794) (444,981) 82,552 1,705 (92,121) (121,933) (2,016) 178,328 103,599 74,728

2016 $ 6,705 (5,122) (3,951) 733 15 (818) (1,083) (18) 1,583 920 664

2016 Annual Report

121

SMFG

Consolidated Statements of Changes in Net Assets Sumitomo Mitsui Financial Group, Inc. and Subsidiaries Millions of yen Capital

Year ended March 31, 2015 stock Balance at the beginning of the fiscal year...................... ¥2,337,895 Cumulative effects of changes in accounting policies.... Restated balance............................................................. 2,337,895 Changes in the fiscal year Cash dividends............................................................ Profit attributable to owners of parent........................ Purchase of treasury stock......................................... Disposal of treasury stock........................................... Changes in shareholders’ interest due to transaction with non-controlling interests.................................... Increase due to increase in subsidiaries..................... Increase due to decrease in subsidiaries.................... Decrease due to increase in subsidiaries.................... Decrease due to decrease in subsidiaries.................. Reversal of land revaluation excess............................ Net changes in items other than stockholders’ equity in the fiscal year.............................................. Net changes in the fiscal year.......................................... — Balance at the end of the fiscal year................................ ¥2,337,895

Capital surplus

Stockholders’ equity Retained earnings

¥758,349 758,349

¥3,480,085 35,459 3,515,544

Treasury stock

¥(175,115) (175,115)

(161) 15

(170,908) 753,610 (161) 17

(170,908) 753,610 2 (1,021)

(1,021) 38 5 (165) (20) 321

38 5 (165) (20) 321

(1,019) ¥757,329

582,880 ¥4,098,425

Total

¥6,401,215 35,459 6,436,674

(146) ¥(175,261)

581,715 ¥7,018,389

Millions of yen Net unrealized gains (losses) on other securities

Year ended March 31, 2015 Balance at the beginning of the fiscal year...................... ¥  949,508 Cumulative effects of changes in accounting policies.... Restated balance............................................................. 949,508 Changes in the fiscal year Cash dividends............................................................ Profit attributable to owners of parent........................ Purchase of treasury stock......................................... Disposal of treasury stock........................................... Changes in shareholders’ interest due to transaction with non-controlling interests.................................... Increase due to increase in subsidiaries..................... Increase due to decrease in subsidiaries.................... Decrease due to increase in subsidiaries.................... Decrease due to decrease in subsidiaries.................. Reversal of land revaluation excess............................ Net changes in items other than stockholders’ equity in the fiscal year.............................................. 841,541 Net changes in the fiscal year.......................................... 841,541 Balance at the end of the fiscal year................................ ¥1,791,049

Accumulated other comprehensive income Foreign Accumulated Net deferred Land currency remeasurements gains (losses) revaluation translation of defined on hedges excess adjustments benefit plans

¥35,749

¥ 27,239

¥ (73,579)

¥  877,971

(60,946)

35,749

27,239

(73,579)

877,971

30,766 30,766 ¥(30,180)

3,265 3,265 ¥39,014

129,070 129,070 ¥156,309

121,246 121,246 ¥ 47,667

1,125,888 1,125,888 ¥2,003,859

Millions of yen Year ended March 31, 2015 Balance at the beginning of the fiscal year...................... Cumulative effects of changes in accounting policies.... Restated balance............................................................. Changes in the fiscal year Cash dividends............................................................ Profit attributable to owners of parent........................ Purchase of treasury stock......................................... Disposal of treasury stock........................................... Changes in shareholders’ interest due to transaction with non-controlling interests.................................... Increase due to increase in subsidiaries..................... Increase due to decrease in subsidiaries.................... Decrease due to increase in subsidiaries.................... Decrease due to decrease in subsidiaries.................. Reversal of land revaluation excess............................ Net changes in items other than stockholders’ equity in the fiscal year.............................................. Net changes in the fiscal year.......................................... Balance at the end of the fiscal year................................

122 2016 Annual Report

Stock acquisition rights

¥1,791 1,791

Noncontrolling interests

Total net assets

¥1,724,041 ¥ 9,005,019 (431) 35,027 1,723,610 9,040,047 (170,908) 753,610 (161) 17 (1,021) 38 5 (165) (20) 321

492 492 ¥2,284

Total

¥(60,946)

(51,872) 1,074,509 (51,872) 1,656,224 ¥1,671,738 ¥10,696,271

SMFG

Consolidated Statements of Changes in Net Assets

Millions of yen

Year ended March 31, 2016

Capital stock

Balance at the beginning of the fiscal year...................... ¥2,337,895 Changes in the fiscal year Cash dividends............................................................ Profit attributable to owners of parent........................ Purchase of treasury stock......................................... Disposal of treasury stock........................................... Changes in shareholders’ interest due to transaction with non-controlling interests.................................... Increase due to increase in subsidiaries..................... Increase due to decrease in subsidiaries.................... Decrease due to increase in subsidiaries.................... Decrease due to decrease in subsidiaries.................. Reversal of land revaluation excess............................ Net changes in items other than stockholders’ equity in the fiscal year.............................................. Net changes in the fiscal year.......................................... — Balance at the end of the fiscal year................................ ¥2,337,895

Stockholders’ equity Retained earnings

Capital surplus

¥757,329

Treasury stock

Total

¥4,098,425

¥(175,261) ¥7,018,389

(211,921) 646,687

(211,921) 646,687 (191) 54

(191) 71

(17) (5) 50 3 (16) (51) 1,295

(5) 50 3 (16) (51) 1,295

(23) 436,047 ¥757,306 ¥4,534,472

(119) 435,904 ¥(175,381) ¥7,454,294

Millions of yen

Year ended March 31, 2016

Net unrealized gains (losses) on other securities

Balance at the beginning of the fiscal year...................... ¥1,791,049 Changes in the fiscal year Cash dividends............................................................ Profit attributable to owners of parent........................ Purchase of treasury stock......................................... Disposal of treasury stock........................................... Changes in shareholders’ interest due to transaction with non-controlling interests.................................... Increase due to increase in subsidiaries..................... Increase due to decrease in subsidiaries.................... Decrease due to increase in subsidiaries.................... Decrease due to decrease in subsidiaries.................. Reversal of land revaluation excess............................ Net changes in items other than stockholders’ equity in the fiscal year.............................................. (443,359) Net changes in the fiscal year.......................................... (443,359) Balance at the end of the fiscal year................................ ¥1,347,689

Accumulated other comprehensive income Foreign Accumulated Net deferred Land currency remeasurements gains (losses) revaluation translation of defined on hedges excess adjustments benefit plans

Total

¥(30,180)

¥39,014

¥156,309

¥ 47,667

¥2,003,859

85,310 85,310 ¥ 55,130

401 401 ¥39,416

(69,266) (69,266) ¥ 87,042

(117,478) (544,392) (117,478) (544,392) ¥ (69,811) ¥1,459,467

Millions of yen Year ended March 31, 2016

Balance at the beginning of the fiscal year...................... Changes in the fiscal year Cash dividends............................................................ Profit attributable to owners of parent........................ Purchase of treasury stock......................................... Disposal of treasury stock........................................... Changes in shareholders’ interest due to transaction with non-controlling interests.................................... Increase due to increase in subsidiaries..................... Increase due to decrease in subsidiaries.................... Decrease due to increase in subsidiaries.................... Decrease due to decrease in subsidiaries.................. Reversal of land revaluation excess............................ Net changes in items other than stockholders’ equity in the fiscal year.............................................. Net changes in the fiscal year.......................................... Balance at the end of the fiscal year................................

Stock acquisition rights

¥2,284

Noncontrolling interests

Total net assets

¥1,671,738 ¥10,696,271 (211,921) 646,687 (191) 54 (5) 50 3 (16) (51) 1,295

600 600 ¥2,884

(140,715) (684,507) (140,715) (248,602) ¥1,531,022 ¥10,447,669

2016 Annual Report

123

SMFG

Consolidated Statements of Changes in Net Assets

Millions of U.S. dollars

Year ended March 31, 2016

Balance at the beginning of the fiscal year...................... Changes in the fiscal year Cash dividends............................................................ Profit attributable to owners of parent........................ Purchase of treasury stock......................................... Disposal of treasury stock........................................... Changes in shareholders’ interest due to transaction with non-controlling interests.................................... Increase due to increase in subsidiaries..................... Increase due to decrease in subsidiaries.................... Decrease due to increase in subsidiaries.................... Decrease due to decrease in subsidiaries.................. Reversal of land revaluation excess............................ Net changes in items other than stockholders’ equity in the fiscal year.............................................. Net changes in the fiscal year.......................................... Balance at the end of the fiscal year................................

Capital stock

Stockholders’ equity Retained earnings

Capital surplus

$20,759

$6,725

$36,392

Treasury stock

Total

$(1,556)

$62,319

(2) 1

(1,882) 5,742 (2) 0

(1,882) 5,742 (0) (0)

(0) 0 0 (0) (0) 11

0 0 (0) (0) 11

— $20,759

(0) $6,724

3,872 $40,263

(1) $(1,557)

3,871 $66,190

Millions of U.S. dollars

Year ended March 31, 2016

Balance at the beginning of the fiscal year...................... Changes in the fiscal year Cash dividends............................................................ Profit attributable to owners of parent........................ Purchase of treasury stock......................................... Disposal of treasury stock........................................... Changes in shareholders’ interest due to transaction with non-controlling interests.................................... Increase due to increase in subsidiaries..................... Increase due to decrease in subsidiaries.................... Decrease due to increase in subsidiaries.................... Decrease due to decrease in subsidiaries.................. Reversal of land revaluation excess............................ Net changes in items other than stockholders’ equity in the fiscal year.............................................. Net changes in the fiscal year.......................................... Balance at the end of the fiscal year................................

Net unrealized gains (losses) on other securities

Accumulated other comprehensive income Foreign Accumulated Net deferred Land currency remeasurements gains (losses) revaluation translation of defined on hedges excess adjustments benefit plans

$(268)

$346

$1,388

$  423

$17,793

(3,937) (3,937) $11,967

758 758 $ 490

4 4 $350

(615) (615) $  773

(1,043) (1,043) $  (620)

(4,834) (4,834) $12,959

Millions of U.S. dollars Year ended March 31, 2016

Balance at the beginning of the fiscal year...................... Changes in the fiscal year Cash dividends............................................................ Profit attributable to owners of parent........................ Purchase of treasury stock......................................... Disposal of treasury stock........................................... Changes in shareholders’ interest due to transaction with non-controlling interests.................................... Increase due to increase in subsidiaries..................... Increase due to decrease in subsidiaries.................... Decrease due to increase in subsidiaries.................... Decrease due to decrease in subsidiaries.................. Reversal of land revaluation excess............................ Net changes in items other than stockholders’ equity in the fiscal year.............................................. Net changes in the fiscal year.......................................... Balance at the end of the fiscal year................................

124 2016 Annual Report

Total

$15,903

Stock acquisition rights

$20

Noncontrolling interests

$14,844

Total net assets

$94,977 (1,882) 5,742 (2) 0 (0) 0 0 (0) (0) 11

5 5 $26

(1,249) (1,249) $13,595

(6,078) (2,207) $92,769

SMFG

Consolidated Statements of Cash Flows Sumitomo Mitsui Financial Group, Inc. and Subsidiaries Millions of U.S. dollars

Millions of yen Year ended March 31

Cash flows from operating activities: Income before income taxes............................................................... Depreciation........................................................................................ Losses on impairment of fixed assets................................................. Amortization of goodwill...................................................................... Gains on negative goodwill................................................................. Gains on step acquisitions.................................................................. Equity in losses of affiliates................................................................. Net change in reserve for possible loan losses................................... Net change in reserve for employee bonuses..................................... Net change in reserve for executive bonuses..................................... Net change in net defined benefit asset and liability.......................... Net change in reserve for executive retirement benefits..................... Net change in reserve for point service program................................ Net change in reserve for reimbursement of deposits........................ Net change in reserve for losses on interest repayment..................... Interest income.................................................................................... Interest expenses................................................................................ Net gains on securities........................................................................ Net gains from money held in trust..................................................... Net exchange (gains) losses............................................................... Net losses from disposal of fixed assets............................................ Net change in trading assets.............................................................. Net change in trading liabilities........................................................... Net change in loans and bills discounted........................................... Net change in deposits....................................................................... Net change in negotiable certificates of deposit................................. Net change in borrowed money (excluding subordinated borrowings)........................................................................................ Net change in deposits with banks..................................................... Net change in call loans and bills bought and others......................... Net change in receivables under securities borrowing transactions.. Net change in call money and bills sold and others........................... Net change in commercial paper........................................................ Net change in payables under securities lending transactions........... Net change in foreign exchanges (assets).......................................... Net change in foreign exchanges (liabilities)....................................... Net change in lease receivables and investment assets..................... Net change in short-term bonds (liabilities)........................................ Issuance and redemption of bonds (excluding subordinated bonds)...... Net change in due to trust account..................................................... Interest received.................................................................................. Interest paid........................................................................................ Other, net............................................................................................. Subtotal............................................................................................... Income taxes paid............................................................................... Net cash provided by (used in) operating activities.................................

2015

2016

2016

¥ 1,309,377 222,195 5,109 26,521 — — 10,600 (81,146) 2,722 (1,576) (47,765) 130 (1,305) 6,012 (23,388) (1,891,932) 386,753 (115,802) (0) (717,621) 6,315 (423,811) 797,462 (4,500,362) 6,639,769 71,330

¥ 980,170 238,348 4,362 27,670 (138) (58) 36,196 (48,022) (5,077) (946) (23,434) 68 656 (4,138) 61,947 (1,868,313) 445,385 (126,398) (0) 445,713 575 (579,837) 448,508 (2,223,331) 7,646,207 442,445

$ 8,703 2,116 39 246 (1) (1) 321 (426) (45) (8) (208) 1 6 (37) 550 (16,590) 3,955 (1,122) (0) 3,958 5 (5,149) 3,982 (19,742) 67,894 3,929

2,656,388 117,475 (857,503) (2,696,803) 922,181 924,066 2,502,245 (105,639) 624,705 (59,744) 225,600 1,038,047 18,803 1,903,720 (375,300) 87,971 8,605,805 (365,578) 8,240,226

(1,119,170) 849,019 157,822 (1,495,854) (3,838,358) (346,866) (2,524,215) 314,707 (22,636) (41,649) (99,500) 420,778 226,408 1,875,947 (438,246) (649,079) (832,332) (294,976) (1,127,308)

(9,938) 7,539 1,401 (13,282) (34,082) (3,080) (22,414) 2,794 (201) (370) (884) 3,736 2,010 16,657 (3,891) (5,763) (7,391) (2,619) (10,010)

2016 Annual Report

125

SMFG

Consolidated Statements of Cash Flows

(Continued) Millions of U.S. dollars

Millions of yen

2015

Year ended March 31

2016

2016

Cash flows from investing activities: Purchases of securities....................................................................... Proceeds from sale of securities......................................................... Proceeds from redemption of securities............................................. Purchases of money held in trust........................................................ Proceeds from sale of money held in trust......................................... Purchases of tangible fixed assets..................................................... Proceeds from sale of tangible fixed assets....................................... Purchases of intangible fixed assets................................................... Proceeds from sale of intangible fixed assets.................................... Purchases of stocks of subsidiaries resulting from their merger........ Proceeds from acquisition of business............................................... Purchases of stocks of subsidiaries resulting in change in scope of consolidation..................................................................................... Proceeds from sale of stocks of subsidiaries resulting in change in scope of consolidation...................................................................... Net cash provided by (used in) investing activities.................................. Cash flows from financing activities: Proceeds from issuance of subordinated borrowings........................ Redemption of subordinated borrowings........................................... Proceeds from issuance of subordinated bonds and bonds with stock acquisition rights..................................................................... Repayment of subordinated bonds and bonds with stock acquisition rights............................................................................... Dividends paid.................................................................................... Repayments to non-controlling stockholders..................................... Dividends paid to non-controlling stockholders................................. Purchases of treasury stock................................................................ Proceeds from disposal of treasury stock........................................... Purchase of stocks of subsidiaries not resulting in change in scope of consolidation................................................................................. Proceeds from sale of stocks of subsidiaries not resulting in change in scope of consolidation.................................................................. Net cash used in financing activities........................................................ Effect of exchange rate changes on cash and cash equivalents............. Net change in cash and cash equivalents................................................ Cash and cash equivalents at the beginning of the fiscal year................ Increase in cash and cash equivalents resulting from inclusion of subsidiaries in consolidation.................................................................. Decrease in cash and cash equivalents resulting from exclusion of subsidiaries from consolidation.............................................................. Cash and cash equivalents at the end of the fiscal year..........................

126 2016 Annual Report

¥(36,624,383) 27,845,192 7,854,257 (0) 3,523 (578,968) 188,309 (145,090) 28 — —

*1

¥(27,007,243) 22,537,031 7,992,771 (1) 1,925 (529,264) 147,995 (158,779) 223 (860) 2,251,106

$(239,809) 200,116 70,971 (0) 17 (4,700) 1,314 (1,410) 2 (8) 19,989

(58)

(652)

(6)

— (1,457,188)

6,698 5,240,950

59 46,537

40,011 (5,000)

18,000 (39,696)

160 (352)

326,350

577,142

5,125

(288,158) (170,917) (124,500) (79,752) (161) 17

(182,617) (211,952) (142,000) (74,891) (191) 54

(1,622) (1,882) (1,261) (665) (2) 0

(1,951)

(6)

(0)

1,473 (302,589) 177,706 6,658,153 26,993,164

162 (55,995) (99,579) 3,958,066 33,598,680

1 (497) (884) 35,145 298,337



59

1

— ¥ 37,556,806

— $ 333,483

(52,637) ¥ 33,598,680

*2

*1

SMFG

Notes to Consolidated Financial Statements Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

(Basis of presentation) Sumitomo Mitsui Financial Group, Inc. (“SMFG”) was established on December 2, 2002 as a holding company for the SMFG group through a statutory share transfer (kabushiki iten) of all of the outstanding equity securities of Sumitomo Mitsui Banking Corporation (“SMBC”) in exchange for SMFG’s newly issued securities. SMFG is a joint stock corporation with limited liability (Kabushiki Kaisha) incorporated under the Companies Act of Japan. Upon formation of SMFG and completion of the statutory share transfer, SMBC became a direct wholly owned subsidiary of SMFG. SMFG has prepared the accompanying consolidated financial statements in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards (“IFRS”). The accounts of overseas subsidiaries and affiliated companies, are, in principle, integrated with those of SMFG’s accounting policies for purposes of consolidation unless they apply different accounting principles and standards as required under U.S. GAAP or IFRS, in which case a certain limited number of items are adjusted based on their materiality. These consolidated financial statements are translated from the consolidated financial statements contained in the annual securities report filed under the Financial Instrument and Exchange Act of Japan (“FIEA based financial statements”) except for the addition of the nonconsolidated financial statements and US dollar figures. Amounts less than 1 million yen have been rounded down. As a result, the totals in Japanese yen shown in the financial statements do not necessarily agree with the sum of the individual amounts. The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers outside Japan, using the prevailing exchange rate at March 31, 2016 which was ¥112.62 to US$1. These translations should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at that rate.

2016 Annual Report

127

SMFG

Notes to Consolidated Financial Statements

As of and for the years ended March 31, 2015 and 2016

(Significant accounting policies for preparing consolidated financial statements) 1. Scope of consolidation (1) Consolidated subsidiaries The number of consolidated subsidiaries at March 31, 2016 is 341. Principal companies: Sumitomo Mitsui Banking Corporation (“SMBC”) SMBC Trust Bank Ltd. (“SMBC Trust”) Sumitomo Mitsui Finance and Leasing Company, Limited (“SMFL”) SMBC Nikko Securities Inc. (“SMBC Nikko”) SMBC Friend Securities Co., Ltd. (“SMBC Friend”) Sumitomo Mitsui Card Company, Limited (“SMCC”) Cedyna Financial Corporation (“Cedyna”) SMBC Consumer Finance Co., Ltd. (“SMBCCF”) The Japan Research Institute, Limited THE MINATO BANK, LTD. (“MINATO”) Kansai Urban Banking Corporation (“KUBC”) Sumitomo Mitsui Banking Corporation Europe Limited Sumitomo Mitsui Banking Corporation (China) Limited SMBC Guarantee Co., Ltd. SMBC Capital Markets, Inc. Changes in the consolidated subsidiaries in the fiscal year ended March 31, 2016 are as follows: 54 companies were newly included in the scope of consolidation as a result of the establishment and for other reasons. 30 companies were excluded from the scope of consolidation because of liquidation and for other reasons. (2) Unconsolidated subsidiaries Principal company: SBCS Co., Ltd. 180 unconsolidated subsidiaries are operators of silent partnerships for lease transactions and their assets and profits/losses do not belong to them substantially. Therefore, they have been excluded from the scope of consolidation pursuant to Article 5 Paragraph 1 Item 2 of Ordinance on Terminology, Forms and Preparation Methods of Consolidated Financial Statements. Other unconsolidated subsidiaries are also excluded from the scope of consolidation because their total amounts in terms of total assets, ordinary income, net income and retained earnings are immaterial, as such, they do not hinder a rational judgment of SMFG’s financial position and results of operations when excluded from the scope of consolidation. 2. Application of the equity method (1) Unconsolidated subsidiaries accounted for by the equity method The number of unconsolidated subsidiaries accounted for by the equity method at March 31, 2016 is 5. Principal company: SBCS Co., Ltd. (2) Affiliates accounted for by the equity method 54 companies Principal companies: PT Bank Tabungan Pensiunan Nasional Tbk. Sumitomo Mitsui Auto Service Company, Limited Daiwa SB Investments Ltd. Changes in the equity method affiliates in the fiscal year ended March 31, 2016 are as follows: ACLEDA Bank Plc. and other 9 companies newly became equity method affiliates due to the acquisition of stocks and for other reasons. 1 company was excluded from the scope of equity method because of liquidation.

128 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

(3) Unconsolidated subsidiaries that are not accounted for by the equity method 180 unconsolidated subsidiaries that are not accounted for by the equity method are operators of silent partnerships for lease transactions and their assets and profits/losses do not belong to them substantially. Therefore, they have not been accounted for by the equity method pursuant to Article 10 Paragraph 1 Item 2 of Ordinance on Terminology, Forms and Preparation Methods of Consolidated Financial Statements. (4) Affiliates that are not accounted for by the equity method Principal company: Daiwa SB Investments (USA) Ltd. Affiliates that are not accounted for by the equity method are also excluded from the scope of equity method because their total amounts in terms of net income and retained earnings are immaterial, and as such, they do not hinder a rational judgment of SMFG’s financial position and results of operations when excluded from the scope of equity method. 3. The balance sheet dates of consolidated subsidiaries (1) The balance sheet dates of the consolidated subsidiaries at March 31, 2016 are as follows: April 30.................................. 1 May 31................................... 1 June 30................................... 6 October 31.............................. 3 November 30.......................... 6 December 31........................... 144 January 31.............................. 14 February 29............................. 6 March 31................................ 160 (2) The subsidiaries with balance sheets dated April 30, May 31, June 30 and November 30 are consolidated using the financial statements as of March 31. The subsidiaries with balance sheets dated October 31 are consolidated using the financial statements as of January 31. Certain subsidiaries with balance sheets dated December 31 and January 31 are consolidated using the financial statements as of March 31. Other subsidiaries are consolidated using the financial statements as of their respective balance sheet dates. Appropriate adjustments were made to material transactions during the periods between their respective balance sheet dates and the consolidated closing date. 4. Accounting policies (1) Standards for recognition and measurement of trading assets/liabilities and trading income/losses Transactions for trading purposes (seeking gains arising from short-term changes in interest rates, currency exchange rates, or market prices of securities and other market related indices or from variation among markets) are included in “Trading assets” or “Trading liabilities” on the consolidated balance sheets on a trade date basis. Profits and losses on trading-purpose transactions are recognized on a trade date basis, and recorded as “Trading income” and “Trading losses.” Securities and monetary claims purchased for trading purposes are stated at the fiscal year-end market value, and financial derivatives such as swaps, futures and options are stated at amounts that would be settled if the transactions were terminated at the consolidated balance sheet date. “Trading income” and “Trading losses” include interest received or paid during the fiscal year. The year-on-year valuation differences of securities and monetary claims are also recorded in the above-mentioned accounts. As for the derivatives, assuming that the settlement will be made in cash, the year-on-year valuation differences are also recorded in the above-mentioned accounts. (2) Standards for recognition and measurement of securities 1) Debt securities that consolidated subsidiaries have the positive intent and ability to hold to maturity are classified as held-tomaturity securities and are carried at amortized cost (straight-line method) using the moving-average method. Investments in unconsolidated subsidiaries and affiliates that are not accounted for by the equity method are carried at cost using the movingaverage method. Securities other than trading purpose securities, held-to-maturity securities and investments in unconsolidated subsidiaries and affiliates are classified as “Other securities” (available-for-sale securities). Stocks (including foreign stocks) in Other securities are carried at their average market prices during the final month of the fiscal year, and bonds and others are carried at their fiscal year-end market prices (cost of securities sold is calculated using primarily the moving-average method). Other securities which are extremely difficult to determine fair value are carried at cost using the moving-average method. Net unrealized gains (losses) on other securities, net of income taxes, are included in “Net assets,” after deducting the amount that is reflected in the fiscal year’s earnings by applying fair value hedge accounting. 2) Securities included in “Money held in trust” are carried in the same method as in (1) and (2) 1) above. (3) Standards for recognition and measurement of derivative transactions Derivative transactions, excluding those classified as trading derivatives, are carried at fair value.

2016 Annual Report

129

SMFG

Notes to Consolidated Financial Statements

(4) Depreciation 1) Tangible fixed assets (excluding assets for rent and lease assets) Buildings owned by SMFG and SMBC are depreciated using the straight-line method. Others are depreciated using the decliningbalance method. The estimated useful lives of major items are as follows: Buildings: 7 to 50 years Others: 2 to 20 years Other consolidated subsidiaries depreciate tangible fixed assets primarily using the straight-line method over the estimated useful lives of the respective assets. 2) Intangible fixed assets Intangible fixed assets are depreciated using the straight-line method. Capitalized software for internal use owned by SMFG and its consolidated domestic subsidiaries is depreciated over its estimated useful life (basically 5 years). 3) Assets for rent Assets for rent are depreciated using the straight-line method, assuming that lease terms are, in principle, their depreciation period and the salvage is estimated disposal value when the lease period expires. 4) Lease assets Lease assets with respect to non-transfer ownership finance leases, which are recorded in “Tangible fixed assets,” are depreciated using the straight-line method, assuming that lease terms are their expected lifetime and salvage values are zero. (5) Reserve for possible loan losses The reserve for possible loan losses of major consolidated subsidiaries is provided as detailed below in accordance with the internal standards for write-offs and provisions. For claims on borrowers that have entered into bankruptcy, special liquidation proceedings or similar legal proceedings (“bankrupt borrowers”) or borrowers that are not legally or formally insolvent but are regarded as substantially in the same situation (“effectively bankrupt borrowers”), a reserve is provided based on the amount of claims, after the write-off stated below, net of the expected amount of recoveries from collateral and guarantees. For claims on borrowers that are not currently bankrupt but are perceived to have a high risk of falling into bankruptcy (“potentially bankrupt borrowers”), a reserve is provided in the amount deemed necessary based on an overall solvency assessment of the borrowers, net of the expected amount of recoveries from collateral and guarantees. Discounted Cash Flows (“DCF”) method is used for claims on borrowers whose cash flows from collection of principals and interest can be rationally estimated and SMBC applies it to claims on large potentially bankrupt borrowers and claims on large borrowers requiring close monitoring that have been classified as “Past due loans (3 months or more)” or “Restructured loans,” whose total loans from SMBC exceed a certain amount. SMBC establishes a reserve for possible loan losses using the DCF method for such claims in the amount of the difference between the present value of principal and interest (calculated using the rationally estimated cash flows discounted at the initial contractual interest rate) and the book value. For other claims, a reserve is provided based on the historical loan-loss ratio. For claims originated in specific overseas countries, an additional reserve is provided in the amount deemed necessary based on the assessment of political and economic conditions. Branches and credit supervision departments assess all claims in accordance with the internal rules for self-assessment of assets, and the Credit Review Department, independent from these operating sections, audits their assessment. The reserve for possible loan losses of SMFG and other consolidated subsidiaries for general claims is provided in the amount deemed necessary based on the historical loan-loss ratios, and for doubtful claims in the amount deemed uncollectible based on assessment of each claim. For collateralized or guaranteed claims on bankrupt borrowers and effectively bankrupt borrowers, the amount exceeding the estimated value of collateral and guarantees is deemed to be uncollectible and written off against the total outstanding amount of the claims. The amount of write-off for the years ended March 31, 2015 and 2016 were ¥363,585 million and ¥301,983 million, respectively. (6) Reserve for employee bonuses The reserve for employee bonuses is provided for payment of bonuses to employees, in the amount of estimated bonuses, which are attributable to the fiscal year. (7) Reserve for executive bonuses The reserve for executive bonuses is provided for payment of bonuses to executives, in the amount of estimated bonuses, which are attributable to the fiscal year. (8) Reserve for executive retirement benefits The reserve for executive retirement benefits is provided for payment of retirement benefits to directors, corporate auditors and other executive officers, in the amount deemed accrued at the fiscal year-end based on our internal regulations. (9) Reserve for point service program The reserve for point service program is provided for the potential future redemption of points awarded to customers under the “SMBC Point Pack,” credit card points programs, and other customer points award programs. The amount is calculated by converting the outstanding points into a monetary amount, and rationally estimating and recognizing the amount that will be redeemed in the future.

130 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

(10) Reserve for reimbursement of deposits The reserve for reimbursement of deposits which were derecognized as liabilities under certain conditions is provided for the possible losses on the future claims of withdrawal based on the historical reimbursements. (11) Reserve for losses on interest repayment The reserve for losses on interest repayment is provided for the possible losses on future claims of repayment of interest based on historical interest repayment experience. (12) Reserve under the special laws The reserve under the special laws is a reserve for contingent liabilities and provided for compensation for losses from securities related transactions or derivative transactions, pursuant to Article 46-5 of the Financial Instruments and Exchange Act. (13) Employee retirement benefits In calculating the projected benefit obligation, mainly the benefit formula basis is used to calculate the expected benefit attributable to the respective fiscal year. Unrecognized prior service cost is amortized on a straight-line basis, primarily over 9 years within the employees’ average remaining service period at incurrence. Unrecognized net actuarial gain (loss) is amortized on a straight-line basis, primarily over 9 years within the employees’ average remaining service period, commencing from the next fiscal year of incurrence. (14) Translation of foreign currency assets and liabilities Assets and liabilities of SMFG and SMBC denominated in foreign currencies and accounts of SMBC overseas branches are translated into Japanese yen mainly at the exchange rate prevailing at the consolidated balance sheet date, with the exception of stocks of subsidiaries and affiliates translated at rates prevailing at the time of acquisition. Other consolidated subsidiaries’ assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate prevailing at their respective balance sheet dates. (15) Lease transactions 1) Recognition of income on finance leases Interest income is allocated to each period. 2) Recognition of income on operating leases Primarily, lease-related income is recognized on a straight-line basis over the full term of the lease, based on the contractual amount of lease fees per month. 3) Recognition of income and expenses on installment sales Primarily, installment-sales-related income and installment-sales-related expenses are recognized on a due-date basis over the full period of the installment sales. (16) Hedge accounting 1) Hedging against interest rate changes As for the hedge accounting method applied to hedging transactions for interest rate risk arising from financial assets and liabilities, SMBC applies deferred hedge accounting. SMBC applies deferred hedge accounting stipulated in “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (JICPA Industry Audit Committee Report No. 24, February 13, 2002) to portfolio hedges on groups of large-volume, small-value monetary claims and debts. As for the portfolio hedges to offset market fluctuation, SMBC assesses the effectiveness of such hedges by classifying the hedged items (such as deposits and loans) and the hedging instruments (such as interest rate swaps) by their maturity. As for the portfolio hedges to fix cash flows, SMBC assesses the effectiveness of such hedges by verifying the correlation between the hedged items and the hedging instruments. As for the individual hedges, SMBC also assesses the effectiveness of such individual hedges. 2) Hedging against currency fluctuations SMBC applies deferred hedge accounting stipulated in “Treatment of Accounting and Auditing Concerning Accounting for Foreign Currency Transactions in Banking Industry” (JICPA Industry Audit Committee Report No. 25, July 29, 2002) to currency swap and foreign exchange swap transactions executed for the purpose of lending or borrowing funds in different currencies. Pursuant to JICPA Industry Audit Committee Report No. 25, SMBC assesses the effectiveness of currency swap and foreign exchange swap transactions executed for the purpose of offsetting the risk of changes in currency exchange rates by verifying that there are foreign-currency monetary claims and debts corresponding to the foreign-currency positions. In order to hedge risk arising from volatility of exchange rates for stocks of subsidiaries and affiliates and other securities (excluding bonds) denominated in foreign currencies, SMBC applies deferred hedge accounting or fair value hedge accounting, on the conditions that the hedged securities are designated in advance and that sufficient on-balance (actual) or off-balance (forward) liability exposure exists to cover the cost of the hedged securities denominated in the same foreign currencies. 3) Hedging against share price fluctuations SMBC applies fair value hedge accounting to individual hedges offsetting the price fluctuation of the shares that are classified under Other securities, and accordingly evaluates the effectiveness of such individual hedges.

2016 Annual Report

131

SMFG

Notes to Consolidated Financial Statements

4) Transactions between consolidated subsidiaries As for derivative transactions between consolidated subsidiaries or internal transactions between trading accounts and other accounts (or among internal sections), SMBC manages the interest rate swaps and currency swaps that are designated as hedging instruments in accordance with the non-arbitrary and strict criteria for external transactions stipulated in JICPA Industry Audit Committee Report No. 24 and No. 25. Therefore, SMBC accounts for the gains or losses that arise from interest rate swaps and currency swaps in its earnings or defers them, rather than eliminating them. Certain other consolidated subsidiaries apply the deferred hedge accounting, fair value hedge accounting or the special treatment for interest rate swaps. (17) Amortization of goodwill Goodwill is amortized using the straight-line method over a period in which its benefit is expected to be realized, not to exceed 20 years. Immaterial goodwill is charged or credited to income directly when incurred. (18) Scope of “Cash and cash equivalents” on consolidated statements of cash flows For the purposes of presenting the consolidated statements of cash flows, “Cash and cash equivalents” are cash on hand, non-interest earning deposits with banks and deposits with the Bank of Japan. (19) Consumption taxes National and local consumption taxes of SMFG and its consolidated domestic subsidiaries are accounted for using the tax-excluded method.

(Unapplied Accounting Standard and Others) “Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26 issued on March 28, 2016) (1) Outline The Guidance supersedes the guidance on recoverability of deferred tax assets stipulated in “Auditing Treatment for Judgment of Recoverability of Deferred Assets” (JICPA Industry Committee Report No. 66). (2) Date of application SMFG intends to apply the Guidance from the fiscal years beginning on April 1, 2016. (3) Effects of Application of the Guidance The effects of application of the Guidance are currently being examined.

(Changes in presentation) In accordance with the provision set forth in Paragraph 39 of the “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, issued on September 13, 2013) and other relevant provisions, changes are made to the presentation of “Net income” and other relevant items, and “Minority interests” is changed to “Non-controlling interests” from the fiscal year ended March 31, 2016. Figures for the fiscal year ended March 31, 2015 in the consolidated financial statements reflect these changes.

(Additional information) Effect of a change in the corporate income tax rule In accordance with the “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 15, 2016) and the “Act to Amend the Local Taxation Act, etc.” (Act No. 13, 2016) promulgated on March 29, 2016, the corporate income tax rate will be lowered from fiscal years beginning on or after April 1, 2016. Additionally, beginning from fiscal years starting on or after April 1, 2016, the use of tax loss carryforwards will be limited to the equivalent of 60% of taxable income before deducting tax loss carryforwards, and beginning from fiscal years starting on or after April 1, 2017, the use of tax loss carryforwards will be limited to the equivalent of 55% of taxable income before deducting tax loss carryforwards. As a result of these changes, profit attributable to owners of parent decreased by ¥12,094 million and total accumulated other comprehensive income increased by ¥30,164 million.

132 2016 Annual Report

SMFG

Notes to Consolidated Financial Statements

(Notes to consolidated balance sheets) *1 Japanese stocks and investments in unconsolidated subsidiaries and affiliates Japanese stocks and investments in unconsolidated subsidiaries and affiliates at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Japanese stocks.................................................................................................................. Investments.......................................................................................................................

2015 ¥583,382 336

2016 ¥609,830 592

Japanese stocks of jointly controlled entities were as follows: Millions of yen March 31

Japanese stocks of jointly controlled entities......................................................................

2015 ¥100,102

2016 ¥104,779

*2 Unsecured loaned securities for which borrowers have the right to sell or pledge The amount of unsecured loaned securities for which borrowers have the right to sell or pledge at March 31, 2015 and 2016 were as follows: March 31, 2015

Japanese government bonds and other securities in “Securities”...........................................................

Millions of yen

March 31, 2016

Millions of yen

Japanese government bonds in “Securities”................

¥900

¥1,540

As for the unsecured borrowed securities, securities under resale agreements and securities borrowed with cash collateral with rights to sell or pledge without restrictions, those securities pledged and those securities held without being disposed at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Securities pledged.............................................................................................................. Securities held without being disposed..............................................................................

2015 ¥3,181,553 3,087,292

2016 ¥5,245,608 3,152,831

*3 Bankrupt loans and non-accrual loans Bankrupt loans and non-accrual loans at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Bankrupt loans.................................................................................................................. Non-accrual loans..............................................................................................................

2015 ¥ 35,861 774,058

2016 ¥ 44,748 594,077

“Bankrupt loans” are loans, after write-off, to legally bankrupt borrowers as defined in Article 96-1-3 and 96-1-4 of “Order for Enforcement of the Corporation Tax Act” (Cabinet Order No. 97 of 1965) and on which accrued interest income is not recognized as there is substantial doubt about the ultimate collectability of either principal or interest because they are past due for a considerable period of time or for other reasons. “Non-accrual loans” are loans on which accrued interest income is not recognized, excluding “Bankrupt loans” and loans on which interest payments are deferred in order to support the borrowers’ recovery from financial difficulties. *4 Past due loans (3 months or more) Past due loans (3 months or more) at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Past due loans (3 months or more).....................................................................................

2015 ¥13,714

2016 ¥19,845

“Past due loans (3 months or more)” are loans on which the principal or interest payment is past due for 3 months or more, excluding “Bankrupt loans” and “Non-accrual loans.” *5 Restructured loans Restructured loans at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Restructured loans.............................................................................................................

2015 ¥278,622

2016 ¥266,698

“Restructured loans” are loans on which terms and conditions have been amended in favor of the borrowers (e.g. reduction of the original interest rate, deferral of interest payments, extension of principal repayments or debt forgiveness) in order to support the borrowers’ recovery from financial difficulties, excluding “Bankrupt loans,” “Non-accrual loans” and “Past due loans (3 months or more).” 2016 Annual Report

133

SMFG

Notes to Consolidated Financial Statements

*6 Risk-monitored loans The total amount of bankrupt loans, non-accrual loans, past due loans (3 months or more) and restructured loans at March 31 , 2015 and 2016 were as follows: Millions of yen March 31

Risk-monitored loans........................................................................................................

2015 ¥1,102,256

2016 ¥925,370

The amounts of loans presented in Notes *3 to *6 above are the amounts before deduction of reserve for possible loan losses. *7 Bills discounted Bills discounted are accounted for as financial transactions in accordance with the “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (JICPA Industry Audit Committee Report No. 24, February 13, 2002). SMBC and its banking subsidiaries have rights to sell or pledge bank acceptance bought, commercial bills discounted, documentary bills and foreign exchanges bought without restrictions, etc. The total face value at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Bills discounted.................................................................................................................

2015 ¥950,790

2016 ¥820,990

*8 Assets pledged as collateral Assets pledged as collateral at March 31, 2015 and 2016 consisted of the following: March 31, 2015

Millions of yen

Assets pledged as collateral: Cash and due from banks.......................................... ¥61,093 Call loans and bills bought................................... 478,457 Monetary claims bought....................................... 75,556 Trading assets....................................................... 1,712,885 Securities.............................................................. 10,445,190 Loans and bills discounted.................................... 2,803,237 Lease receivables and investment assets................. 3,163 Tangible fixed assets............................................. 9,969 Other assets (installment account receivable, etc.).................................................................... 172 Liabilities corresponding to assets pledged as collateral: Deposits............................................................... 33,800 Call money and bills sold...................................... 1,095,000 Payables under repurchase agreements.................. 406,212 Payables under securities lending transactions...... 4,121,603 Trading liabilities................................................. 480,464 Borrowed money.................................................. 6,099,726 Other liabilities.................................................... 35,952 Acceptances and guarantees.................................. 207,009

March 31, 2016

Millions of yen

Assets pledged as collateral: Cash and due from banks.......................................... ¥   75,954 Call loans and bills bought................................... 433,224 Monetary claims bought....................................... 49,961 Trading assets....................................................... 2,531,750 Securities.............................................................. 5,560,230 Loans and bills discounted.................................... 2,609,736 Lease receivables and investment assets................. 2,467 Tangible fixed assets............................................. 9,557 Other assets (installment account receivable, etc.).................................................................... 135 Liabilities corresponding to assets pledged as collateral: Deposits............................................................... 39,403 Payables under repurchase agreements.................. 448,908 Payables under securities lending transactions...... 3,307,827 Trading liabilities................................................. 430,159 Borrowed money.................................................. 4,922,927 Other liabilities.................................................... 28,710 Acceptances and guarantees.................................. 194,035

In addition to the assets presented above, the following assets were pledged as collateral for cash settlements, and substitution for margins of futures transactions and certain other purposes at March 31, 2015 and 2016: March 31, 2015

Millions of yen

Cash and due from banks........................................... ¥   13,580 Trading assets............................................................ 2,271 Securities................................................................... 6,067,851

134 2016 Annual Report

March 31, 2016

Millions of yen

Cash and due from banks........................................... ¥   12,731 Trading assets............................................................ 13,026 Securities................................................................... 6,284,022

Notes to Consolidated Financial Statements

SMFG

Other assets include collateral money deposited for financial instruments, surety deposits, margin of futures markets and other margins. The amounts for such assets were as follows: March 31, 2015

Collateral money deposited for financial instruments..... Surety deposits.......................................................... Margins of futures markets........................................ Other margins...........................................................

Millions of yen

¥410,317 119,525 63,433 27,819

March 31, 2016

Millions of yen

Collateral money deposited for financial instruments..... Surety deposits.......................................................... Margins of futures markets........................................ Other margins...........................................................

¥873,964 114,976 47,015 35,058

*9 Commitment line contracts on overdrafts and loans Commitment line contracts on overdrafts and loans are agreements to lend to customers, up to a prescribed amount, as long as there is no violation of any condition established in the contracts. The amounts of unused commitments at March 31, 2015 and 2016 were as follows: Millions of yen March 31

The amounts of unused commitments............................................................................... The amounts of unused commitments whose original contract terms are within 1 year or unconditionally cancelable at any time............................................................................

2015 ¥53,473,427

2016 ¥57,798,996

40,386,315

42,315,486

Since many of these commitments are expected to expire without being drawn upon, the total amount of unused commitments does not necessarily represent actual future cash flow requirements. Many of these commitments include clauses under which SMBC and other consolidated subsidiaries can reject an application from customers or reduce the contract amounts in the event that economic conditions change, SMBC and other consolidated subsidiaries need to secure claims, or other events occur. In addition, SMBC and other consolidated subsidiaries may request the customers to pledge collateral such as premises and securities at the time of the contracts, and take necessary measures such as monitoring customers’ financial positions, revising contracts when such need arises and securing claims after the contracts are made. *10 Land revaluation excess SMBC and other consolidated subsidiaries revalued their own land for business activities in accordance with “Act on Revaluation of Land” (the “Act”) (Act No. 34, effective March 31, 1998) and “Act for Partial Revision of Act on Revaluation of Land” (Act No. 19, effective March 31, 2001). The income taxes corresponding to the net unrealized gains are reported in “Liabilities” as “Deferred tax liabilities for land revaluation excess,” and SMFG’s share of the net unrealized gains, net of deferred taxes, are reported as “Land revaluation excess” in “Net assets.” Certain affiliates also revalued its own land for business activities in accordance with the Act. SMFG’s share of the net unrealized gains, net of deferred taxes, are reported as “Land revaluation excess” in “Net assets.” Date of the revaluation SMBC: March 31, 1998 and March 31, 2002 Other consolidated subsidiaries and affiliates: March 31, 1999 and March 31, 2002 Method of revaluation (stipulated in Article 3-3 of the Act) SMBC: Fair values were determined by applying appropriate adjustments for land shape and timing of appraisal to the values stipulated in Article 2-3, 2-4 or 2-5 of “Order for Enforcement of Act on Revaluation of Land” (Cabinet Order No. 119 effective March 31, 1998). Other consolidated subsidiaries and affiliates: Fair values were determined based on the values stipulated in Article 2-3 and 2-5 of “Order for Enforcement of Act on Revaluation of Land” (Cabinet Order No. 119 effective March 31, 1998). *11 Accumulated depreciation on tangible fixed assets Accumulated depreciation on tangible fixed assets at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Accumulated depreciation.................................................................................................

2015 ¥944,545

2016 ¥977,479

2016 Annual Report

135

SMFG

Notes to Consolidated Financial Statements

*12 Deferred gain on tangible fixed assets deductible for tax purposes Deferred gain on tangible fixed assets deductible for tax purposes at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Deferred gain on tangible fixed assets deductible for tax purposes...................................... [The consolidated fiscal year concerned]........................................................................

2015 ¥62,704 [145]

2016 ¥62,665 [—]

*13 Subordinated borrowings The balance of subordinated borrowings with the special clause specifying that the repayment order of the borrowing subordinate to other borrowings included in “Borrowed money” at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Subordinated borrowings...................................................................................................

2015 ¥317,461

2016 ¥295,199

*14 Subordinated bonds The balance of subordinated bonds included in “Bonds” at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Subordinated bonds...........................................................................................................

2015 ¥1,777,502

2016 ¥2,142,286

*15 Guaranteed amount to privately-placed bonds The amount guaranteed by SMBC and its banking subsidiaries to privately-placed bonds (stipulated by Article 2-3 of the Financial Instruments and Exchange Act) in “Securities” at March 31, 2015 and 2016 were as follows: Millions of yen March 31

Guaranteed amount to privately-placed bonds...................................................................

136 2016 Annual Report

2015 ¥2,030,463

2016 ¥2,004,096

Notes to Consolidated Financial Statements

SMFG

(Notes to consolidated statements of income) *1 Other income “Other” in “Other income” for the fiscal years ended March 31, 2015 and 2016 included the following: Year ended March 31, 2015

Gains on sales of stocks..............................................

Millions of yen

¥83,503

Year ended March 31, 2016

Millions of yen

Gains on sales of stocks..............................................

¥100,302

*2 General and administrative expenses “General and administrative expenses” for the fiscal years ended March 31, 2015 and 2016 included the following: Year ended March 31, 2015

Salaries and related expenses...................................... Research and development costs................................

Millions of yen

¥610,998 171

Year ended March 31, 2016

Millions of yen

Salaries and related expenses...................................... Research and development costs................................

¥626,149 207

*3 Other expenses “Other expenses” for the fiscal years ended March 31, 2015 and 2016 included the following: Year ended March 31, 2015

Provision for reserve for losses on interest repayment............................................................... Write-off of loans......................................................

Millions of yen

¥64,836 76,997

Year ended March 31, 2016

Millions of yen

Provision for reserve for losses on interest repayment............................................................... Write-off of loans...................................................... Equity in losses of affiliates........................................

¥140,264 74,180 36,196

2016 Annual Report

137

SMFG

Notes to Consolidated Financial Statements

*4 Losses on impairment of fixed assets The differences between the recoverable amounts and the book value of the following asset is recognized as “Losses on impairment of fixed assets,” and included in “Extraordinary losses” for the fiscal year ended March 31, 2015 and 2016. Year ended March 31, 2015 Area

Purpose of use

Tokyo metropolitan area................................Branches (3 items) Idle assets (36 items) Other (1 item) Kinki area.....................................................Branches (4 items) Corporate assets (2 items) Idle assets (29 items) Other............................................................Corporate asset (1 item) Idle assets (11 items) Year ended March 31, 2016 Area

Purpose of use

Tokyo metropolitan area................................Branches (3 items) Idle assets (26 items) Other (1 item) Kinki area.....................................................Branches (14 items) Corporate asset (1 item) Idle assets (24 items) Other............................................................Branches (1 item) Idle assets (11items) Others (4 items)

Type

Land and buildings, etc.

Land and buildings, etc.

Land and buildings, etc.

Type

Land and buildings, etc.

Land and buildings, etc.

Land and buildings, etc.

Millions of yen Impairment loss

¥   77 3,019 0 137 12 1,802 0 59 Millions of yen Impairment loss

¥   45 2,265 0 649 349 628 6 416 0

At SMBC, a branch, which continuously manages and determines its income and expenses, is the smallest unit of asset group for recognition and measurement of impairment loss of fixed assets. Assets such as corporate headquarters facilities, training facilities, data and system centers, and health and recreational facilities which do not produce cash flows that can be attributed to individual assets are treated as corporate assets. As for idle assets, impairment loss is measured individually. At SMFG and other consolidated subsidiaries, a branch or other group is the smallest asset grouping unit as well. The carrying amounts of idle assets at SMBC are reduced to their recoverable amounts, and the decreased amounts are included in “Extraordinary losses” as “Losses on impairment of fixed assets,” if there are indicators that the invested amounts may not be recoverable. And the carrying amounts of branches, corporate assets and idle assets at other consolidated subsidiaries are reduced in the same method as at SMBC. The recoverable amount is calculated using net realizable value which is basically determined by subtracting the expected disposal cost from the appraisal value based on the Real Estate Appraisal Standard.

138 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

(Notes to consolidated statements of comprehensive income) *1 Reclassification adjustment and tax effect of other comprehensive income Millions of yen Year ended March 31

Net unrealized gains (losses) on other securities: Amount arising during the fiscal year........................................................................... Reclassification adjustments......................................................................................... Before adjustments to tax effect............................................................................... Tax effect................................................................................................................. Net unrealized gains (losses) on other securities....................................................... Net deferred gains (losses) on hedges: Amount arising during the fiscal year........................................................................... Reclassification adjustments......................................................................................... Adjustment on the cost of the assets............................................................................. Before adjustments to tax effect............................................................................... Tax effect................................................................................................................. Net deferred gains (losses) on hedges....................................................................... Land revaluation excess: Amount arising during the fiscal year........................................................................... Reclassification adjustments......................................................................................... Before adjustments to tax effect............................................................................... Tax effect................................................................................................................. Land revaluation excess............................................................................................ Foreign currency translation adjustments: Amount arising during the fiscal year........................................................................... Reclassification adjustments......................................................................................... Before adjustments to tax effect............................................................................... Tax effect................................................................................................................. Foreign currency translation adjustments................................................................ Remeasurements of defined benefit plans: Amount arising during the fiscal year........................................................................... Reclassification adjustments......................................................................................... Before adjustments to tax effect............................................................................... Tax effect................................................................................................................. Remeasurements of defined benefit plans................................................................. Share of other comprehensive income of affiliates: Amount arising during the fiscal year........................................................................... Reclassification adjustments......................................................................................... Before adjustments to tax effect............................................................................... Tax effect................................................................................................................. Share of other comprehensive income of affiliates..................................................... Total other comprehensive income......................................................................

2015

2016

¥1,403,111 (215,162) 1,187,948 (323,451) 864,496

¥(467,311) (201,084) (668,396) 223,414 (444,981)

26,574 23,028 0 49,603 (20,144) 29,458

88,104 31,934 — 120,038 (37,486) 82,552

— — — 3,604 3,604

— — — 1,705 1,705

178,283 (2,443) 175,840 — 175,840

(84,007) (8,114) (92,121) — (92,121)

163,011 22,633 185,645 (63,093) 122,552

(206,195) 31,776 (174,418) 52,485 (121,933)

952 (1,410) (458) — (458) ¥1,195,494

(659) (1,357) (2,016) — (2,016) ¥(576,794)

2016 Annual Report

139

SMFG

Notes to Consolidated Financial Statements

(Notes to consolidated statements of changes in net assets) Fiscal year ended March 31, 2015 1. Type and number of shares issued and treasury stock Number of shares At the beginning of the fiscal year

Year ended March 31, 2015

Shares issued Common stock..................................... Total................................................ Treasury stock Common stock..................................... Total................................................

Increase

At the end of the fiscal year

Decrease

1,414,055,625 1,414,055,625

— —

— —

1,414,055,625 1,414,055,625

46,781,669 46,781,669

37,310 37,310

4,778 4,778

46,814,201 46,814,201

Notes

1,2

Notes: 1. Increase of 37,310 shares in the number of treasury common stock was due to purchases of fractional shares. 2. Decrease of 4,778 shares in the number of treasury common stock was due to sales of fractional shares and exercise of stock options.

2. Information on stock acquisition rights

Year ended March 31, 2015

Number of shares Millions of yen Type of At the beginning At the end of the At the end of the shares of the fiscal year Increase Decrease fiscal year fiscal year

Details of stock acquisition rights

Stock acquisition rights as stock options Consolidated subsidiaries....... — Total.................................

Notes

SMFG





— —





¥2,085 198 ¥2,284

3. Information on dividends (1) Dividends paid in the fiscal year

Date of resolution

Type of shares

Ordinary general meeting of shareholders held on June 27, 2014................................. Meeting of the Board of Directors held on November 13, 2014....................................

Cash dividends

Millions of yen, except per share amount Cash dividends per share Record date Effective date

Common stock

¥91,656

¥65

Common stock

84,604

60

March 31, 2014

June 27, 2014

September 30, 2014 December 3, 2014

(2) Dividends to be paid in the next fiscal year

Date of resolution

Type of shares

Ordinary general meeting of shareholders held on June 26, 2015.................................

Common stock

Cash dividends

Millions of yen, except per share amount Cash Source of dividends dividends per share Record date

¥112,804

Retained earnings

¥80

Effective date

March 31, 2015 June 26, 2015

Fiscal year ended March 31, 2016 1. Type and number of shares issued and treasury stock Number of shares Year ended March 31, 2016

Shares issued Common stock..................................... Total................................................ Treasury stock Common stock..................................... Total................................................

At the beginning of the fiscal year

Increase

At the end of the fiscal year

Decrease

1,414,055,625 1,414,055,625

— —

— —

1,414,055,625 1,414,055,625

46,814,201 46,814,201

39,113 39,113

22,432 22,432

46,830,882 46,830,882

Notes: 1. Increase of 39,113 shares in the number of treasury common stock was due to purchases of fractional shares. 2. Decrease of 22,432 shares in the number of treasury common stock was due to sales of fractional shares and exercise of stock options.

140 2016 Annual Report

Notes

1,2

Notes to Consolidated Financial Statements

SMFG

2. Information on stock acquisition rights Year ended March 31, 2016

Details of stock acquisition rights

Number of shares Millions of yen Type of At the beginning At the end of the At the end of the shares of the fiscal year Increase Decrease fiscal year fiscal year

Stock acquisition rights as stock options Consolidated subsidiaries....... — Total.................................

Notes

SMFG





— —





¥2,635 249 ¥2,884

3. Information on dividends (1) Dividends paid in the fiscal year

Date of resolution

Ordinary General Meeting of Shareholders held on June 26, 2015................................. Meeting of the Board of Directors held on November 12, 2015....................................

Type of shares

Cash dividends

Millions of yen, except per share amount Cash dividends per share Record date Effective date

Common stock

¥112,804

¥80

March 31, 2015

June 26, 2015

Common stock

105,753

75

September 30, 2015

December 3, 2015

(2) Dividends to be paid in the next fiscal year

Date of resolution

Ordinary general meeting of shareholders held on June 29, 2016.................................

Type of shares

Common stock

Cash dividends

Millions of yen, except per share amount Cash Source of dividends dividends per share Record date

Effective date

¥105,753

Retained earnings

June 29, 2016

¥75 March 31, 2016

(Notes to consolidated statements of cash flows) *1 The relation between the amounts of accounts listed on the consolidated financial statements and “Cash and cash equivalents” Millions of yen Year ended March 31

Cash and due from banks................................................................................................... Interest earning deposits with banks (excluding the deposit with the Bank of Japan)......... Cash and cash equivalents..................................................................................................

2015 ¥39,748,979 (6,150,298) ¥33,598,680

2016 ¥42,789,236 (5,232,430) ¥37,556,806

*2 The major components of increased assets and liabilities by succession The major components of increased assets and liabilities due to the integration of the retail banking business of Citibank Japan Ltd. by SMBC Trust and the relation between the acquisition cost of the acquired business and net gains from acquisition of business were as follow; Year ended March 31, 2016

Assets................................................................................................................................ Cash and due from banks.............................................................................................. Liabilities.......................................................................................................................... Deposits....................................................................................................................... Goodwill........................................................................................................................... Acquisition cost................................................................................................................. Cash and cash equivalents included in acquired asset......................................................... Proceeds from acquisition of business................................................................................

Millions of yen

¥ 2,407,085 2,296,106 (2,376,561) (2,361,907) 14,476 45,000 (2,296,106) ¥ 2,251,106

2016 Annual Report

141

SMFG

Notes to Consolidated Financial Statements

(Notes to lease transactions) 1. Finance leases (1) Lessee side 1) Lease assets (a) Tangible fixed assets Tangible fixed assets mainly consisted of branches and equipment. (b) Intangible fixed assets Intangible fixed assets are software. 2) Depreciation method of lease assets Depreciation method of lease assets is reported in 4. Accounting policies (4) Depreciation. (2) Lessor side 1) Breakdown of lease investment assets Millions of yen March 31

Lease receivables....................................................................................................... Residual value.......................................................................................................... Unearned interest income......................................................................................... Total.........................................................................................................................

2015 ¥1,187,853 107,078 (167,407) ¥1,127,525

2016 ¥1,239,009 120,223 (215,850) ¥1,143,383

2) The scheduled collections of lease payments receivable related to lease receivables and investment assets are as follows: Millions of yen

2015 March 31

Within 1 year............................... More than 1 year to 2 years........... More than 2 years to 3 years......... More than 3 years to 4 years......... More than 4 years to 5 years......... More than 5 years......................... Total.............................................

2016

Lease payments receivable Lease payments receivable Lease payments receivable related to investment Lease payments receivable related to investment related to lease receivables assets related to lease receivables assets

¥295,756 205,864 127,113 82,174 47,544 135,539 ¥893,993

¥  337,777 258,682 194,449 138,694 99,092 159,157 ¥1,187,853

¥297,221 209,762 149,792 91,901 65,764 145,560 ¥960,003

¥  320,674 253,931 198,762 143,147 93,905 228,588 ¥1,239,009

3) Non-transfer ownership finance leases, which commenced in fiscal years beginning before April 1, 2008, are valued at their appropriate book value, net of accumulated depreciation, as of March 31, 2008, and recorded as the beginning balance of “Lease receivables and investment assets.” Moreover, interest on such non-transfer ownership finance leases during the remaining term of the leases is allocated over the lease term using the straight-line method. As a result of this accounting treatment, “Income before income taxes” for the fiscal years ended March 31, 2015 and 2016 were ¥2,347 million and ¥1,759 million, respectively, more than it would have been if such transactions had been treated in a similar way to sales of the underlying assets. 2. Operating leases (1) Lessee side Future minimum lease payments on operating leases which were not cancelable were as follows: Millions of yen March 31

Due within 1 year.......................................................................................................... Due after 1 year............................................................................................................. Total..............................................................................................................................

2015 ¥ 44,637 239,659 ¥284,296

2016 ¥ 42,254 213,401 ¥255,656

(2) Lessor side Future minimum lease payments on operating leases which were not cancelable were as follows: Millions of yen March 31

Due within 1 year.......................................................................................................... Due after 1 year............................................................................................................. Total..............................................................................................................................

2015 ¥  165,897 1,027,007 ¥1,192,904

2016 ¥  186,113 1,218,850 ¥1,404,963

Future lease payments receivable on operating leases which were not cancelable at March 31, 2015 and 2016 amounting to ¥0 million and ¥0 million, respectively, on the lessor side were pledged as collateral for borrowings. 142 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

(Notes to financial instruments) 1. Status of financial instruments (1) Policies on financial instruments SMFG Group conducts banking and other financial services such as leasing, securities, consumer finance, system development and information processing. Its banking business includes deposit taking, lending, securities trading and investment, remittance and transfer, foreign exchange, bond subscription agent, trust business, and over-the-counter sales of securities investment trusts and insurance products. These services entail holding of financial assets such as loans and bills discounted, bonds, and stocks. Meanwhile, SMFG Group raises funds through deposit taking, borrowing, bond offering, etc. Furthermore, it undertakes derivative transactions to meet customers’ hedging needs, to control market risk associated with deposit taking and lending (“ALM purposes”), and to make profit on short-term fluctuations in interest rates, foreign exchange rates, etc. (“trading purposes”). At SMBC, SMFG’s major consolidated subsidiary, derivative transactions for ALM purposes are undertaken by the Treasury Dept. and the International Treasury Dept. of the Treasury Unit, while derivative transactions for trading purposes are undertaken by the Trading Dept. of the Treasury Unit (in Asia and Oceania regions, the Asia and Oceania Treasury Dept. is responsible for derivative transactions for both ALM and trading purposes). (2) Details of financial instruments and associated risks 1) Financial assets The main financial assets held by SMFG Group include loans to foreign and domestic companies and domestic individuals, and securities such as bonds (government and corporate bonds) and stocks (foreign and domestic stocks), etc. Bonds such as government bonds are held for both trading and ALM purposes, and certain bonds are held as held-to-maturity securities. Stocks are held mainly for strategic purposes. These assets expose SMFG to credit risk, market risk and liquidity risk. Credit risk is the risk of loss arising from nonperformance of obligations by the borrower or issuer due to factors such as deterioration in the borrower’s/issuer’s financial conditions. Market risk is the risk stemming from fluctuations in interest rates, exchange rates, or share prices. Liquidity risk is the risk arising from difficulty executing transactions in desired quantities at appropriate prices due to low market liquidity. These risks are properly monitored and managed based on “(3) Risk management framework for financial instruments” below. 2) Financial liabilities Financial liabilities of SMFG Group include borrowed money and bonds, etc. in addition to deposits. Deposits mainly comprise deposits of domestic and foreign companies and domestic individuals. Borrowed money and bonds include subordinated borrowings and subordinated bonds. Also, financial liabilities, like financial assets, expose SMFG to not only market risk but also funding liquidity risk: the risk of SMFG not being able to raise funds due to market turmoil, deterioration in its creditworthiness or other factors. These risks are properly monitored and managed based on “(3) Risk management framework for financial instruments” below. 3) Derivative transactions Derivatives handled by SMFG Group include foreign exchange futures; futures, forwards, swaps and options related to interest rates, currencies, equities, bonds and commodities; and credit and weather derivatives. Major risks associated with derivatives include market risk, liquidity risk, and credit risk arising from nonperformance of contractual obligations due to deterioration in the counterparty’s financial conditions. These risks are properly monitored and managed based on “(3) Risk management framework for financial instruments” below. Hedge accounting is applied to derivative transactions executed for ALM purposes, as necessary. Hedging instruments, hedged items, hedging policy and hedging method to assess the effectiveness of the hedge are described in “(Notes to significant accounting policies for preparing consolidated financial statements), 4. Accounting policies, (16) Hedge accounting.” (3) Risk management framework for financial instruments The fundamental matters on risk management for the entire Group are set forth in “Regulations on Risk Management.” SMFG’s Management Committee establishes the basic risk management policy for the entire Group, based on the Regulations, which is then approved by the Board of Directors. SMFG Group has a risk management system based on the basic policy. The Corporate Risk Management Dept., which, together with the Corporate Planning Dept., controls risk management across SMFG Group by monitors the development and implementation of SMFG Group’s risk management system, and gives appropriate guidance as needed. Under this framework, SMFG comprehensively and systematically manages risks on a Group basis. 1) Management of credit risk SMFG has established fundamental principles on credit risk management to thoroughly manage the credit risk of the entire Group. Each group company conducts integrated management of credit risk according to its operational characteristics, and the credit risk inherent in the entire portfolio as well as the risk in individual credits are managed quantitatively and continuously. (a) Credit risk management system At SMBC, SMFG’s major consolidated subsidiary, basic policies on credit risk management and other significant matters require the resolution of Management Committee and the approval of Board of Directors. The Credit & Investment Planning Dept. of the Risk Management Unit is responsible for the comprehensive management of credit risk. This department establishes, revises or abolishes credit policies, the internal rating system, credit authority regulations, credit application regulations, and manages non-performing loans and other aspects of credit portfolio management. The department also controls SMBC’s total credit risk by quantifying credit risk (i.e. calculating risk capital and risk-weighted assets) in cooperation with the Corporate Risk Management Dept. The department also monitors risk situations and regularly 2016 Annual Report

143

SMFG

Notes to Consolidated Financial Statements

reports to the Management Committee and the Board of Directors. Moreover, the Credit Portfolio Management Dept. within the Credit & Investment Planning Dept. works to stabilize SMBC’s overall credit portfolio through selling credit derivatives and loan claims. The Credit Departments of Wholesale Banking Unit, Retail Banking Unit and other business units play a central role in credit screening and managing their units’ credit portfolios. In the Wholesale Banking Unit, the Credit Administration Dept. is responsible for formulating and implementing measures to reduce SMBC’s exposures mainly to borrowers classified as potentially bankrupt or lower. Each business unit establishes its credit limits based on the baseline amounts for each borrower’s grading category. Borrowers or loans perceived to have high credit risk undergo intensive evaluation and administration by the unit’s Credit Department. The Corporate Research Dept. analyzes industries as well as investigates individual borrowers’ business situations to detect early signs of problems. Moreover, the Credit Risk Management Committee, a consultative body straddling the business units, rounds out SMBC’s oversight system for undertaking flexible and efficient control of credit risk and ensuring the overall soundness of the bank’s loan operations. In addition to these, the Internal Audit Unit, operating independently of the business units, audits asset quality, grading accuracy, self-assessment, and appropriateness of the credit risk management system, and reports the results directly to the Board of Directors and the Management Committee. (b) Method of credit risk management SMBC properly manages the credit risk inherent in individual loans and the entire portfolio by assessing and quantifying the credit risk of each borrower/loan using the internal rating system. In addition to management of individual loans through credit screening and monitoring, it manages the credit portfolio as described below in order to secure and improve the credit portfolio’s soundness and medium-term profitability. • Appropriate risk-taking within the scope of capital To keep credit risk exposure to a permissible level relative to capital, SMBC sets “credit risk capital limit” for internal control purposes. Under these limits, separate guidelines are issued for each business unit and marketing unit. SMBC regularly monitors compliance with these guidelines. • Controlling concentration of risk Because concentration of credit risk in an industry or corporate group has the potential to impair a bank’s capital significantly, SMBC implements measures to prevent excessive concentration of loan in a single industry and to control large exposure to individual borrowers by setting maximum loan amounts and conducting loan reviews thoroughly. To manage country risk, SMBC also has credit limit guidelines based on each country’s creditworthiness. • Greater understanding of actual corporate conditions and balancing returns and risks SMBC runs credit operations on the basic principle of thoroughly understanding actual corporate conditions and gaining profit commensurate with the level of credit risk entailed, and makes every effort to improve profit at after-cost (credit cost, capital cost and overhead) level. • Reduction and prevention of non-performing loans For non-performing loans and potential non-performing loans, SMBC carries out loan reviews to clarify credit policies and action plans, enabling it to swiftly implement measures to prevent deterioration of borrowers’ business situations, support business recoveries, collect on loans, and enhance loan security. In regards to financial instruments such as investments in certain funds, securitized products and credit derivatives that indirectly retain risks related to assets such as corporate bonds and loan claims (underlying assets), such instruments entail market and liquidity risks in addition to credit risk, since such instruments are traded on the market. Credit risk management for these instruments involving detailed analysis and evaluation of characteristics of underlying assets is performed while market risk is comprehensively managed within the framework for managing market and liquidity risks. Moreover, guidelines have been established based on the characteristics of each type of risk to appropriately manage risks of incurring losses. In regards to credit risk of derivative transactions, the potential exposure based on the market price is regularly calculated and properly managed. When the counterparty is a financial institution with whom SMBC frequently conducts derivative transactions, measures such as a close-out netting provision, which provide that offsetting credit exposures between the two parties will be combined into a single net payment from one party to the other in case of bankruptcy or other default event, are implemented to reduce credit risk. 2) Management of market and liquidity risks SMFG manages market and liquidity risks across the entire Group by setting allowable risk limits; ensuring the transparency of the risk management process; and clearly separating front-office, middle-office, and back-office operations for a highly efficient system of mutual checks and balances. (a) Market and liquidity risk management systems At SMBC, important matters such as basic policies for managing market and liquidity risks and risk management framework are determined by the Management Committee and then approved by the Board of Directors. The aforementioned Corporate Risk Management Dept., which is independent of the business units that directly handle business transactions and manages market and liquidity risks in an integrated manner. The department also monitors market and liquidity risk situations and regularly reports to the Management Committee and the Board of Directors. 144 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

Furthermore, its cross-departmental “ALM Committee” reports on the state of observance of SMBC’s market and liquidity risk capital limits, and deliberates on administration of ALM policies. It also has a system whereby front-office departments, middleoffice departments and back-office departments check each other’s work in order to prevent clerical errors, unauthorized transactions, etc. In addition, its Internal Audit Unit, which is independent of other departments, periodically performs comprehensive internal audits to verify that the risk management framework is properly functioning and reports the audit results to the Management Committee, the Board of Directors and other concerned committees and departments. (b) Market and liquidity risk management methodology • Market risk management SMBC manages market risk by setting maximum loss and VaR (value at risk: maximum potential loss that may be incurred to a specific financial instrument for a given probability) within the market risk capital limit, which is set taking into account stockholders’ equity and other factors in accordance with the market transaction policies. SMBC uses the historical simulation method (a method for estimating the maximum loss by running simulations of changes in profit and loss on market fluctuations scenarios based on historical data) to measure VaR. Regarding banking activities (activities for generating profit through management of interest rates, terms, and other aspects of such as loans and bonds in assets, deposits in liabilities) and trading activities (activities for generating profit by taking advantage of short-term fluctuations in market values and differences in value among markets), SMBC calculates the maximum loss that may occur as a result of market fluctuations in 1 day with a probability of 1% based on 4 years of historical observation. With regard to the holding of shares (such as listed shares) for the purpose of strategic investment, SMBC calculates the maximum loss that may occur as a result of market fluctuations in 1 year with a probability of 1% based on 10 years of historical observation. Regarding risks associated with foreign exchange rates, interest rates, equity risk, option prices and other market risk factors, SMBC manages such risks by setting a maximum limit on the indicator suited for each market risk factor such as BPV (basis point value: denotes the change in value of a financial instrument resulting from a 0.01 percentage-point change in the yield). • Quantitative information on market risks As of March 31, 2016, total VaR of SMBC and its major consolidated subsidiaries was ¥34.0 billion for the banking activities, ¥11.0 billion for the trading activities and ¥1,387.6 billion for the holding of shares (such as listed shares) for the purpose of strategic investment. However, it should be noted that these figures are statistical figures that change according to changes in assumptions and calculation methods, and may not cover the risk of future market conditions fluctuating drastically compared to market fluctuations of the past. • Liquidity risk management At SMBC, funding liquidity risk is managed based on a framework consisting of setting funding gap limits, establishing contingency plans, and maintaining a system of highly liquid supplementary funding sources. A funding gap is the amount of funds needed in the future to cover duration mismatch between required investments and funding resources. SMBC tries to avoid excessive reliance on short-term funds by managing funding gap limits and has established a contingency plan covering emergency action plans such as reducing funding gap limits. In addition, to ensure smooth fulfillment of transactions in face of market turmoil, it holds assets such as U.S. treasuries that can be sold immediately and emergency committed lines as supplemental liquidity. Moreover, to manage the liquidity risk of marketable instruments, derivative transactions, etc., SMBC has trading limits for each business office classified by currency, instrument, transaction period, etc. As for financial futures, etc., risks are managed by restricting positions to within a certain percentage of open interest in the entire market. (4) Supplementary explanations about matters concerning fair value of financial instruments Fair values of financial instruments are based on their market prices and, in cases where market prices are not available, on reasonably calculated prices. These prices have been calculated using certain assumptions, and may differ if calculated based on different assumptions.

2016 Annual Report

145

SMFG

Notes to Consolidated Financial Statements

2. Fair value of financial instruments (1) “Consolidated balance sheet amount”, “Fair value” and “Net unrealized gains (losses)” of financial instruments as of March 31, 2015 and 2016 are as follows: The amounts shown in the following tables do not include financial instruments (see (3) below) whose fair values are extremely difficult to determine, such as unlisted stocks classified as Other securities, and stocks of subsidiaries and affiliates. Millions of yen March 31, 2015

1) 2) 3) 4) 5) 6)

Cash and due from banks *1....................................................... Call loans and bills bought *1..................................................... Receivables under resale agreements........................................... Receivables under securities borrowing transactions................... Monetary claims bought *1......................................................... Trading assets Securities classified as trading purposes.................................. 7) Money held in trust.................................................................... 8) Securities Bonds classified as held-to-maturity...................................... Other securities..................................................................... 9) Loans and bills discounted.......................................................... Reserve for possible loan losses *1..........................................

10) Foreign exchanges *1.................................................................. 11) Lease receivables and investment assets *1................................... Total assets................................................................................. 1) Deposits..................................................................................... 2) Negotiable certificates of deposit................................................ 3) Call money and bills sold............................................................ 4) Payables under repurchase agreements........................................ 5) Payables under securities lending transactions............................ 6) Commercial paper...................................................................... 7) Trading liabilities Trading securities sold for short sales..................................... 8) Borrowed money........................................................................ 9) Foreign exchanges...................................................................... 10) Short-term bonds........................................................................ 11) Bonds......................................................................................... 12) Due to trust account................................................................... Total liabilities........................................................................... Derivative transactions *2 Hedge accounting not applied............................................... Hedge accounting applied..................................................... Total...........................................................................................

Consolidated balance sheet amount

Fair value

Net unrealized gains (losses)

¥ 39,739,777 1,326,280 746,431 6,477,063 4,282,392

¥ 39,746,763 1,327,080 747,509 6,477,657 4,293,764

¥    6,986 800 1,077 593 11,371

3,235,701 7,087

3,235,701 7,087

— —

3,397,151 25,031,810 73,068,240 (461,747) 72,606,492 1,903,702 1,899,760 ¥160,653,651 ¥101,047,918 13,825,898 5,873,123 991,860 7,833,219 3,351,459

3,417,732 25,031,810

20,580 —

74,598,557 1,907,769 1,974,558 ¥162,765,990 ¥101,053,137 13,829,279 5,873,118 991,860 7,833,219 3,351,431

1,992,064 4,066 74,798 ¥2,112,338 ¥    5,219 3,381 (5) — — (27)

2,193,399 9,778,095 1,110,822 1,370,800 6,222,918 718,133 ¥154,317,650

2,193,399 9,828,014 1,110,822 1,370,799 6,437,691 718,133 ¥154,590,909

— 49,918 — (0) 214,772 — ¥  273,259

¥    593,008 [861,906] ¥ [268,898]

¥    593,008 [861,906] ¥ [268,898]

¥ — — ¥ —

*1 The amounts do not include general reserve for possible loan losses and specific reserve for possible loan losses. The reserves for possible losses on “Cash and due from banks,” “Call loans and bills bought,” “Monetary claims bought,” “Foreign exchanges” and “Lease receivables and investment assets” are deducted directly from “Consolidated balance sheet amount” since they are immaterial. *2 The amounts collectively represent the derivative transactions which are recorded on “Trading assets,” “Trading liabilities,” “Other assets” and “Other liabilities.” Debts and credits arising from derivative transactions are presented on a net basis, with a net debt presented in square brackets.

146 2016 Annual Report

SMFG

Notes to Consolidated Financial Statements

Millions of yen March 31, 2016

1) 2) 3) 4) 5) 6)

Cash and due from banks *1........................................................ Call loans and bills bought *1..................................................... Receivables under resale agreements........................................... Receivables under securities borrowing transactions *1............... Monetary claims bought *1......................................................... Trading assets Securities classified as trading purposes.................................. 7) Money held in trust.................................................................... 8) Securities Bonds classified as held-to-maturity...................................... Other securities..................................................................... 9) Loans and bills discounted.......................................................... Reserve for possible loan losses *1..........................................

10) Foreign exchanges *1.................................................................. 11) Lease receivables and investment assets *1................................... Total assets................................................................................. 1) Deposits..................................................................................... 2) Negotiable certificates of deposit................................................ 3) Call money and bills sold............................................................ 4) Payables under repurchase agreements........................................ 5) Payables under securities lending transactions............................ 6) Commercial paper...................................................................... 7) Trading liabilities Trading securities sold for short sales..................................... 8) Borrowed money........................................................................ 9) Foreign exchanges...................................................................... 10) Short-term bonds........................................................................ 11) Bonds......................................................................................... 12) Due to trust account................................................................... Total liabilities........................................................................... Derivative transactions *2 Hedge accounting not applied............................................... Hedge accounting applied..................................................... Total...........................................................................................

Consolidated balance sheet amount

Fair value

Net unrealized gains (losses)

¥ 42,776,432 1,290,196 494,949 7,972,679 4,345,143

¥ 42,783,707 1,291,525 494,867 7,973,016 4,354,958

¥    7,274 1,329 (82) 337 9,814

3,634,054 5,163

3,634,054 5,163

— —

2,267,598 21,980,120 75,066,080 (415,728) 74,650,351 1,574,079 1,977,899 ¥162,968,668 ¥110,668,828 14,250,434 1,220,455 1,761,822 5,309,003 3,017,404

2,284,166 21,980,120

16,568 —

76,996,975 1,576,439 2,081,232 ¥165,456,227 ¥110,672,780 14,258,203 1,220,455 1,761,822 5,309,003 3,017,372

2,346,623 2,359 103,333 ¥2,487,558 ¥    3,951 7,769 (0) — — (32)

2,197,673 8,571,227 1,083,450 1,271,300 7,006,357 944,542 ¥157,302,500

2,197,673 8,635,608 1,083,450 1,271,295 7,258,216 944,542 ¥157,630,423

— 64,380 — (4) 251,858 — ¥  327,923

¥    492,569 [207,696] ¥    284,872

¥    492,569 [207,696] ¥    284,872

¥ — — ¥ —

*1 The amounts do not include general reserve for possible loan losses and specific reserve for possible loan losses. The reserves for possible losses on “Cash and due from banks,” “Call loans and bills bought,” “Receivables under securities borrowing transactions,” “Monetary claims bought,” “Foreign exchanges” and “Lease receivables and investment assets” are deducted directly from consolidated balance sheet amount since they are immaterial. *2 The amounts collectively represent the derivative transactions which are recorded in “Trading assets,” “Trading liabilities,” “Other assets” and “Other liabilities.” Debts and credits arising from derivative transactions are presented on a net basis, with a net debt presented in square brackets.

(2) Fair value calculation methodology for financial instruments Assets 1) Cash and due from banks, 2) Call loans and bills bought, 3) Receivables under resale agreements, 4) Receivables under securities borrowing transactions, 9) Loans and bills discounted, 10) Foreign exchanges and 11) Lease receivables and investment assets: Of these transactions, for dues from banks without maturity and overdrafts with no specified repayment dates, the book values are used as fair value as they are considered to approximate their fair value. For short-term transactions with remaining maturity not exceeding 6 months, in principle, the book values are used as fair value as they are considered to approximate their fair value. The fair value of those with a remaining maturity of more than 6 months is, in principle, the present value of future cash flows (calculated by discounting estimated future cash flows, taking into account factors such as the borrower’s internal rating and pledged collateral, using a rate comprising of a risk-free interest rate and an adjustment). Certain consolidated subsidiaries of SMFG calculate the present value by discounting the estimated future cash flows computed based on the contractual interest rate, using a rate comprising a risk-free rate and a credit risk premium. 2016 Annual Report

147

SMFG

Notes to Consolidated Financial Statements

Regarding claims on bankrupt borrowers, effectively bankrupt borrowers and potentially bankrupt borrowers, expected losses on such claims are calculated based on either the expected recoverable amount from disposal of collateral or guarantees, or the present value of expected future cash flows. Since the claims’ balance sheet amounts minus the expected amount of loan losses approximate their fair values, such amounts are considered to be their fair values. 5) Monetary claims bought: The fair values of monetary claims bought, such as subordinated trust beneficiary interests related to securitized housing loans, are based on the assessed value of underlying housing loans securitized through the trust scheme minus the assessed value of senior beneficial interests, etc. The fair values of other transactions are, in principle, based on prices calculated using methods similar to the methods applied to 9) Loans and bills discounted. 6) Trading assets: The fair values of bonds and other securities held for trading purposes are, in principle, based on their market price at the end of the fiscal year. 7) Money held in trust: The fair values of money held in trust are, in principle, based on the market prices of securities held in trust calculated using methods similar to the methods applied to 8) Securities. 8) Securities: In principle, the fair values of stocks (including foreign stocks) are based on the average market price during 1 month before the end of the fiscal year. The fair values of bonds and securities with market prices other than stocks are prices calculated based on their market prices as of the end of the fiscal year. In light of the “Practical Solution on Measurement of Fair Value for Financial Assets” (ASBJ Practical Issue Task Force No. 25), the fair values of floating rate government bonds are based on the present value of future cash flows (the government bond yield is used to discount and estimate future cash flows). Bond yield and yield volatility are the main price parameters. The fair values of those without market prices, such as private placement bonds, are based on the present value of future cash flows calculated by discounting estimated future cash flows taking into account the borrower’s internal rating and pledged collateral by a rate comprising a risk-free interest rate and an adjustment. However, the fair values of bonds, such as private placement bonds issued by bankrupt borrowers, effectively bankrupt borrowers and potentially bankrupt borrowers are based on the bond’s book value after the deduction of the expected amount of a loss on the bond computed by using the same method applied to the estimation of a loan loss. Meanwhile, the fair values of publicly offered investment trusts are calculated based on the published net asset value (NAV) per share, while those of private placement investment trusts are calculated based on the NAV published by securities firms and other financial institutions. Liabilities 1) Deposits, 2) Negotiable certificates of deposit and 12) Due to trust account: The fair values of demand deposits and deposits without maturity are based on their book values. The fair values of short-term transactions with remaining maturity not exceeding 6 months are also based on their book values, as their book values are regarded to approximate their market values. The fair values of transactions with a remaining maturity of more than 6 months are, in principle, based on the present value of estimated future cash flows calculated using the rate applied to the same type of deposits that are newly accepted until the end of the remaining maturity. 3) Call money and bills sold, 4) Payables under repurchase agreements, 5) Payables under securities lending transactions, 6) Commercial paper, 8) Borrowed money, 10) Short-term bonds and 11) Bonds: The fair values of short-term transactions with remaining maturity not exceeding 6 months are based on their book values, as their book values are considered to approximate their fair values. For transactions with a remaining maturity of more than 6 months, their fair values are, in principle, based on the present value of estimated future cash flows calculated using the refinancing rate applied to the same type of instruments for the remaining maturity. The fair values of bonds are based on the present value of future cash flows calculated using the rate derived from the data on the yields of benchmark bonds and publicly-offered subordinated bonds published by securities firms. 7) Trading liabilities: The fair values of bonds sold for short sales and other securities for trading purposes are, in principle, based on their market prices as of the end of the fiscal year. 9) Foreign exchanges: The fair values of foreign currency-denominated deposits without maturity received from other banks are based on their book values. The fair values of foreign exchange related short-term borrowings are based on their book values, as their book values are regarded to approximate their fair values. Derivatives transactions The fair values of exchange-traded derivatives are based on their closing prices. With regard to OTC transactions, the fair values of interest rate, currency, stock, bond and credit derivatives are based on their prices calculated based on the present value of the future cash flows, option valuation models, etc. The fair values of commodity derivatives transactions are based on their prices calculated based on the derivative instrument’s components, including price and contract term. 148 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

(3) Consolidated balance sheet amount of financial instruments whose fair values are extremely difficult to determine are as follows: Millions of yen March 31

Monetary claims bought: Monetary claims bought without market prices *1.................................................... Securities: Unlisted stocks, etc. *2 *4......................................................................................... Investments in partnership, etc. *3 *4....................................................................... Total..............................................................................................................................

2015

2016

¥  2,537

¥  2,460

361,541 259,445 ¥623,523

157,382 248,921 ¥408,764

*1 They are beneficiary claims on loan trusts (a) that behave more like equity than debt, (b) that do not have market prices, and (c) for which it is difficult to rationally estimate their fair values. *2 They are not included in the scope of fair value disclosure since there are no market prices and it is extremely difficult to determine their fair values. *3 They are capital contributions with no market prices. The above-stated amount includes the book value amount of investments in the partnership of which SMFG records net changes in their balance sheets and statements of income. *4 Unlisted stocks and investments in partnership totaling ¥12,762 million and ¥7,618 million were written-off in the fiscal year ended March 31, 2015 and 2016, respectively.

(4) Redemption schedule of monetary claims and securities with maturities March 31, 2015

Within 1 year

Millions of yen After 1 year After 5 years through 5 years through 10 years

Deposits with banks.................................................... Call loans and bills bought.......................................... Receivables under resale agreements............................ Receivables under securities borrowing transactions.... Monetary claims bought*1........................................... Securities*1................................................................. Bonds classified as held-to-maturity....................... Japanese government bonds............................... Japanese local government bonds....................... Japanese corporate bonds................................... Other................................................................ Other securities with maturity............................... Japanese government bonds............................... Japanese local government bonds....................... Japanese corporate bonds................................... Other................................................................ Loans and bills discounted*1 *2.................................... Foreign exchanges*1.................................................... Lease receivables and investment assets*1..................... Total............................................................................

¥38,506,416 1,272,265 674,341 6,427,273 3,378,992 5,656,240 1,392,417 1,300,000 51,347 41,070 — 4,263,823 1,715,975 28,278 452,917 2,066,652 16,197,047 1,883,491 547,109 ¥74,543,178

¥    46,508 51,242 72,090 49,790 597,974 14,446,962 2,001,567 1,980,000 16,356 5,210 — 12,445,395 8,893,500 21,904 1,584,554 1,945,436 30,706,918 21,463 1,005,281 ¥46,998,231

¥    20,911 3,456 — — 48,832 2,311,100 — — — — — 2,311,100 369,500 1,224 503,625 1,436,750 10,754,197 — 156,851 ¥13,295,349

After 10 years

¥     1,241 — — — 221,903 758,126 — — — — — 758,126 — 35 31,767 726,322 9,205,773 — 50,521 ¥10,237,565

*1 The amounts shown in the table above do not include amounts for claims on bankrupt borrowers, effectively bankrupt borrowers and potentially bankrupt borrowers and other claims for which redemption is unlikely. The amounts for such claims are Monetary claims bought: ¥21 million, Securities: ¥44,760 million, Loans and bills discounted: ¥756,824 million, Foreign exchanges: ¥2,712 million and Lease receivables and investment assets: ¥19,460 million. *2 “Loans and bills discounted” without the maturity dates are not included. Such amount is totaled to ¥5,445,535 million at March 31, 2015.

2016 Annual Report

149

SMFG

Notes to Consolidated Financial Statements

March 31, 2016

Within 1 year

Millions of yen After 1 year After 5 years through 5 years through 10 years

Deposits with banks.................................................... Call loans and bills bought.......................................... Receivables under resale agreements............................ Receivables under securities borrowing transactions.... Monetary claims bought*1........................................... Securities*1................................................................. Bonds classified as held-to-maturity....................... Japanese government bonds............................... Japanese local government bonds....................... Japanese corporate bonds................................... Other................................................................ Other securities with maturity............................... Japanese government bonds............................... Japanese local government bonds....................... Japanese corporate bonds................................... Other................................................................ Loans and bills discounted*1 *2.................................... Foreign exchanges*1.................................................... Lease receivables and investment assets*1..................... Total............................................................................

¥41,764,849 1,235,295 427,377 7,961,878 3,349,198 5,125,770 1,093,340 1,080,000 13,340 — — 4,032,430 1,548,400 12,838 476,283 1,994,907 16,340,462 1,572,622 531,712 ¥78,309,168

¥    33,628 50,706 67,572 11,040 678,150 10,864,943 1,172,636 1,160,000 7,426 5,210 — 9,692,306 6,172,500 14,197 1,558,803 1,946,805 31,637,487 2,557 1,039,875 ¥44,385,961

¥    24,213 5,363 — — 43,207 2,047,674 — — — — — 2,047,674 11,000 3,855 555,748 1,477,070 11,694,402 — 155,118 ¥13,969,979

After 10 years

¥     1,329 — — — 235,211 1,712,001 — — — — — 1,712,001 239,400 33 96,278 1,376,289 9,085,329 — 102,003 ¥11,135,875

*1 The amounts shown in the table above do not include amounts for claims on bankrupt borrowers, effectively bankrupt borrowers and potentially bankrupt borrowers and other claims for which redemption is unlikely. The amounts for such claims are Monetary claims bought: ¥0 million, Securities: ¥33,496 million, Loans and bills discounted: ¥608,928 million, Foreign exchanges: ¥1,987 million, Lease receivables and investment assets: ¥18,510 million. *2 “Loans and bills discounted” without the maturity dates are not included. Such amount is totaled to ¥5,697,958 million at March 31, 2016.

(5) Redemption schedule of bonds, borrowed money and other interest-bearing debts

March 31, 2015

Within 1 year

Deposits *................................................................... Negotiable certificates of deposit................................. Call money and bills sold............................................. Payables under repurchase agreements......................... Payables under securities lending transactions............. Commercial paper....................................................... Borrowed money......................................................... Foreign exchanges....................................................... Short-term bonds......................................................... Bonds.......................................................................... Due to trust account.................................................... Total............................................................................

¥ 95,917,733 13,518,726 5,873,123 991,860 7,833,219 3,351,459 7,158,084 1,110,822 1,370,800 1,023,264 718,133 ¥138,867,230

* Demand deposits are included in “Within 1 year.” Deposits include current deposits.

150 2016 Annual Report

Millions of yen After 1 year After 5 years through 5 years through 10 years

¥4,284,380 304,980 — — — — 1,306,961 — — 2,742,910 — ¥8,639,233

¥  497,816 2,170 — — — — 824,115 — — 2,034,764 — ¥3,358,866

After 10 years

¥  347,987 20 — — — — 488,932 — — 426,306 — ¥1,263,246

Notes to Consolidated Financial Statements

March 31, 2016

Within 1 year

Deposits *................................................................... Negotiable certificates of deposit................................. Call money and bills sold............................................. Payables under repurchase agreements......................... Payables under securities lending transactions............. Commercial paper....................................................... Borrowed money......................................................... Foreign exchanges....................................................... Short-term bonds......................................................... Bonds.......................................................................... Due to trust account.................................................... Total............................................................................

¥105,655,087 13,740,528 1,219,196 1,761,822 5,309,003 3,017,404 5,790,740 1,083,450 1,271,300 985,979 944,542 ¥140,779,055

Millions of yen After 1 year After 5 years through 5 years through 10 years

¥4,098,017 506,777 1,259 — — — 1,292,699 — — 3,213,584 — ¥9,112,338

¥  468,420 3,125 — — — — 1,018,602 — — 2,094,283 — ¥3,584,431

SMFG

After 10 years

¥  447,303 1 — — — — 469,186 — — 716,106 — ¥1,632,598

* Demand deposits are included in “Within 1 year.” Deposits include current deposits.

2016 Annual Report

151

SMFG

Notes to Consolidated Financial Statements

(Notes to securities) The amounts shown in the following tables include trading securities and short-term bonds classified as “Trading assets,” negotiable certificates of deposit classified as “Cash and due from banks,” and beneficiary claims on loan trust classified as “Monetary claims bought,” in addition to “Securities” stated in the consolidated balance sheets. 1. Securities classified as trading purposes Millions of yen March 31

Valuation gains (losses) included in the earnings for the fiscal year.......................................

2015 ¥72,389

2016 ¥(32,241)

2. Bonds classified as held-to-maturity Millions of yen March 31, 2015

Bonds with unrealized gains:

Japanese government bonds........................ Japanese local government bonds................ Japanese corporate bonds............................ Other......................................................... Subtotal...................................................... Bonds with unrealized losses: Japanese government bonds........................ Japanese local government bonds................ Japanese corporate bonds............................ Other......................................................... Subtotal...................................................... Total..............................................................................................................

Consolidated balance sheet amount

¥3,283,044 67,843 46,263 — 3,397,151 — — — — — ¥3,397,151

Fair value

¥3,303,228 68,065 46,438 — 3,417,732 — — — — — ¥3,417,732

Net unrealized gains (losses)

¥20,183 221 175 — 20,580 — — — — — ¥20,580

Millions of yen March 31, 2016

Bonds with unrealized gains:

Japanese government bonds........................ Japanese local government bonds................ Japanese corporate bonds............................ Other......................................................... Subtotal...................................................... Bonds with unrealized losses: Japanese government bonds........................ Japanese local government bonds................ Japanese corporate bonds............................ Other......................................................... Subtotal...................................................... Total..............................................................................................................

152 2016 Annual Report

Consolidated balance sheet amount

¥2,241,546 16,460 5,202 — 2,263,208 — 4,389 — — 4,389 ¥2,267,598

Fair value

¥2,258,065 16,485 5,230 — 2,279,780 — 4,385 — — 4,385 ¥2,284,166

Net unrealized gains (losses)

¥16,518 25 27 — 16,572 — (3) — — (3) ¥16,568

Notes to Consolidated Financial Statements

SMFG

3. Other securities Millions of yen March 31, 2015

Other securities with Stocks......................................................... unrealized gains: Bonds......................................................... Japanese government bonds................... Japanese local government bonds........... Japanese corporate bonds....................... Other......................................................... Subtotal...................................................... Other securities with Stocks......................................................... unrealized losses: Bonds......................................................... Japanese government bonds................... Japanese local government bonds........... Japanese corporate bonds....................... Other......................................................... Subtotal...................................................... Total...............................................................................................

Consolidated balance sheet amount

¥ 3,726,432 11,259,951 8,953,781 49,123 2,257,045 6,024,855 21,011,239 119,767 2,439,610 2,053,225 3,026 383,358 2,069,284 4,628,662 ¥25,639,901

Acquisition cost

Net unrealized gains (losses)

¥ 1,653,065 11,199,114 8,935,132 48,842 2,215,139 5,505,092 18,357,271 138,826 2,450,418 2,058,905 3,039 388,473 2,088,398 4,677,644 ¥23,034,915

¥2,073,367 60,837 18,649 281 41,905 519,762 2,653,967 (19,059) (10,808) (5,680) (12) (5,114) (19,113) (48,981) ¥2,604,985

Notes: 1. Net unrealized gains (losses) on other securities shown above include gains of ¥29,870 million for the fiscal year ended March 31, 2015 that are recognized in the earnings by applying fair value hedge accounting. 2. Consolidated balance sheet amounts of other securities whose fair values are extremely difficult to determine are as follows: March 31, 2015 Stocks........................................................................................................ Other........................................................................................................ Total..........................................................................................................

Millions of yen ¥219,799 403,724 ¥623,523

These amounts are not included in “3. Other securities” since there are no market prices and it is extremely difficult to determine their fair values.

Millions of yen March 31, 2016

Other securities with Stocks......................................................... unrealized gains: Bonds......................................................... Japanese government bonds................... Japanese local government bonds.............. Japanese corporate bonds....................... Other......................................................... Subtotal...................................................... Other securities with Stocks......................................................... unrealized losses: Bonds......................................................... Japanese government bonds................... Japanese local government bonds.............. Japanese corporate bonds....................... Other......................................................... Subtotal...................................................... Total...............................................................................................

Consolidated balance sheet amount

¥ 3,103,065 9,870,848 7,380,250 26,353 2,464,245 5,318,399 18,292,314 277,214 1,022,241 724,800 4,867 292,573 3,132,891 4,432,347 ¥22,724,662

Acquisition cost

Net unrealized gains (losses)

¥ 1,480,085 9,759,438 7,317,408 26,195 2,415,834 5,027,532 16,267,055 327,194 1,024,465 725,202 4,885 294,377 3,198,433 4,550,093 ¥20,817,149

¥1,622,980 111,410 62,842 157 48,411 290,867 2,025,258 (49,979) (2,223) (402) (17) (1,803) (65,542) (117,745) ¥1,907,512

Notes: 1. Net unrealized gains (losses) on other securities shown above include gains of ¥871 million for the fiscal year ended March 31, 2016 that are recognized in the earnings by applying fair value hedge accounting. 2. Consolidated balance sheet amounts of other securities whose fair values are extremely difficult to determine are as follows: March 31, 2016 Stocks........................................................................................................ Other........................................................................................................ Total..........................................................................................................

Millions of yen ¥131,602 277,161 ¥408,764

These amounts are not included in “3. Other securities” since there are no market prices and it is extremely difficult to determine their fair values.

2016 Annual Report

153

SMFG

Notes to Consolidated Financial Statements

4. Held-to-maturity bonds sold during the fiscal year Fiscal year ended March 31, 2015 There are no corresponding transactions. Fiscal year ended March 31, 2016 There are no corresponding transactions. 5. Other securities sold during the fiscal year Year ended March 31, 2015

Sales amount

Stocks............................................................................................. Bonds............................................................................................. Japanese government bonds....................................................... Japanese local government bonds............................................... Japanese corporate bonds........................................................... Other............................................................................................. Total...............................................................................................

¥   113,544 13,407,655 13,142,974 63,699 200,981 14,275,561 ¥27,796,760

Year ended March 31, 2016

Sales amount

Stocks............................................................................................. Bonds............................................................................................. Japanese government bonds....................................................... Japanese local government bonds............................................... Japanese corporate bonds........................................................... Other............................................................................................. Total...............................................................................................

¥   161,735 12,304,977 12,079,605 61,407 163,963 10,175,242 ¥22,641,955

Millions of yen Gains on sales

Losses on sales

¥ 45,455 9,406 8,939 37 429 98,168 ¥153,030 Millions of yen Gains on sales

¥ (1,890) (5,699) (5,593) (94) (11) (16,739) ¥(24,329) Losses on sales

¥ 42,097 25,883 25,531 23 329 117,516 ¥185,497

¥ (2,784) (1,520) (237) (98) (1,185) (28,467) ¥(32,773)

6. Change of classification of securities Fiscal year ended March 31, 2015 There are no significant corresponding transactions to be disclosed. Fiscal year ended March 31, 2016 There are no significant corresponding transactions to be disclosed. 7. Write-down of securities Bonds classified as held-to-maturity and other securities (excluding securities whose fair values are extremely difficult to determine) are considered as impaired if the fair value decreases materially below the acquisition cost and such decline is not considered as recoverable. The fair value is recognized as the consolidated balance sheet amount and the amount of write-down is accounted for as valuation loss for the fiscal year. Valuation losses for the fiscal years ended March 31, 2015 and 2016 were ¥5,992 million and ¥4,838 million, respectively. The rule for determining “material decline” is as follows and is based on the classification of issuers under the rules of self-assessment of assets. Bankrupt/Effectively bankrupt/Potentially bankrupt issuers:

Fair value is lower than acquisition cost.

Issuers requiring caution:

Fair value is 30% or lower than acquisition cost.

Normal issuers:

Fair value is 50% or lower than acquisition cost.

Bankrupt issuers: Issuers that are legally bankrupt or formally declared bankrupt. Effectively bankrupt issuers: Issuers that are not legally bankrupt but regarded as substantially bankrupt. Potentially bankrupt issuers: Issuers that are not bankrupt now, but are perceived to have a high risk of falling into bankruptcy. Issuers requiring caution: Issuers that are identified for close monitoring. Normal issuers: Issuers other than the above 4 categories of issuers.

154 2016 Annual Report

SMFG

Notes to Consolidated Financial Statements

(Notes to money held in trust) 1. Money held in trust classified as trading purposes Fiscal year ended March 31, 2015 There are no corresponding transactions. Fiscal year ended March 31, 2016 There are no corresponding transactions. 2. Money held in trust classified as held-to-maturity Fiscal year ended March 31, 2015 There are no corresponding transactions. Fiscal year ended March 31, 2016 There are no corresponding transactions. 3. Other money held in trust Millions of yen March 31, 2015

Other money held in trust..............................................................

Consolidated balance sheet amount

¥7,087

Acquisition cost

¥7,087

Net unrealized gains (losses)



Millions of yen March 31, 2016

Other money held in trust..............................................................

Consolidated balance sheet amount

¥5,163

Acquisition cost

¥5,163

Net unrealized gains (losses)



2016 Annual Report

155

SMFG

Notes to Consolidated Financial Statements

(Notes to net unrealized gains (losses) on other securities and other money held in trust) The breakdown of “Net unrealized gains (losses) on other securities” reported on the consolidated balance sheets is as shown below: March 31, 2015

Net unrealized gains (losses)........................................................................................................................................... Other securities......................................................................................................................................................... Other money held in trust......................................................................................................................................... (−) Deferred tax liabilities.............................................................................................................................................. Net unrealized gains (losses) on other securities (before following adjustments).............................................................. (−) Non-controlling interests.......................................................................................................................................... (+) SMFG’s interest in net unrealized gains (losses) on valuation of other securities held by equity method affiliates....... Net unrealized gains (losses) on other securities.............................................................................................................. Notes:

Millions of yen

¥2,575,489 2,575,489 — 727,559 1,847,929 59,441 2,560 ¥1,791,049

1. Net unrealized gains of ¥29,870 million for the fiscal year ended March 31, 2015 recognized in the fiscal year’s earnings by applying fair value hedge accounting are deducted from net unrealized gains on other securities. 2. Net unrealized gains (losses) on other securities include foreign currency translation adjustments on foreign currency denominated securities whose fair value is extremely difficult to determine.

March 31, 2016

Net unrealized gains (losses)........................................................................................................................................... Other securities......................................................................................................................................................... Other money held in trust......................................................................................................................................... (−) Deferred tax liabilities.............................................................................................................................................. Net unrealized gains (losses) on other securities (before following adjustments).............................................................. (−) Non-controlling interests.......................................................................................................................................... (+) SMFG’s interest in net unrealized gains (losses) on valuation of other securities held by equity method affiliates....... Net unrealized gains (losses) on other securities..............................................................................................................

Millions of yen

¥1,907,093 1,907,093 — 504,144 1,402,948 57,075 1,817 ¥1,347,689

Notes: 1. Net unrealized gains of ¥871 million for the fiscal year ended March 31, 2016 recognized in the fiscal year’s earnings by applying fair value hedge accounting are deducted from net unrealized gains on other securities. 2. Net unrealized gains (losses) on other securities include foreign currency translation adjustments on foreign currency denominated securities whose fair value is extremely difficult to determine.

156 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

(Notes to derivative transactions) 1. Derivative transactions to which the hedge accounting method is not applied The following tables set forth the contract amount or the amount equivalent to the notional amount, fair value, valuation gains (losses) and fair value calculation methodologies by type of derivative with respect to derivative transactions to which the hedge accounting method is not applied at the end of the fiscal year. Contract amount does not indicate the market risk relating to derivative transactions. (1) Interest rate derivatives

March 31, 2015

Listed Interest rate futures: Sold............................................................................. Bought........................................................................ Interest rate options: Sold............................................................................. Bought........................................................................

Millions of yen Contract amount Total Over 1 year Fair value

Valuation gains (losses)

¥ 72,417,655 70,808,254

¥ 27,182,460 25,824,043

¥   (63,824) 58,948

¥   (63,824) 58,948

345,874 36,305,940

36,168 16,041,662

(110) 6,990

(110) 6,990

606 (604) 124,036 6,138,890 (6,018,957) (2,593)

606 (604) 124,036 6,138,890 (6,018,957) (2,593)

19,802 (12,738)

19,802 (12,738)

(18,189) (4,231)

(18,189) (4,231)

(533) 2,659

(533) 2,659

(6,496) 9,944 ¥  116,260

(6,496) 9,944 ¥  116,260

Over-the-counter Forward rate agreements: 6,869,797 35,565 Sold............................................................................. Bought........................................................................ 6,747,669 377,473 Interest rate swaps:........................................................... 449,422,723 374,591,082 211,594,325 176,500,223 Receivable fixed rate/payable floating rate.................... 209,580,904 175,966,222 Receivable floating rate/payable fixed rate.................... 28,142,407 22,028,051 Receivable floating rate/payable floating rate............... Interest rate swaptions: Sold............................................................................. 3,595,666 2,228,852 2,131,049 1,590,233 Bought........................................................................ Caps: 21,514,098 16,330,540 Sold............................................................................. 7,165,728 5,603,385 Bought........................................................................ Floors: 594,392 417,517 Sold............................................................................. Bought........................................................................ 98,034 98,034 Other: 1,004,262 885,363 Sold............................................................................. Bought........................................................................ 3,924,935 3,249,593 Total................................................................................. / /

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value of transactions listed on an exchange is calculated using the closing price on the Tokyo Financial Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using discounted present value and option pricing models.

2016 Annual Report

157

SMFG

Notes to Consolidated Financial Statements

March 31, 2016

Listed Interest rate futures: Sold............................................................................. Bought........................................................................ Interest rate options: Sold............................................................................. Bought........................................................................

Millions of yen Contract amount Total Over 1 year Fair value

Valuation gains (losses)

¥ 63,471,276 57,572,037

¥  7,435,505 4,357,650

¥   (79,505) 75,639

¥   (79,505) 75,639

44,716 33,993,010

24,106 14,119,537

(8) 6,597

(8) 6,597

(1,288) 1,352 176,265 6,357,881 (6,206,980) 14,589

(1,288) 1,352 176,265 6,357,881 (6,206,980) 14,589

(7,029) (22,676)

(7,029) (22,676)

(13,737) (6,724)

(13,737) (6,724)

(596) 4,193

(596) 4,193

(433) 484 ¥  132,532

(433) 484 ¥  132,532

Over-the-counter Forward rate agreements: 7,874,784 148,664 Sold............................................................................. Bought........................................................................ 7,963,487 220,176 396,761,415 332,313,682 Interest rate swaps:........................................................... 183,975,452 154,668,295 Receivable fixed rate/payable floating rate.................... Receivable floating rate/payable fixed rate.................... 180,604,918 151,380,739 Receivable floating rate/payable floating rate............... 32,005,448 26,092,014 Interest rate swaptions: Sold............................................................................. 4,681,782 2,792,669 Bought........................................................................ 3,416,990 2,680,830 Caps: Sold............................................................................. 27,745,929 20,292,051 Bought........................................................................ 8,098,947 6,390,955 Floors: Sold............................................................................. 623,291 431,693 Bought........................................................................ 275,954 274,754 Other: Sold............................................................................. 1,412,146 1,128,576 Bought........................................................................ 5,480,980 4,930,203 Total................................................................................. / /

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value of transactions listed on an exchange is calculated using the closing price on the Tokyo Financial Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using discounted present value and option pricing models.

158 2016 Annual Report

SMFG

Notes to Consolidated Financial Statements

(2) Currency derivatives

March 31, 2015

Listed Currency futures: Sold............................................................................. Bought........................................................................

Millions of yen Contract amount Total Over 1 year Fair value

¥    80,931 497

¥       — —

Over-the-counter Currency swaps................................................................. 27,035,522 20,122,147 Currency swaptions: Sold............................................................................. 308,906 304,563 Bought........................................................................ 451,270 443,519 62,599,180 5,225,986 Forward foreign exchange................................................. Currency options: Sold............................................................................. 2,723,327 1,495,074 Bought........................................................................ 2,395,875 1,248,848 Total................................................................................. / /

Valuation gains (losses)

¥    180 0

¥    180 0

694,080

10,572

(559) (397) (141,028)

(559) (397) (141,028)

(181,167) 121,468 ¥ 492,576

(181,167) 121,468 ¥(190,931)

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value of transactions listed on exchange is calculated using the closing price on the Tokyo Financial Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using discounted present value, option pricing models and other methodologies.

March 31, 2016

Listed Currency futures: Sold............................................................................. Bought........................................................................ Over-the-counter Currency swaps................................................................. Currency swaptions: Sold............................................................................. Bought........................................................................ Forward foreign exchange................................................. Currency options: Sold............................................................................. Bought........................................................................ Total.................................................................................

Millions of yen Contract amount Total Over 1 year Fair value

Valuation gains (losses)

¥      658 32

¥       — —

¥     17 0

¥     17 0

33,811,276

24,295,023

387,527

15,992

621,538 785,064 56,831,766

576,940 735,396 7,266,262

(5,697) 5,823 7,441

(5,697) 5,823 7,441

2,692,132 2,558,291 /

1,560,230 1,381,862 /

(138,718) 112,318 ¥ 368,712

(138,718) 112,318 ¥  (2,822)

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value of transactions listed on exchange is calculated using the closing price on the Tokyo Financial Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using discounted present value, option pricing models and other methodologies.

2016 Annual Report

159

SMFG

Notes to Consolidated Financial Statements

(3) Equity derivatives

March 31, 2015

Listed Equity price index futures: Sold............................................................................. Bought........................................................................ Equity price index options: Sold............................................................................. Bought........................................................................

Millions of yen Contract amount Total Over 1 year Fair value

Valuation gains (losses)

¥995,977 278,331

¥     — —

¥(11,341) 6,718

¥(11,341) 6,718

169,645 153,942

68,750 59,715

(16,412) 11,545

(16,412) 11,545

(23,558) 24,976

(23,558) 24,976

126 500

126 500

(1,262)

(1,262)

1,942 ¥ (6,764)

1,942 ¥ (6,764)

Over-the-counter Equity options: 225,859 218,338 Sold............................................................................. 233,896 218,338 Bought........................................................................ Equity index forward contracts: 16,717 — Sold............................................................................. 33,481 499 Bought........................................................................ Equity price index swaps: Receivable equity index/payable short-term floating rate............................................................................ 31,690 31,225 Receivable short-term floating rate/payable equity index......................................................................... 59,675 58,570 Total................................................................................. / /

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value of transactions listed on exchange is calculated using the closing price on the Osaka Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using discounted present value and option pricing models.

March 31, 2016

Listed Equity price index futures: Sold............................................................................. Bought........................................................................ Equity price index options: Sold............................................................................. Bought........................................................................ Over-the-counter Equity options: Sold............................................................................. Bought........................................................................ Equity index forward contracts: Sold............................................................................. Bought........................................................................ Equity price index swaps: Receivable equity index/payable short-term floating rate............................................................................ Receivable short-term floating rate/payable equity index......................................................................... Total.................................................................................

Millions of yen Contract amount Total Over 1 year Fair value

Valuation gains (losses)

¥739,284 350,541

¥     — 23,912

¥ (4,371) 804

¥ (4,371) 804

211,201 146,407

118,394 67,456

(19,465) 8,512

(19,465) 8,512

225,296 220,558

207,647 209,864

(20,896) 20,609

(20,896) 20,609

4,236 7,722

— 400

152 333

152 333

65,728

51,288

(12,612)

(12,612)

136,471 /

113,501 /

21,211 ¥ (5,723)

21,211 ¥ (5,723)

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value of transactions listed on exchange is calculated using the closing price on the Osaka Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using discounted present value and option pricing models.

160 2016 Annual Report

SMFG

Notes to Consolidated Financial Statements

(4) Bond derivatives

March 31, 2015

Listed Bond futures: Sold............................................................................. Bought........................................................................ Bond futures options: Sold............................................................................. Bought........................................................................

Millions of yen Contract amount Total Over 1 year Fair value

Valuation gains (losses)

¥3,261,725 2,668,201

¥     — —

¥(23,171) 15,828

¥(23,171) 15,828

38,448 39,048

— —

(40) 107

(40) 107

Over-the-counter Bond options: 39,607 — Sold............................................................................. 174,030 134,394 Bought........................................................................ Total................................................................................. / /

(123) 655 ¥ (6,743)

(123) 655 ¥ (6,743)

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value of transactions listed on exchange is calculated using the closing price on the Osaka Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using option pricing models.

March 31, 2016

Listed Bond futures: Sold............................................................................. Bought........................................................................ Bond futures options: Sold............................................................................. Bought........................................................................ Over-the-counter Bond options: Sold............................................................................. Bought........................................................................ Total.................................................................................

Millions of yen Contract amount Total Over 1 year Fair value

Valuation gains (losses)

¥2,881,937 2,533,396

¥     — —

¥(11,472) 10,038

¥(11,472) 10,038

158,794 31,426

— —

(362) 26

(362) 26

455,731 382,507 /

— 119,292 /

(11) 737 ¥ (1,043)

(11) 737 ¥ (1,043)

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value of transactions listed on exchange is calculated using the closing price on the Osaka Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using option pricing models.

2016 Annual Report

161

SMFG

Notes to Consolidated Financial Statements

(5) Commodity derivatives

March 31, 2015

Millions of yen Contract amount Total Over 1 year Fair value

Listed Commodity futures: Sold............................................................................. Bought........................................................................

¥ 14,001 15,703

¥    — —

Over-the-counter Commodity swaps: 111,581 72,095 Receivable fixed price/payable floating price................ Receivable floating price/payable fixed price................ 87,933 62,634 Receivable floating price/payable floating price............ 3,922 3,384 Commodity options: Sold............................................................................. 15,529 13,787 Bought........................................................................ 9,095 7,946 Total................................................................................. / /

Valuation gains (losses)

¥ 1,546 (2,183)

¥ 1,546 (2,183)

7,608 (5,971) (132)

7,608 (5,971) (132)

(506) (108) ¥  253

(506) (108) ¥  253

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value of transactions listed on exchange is calculated using the closing price on the New York Mercantile Exchange or other relevant exchanges. Fair value of OTC transactions is calculated based on factors such as price of the relevant commodity and contract term. 3. Underlying assets of commodity derivatives are fuels and metals.

March 31, 2016

Listed Commodity futures: Sold............................................................................. Bought........................................................................

Millions of yen Contract amount Total Over 1 year Fair value

¥ 7,458 7,841

¥    — —

Over-the-counter Commodity swaps: Receivable fixed price/payable floating price................ 82,658 54,945 Receivable floating price/payable fixed price................ 80,511 52,227 Receivable floating price/payable floating price............ 3,141 3,061 Commodity options: 19,191 16,972 Sold............................................................................. Bought........................................................................ 15,141 13,044 Total................................................................................. / /

Valuation gains (losses)

¥   377 (590)

¥   377 (590)

21,539 (19,680) 299

21,539 (19,680) 299

(967) (1) ¥   975

(967) (1) ¥   975

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value of transactions listed on exchange is calculated using the closing price on the New York Mercantile Exchange or other relevant exchanges. Fair value of OTC transactions is calculated based on factors such as price of the relevant commodity and contract term. 3. Underlying assets of commodity derivatives are fuels and metals.

162 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

(6) Credit derivative transactions

March 31, 2015

Millions of yen Contract amount Total Over 1 year Fair value

Over-the-counter Credit default options: Sold............................................................................. ¥491,723 ¥397,171 Bought........................................................................ 652,486 520,233 Total................................................................................. / /

¥ 6,882 (9,456) ¥(2,574)

Valuation gains (losses)

¥ 6,882 (9,456) ¥(2,574)

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value is calculated using discounted present value and option pricing models. 3. “Sold” represents transactions in which the credit risk is accepted; “Bought” represents transactions in which the credit risk is transferred.

March 31, 2016

Millions of yen Contract amount Total Over 1 year Fair value

Over-the-counter Credit default options: Sold............................................................................. Bought........................................................................ Total.................................................................................

¥583,300 765,485 /

¥482,110 611,156 /

¥ 3,336 (6,221) ¥(2,885)

Valuation gains (losses)

¥ 3,336 (6,221) ¥(2,885)

Notes: 1. The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income. 2. Fair value is calculated using discounted present value and option pricing models. 3. “Sold” represents transactions in which the credit risk is accepted; “Bought” represents transactions in which the credit risk is transferred.

2016 Annual Report

163

SMFG

Notes to Consolidated Financial Statements

2. Derivative transactions to which the hedge accounting method is applied The following tables set forth the contract amount or the amount equivalent to the notional amount, fair value and fair value calculation methodologies by type of derivative and hedge accounting method with respect to derivative transactions to which the hedge accounting method is applied at the end of the fiscal year. Contract amount does not indicate the market risk relating to derivative transactions. (1) Interest rate derivatives March 31, 2015 Hedge accounting method Deferral hedge method

Recognition of gain or loss on the hedged items Special treatment for interest rate swaps

Principal items Type of derivative hedged Interest futures: Interest-earning/bearing Sold...................................................... financial assets/liabilities Bought................................................. such as loans and bills discounted, other securities, Interest rate swaps: deposits and negotiable Receivable fixed rate/payable floating certificates of deposit rate..................................................... Receivable floating rate/payable fixed rate..................................................... Receivable floating rate/payable floating rate..................................................... Interest rate swaptions: Sold...................................................... Bought................................................. Caps: Sold...................................................... Bought................................................. Interest rate swaps: Loans and bills discounted Receivable floating rate/payable fixed rate..................................................... Interest rate swaps: Loans and bills discounted; borrowed money, corporate Receivable floating rate/payable fixed rate..................................................... bonds Receivable floating rate/payable floating rate..................................................... Total...........................................................

Millions of yen Contract amount Total Over 1 year

Fair value

¥ 9,431,618 1,300,300

¥ 6,067,453 —

¥  (5,029) (41)

31,042,631

26,461,484

718,262

16,875,562

15,294,056

(666,588)

3,604



4

12,344 —

12,344 —

89 —

65,156 65,156

61,248 61,248

135 (135)

148,693

91,040

728

167,412

149,076

3,000 1,000 / /

(Note 3)

¥  47,425

Notes: 1. SMFG applies deferred hedge accounting stipulated in “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (JICPA Industry Audit Committee Report No. 24, February 13, 2002). 2. Fair value of transactions listed on exchange is calculated using the closing price on the Tokyo Financial Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using discounted present value and option pricing models. 3. Interest rate swap amounts measured by the special treatment for interest rate swaps are treated with the borrowed money or other transactions that are subject to the hedge. Therefore such fair value is included in the fair value of the relevant transaction subject to the hedge in the “(Notes to financial instruments) 2. Fair value of financial instruments.”

164 2016 Annual Report

SMFG

Notes to Consolidated Financial Statements

March 31, 2016 Hedge accounting method Deferral hedge method

Recognition of gain or loss on the hedged items Special treatment for interest rate swaps

Principal items Type of derivative hedged Interest futures: Interest-earning/bearing Sold...................................................... financial assets/liabilities Bought................................................. such as loans and bills discounted, other securities, Interest rate swaps: deposits and negotiable Receivable fixed rate/payable floating certificates of deposit rate..................................................... Receivable floating rate/payable fixed rate..................................................... Receivable floating rate/payable floating rate..................................................... Interest rate swaptions: Sold...................................................... Bought................................................. Caps: Sold...................................................... Bought................................................. Interest rate swaps: Loans and bills discounted Receivable floating rate/payable fixed rate..................................................... Interest rate swaps: Loans and bills discounted; borrowed money, corporate Receivable floating rate/payable fixed rate..................................................... bonds Receivable floating rate/payable floating rate..................................................... Total...........................................................

Millions of yen Contract amount Total Over 1 year

Fair value

¥   469,759 466,100

¥    20,000 —

¥    (853) 176

30,806,710

27,874,743

873,379

17,287,315

15,999,299

(746,964)







75,230 —

75,230 —

4,382 —

61,472 61,472

50,267 50,267

5 (5)

121,347

118,381

(4,850)

446,074

430,758

1,000 /

— /

(Note 3)

¥ 125,268

Notes: 1. SMFG applies deferred hedge accounting stipulated in “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (JICPA Industry Audit Committee Report No. 24, February 13, 2002). 2. Fair value of transactions listed on exchange is calculated using the closing price on the Tokyo Financial Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using discounted present value and option pricing models. 3. Interest rate swap amounts measured by the special treatment for interest rate swaps are treated with the borrowed money or other transactions that are subject to the hedge. Therefore such fair value is included in the fair value of the relevant transaction subject to the hedge in the “(Notes to financial instruments) 2. Fair value of financial instruments.”

2016 Annual Report

165

SMFG

Notes to Consolidated Financial Statements

(2) Currency derivatives March 31, 2015 Hedge accounting method Deferral hedge method

Recognition of gain or loss on the hedged items Allocation method

Type of derivative Principal items hedged Currency swaps................................. Foreign currency denominated loans and bills discounted, other securities, deposits, Forward foreign exchange................. foreign currency exchange, etc. Currency swaps................................. Loans and bills discounted, foreign Forward foreign exchange................. exchange Currency swaps................................. Borrowed money Total.................................................

Millions of yen Contract amount Total Over 1 year ¥6,727,385 ¥4,770,873 8,980

Fair value ¥(911,989)



(36)

100,155 84,886 813,122 16,526 39,455 36,397 / /

16,193 (173) (Note 3) ¥(896,005)

Notes: 1. SMFG applies deferred hedge accounting stipulated in “Treatment of Accounting and Auditing Concerning Accounting for Foreign Currency Transactions in Banking Industry” (JICPA Industry Audit Committee Report No. 25, July 29, 2002). 2. Fair value is calculated using discounted present value. 3. Forward foreign exchange amounts treated by the allocation method are treated with other securities or other transactions that are subject to the hedge. Therefore such fair value is included in the fair value of the relevant transaction subject to the hedge in the “(Notes to financial instruments) 2. Fair value of financial instruments.”

March 31, 2016 Hedge accounting method Deferral hedge method

Recognition of gain or loss on the hedged items Allocation method

Type of derivative Principal items hedged Currency swaps................................. Foreign currency denominated loans and bills discounted, other securities deposits, Forward foreign exchange................. foreign currency exchange, etc. Currency swaps................................. Loans and bills discounted, foreign Forward foreign exchange................. exchange Currency swaps................................. Borrowed money Total.................................................

Millions of yen Contract amount Total Over 1 year ¥9,600,108 ¥4,735,539

Fair value ¥(364,414)

8,052



158

90,378 494,141 46,415 /

69,277 — 44,900 /

22,037 8,939 (Note 3) ¥(333,280)

Notes: 1. SMFG applies deferred hedge accounting stipulated in “Treatment of Accounting and Auditing Concerning Accounting for Foreign Currency Transactions in Banking Industry” (JICPA Industry Audit Committee Report No. 25, July 29, 2002). 2. Fair value is calculated using discounted present value. 3. Forward foreign exchange amounts treated by the allocation method are treated with other securities or other transactions that are subject to the hedge. Therefore such fair value is included in the fair value of the relevant transaction subject to the hedge in the “(Notes to financial instruments) 2. Fair value of financial instruments.”

166 2016 Annual Report

SMFG

Notes to Consolidated Financial Statements

(3) Equity derivatives March 31, 2015 Hedge accounting Principal items method Type of derivative hedged Recognition of gain or Equity price index futures: Other securities loss on the hedged items Sold.............................................................. Bought......................................................... Equity price index swaps: Receivable equity index/payable floating rate........................................................... Receivable floating rate/payable equity index........................................................ Total............................................................... Note:

Fair value

¥118,375 —

¥   — —

¥  1,687 —







65,978 /

8,769 /

(15,013) ¥(13,326)

Fair value of transactions listed on exchange is calculated using the closing price on the Osaka Exchange or other relevant exchanges. Fair value of OTC transactions is calculated using discounted present value.

March 31, 2016 Hedge accounting method Type of derivative Recognition of gain or Equity price index swaps: loss on the hedged items Receivable equity index/payable floating

Principal items hedged Other securities

rate........................................................... Receivable floating rate/payable equity index........................................................ Total............................................................... Note:

Millions of yen Contract amount Total Over 1 year

Millions of yen Contract amount Total Over 1 year

Fair value







9,929 /

— /

315 ¥315

Fair value of OTC transactions is calculated using discounted present value.

2016 Annual Report

167

SMFG

Notes to Consolidated Financial Statements

(Notes to employee retirement benefits) 1. Outline of employee retirement benefits SMFG’s consolidated subsidiaries have funded and unfunded contributory defined benefit pension plans and defined-contribution pension plans for benefit payments to their employees. Funded contributory defined benefit pension plans mainly consist of contributory funded defined benefit pension plans and lump-sum severance indemnity plans which set up employee retirement benefit trusts. Unfunded contributory defined benefit pension plans are lump-sum severance indemnity plans which do not use such trust scheme. Some consolidated subsidiaries adopt the simplified method in calculating the projected benefit obligation. Additional benefits may also be granted when employees retire. 2. Contributory defined benefit pension plan (1) Reconciliation of beginning and ending balances of projected benefit obligation Millions of yen Year ended March 31

Beginning balance of projected benefit obligation.......................................................... Cumulative effects of changes in accounting policies................................................... Restated balance............................................................................................................ Service cost................................................................................................................. Interest cost on projected benefit obligation................................................................ Unrecognized net actuarial gain or loss incurred......................................................... Payments of retirement benefits.................................................................................. Unrecognized prior service cost................................................................................... Net change as a result of business combinations......................................................... Other.......................................................................................................................... Ending balance of projected benefit obligation...............................................................

2015 ¥1,089,286 (52,699) 1,036,587 31,681 13,913 50,926 (50,266) 60 — 206 ¥1,083,109

2016 ¥1,083,109 — 1,083,109 34,653 11,735 114,691 (51,724) (31) 13,477 (3,438) ¥1,202,471

(2) Reconciliation of beginning and ending balances of plan assets Millions of yen Year ended March 31

Beginning balance of plan assets.................................................................................... Expected return on plan assets.................................................................................. Unrecognized net actuarial gain or loss incurred....................................................... Contributions by the employer................................................................................. Payments of retirement benefits................................................................................ Net change as a result of business combinations...................................................... Other....................................................................................................................... Ending balance of plan assets.........................................................................................

2015 ¥1,163,834 34,677 213,991 48,937 (40,973) — 801 ¥1,421,268

2016 ¥1,421,268 39,543 (91,563) 45,233 (66,589) 12,281 (2,998) ¥1,357,175

(3) Reconciliation of the projected benefit obligation and plan assets to net defined benefit asset and net defined benefit liability reported on the consolidated balance sheets Millions of yen March 31

Funded projected benefit obligation............................................................................... Plan assets..................................................................................................................... Unfunded projected benefit obligation........................................................................... Net amount of asset and liability reported on the consolidated balance sheet.................

2015 ¥(1,049,307) 1,421,268 371,961 (33,802) ¥  338,159

2016 ¥(1,166,606) 1,357,175 190,568 (35,864) ¥  154,704

Millions of yen March 31

Net defined benefit asset................................................................................................ Net defined benefit liability........................................................................................... Net amount of asset and liability reported on the consolidated balance sheet.................

168 2016 Annual Report

2015 ¥376,255 (38,096) ¥338,159

2016 ¥203,274 (48,570) ¥154,704

Notes to Consolidated Financial Statements

SMFG

(4) Pension expenses Millions of yen Year ended March 31

Service cost.................................................................................................................... Interest cost on projected benefit obligation................................................................... Expected return on plan assets....................................................................................... Amortization of unrecognized net actuarial gain or loss................................................. Amortization of unrecognized prior service cost............................................................. Other (nonrecurring additional retirement allowance paid and other)............................ Pension expenses........................................................................................................... Note:

2015 ¥ 31,681 13,913 (34,677) 22,763 (129) 6,850 ¥ 40,402

2016 ¥ 34,653 11,735 (39,543) 31,956 (179) 4,672 ¥ 43,294

Pension expenses of consolidated subsidiaries which adopt the simplified method are included in “Service cost.”

(5) Remeasurements of defined benefit plans The breakdown of “Remeasurements of defined benefit plans” (before deducting tax effect) is as shown below: Millions of yen Year ended March 31

Prior service cost............................................................................................................ Net actuarial gain or loss............................................................................................... Total..............................................................................................................................

2015 ¥    190 (185,835) ¥(185,645)

2016 ¥    148 174,270 ¥174,418

(6) Accumulated remeasurements of defined benefit plans The breakdown of “Accumulated remeasurements of defined benefit plans” (before deducting tax effect) is as shown below: Millions of yen March 31

Unrecognized prior service cost..................................................................................... Unrecognized net actuarial gain or loss.......................................................................... Total..............................................................................................................................

2015 ¥   (956) (69,637) ¥(70,594)

2016 ¥   (808) 104,633 ¥103,824

2015 62.8% 21.5% 15.7% 100.0%

2016 61.3% 27.3% 11.4% 100.0%

(7) Plan assets 1) Major asset classes of plan assets The proportion of major asset classes to the total plan assets is as follows: March 31

Stocks....................................................................................................................... Bonds....................................................................................................................... Other....................................................................................................................... Total......................................................................................................................... Note:

The retirement benefit trusts set up for employee pension plans and lump-sum severance indemnity plans account for 37.9% and 34.0% of the total plan assets at March 31, 2015 and 2016, respectively.

2) Method for setting the long-term expected rate of return on plan assets The long-term expected rate of return on plan assets is determined based on the current and expected allocation of plan assets and the current and expected long-term rates of return on various asset classes of plan assets. (8) Actuarial assumptions The principal assumptions used in determining benefit obligation and pension expenses are as follows: 1) Discount rate Year ended March 31, 2015 Domestic consolidated subsidiaries......................... Overseas consolidated subsidiaries..........................

Percentages 0.4% to 1.6% 3.1% to 12.0%

Year ended March 31, 2016 Domestic consolidated subsidiaries......................... Overseas consolidated subsidiaries..........................

Percentages (0.1)% to 1.5% 3.3% to 12.8%

2016 Annual Report

169

SMFG

Notes to Consolidated Financial Statements

2) Long-term expected rate of return on plan assets Year ended March 31, 2015 Domestic consolidated subsidiaries......................... Overseas consolidated subsidiaries..........................

Percentages 0% to 6.1% 3.1% to 12.0%

Year ended March 31, 2016 Domestic consolidated subsidiaries......................... Overseas consolidated subsidiaries..........................

3. Defined contribution plan Fiscal year ended March 31, 2015 The amount required to be contributed by the consolidated subsidiaries is ¥6,770 million. Fiscal year ended March 31, 2016 The amount required to be contributed by the consolidated subsidiaries is ¥7,060 million.

170 2016 Annual Report

Percentages 0% to 4.3% 3.5% to 12.8%

SMFG

Notes to Consolidated Financial Statements

(Notes to stock options) 1. Amount of stock options expenses Stock options expenses which were accounted for as general and administrative expenses for the fiscal years ended March 31, 2015 and 2016 are as follows: Millions of yen

2015

Year ended March 31

General and administrative expenses....................................................................................

2016 ¥510

¥652

2. Amount of profit by non-exercise of stock acquisition rights Profit by non-exercise of stock acquisition rights which were accounted for as other income for the fiscal years ended March 31, 2015 and 2016 are as follows: Millions of yen

2015

Year ended March 31

Other income......................................................................................................................

2016 ¥14

¥6

3. Outline of stock options and changes (1) SMFG 1) Outline of stock options Date of resolution Title and number of grantees............................

Number of stock options*.................. Grant date.......................... Condition for vesting..........

Requisite service period......

Exercise period...................

July 28, 2010

July 29, 2011

July 30, 2012

July 29, 2013

Directors of SMFG 8 Directors of SMFG 9 Directors of SMFG 9 Directors of SMFG 9 Corporate auditors of SMFG 3 Corporate auditors of SMFG 3 Corporate auditors of SMFG 3 Corporate auditors of SMFG 3 Executive officers of SMFG 2 Executive officers of SMFG 2 Executive officers of SMFG 2 Executive officers of SMFG 3 Directors, corporate auditors and Directors, corporate auditors and Directors, corporate auditors and Directors, corporate auditors and executive officers of SMBC 69 executive officers of SMBC 71 executive officers of SMBC 71 executive officers of SMBC 67 Common shares 102,600 August 13, 2010 Stock acquisition right holders may exercise stock acquisition rights from the day when they are relieved of their positions either as a director, corporate auditor or executive officer of SMFG and SMBC. From June 29, 2010 to the closing of the ordinary general meeting of shareholders of SMFG for the fiscal year ended March 31, 2011 August 13, 2010 to August 12, 2040

Common shares 268,200 August 16, 2011 Stock acquisition right holders may exercise stock acquisition rights from the day when they are relieved of their positions either as a director, corporate auditor or executive officer of SMFG and SMBC. From June 29, 2011 to the closing of the ordinary general meeting of shareholders of SMFG for the fiscal year ended March 31, 2012 August 16, 2011 to August 15, 2041

Common shares 280,500 August 15, 2012 Stock acquisition right holders may exercise stock acquisition rights from the day when they are relieved of their positions either as a director, corporate auditor or executive officer of SMFG and SMBC. From June 28, 2012 to the closing of the ordinary general meeting of shareholders of SMFG for the fiscal year ended March 31, 2013 August 15, 2012 to August 14, 2042

Common shares 115,700 August 14, 2013 Stock acquisition right holders may exercise stock acquisition rights from the day when they are relieved of their positions either as a director, corporate auditor or executive officer of SMFG and SMBC. From June 27, 2013 to the closing of the ordinary general meeting of shareholders of SMFG for the fiscal year ended March 31, 2014 August 14, 2013 to August 13, 2043

2016 Annual Report

171

SMFG

Notes to Consolidated Financial Statements

Date of resolution Title and number of grantees............................

Number of stock options*.................. Grant date.......................... Condition for vesting..........

Requisite service period......

Exercise period...................

July 30, 2014

July 31, 2015

Directors of SMFG 10 Directors of SMFG 8 Corporate auditors of SMFG 3 Corporate auditors of SMFG 3 Executive officers of SMFG 2 Executive officers of SMFG 4 Directors, corporate auditors and Directors, corporate auditors and executive officers of SMBC 67 executive officers of SMBC 68 Common shares 121,900 August 15, 2014 Stock acquisition right holders may exercise stock acquisition rights from the day when they are relieved of their positions either as a director, corporate auditor or executive officer of SMFG and SMBC. From June 27, 2014 to the closing of the ordinary general meeting of shareholders of SMFG for the fiscal year ended March 31, 2015 August 15, 2014 to August 14, 2044

Common shares 132,400 August 18, 2015 Stock acquisition right holders may exercise stock acquisition rights from the day when they are relieved of their positions either as a director, corporate auditor or executive officer of SMFG and SMBC. From June 26, 2015 to the closing of the ordinary general meeting of shareholders of SMFG for the fiscal year ended March 31, 2016 August 18, 2015 to August 17, 2045

* Number of stock options has been converted and stated as number of shares.

2) Stock options granted and changes (a) Number of stock options Number of stock options

Date of resolution July 28, 2010 July 29, 2011 July 30, 2012 July 29, 2013 July 30, 2014 July 31, 2015 Before vested Previous fiscal year-end....... 38,400 151,300 232,500 111,600 121,600 — Granted.............................. — — — — — 132,400 Forfeited............................. — — — — 800 — Vested................................ 9,400 20,100 86,200 22,100 11,100 — Outstanding....................... 29,000 131,200 146,300 89,500 109,700 132,400 After vested Previous fiscal year-end....... 58,800 110,500 44,600 3,700 200 — Vested................................ 9,400 20,100 86,200 22,100 11,100 — Exercised............................ 7,600 2,200 9,000 900 700 — Forfeited............................. — — — — — — Exercisable......................... 60,600 128,400 121,800 24,900 10,600 — Note: Number of stock options has been converted and stated as number of shares.

(b) Price information Yen

Date of resolution July 28, 2010 July 29, 2011 July 30, 2012 July 29, 2013 July 30, 2014 July 31, 2015 Exercise price........................... ¥    1 ¥    1 ¥    1 ¥    1 ¥    1 ¥    1 Average exercise price.............. 3,726 3,418 5,263 3,605 3,604 — Fair value at the grant date...... 4,159 3,661 4,904 2,215 1,872 2,042

172 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

3) Valuation technique used for valuating fair value of stock options Stock options granted in the fiscal year were valuated using the following valuation technique. • Valuation technique: Black-Scholes option-pricing model • Principal parameters used in the option-pricing model Date of resolution Expected volatility *1........................................................................... Average expected life *2........................................................................ Expected dividends *3.......................................................................... Risk-free interest rate *4.......................................................................

July 31, 2015 27.38% 4 years ¥150 per share 0.05%

*1. Calculated based on the actual stock prices during 4 years from August 19, 2011 to August 18, 2015. *2. The average expected life could not be estimated rationally due to insufficient amount of data. Therefore, it was estimated based on average assumption periods of directors of SMFG and SMBC. *3. Expected dividends are based on the expected dividends on common stock for the fiscal year ended March 31, 2016 of the date of grant. *4. Japanese government bond yield corresponding to the average expected life.

4) Method of estimating the number of stock options vested Only the actual number of forfeited stock options is reflected because it is difficult to rationally estimate the actual number of stock options that will be forfeited in the future. (2) Consolidated subsidiary, KUBC 1) Outline of stock options Date of resolution Title and number of grantees........

Number of stock options*............ Grant date.................................... Condition for vesting.................... Requisite service period................ Exercise period.............................

June 29, 2005 Directors and employees 183 Common shares 46,400 July 29, 2005 N.A. N.A. June 30, 2007 to June 29, 2015

Date of resolution June 28, 2007 Title and number of grantees........ Officers not doubling as directors 14 Employees 48 Number of stock options*............ Grant date.................................... Condition for vesting.................... Requisite service period................ Exercise period.............................

Common shares 11,200 July 31, 2007 N.A. N.A. June 29, 2009 to June 28, 2017

June 29, 2006 Directors 9 Common shares 16,200 July 31, 2006 N.A. N.A. June 30, 2008 to June 29, 2016

June 29, 2006 Officers not doubling as directors 14 Employees 46 Common shares 11,500 July 31, 2006 N.A. N.A. June 30, 2008 to June 29, 2016

June 27, 2008 Directors 9 Officers not doubling as directors 16 Employees 45 Common shares 28,900 July 31, 2008 N.A. N.A. June 28, 2010 to June 27, 2018

June 26, 2009 Directors 11 Officers not doubling as directors 14 Employees 57 Common shares 35,000 July 31, 2009 N.A. N.A. June 27, 2011 to June 26, 2019

June 28, 2007 Directors 10 Common shares 17,400 July 31, 2007 N.A. N.A. June 29, 2009 to June 28, 2017

* ‌Number of stock options has been converted and stated as the number of shares in consideration of the reverse stock split to combine 10 common shares as one share, performed on October 1, 2014.

2016 Annual Report

173

SMFG

Notes to Consolidated Financial Statements

2) Stock options granted and changes (a) Number of stock options Number of stock options Date of resolution

Before vested Previous fiscal year-end......... Granted................................ Forfeited............................... Vested.................................. Outstanding......................... After vested Previous fiscal year-end......... Vested.................................. Exercised.............................. Forfeited............................... Exercisable........................... Note:

June 29, 2005

June 29, 2006

June 29, 2006

June 28, 2007

June 28, 2007

June 27, 2008

June 26, 2009

— — — — —

— — — — —

— — — — —

— — — — —

— — — — —

— — — — —

— — — — —

22,600 — — 22,600 —

6,200 — — — 6,200

5,700 — — 1,700 4,000

7,800 — — — 7,800

7,000 — — 1,900 5,100

22,700 — — 2,700 20,000

31,900 — — 3,100 28,800

Number of stock options has been converted and stated as the number of shares in consideration of the reverse stock split to combine 10 common shares as one share, performed on October 1, 2014.

(b) Price information Yen Date of resolution

Exercise price............................. Average exercise price................ Fair value at the grant date .......

June 29, 2005 ¥3,130 — —

June 29, 2006 ¥4,900 — 1,380

June 29, 2006 ¥4,900 — 1,380

June 28, 2007 ¥4,610 — 960

June 28, 2007 ¥4,610 — 960

June 27, 2008 ¥3,020 — 370

June 26, 2009 ¥1,930 — 510

3) Method of estimating the number of stock options vested Only the actual number of forfeited stock options is reflected because it is difficult to rationally estimate the actual number of stock options that will be forfeited in the future. (3) Consolidated subsidiary, MINATO 1) Outline of stock options Date of resolution Title and number of grantees............................ Number of stock options*.................. Grant date.......................... Condition for vesting..........

Requisite service period......

Exercise period...................

June 28, 2012

June 27, 2013

June 27, 2014

June 26, 2015

Directors 7 Officers 12

Directors 7 Officers 12

Directors 7 Officers 16

Directors 7 Officers 17

Common shares 368,000 July 20, 2012 Stock acquisition right holders may exercise stock acquisition rights from the day when they are relieved of their positions either as a director or executive officer of MINATO. June 28, 2012 to the closing of the ordinary general meeting of shareholders of MINATO for the fiscal year ended March 31, 2013. July 21, 2012 to July 20, 2042

Common shares 334,000 July 19, 2013 Stock acquisition right holders may exercise stock acquisition rights from the day when they are relieved of their positions either as a director or executive officer of MINATO. June 27, 2013 to the closing of the ordinary general meeting of shareholders of MINATO for the fiscal year ended March 31, 2014. July 20, 2013 to July 19, 2043

Common shares 320,000 July 18, 2014 Stock acquisition right holders may exercise stock acquisition rights from the day when they are relieved of their positions either as a director or executive officer of MINATO. June 27, 2014 to the closing of the ordinary general meeting of shareholders of MINATO for the fiscal year ended March 31, 2015 July 19, 2014 to July 18, 2044

Common shares 200,000 July 17, 2015 Stock acquisition right holders may exercise stock acquisition rights from the day when they are relieved of their positions either as a director or executive officer of MINATO. June 26, 2015 to the closing of the ordinary general meeting of shareholders of MINATO for the fiscal year ended March 31, 2016. July 18, 2015 to July 17, 2045

* Number of stock options has been converted and stated as number of shares.

174 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

2) Stock options granted and changes (a) Number of stock options Number of stock options Date of resolution

Before vested Previous fiscal year-end............................. Granted.................................................... Forfeited................................................... Vested...................................................... Outstanding............................................. After vested Previous fiscal year-end............................. Vested...................................................... Exercised.................................................. Forfeited................................................... Exercisable............................................... Note:

June 28, 2012

June 27, 2013

June 27, 2014

June 26, 2015

202,000 — — 71,000 131,000

223,000 — — 81,000 142,000

262,000 — 6,000 70,000 186,000

— 200,000 5,000 19,000 176,000

143,000 71,000 — — 214,000

105,000 81,000 — — 186,000

46,000 70,000 — — 116,000

— 19,000 — — 19,000

June 27, 2013 ¥  1 — 166

June 27, 2014 ¥  1 — 181

June 26, 2015 ¥  1 — 309

Number of stock options has been converted and stated as number of shares.

(b) Price information Date of resolution

Exercise price................................................. Average exercise price.................................... Fair value at the grant date............................

June 28, 2012 ¥  1 — 132

3) Valuation technique used for valuating fair value of stock options Stock options granted in the fiscal year were valuated using the following valuation technique. • Valuation technique: Black-Scholes option-pricing model • Principal parameters used in the option-pricing model Date of resolution

Expected volatility*1............................................................................ Average expected life*2......................................................................... Expected dividends*3........................................................................... Risk-free interest rate*4........................................................................

June 26, 2015 24.38% 2 years ¥5 per share 0.005%

*1 Calculated based on the actual stock prices during 2 years from July 18, 2013 to July 17, 2015. *2 The average expected life could not be estimated rationally due to insufficient amount of data. Therefore, it was estimated based on average assumption periods of directors of MINATO. *3 Expected dividends are based on the actual dividends on common stock for the fiscal year ended March 31, 2015. *4 Japanese government bond yield corresponding to the average expected life.

4) Method of estimating the number of stock options vested Only the actual number of forfeited stock options is reflected because it is difficult to rationally estimate the actual number of stock options that will be forfeited in the future.

2016 Annual Report

175

SMFG

Notes to Consolidated Financial Statements

(Notes to deferred tax assets and liabilities) 1. Significant components of deferred tax assets and liabilities March 31, 2015

Millions of yen

Deferred tax assets: Net operating loss carryforwards............................. ¥  320,680 Reserve for possible loan losses and write-off of loans..................................................................... 290,628 113,876 Write-off of securities............................................. Net defined benefit liability.................................... 35,174 Deferred losses on hedges....................................... 14,082 248,581 Other..................................................................... Subtotal.................................................................. 1,023,023 Valuation allowance................................................ (568,997) 454,026 Total deferred tax assets............................................... Deferred tax liabilities: Net unrealized gains on other securities.................. (731,045) Gains on securities contributed to employee (35,492) retirement benefits trust....................................... Remeasurements of defined benefit plans................ (23,160) (22,513) Leveraged lease....................................................... Other..................................................................... (115,367) Total deferred tax liabilities......................................... (927,578) Net deferred tax assets (liabilities)............................... ¥ (473,551)

March 31, 2016

Millions of yen

Deferred tax assets: Net operating loss carryforwards............................. ¥   319,801 Reserve for possible loan losses and write-off of loans..................................................................... 246,676 Write-off of securities............................................. 115,451 Net defined benefit liability.................................... 33,116 Remeasurements of defined benefit plans................ 32,331 Other..................................................................... 261,905 Subtotal.................................................................. 1,009,283 Valuation allowance................................................ (517,459) Total deferred tax assets............................................... 491,823 Deferred tax liabilities: Net unrealized gains on other securities.................. (498,610) Gains on securities contributed to employee retirement benefits trust....................................... (33,593) Deferred gains on hedges........................................ (30,151) Undistributed earnings of subsidiaries.................... (19,284) Other..................................................................... (132,542) Total deferred tax liabilities......................................... (714,182) Net deferred tax assets (liabilities)............................... ¥ (222,358)

2. Significant components of difference between the statutory tax rate used by SMFG and the effective income tax rate March 31, 2015

Statutory tax rate......................................................... Difference between SMFG and overseas consolidated subsidiaries....................................... Dividends exempted for income tax purposes......... Valuation allowance................................................ Effects of changes in the corporate income tax rate.. Other..................................................................... Effective income tax rate..............................................

Percentages

March 31, 2016

35.64% Statutory tax rate......................................................... Valuation allowance................................................ (2.34) Difference between SMFG and overseas (2.05) consolidated subsidiaries....................................... (0.48) Difference of the scope of taxable income between corporate income tax and enterprise income tax.... 2.10 Dividends exempted for income tax purposes......... 0.84 Effects of changes in the corporate income tax rate.. 33.71% Equity in losses of affiliates..................................... Other..................................................................... Effective income tax rate..............................................

Percentages

33.06% (8.06) (2.42) (1.08) (0.61) 1.34 1.22 (0.49) 22.96%

3. Adjustments to deferred tax assets and liabilities arising from a change in the income tax rate In accordance with the Act for Partial Amendment of the Income Tax Act, etc. (Act No. 15, 2016) and the Act to Amend the Local Taxation Act, etc. (Act No.13, 2016) on March 29, 2016, the corporate income tax rate is lowered from fiscal years beginning on or after April 1, 2016. As a result of these changes, the effective statutory tax rate used by SMFG and its consolidated domestic subsidiaries for the calculation of deferred tax assets and liabilities was changed from the current rate of 32.26 % to 30.86 % for temporary differences and other items expected to be realized during the period beginning from the fiscal year beginning on April 1, 2016 or April 1 2017, and to 30.62 % for temporary differences and other items expected to be realized in the fiscal year beginning on or after April 1, 2018. As a result of these changes in tax rates, “Net deferred tax assets (liabilities)” increased by ¥16,552 million, “Net unrealized gains (losses) on other securities” increased by ¥26,903 million, “Net deferred gains (losses) on hedges” increased by ¥1,305 million, “Remeasurements of defined benefit plans” increased by ¥1,289 million, and “Income tax deferred” increased by ¥12,946 million before considering about non-controlling interests. “Deferred tax liabilities for land revaluation excess” decreased by ¥1,705 million, while “Land revaluation excess” increased by the same amount before considering about non-controlling interests.

176 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

(Notes to asset retirement obligations) Fiscal year ended March 31, 2015 There is no significant information to be disclosed. Fiscal year ended March 31, 2016 There is no significant information to be disclosed.

(Notes to real estate for rent) Fiscal year ended March 31, 2015 There is no significant information to be disclosed. Fiscal year ended March 31, 2016 There is no significant information to be disclosed.

2016 Annual Report

177

SMFG

Notes to Consolidated Financial Statements

(Notes to segment and other related information) [Segment information] 1. Summary of reportable segment SMFG Group’s reportable segment is defined as an operating segment for which discrete financial information is available and reviewed by the Board of Directors and SMFG’s Management Committee regularly in order to make decisions about resources to be allocated to the segment and assess its performance. Besides commercial banking, SMFG Group companies conduct businesses such as leasing, securities, consumer finance, system development and data processing. The primary businesses, “Commercial banking,” “Leasing,” “Securities” and “Consumer Finance,” are separate reportable segments, and other businesses are aggregated as “Other business.” SMBC assesses business performance by classifying “Commercial banking” into the following 4 business units: “Wholesale banking unit,” “Retail banking unit” and “International banking unit” that are based on the client segment, and “Treasury unit” that is based on the financial markets. 2. Method of calculating profit and loss amount by reportable segment Accounting methods applied to the reported business segment are the same as those described in “(Notes to significant accounting policies for preparing consolidated financial statements).” SMFG does not assess assets by business segments.

178 2016 Annual Report

SMFG

Notes to Consolidated Financial Statements

3. Information on profit and loss amount by reportable segment Millions of yen Commercial banking

Year ended March 31, 2015

SMBC Sub-total

Gross profit.......................... ¥1,634,284 Interest income................ 1,121,428 Non-interest income........ 512,856 Expenses, etc........................ (791,211) Depreciation................... (82,976) Consolidated net business profit..................... ¥  843,073

Wholesale Banking Unit

Retail Banking Unit

SMBC International Banking Unit

Treasury Unit

Head office account

Others

Total

¥ 555,429 315,796 239,633 (206,778) (23,281)

¥ 386,784 313,171 73,613 (350,047) (31,317)

¥ 345,332 227,808 117,524 (106,637) (10,195)

¥353,990 212,361 141,629 (25,918) (4,682)

¥  (7,250) 52,292 (59,542) (101,831) (13,501)

¥ 289,397 ¥1,923,682 171,222 1,292,650 118,175 631,032 (202,923) (994,135) (10,041) (93,018)

¥ 348,651

¥  36,737

¥238,695

¥328,072

¥(109,081)

¥  86,473

¥  929,547

Millions of yen Year ended March 31, 2015

Gross profit.......................... Interest income................ Non-interest income........ Expenses, etc........................ Depreciation.................... Consolidated net business profit.....................

Year ended March 31, 2015

SMFL

Leasing Others

Total

SMBC Nikko

Securities SMBC Friend Others

Total

¥136,965 19,311 117,654 (56,497) (3,555)

¥12,325 5,132 7,193 (4,244) (4,720)

¥149,290 24,443 124,847 (60,742) (8,275)

¥ 346,294 1,498 344,796 (248,680) (2,720)

¥ 50,393 1,246 49,146 (39,993) (1,707)

¥ (2,799) 1,015 (3,814) (13,238) (677)

¥ 393,888 3,759 390,128 (301,913) (5,105)

¥ 80,467

¥ 8,081

¥ 88,548

¥  97,613

¥ 10,399

¥(16,037)

¥  91,974

SMCC

Gross profit.......................... ¥ 196,462 Interest income................ 13,667 Non-interest income........ 182,794 Expenses, etc........................ (146,087) Depreciation.................... (11,577) Consolidated net business profit..................... ¥  50,375

Cedyna

Millions of yen Consumer Finance SMBCCF Others

Total

Other Business

Grand Total

¥ 164,205 25,916 138,289 (121,750) (8,686)

¥215,559 149,016 66,543 (96,123) (5,942)

¥   661 (9,943) 10,605 (17,944) (2,178)

¥ 576,889 178,657 398,232 (381,906) (28,385)

¥(63,347) ¥ 2,980,403 5,668 1,505,178 (69,015) 1,475,224 68,754 (1,669,942) (11,423) (146,209)

¥  42,455

¥119,436

¥(17,283)

¥ 194,982

¥  5,407 ¥ 1,310,461

Notes: 1. Figures shown in the parenthesis represent the loss. 2. “SMFL” and “SMBCCF” represent consolidated figures of SMFL and SMBCCF. “SMBC Nikko” represents non-consolidated figures of SMBC Nikko plus figures of the overseas incorporated securities companies. “Cedyna” represents consolidated figures of Cedyna excluding figures of the immaterial subsidiaries. 3. “Other business” includes profit or loss to be eliminated as inter-segment transactions.

2016 Annual Report

179

SMFG

Notes to Consolidated Financial Statements

Millions of yen Commercial banking

Year ended March 31, 2016

SMBC Sub-total

Gross profit.......................... ¥1,534,271 Interest income................ 1,023,576 Non-interest income........ 510,694 Expenses, etc........................ (805,483) Depreciation................... (92,376) Consolidated net business profit..................... ¥  728,787

SMBC International Banking Unit

Wholesale Banking Unit

Retail Banking Unit

¥ 545,350 300,125 245,225 (205,095) (23,592)

¥ 372,811 302,025 70,786 (354,116) (35,577)

¥ 340,255

¥   18,695

Treasury Unit

Head office account

¥ 355,994 225,437 130,557 (116,484) (10,934)

¥293,570 168,190 125,380 (29,074) (5,473)

¥ (33,453) 27,799 (61,253) (100,714) (16,800)

¥ 302,987 ¥  1,837,258 174,431 1,198,007 128,555 639,250 (218,991) (1,024,475) (11,597) (103,974)

¥ 239,510

¥264,496

¥(134,168)

¥  83,995 ¥    812,783

Others

Total

Millions of yen Year ended March 31, 2016

SMFL

Gross profit.......................... ¥142,813 Interest income................ 17,847 Non-interest income........ 124,965 Expenses, etc........................ (62,140) Depreciation.................... (3,170) Consolidated net business profit..................... ¥ 80,673

Year ended March 31, 2016

SMCC

Gross profit.......................... ¥208,514 Interest income................ 13,579 Non-interest income........ 194,934 Expenses, etc........................ (157,112) Depreciation.................... (12,865) Consolidated net business profit....................... ¥ 51,402

Leasing Others

Total

SMBC Nikko

Securities SMBC Friend Others

Total

¥19,740 5,053 14,686 (4,944) (5,487)

¥162,553 22,900 139,652 (67,084) (8,658)

¥ 316,329 1,605 314,724 (255,820) (2,895)

¥ 43,771 1,499 42,271 (38,797) (1,291)

¥ (2,971) 1,531 (4,502) (12,652) (755)

¥ 357,130 4,636 352,493 (307,270) (4,942)

¥14,795

¥ 95,468

¥  60,509

¥  4,974

¥(15,624)

¥  49,859

Cedyna

Millions of yen Consumer Finance SMBCCF Others

Total

Other Business

Grand Total

¥ 165,143 23,685 141,458 (124,151) (7,896)

¥ 233,388 156,985 76,402 (104,843) (7,028)

¥  4,467 (5,382) 9,849 (11,118) (824)

¥ 611,512 188,867 422,645 (397,225) (28,615)

¥(64,490) ¥   2,903,964 8,515 1,422,928 (73,005) 1,481,036 35,023 (1,761,032) (12,373) (158,564)

¥  40,991

¥ 128,544

¥ (6,651)

¥ 214,287

¥(29,467) ¥   1,142,931

Notes: 1. Figures shown in the parenthesis represent the loss. 2. “SMFL” and “SMBCCF” represent consolidated figures of SMFL and SMBCCF. “SMBC Nikko” represents non-consolidated figures of SMBC Nikko plus figures of the overseas incorporated securities companies. “Cedyna” represents consolidated figures of Cedyna excluding figures of the immaterial subsidiaries. 3. “Other business” includes profit or loss to be eliminated as inter-segment transactions.

4. Difference between total amount of consolidated net business profit by reportable segment and ordinary profit on consolidated statements of income (adjustment of difference) Year ended March 31, 2015

Consolidated net business profit................................................................................................................................. Other ordinary income.............................................................................................................................................. Other ordinary expenses (excluding equity in losses of affiliates)................................................................................ Ordinary profit on consolidated statements of income................................................................................................ Year ended March 31, 2016

Consolidated net business profit................................................................................................................................. Other ordinary income.............................................................................................................................................. Other ordinary expenses (excluding equity in losses of affiliates)................................................................................ Ordinary profit on consolidated statements of income................................................................................................

180 2016 Annual Report

Millions of yen

¥1,310,461 218,008 (207,313) ¥1,321,156 Millions of yen

¥1,142,931 197,494 (355,141) ¥  985,284

Notes to Consolidated Financial Statements

SMFG

[Related information] Fiscal year ended March 31, 2015 1. Information on each service

Ordinary income to external customers....................................... Note:

Commercial banking

Leasing

Millions of yen Consumer Securities Finance

¥2,557,945

¥691,177

¥494,779

¥1,013,679

Other business

Total

¥93,620

¥4,851,202

Consolidated ordinary income is presented as a counterpart of sales of companies in other industries.

2. Geographic information (1) Ordinary income Japan

The Americas

¥3,783,696

¥294,216

Millions of yen Europe and Middle East

¥387,251

Asia and Oceania

Total

¥386,037

¥4,851,202

Notes: 1. Consolidated ordinary income is presented as a counterpart of sales of companies in other industries. 2. Ordinary income from transactions of SMFG and its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries is classified as “Japan.” Ordinary income from transactions of overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries is classified as “The Americas,” “Europe and Middle East” and “Asia and Oceania,” based on their locations and in consideration of their geographic proximity and other factors. 3. The Americas includes the United States, Brazil, Canada and others; Europe and Middle East includes the United Kingdom, Germany, France and others; Asia and Oceania includes China, Singapore, Australia and others except Japan.

(2) Tangible fixed assets Japan

The Americas

¥1,360,804

¥191,232

Millions of yen Europe and Middle East

¥1,201,437

Asia and Oceania

Total

¥17,378

¥2,770,853

3. Information on major customers There are no major customers individually accounting for 10% or more of ordinary income reported on the consolidated statements of income. Fiscal year ended March 31, 2016 1. Information on each service Commercial banking

Ordinary income to external customers................................ Note:

¥2,481,366

Millions of yen Consumer Securities Finance

Leasing

¥671,074

¥368,052

¥1,106,836

Other business

Total

¥144,771

¥4,772,100

Consolidated ordinary income is presented as a counterpart of sales of companies in other industries.

2. Geographic information (1) Ordinary income Japan

The Americas

Millions of yen Europe and Middle East

Asia and Oceania

Total

¥3,592,825

¥370,538

¥419,241

¥389,495

¥4,772,100

Notes: 1. Consolidated ordinary income is presented as a counterpart of sales of companies in other industries. 2. Ordinary income from transactions of SMFG and its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries is classified as “Japan.” Ordinary income from transactions of overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries is classified as “The Americas,” “Europe and Middle East” and “Asia and Oceania,” based on their locations and in consideration of their geographic proximity and other factors. 3. The Americas includes the United States, Brazil, Canada and others; Europe and Middle East includes the United Kingdom, Germany, France and others; Asia and Oceania includes China, Singapore, Australia and others except Japan.

(2) Tangible fixed assets Japan

The Americas

Millions of yen Europe and Middle East

Asia and Oceania

Total

¥1,479,043

¥238,373

¥1,181,711

¥20,296

¥2,919,424 2016 Annual Report

181

SMFG

Notes to Consolidated Financial Statements

3. Information on major customers There are no major customers individually accounting for 10% or more of ordinary income reported on the consolidated statements of income. [Information on impairment loss for fixed assets by reportable segment] Millions of yen Year ended March 31,2015

Impairment loss..............................

Commercial Banking

Leasing

¥4,906

Securities

¥—

Consumer finance

¥173

¥29

Other business

Total

¥—

¥5,109

Millions of yen Year ended March 31,2016

Impairment loss..............................

Commercial Banking

Leasing

¥4,076

Securities

¥—

Consumer finance

¥241

¥0

Other business

Total

¥43

¥4,362

[Information on amortization of goodwill and unamortized balance by reportable segment] Millions of yen Year ended March 31, 2015

Amortization of goodwill............... Unamortized balance......................

Commercial Banking

Leasing

¥ 2,010 22,098

¥ 6,446 75,414

Securities

Consumer finance

¥ 14,013 188,202

¥ 4,025 66,180

Other business

¥23 71

Total

¥ 26,521 351,966

Millions of yen Year ended March 31, 2016

Amortization of goodwill............... Unamortized balance......................

Commercial Banking

Leasing

¥ 3,237 34,262

¥ 6,375 68,526

Securities

¥ 14,013 174,188

Consumer finance

¥ 4,019 62,160

Other business

¥23 47

Total

¥ 27,670 339,185

[Information on gains on negative goodwill by reportable segment] Fiscal year ended March 31, 2015 There are no corresponding transactions. Fiscal year ended March 31, 2016 There is no significant information to be disclosed. [Information on total credit cost by reportable segment]

Year ended March 31, 2015

Total credit cost..............................

Commercial banking

¥(68,299)

Leasing

¥(6,066)

Millions of yen Consumer Securities finance

¥(212)

¥78,780

Other business

Total

¥3,644

¥7,847

Notes: 1. Total credit cost = Write-off loans + Losses on sales of delinquent loans – Gains on reversal of reserve for possible loan losses – Recoveries of written-off claims. 2. “Other business” includes profit or loss to be eliminated as inter-segment transactions. 3. Figures shown in the parenthesis represent the reversal of total credit cost.

Year ended March 31, 2016

Total credit cost..............................

Commercial banking

¥10,333

Leasing

¥(1,491)

Millions of yen Consumer Securities finance

¥(197)

¥91,425

Other business

¥2,750

Notes: 1. Total credit cost = Provision for reserve for possible loan losses + Write-off loans + Losses on sales of delinquent loans – Recoveries of written-off claims. 2. “Other business” includes profit or loss to be eliminated as inter-segment transactions. 3. Figures shown in the parenthesis represent the reversal of total credit cost.

182 2016 Annual Report

Total

¥102,820

Notes to Consolidated Financial Statements

SMFG

[Information on related parties] Fiscal year ended March 31, 2015 There is no significant information to be disclosed. Fiscal year ended March 31, 2016 There is no significant information to be disclosed.

(Business Combinations) The integration of Citibank’s retail banking business by SMBC Trust Bank SMBC Trust Bank Ltd. (“SMBC Trust”), a wholly owned subsidiary of SMFG, succeeded the retail banking business from Citibank Japan Ltd. (“Citibank”), a wholly owned subsidiary of Citigroup Inc., through the absorption-type split on November 1, 2015 (effective date). The outline of the business combination through acquisition is as follows: 1. Outline of the business combination (1) Name of the acquired company and its business Citibank Japan Ltd. (Retail banking business) (2) Main reasons for the business combination The acquisition is aimed at achieving sustainable growth at SMFG, through expansion of the customer base with the integration of retail customers acquired from Citibank; further strengthening of overseas operations through the acquisition of approximately 1 trillion yen in foreign currency deposits; and the sharing of expertise in various areas, including foreign currency investment management and marketing. (3) Date of the business combination November 1, 2015 (4) Legal form of the business combination This is an absorption-type split in which SMBC Trust is the successor company. (5) Name of the entity after the business combination SMBC Trust Bank Ltd. (6) Grounds for deciding on the acquirer SMBC Trust allocated non-voting stocks to Citibank as the consideration of the acquisition. 2. Period of the acquired company’s financial result included in the consolidated statements of income of SMFG From November 1, 2015 to March 31, 2016 3. Acquisition cost and consideration of the acquired business Consideration Acquisition cost

Non-voting stocks (900,000 shares)

¥45,000 million ¥45,000 million

Note that SMBC Trust allocated its non-voting stocks to Citibank and SMBC, a wholly owned subsidiary of SMFG, acquired them in cash. 4. Major acquisition-related costs Advisory fees etc., ¥286 million 5. Amount of goodwill, reason for recognizing goodwill, amortization method and the period (1) Amount of goodwill ¥14,476 million (2) Reason for recognizing goodwill SMFG accounted for the difference between the acquisition cost and fair value of the acquired net assets on the date of the business combination as goodwill. (3) Amortization method and the period Straight-line method over 20 years 6. Amounts of assets and liabilities acquired on the date of the business combination (1) Assets Millions of yen

Total assets.................................................................................................................... Cash and due from banks..........................................................................................

2,407,085 2,296,106

2016 Annual Report

183

SMFG

Notes to Consolidated Financial Statements

(2) Liabilities Millions of yen

Total liabilities.............................................................................................................. Deposits...................................................................................................................

2,376,561 2,361,907

7. The amounts allocated to intangible fixed assets other than goodwill, breakdown by component and the weighted average amortization period by component Intangible fixed assets, other than goodwill......................................................................... Core deposits....................................................................................................................... Assets related to customers..................................................................................................

¥36,807 million ¥27,487 million ¥9,320 million

(20 years) (20 years) (20 years)

8. Approximate amounts and their calculation method of impact on the consolidated statements of income for the fiscal year ended March 31, 2016, assuming that the business combination had been completed at the beginning of the fiscal year The approximate amounts have not been disclosed since they are immaterial.

(Per Share Data) Yen As of and year ended March 31

Net assets per share.................................................................................................................. Earnings per share.................................................................................................................... Earnings per share (diluted)......................................................................................................

2015 ¥6,598.87 551.18 550.85

2016 ¥6,519.60 472.99 472.67

Notes: 1. Earnings per share and earnings per share (diluted) are calculated based on the following.

Millions of yen except number of shares Year ended March 31

Earnings per share: Profit attributable to owners of parent.................................................................. Amount not attributable to common stockholders................................................ Profit attributable to owners of parent attributable to common stock................... Average number of common stock during the fiscal year (in thousand).................. Earnings per share (diluted): Adjustment for profit attributable to owners of parent.......................................... Adjustment of dilutive shares issued by subsidiaries and affiliates.................... Increase in number of common stock (in thousand)............................................... Stock acquisition rights................................................................................... Outline of dilutive shares which were not included in the calculation of “Earnings per share (diluted)” because they do not have dilutive effect:

2015

2016

¥  753,610 — ¥  753,610 1,367,258 ¥ (0) (0) 816 816

¥  646,687 — ¥  646,687 1,367,228 ¥ (0) (0) 928 928





2. Net assets per share are calculated based on the following:

Millions of yen except number of shares March 31

Net assets.................................................................................................................. Amounts excluded from Net assets............................................................................ Stock acquisition rights........................................................................................ Non-controlling interests..................................................................................... Net assets attributable to common stock at the fiscal year-end................................... Number of common stock at the fiscal year-end used for the calculation of Net assets per share (in thousands)...........................................................................................

(Significant Subsequent Events) There is no significant subsequent event to be disclosed.

184 2016 Annual Report

2015 ¥10,696,271 1,674,022 2,284 1,671,738 ¥ 9,022,249

2016 ¥10,447,669 1,533,907 2,884 1,531,022 ¥ 8,913,761

1,367,241

1,367,224

SMFG

Notes to Consolidated Financial Statements

[Consolidated supplementary financial schedules] [Schedule of bonds] Date of issuance

Company Type of bonds SMFG Straight bonds, payable in U.S. dollars (Note 3)............................................ Mar. 9, 2016 Sep. 2014 ~ Subordinated bonds, payable in Yen.... Sep. 2015 Sep. 2014 ~ Subordinated bonds, payable in Yen.... Sep. 2015 Perpetual subordinated bonds, payable Jul. 30, in Yen............................................... 2015 Subordinated bonds, payable in U.S. Apr. 2, dollars (Note 3) ................................ 2014 SMBC Short-term bonds, payable in Yen Mar. 31, (Note 4)............................................ 2015 Straight bonds, payable in Yen Aug. 2004 ~ (Note 4)............................................ Sep. 2004 Straight bonds, payable in Yen Apr. 2010 ~ (Note 4)............................................ Apr. 2014 Straight bonds, payable in Euroyen May. 8, (Note 4)............................................ 2006 Straight bonds, payable in U.S. dollars (Notes 3 and 4)................................. Subordinated bonds, payable in U.S. dollars (Note 3).................................

Jul. 2010 ~ Jan. 2016 May. 28, 2015

Straight bonds, payable in British pound sterling (Notes 3 and 4).......... Straight bonds, payable in Euro (Note 3)............................................

Mar. 18, 2013 Jul. 2013 ~ Nov. 2015

Straight bonds, payable in Australian dollars (Notes 3 and 4)...................... Straight bonds, payable in Hong Kong dollars (Note 3)................................. Subordinated bonds, payable in Yen (Note 4)............................................ Subordinated bonds, payable in Yen............................................... Subordinated bonds, payable in Euroyen........................................ Perpetual subordinated bonds, payable in U. S. dollars (Note 3).................... Perpetual subordinated bonds, payable in U. S. dollars (Note 3).................... Subordinated bonds, payable in Euro (Note 3)............................................ Perpetual subordinated bonds, payable in Euro (Note 3)................................ (*1) Consolidated subsidiaries, straight bonds, payable in Yen (Notes 2 and 4).............. (*2) Consolidated subsidiaries, straight bonds, payable in U. S. dollars (Notes 2,3 and 4) ............................. (*3) Consolidated subsidiaries, straight bonds, payable in Australian dollars (Notes 2 and 3) ................................ (*4) Consolidated subsidiaries, straight bonds, payable in Renminbi (Notes 2,3 and 4) .................................. (*5) Consolidated subsidiaries, straight bonds, payable in Renminbi (Notes 2,3 and 4)..................................... (*6) Consolidated subsidiaries, straight bonds, payable in Indonesia rupiah (Notes 2 and 3)..................................... (*7) Consolidated subsidiaries, subordinated bonds, payable in Yen (Notes 2 and 4)..................................... (*8) Consolidated subsidiaries, short-term bonds, payable in Yen (Notes 2 and 4)..................................... Total.....................................................................

Jun. 2012 ~ Aug. 2015 Mar. 2015 ~ Apr. 2015 Aug. 2005 ~ Dec. 2011 Nov. 2011 ~ Jan. 2013 Jun. 2005 ~ Jun. 2008 Mar. 1, 2012 Jul. 22, 2005 Nov. 9, 2010 Jul. 22, 2005 Apr. 2010 ~ Mar. 2016 Apr. 2014 ~ Mar. 2016 Mar. 29, 2016

Millions of yen At the beginning of At the end of the fiscal year the fiscal year 450,480 — ($4,000,000 thousand) 99,399

255,815

34,800

153,531

— 209,788 ($ 1,746,058 thousand) 25,000 [25,000]

300,000 196,717 ($ 1,746,753 thousand)

35,000 729,974 [370,000] 500 [500] 2,562,816 ($21,330,140 thousand) [432,540] — 44,502 (£250,000 thousand) [44,502] 259,206 (€1,989,456 thousand) 137,981 (A$1,499,469 thousand) [12,882] 13,392 (HK$864,000 thousand) 583,046 [50,000] 354,715 12,000 178,636 ($1,486,780 thousand) 39,309 ($327,169 thousand) 96,452 (€740,294 thousand) 43,152 (€331,204 thousand) 629,682 [91,114] 1,457 ($13,000 thousand) [108]

Aug. 3, 2012

— 11,616 (RMB600,000 thousand) [11,616]

May. 2014 ~ Mar. 2016

19,287 (RMB996,255 thousand)

Feb. 3, 2015

— 35,000 [35,000] 359,992 [200,000] — 2,538,524 ($22,540,617 thousand) [439,218] 73,766 ($655,000 thousand) — 445,008 (€3,491,084 thousand) 131,958 (A$1,529,597 thousand) [53,487] 34,348 (HK$2,364,000 thousand) 534,055 [70,000]

Percentages Interest rate (Note 1) Collateral 2.3161 ~ 3.784 None 0.849 ~ 1.328 None 0.59 ~ 0.61 None 2.49 ~ 2.88 None

Date of maturity Mar. 2021 ~ Mar. 2026 Sep. 2024 ~ May. 2030 Sep. 2024 ~ Oct. 2025 Perpetual

4.436

None

Apr. 2, 2024

— -0.03943 ~ -0.03914 0.254 ~ 0.69



None

— Aug. 2016 ~ Sep. 2016 Apr. 2016 ~ Apr. 2019







0.9411 ~ 4.13

None

Jul. 2016 ~ Mar. 2030

4.3

None

May. 30, 2045

— 0.085 ~ 2.75



— Sep. 2017 ~ Jul. 2023

None

None

Jun. 2016 ~ Mar. 2025 Apr. 2020 ~ Apr. 2025 Feb. 2017 ~ Dec. 2026 Nov. 2021 ~ Feb. 2023

2.564

None

Jun. 16, 2023

4.85

None

Mar. 1, 2022

— 94,421 (€740,733 thousand)







4

None

Nov. 9, 2020

— 746,465 [139,660] 3,294 ($32,530 thousand) [886]

— 0.01 ~ 19.2

— None

— Apr. 2016 ~ Mar. 2046

0.01 ~ 5

None

Apr. 2016 ~ Feb. 2036

0.01

None

Mar. 29, 2019







2.809 ~ 5.8

None

May. 2016 ~ Jun. 2016

9.85

None

Feb. 3, 2018

2.19 ~ 4.5

None

Mar. 2016 ~ Perpetual

-0.001 ~ 0.15 —

None —

Apr. 2016 ~ Oct. 2016 —

354,651 2,000 168,794 ($1,498,795 thousand)

89 (A$1,040,thousand) — 36,365 (RMB2,093,569 thousand) [36,365]

8,778 — (IDR997,500,994 thousand)

Mar. 1996~ Dec. 2012

126,200 [10,000]

82,300 [11,250]

Apr. 2014 ~ Mar. 2016 —

1,345,800 [1,345,800] ¥ 7,593,718

1,271,300 [1,271,300] ¥ 8,277,657

2.97 ~ 4.13 2.09 ~ 2.92 1.43 ~ 2.8 0.87 ~ 1.1

None

None None None

2016 Annual Report

185

SMFG

Notes to Consolidated Financial Statements

Notes: 1. “Interest rate” indicates a nominal interest rate which is applied at respective consolidated balance sheet dates. Therefore, this rate may differ from an actual interest rate. 2. (*1) This represents an aggregate of straight bond issued in yen by SMFL, SMBC Nikko and SMBCCF, domestic consolidated subsidiaries. (*2) This represents an aggregate of straight bond issued in U.S. dollar by SMBC Nikko, a domestic consolidated subsidiary. (*3) This is a straight bond issued in Australian dollars by SMBC Nikko, a domestic consolidated subsidiary. (*4) This is a straight bond issued in Renminbi by SMFL, a domestic consolidated subsidiary. (*5) This represents an aggregate of straight bond issued in Renminbi by Sumitomo Mitsui Banking Corporation (China) Limited, an overseas consolidated subsidiary. (*6) This is a straight bond issued in Indonesia rupiah by PT Bank Sumitomo Mitsui Indonesia, an overseas consolidated subsidiary. (*7) This represents an aggregate of perpetual subordinated bonds and subordinated term bonds issued in yen by SMBC International Finance N.V., an overseas consolidated subsidiary and KUBC and MINATO, domestic consolidated subsidiaries. (*8) This represents an aggregate of short-term bond issued in yen by SMCC, SMFL and SMBC Nikko, domestic consolidated subsidiaries. 3. Figures showed in ( ) in “At the beginning of the fiscal year” and “At the end of the fiscal year” are in foreign currency. 4. Figures showed in [ ] in “At the beginning of the fiscal year” and “At the end of the fiscal year” are the amounts to be redeemed within one year. 5. The redemption schedule over the next 5 years after respective balance sheet dates of the consolidated subsidiaries was as follows:

Within 1 year

More than 1 year to 2 years

Millions of yen More than 2 years to 3 years

More than 3 years to 4 years

More than 4 years to 5 years

¥2,257,279

¥1,025,581

¥674,297

¥539,293

¥974,411

[Schedule of borrowings]

Classification

Borrowed money........................................... Other borrowings..................................... Lease obligations...........................................

Millions of yen At the beginning of At the end of the fiscal year the fiscal year

¥9,778,095 9,778,095 101,840

Percentages Average interest rate

¥8,571,227 8,571,227 105,691

0.65 0.65 4.62

Repayment Term

— Jan. 2016 ~ Perpetual Apr. 2016 ~ Jul. 2032

Notes: 1. “Average interest rate” represents the weighted average interest rate based on the interest rates and “At the end of the fiscal year” at respective balance sheet dates of consolidated subsidiaries. 2. The redemption schedule over the next 5 years on Borrowings and Lease obligations after respective balance sheet dates of the consolidated subsidiaries was as follows:

Other borrowings............................ Lease obligations.............................

Within 1 year

More than 1 year to 2 years

Millions of yen More than 2 years to 3 years

More than 3 years to 4 years

More than 4 years to 5 years

¥5,790,740 23,399

¥210,316 21,651

¥482,027 19,304

¥345,289 17,035

¥255,066 14,984

Since the commercial banking business accepts deposits and raises and manages funds through the call loan and commercial paper markets as a normal course of business, the schedule of borrowings shows a breakdown of Borrowed money included in the “Liabilities” and Lease obligations included in “Other liabilities” in the consolidated balance sheet. Reference: Commercial paper issued for funding purpose as a normal course of business is as follows: Millions of yen At the beginning of At the end of the fiscal year the fiscal year

Commercial paper.........................................

¥3,351,459

¥3,017,404

Percentages Average interest rate

0.53

Repayment Term

Apr. 2016 ~ Mar. 2017

[Schedule of asset retirement obligations] Since the amount of asset retirement obligations accounts for 1% or less than the total of liabilities and net assets, the schedule of asset liability obligation is not disclosed.

186 2016 Annual Report

Notes to Consolidated Financial Statements

SMFG

[Others] Quarterly consolidated financial information in the fiscal year ended March 31, 2016 is as follows; First quarter consolidated total period

Ordinary income........................................... Income before income taxes........................... Profit attributable to owners of parent........... Earnings per share.........................................

Millions of yen (except Earnings per share) Second quarter Third quarter consolidated consolidated total period total period

¥1,259,549 406,501 267,869 195.92

¥2,388,800 630,832 388,137 283.89

First quarter consolidated accounting period

¥195.92

Fiscal year ended March 31, 2016

¥3,574,474 897,938 626,242 458.04

¥4,772,100 980,170 646,687 472.99

Second quarter consolidated accounting period

Third quarter consolidated accounting period

Fourth quarter consolidated accounting period

¥87.96

¥174.15

¥14.95

Yen

Earnings per share.........................................

2016 Annual Report

187

SMFG

Notes to Consolidated Financial Statements

(Non-consolidated financial statements) 1. Non-consolidated balance sheets Millions of U.S. dollars

Millions of yen March 31

Assets: Current assets Cash and due from banks.......................................................................... Prepaid expenses...................................................................................... Accrued income......................................................................................... Accrued income tax refunds...................................................................... Other current assets................................................................................... Total current assets.................................................................................... Fixed assets Tangible fixed assets Buildings............................................................................................... Equipment............................................................................................ Total tangible fixed assets.................................................................... Intangible fixed assets Software................................................................................................ Total intangible fixed assets................................................................. Investments and other assets Investments in subsidiaries and affiliates............................................. Long-term loans receivable from subsidiaries and affiliates................ Other investments and other assets..................................................... Total investments and other assets...................................................... Total fixed assets....................................................................................... Total assets..................................................................................................... Liabilities: Current liabilities Short-term borrowings............................................................................... Accounts payable...................................................................................... Accrued expenses..................................................................................... Income taxes payable................................................................................ Business office taxes payable.................................................................... Reserve for employee bonuses................................................................. Reserve for executive bonuses.................................................................. Other current liabilities............................................................................... Total current liabilities................................................................................. Fixed liabilities Bonds......................................................................................................... Long-term borrowings............................................................................... Total fixed liabilities.................................................................................... Total liabilities................................................................................................. Net assets: Stockholders’ equity Capital stock.............................................................................................. Capital surplus Capital reserve...................................................................................... Other capital surplus............................................................................ Total capital surplus.............................................................................. Retained earnings Other retained earnings Voluntary reserve............................................................................ Retained earnings brought forward................................................ Total retained earnings......................................................................... Treasury stock............................................................................................ Total stockholders’ equity.......................................................................... Stock acquisition rights.................................................................................. Total net assets............................................................................................... Total liabilities and net assets.............................................................................

188 2016 Annual Report

2015

2016

2016

¥  201,862 61 4,786 102,966 2,275 311,951

¥  502,449 139 8,940 110,953 2,661 625,144

$ 4,461 1 79 985 24 5,551

30 0 31

41 1 43

0 0 0

265 265

318 318

3 3

6,155,487 376,262 — 6,531,750 6,532,046 ¥6,843,998

6,155,487 1,406,565 0 7,562,053 7,562,414 ¥8,187,559

54,657 12,489 0 67,147 67,150 $72,701

¥1,228,030 870 7,084 21 7 180 97 961 1,237,253

¥1,228,030 839 11,268 31 8 203 88 898 1,241,369

$10,904 7 100 0 0 2 1 8 11,023

611,962 31,000 642,962 1,880,215

1,624,265 49,000 1,673,265 2,914,634

14,423 435 14,858 25,880

2,337,895

2,337,895

20,759

1,559,374 24,349 1,583,723

1,559,374 24,332 1,583,706

13,846 216 14,062

30,420 1,022,371 1,052,791 (12,713) 4,961,697 2,085 4,963,782 ¥6,843,998

30,420 1,331,100 1,361,520 (12,833) 5,270,289 2,635 5,272,925 ¥8,187,559

270 11,819 12,090 (114) 46,797 23 46,821 $72,701

SMFG

Notes to Consolidated Financial Statements

2. Non-consolidated Statements of Income Millions of U.S. dollars

Millions of yen Year ended March 31

Operating income: Dividends on investments in subsidiaries and affiliates................................... Fees and commissions received from subsidiaries......................................... Interests on loans receivable from subsidiaries and affiliates.......................... Total operating income..................................................................................... Operating expenses: General and administrative expenses.............................................................. Interest on bonds............................................................................................. Interest on long term borrowings..................................................................... Total operating expenses................................................................................. Operating profit.................................................................................................... Non-operating income: Interest income on deposits............................................................................. Fees and commissions income........................................................................ Other non-operating income............................................................................ Total non-operating income............................................................................. Non-operating expenses: Interest on borrowings..................................................................................... Fees and commissions payments.................................................................... Amortization of bond issuance cost................................................................. Other non-operating expenses........................................................................ Total non-operating expenses.......................................................................... Ordinary profit....................................................................................................... Income before income taxes............................................................................... Income taxes-current....................................................................................... Income taxes......................................................................................................... Net income............................................................................................................

2015

2016

2016

¥504,097 13,800 9,492 527,391

¥543,143 16,621 18,080 577,845

$4,823 148 161 5,131

8,683 25,034 20 33,739 493,651

9,742 29,259 347 39,349 538,496

87 260 3 349 4,782

163 2 80 246

267 2 222 492

2 0 2 4

5,894 0 2,028 0 7,923 485,974 485,974 3 3 ¥485,970

5,787 — 5,906 1 11,696 527,292 527,292 3 3 ¥527,288

51 — 52 0 104 4,682 4,682 0 0 $4,682

Yen

2015 Per share data: Earnings per share................................................................................................ Earnings per share (diluted)...................................................................................

¥344.64 344.44

U.S. dollars

2016 ¥373.95 373.70

2016 $3 3

2016 Annual Report

189

SMFG

Notes to Consolidated Financial Statements

3. Non-consolidated Statements of changes in net assets Millions of yen Stockholders’ equity Capital surplus

Year ended March 31, 2015

Capital stock

Balance at the beginning of the fiscal year.... ¥2,337,895 Changes in the fiscal year: Cash dividends............................... Net income...................................... Purchase of treasury stock............. Disposal of treasury stock............... Net changes in items other than stockholders’ equity in the fiscal year...... Net changes in the fiscal year............... — Balance at the end of the fiscal year..... ¥2,337,895

Year ended March 31, 2015

Balance at the beginning of the fiscal year.... Changes in the fiscal year: Cash dividends............................... Net income...................................... Purchase of treasury stock............. Disposal of treasury stock............... Net changes in items other than stockholders’ equity in the fiscal year...... Net changes in the fiscal year............... Balance at the end of the fiscal year.....

190 2016 Annual Report

Capital reserve

¥1,559,374

— ¥1,559,374

Other capital surplus

Total capital surplus

¥24,347

¥1,583,721

2

2

2 ¥24,349

2 ¥1,583,723

Millions of yen Stockholders’ equity Stock Treasury acquisition stock Total rights

¥(12,566)

¥4,652,131

(161) 15

(176,260) 485,970 (161) 17

(146) ¥(12,713)

309,565 ¥4,961,697

¥1,634

Total net assets

¥4,653,766 (176,260) 485,970 (161) 17

451 451 ¥2,085

451 310,016 ¥4,963,782

Retained earnings Other retained earnings Retained earnings Total retained Voluntary brought forward reserve earnings

¥30,420

— ¥30,420

¥  712,661

¥  743,081

(176,260) 485,970

(176,260) 485,970

309,709 ¥1,022,371

309,709 ¥1,052,791

Notes to Consolidated Financial Statements

Millions of yen Stockholders’ equity Capital surplus

Year ended March 31, 2016

Capital stock

Balance at the beginning of the fiscal year.... ¥2,337,895 Changes in the fiscal year: Cash dividends............................... Net income...................................... Purchase of treasury stock............. Disposal of treasury stock............... Net changes in items other than stockholders’ equity in the fiscal year...... Net changes in the fiscal year............... — Balance at the end of the fiscal year..... ¥2,337,895

Capital reserve

¥1,559,374

— ¥1,559,374

Other capital surplus

Total capital surplus

¥24,349

¥1,583,723

(17)

(17)

(17) ¥24,332

(17) ¥1,583,706

Year ended March 31, 2016

Millions of yen Stockholders’ equity Stock Treasury acquisition stock Total rights

Balance at the beginning of the fiscal year....

¥(12,713)

¥4,961,697

(191) 71

(218,558) 527,288 (191) 54

(119) ¥(12,833)

308,592 ¥5,270,289

Changes in the fiscal year: Cash dividends............................... Net income...................................... Purchase of treasury stock............. Disposal of treasury stock............... Net changes in items other than stockholders’ equity in the fiscal year...... Net changes in the fiscal year............... Balance at the end of the fiscal year.....

¥2,085

SMFG

Retained earnings Other retained earnings Retained earnings Total retained Voluntary brought forward reserve earnings

¥30,420

— ¥30,420

¥1,022,371

¥1,052,791

(218,558) 527,288

(218,558) 527,288

308,729 ¥1,331,100

308,729 ¥1,361,520

Total net assets

¥4,963,782 (218,558) 527,288 (191) 54

549 549 ¥2,635

549 309,142 ¥5,272,925

2016 Annual Report

191

SMFG

Notes to Consolidated Financial Statements

Millions of U. S. dollars Stockholders’ equity Capital surplus

Year ended March 31, 2016

Capital stock

Capital reserve

Balance at the beginning of the fiscal year....

$20,759

$13,846

Changes in the fiscal year: Cash dividends............................... Net income...................................... Purchase of treasury stock............. Disposal of treasury stock............... Net changes in items other than stockholders’ equity in the fiscal year...... Net changes in the fiscal year............... Balance at the end of the fiscal year.....

Year ended March 31, 2016

Balance at the beginning of the fiscal year.... Changes in the fiscal year: Cash dividends............................... Net income...................................... Purchase of treasury stock............. Disposal of treasury stock............... Net changes in items other than stockholders’ equity in the fiscal year...... Net changes in the fiscal year............... Balance at the end of the fiscal year.....

192 2016 Annual Report

— $20,759

— $13,846

Other capital surplus

Total capital surplus

$216

$14,063

(0)

(0)

(0) $216

(0) $14,062

Millions of U. S. dollars Stockholders’ equity Stock Treasury acquisition stock Total rights

$(113)

$44,057

(2) 1

(1,941) 4,682 (2) 0

(1) $(114)

2,740 $46,797

$19

Total net assets

$44,075 (1,941) 4,682 (2) 0

5 5 $23

5 2,745 $46,821

Retained earnings Other retained earnings Retained earnings Total retained Voluntary brought forward reserve earnings

$270

— $270

$ 9,078

$ 9,348

(1,941) 4,682

(1,941) 4,682

2,741 $11,819

2,741 $12,090

SMFG

Independent Auditor’s Report To the Board of Directors of Sumitomo Mitsui Financial Group, Inc.: We have audited the accompanying consolidated financial statements of Sumitomo Mitsui Financial Group, Inc. (“SMFG”) and subsidiaries, which comprise the consolidated balance sheets as at March 31, 2015 and 2016, and the consolidated statements of income, comprehensive income, changes in net assets and cash flows for the years then ended, and basis of presentation, significant accounting policies and other explanatory information. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of SMFG and subsidiaries as at March 31, 2015 and 2016, and their financial performance and cash flows for the years then ended in accordance with accounting principles generally accepted in Japan. Convenience Translation The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2016 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in basis of presentation.

June 28, 2016 Tokyo, Japan 2016 Annual Report

193

SMBC

Supplemental Information

Supplemental Information Consolidated Balance Sheets (Unaudited) Sumitomo Mitsui Banking Corporation and Subsidiaries

Millions of U.S. dollars

Millions of yen March 31

Assets: Cash and due from banks..................................................................................... Call loans and bills bought.................................................................................... Receivables under resale agreements.................................................................. Receivables under securities borrowing transactions........................................... Monetary claims bought........................................................................................ Trading assets....................................................................................................... Money held in trust................................................................................................ Securities............................................................................................................... Loans and bills discounted................................................................................... Foreign exchanges................................................................................................ Lease receivables and investment assets............................................................. Other assets.......................................................................................................... Tangible fixed assets............................................................................................. Assets for rent.................................................................................................. Buildings........................................................................................................... Land................................................................................................................. Lease assets.................................................................................................... Construction in progress.................................................................................. Other tangible fixed assets.............................................................................. Intangible fixed assets........................................................................................... Software........................................................................................................... Goodwill........................................................................................................... Lease assets.................................................................................................... Other intangible fixed assets............................................................................ Net defined benefit asset...................................................................................... Deferred tax assets............................................................................................... Customers’ liabilities for acceptances and guarantees........................................ Reserve for possible loan losses........................................................................... Total assets...........................................................................................................

194 2016 Annual Report

2015

2016

¥ 39,569,276 1,326,965 746,431 6,447,116 4,128,907 7,364,988 1 29,559,334 75,119,565 1,907,667 252,213 3,422,970 1,073,206 158,224 287,583 468,728 11,270 75,883 71,515 454,584 261,433 157,350 140 35,660 367,953 68,265 6,289,881 (540,134) ¥177,559,197

¥ 42,594,225 1,291,365 494,949 7,964,208 4,183,995 7,980,971 3 25,153,750 77,331,124 1,577,167 269,429 3,697,438 1,167,627 206,419 357,116 488,708 10,885 27,084 77,413 526,112 299,159 160,067 136 66,749 198,637 66,570 6,407,272 (496,178) ¥180,408,672

2016 $  378,212 11,467 4,395 70,718 37,151 70,866 0 223,351 686,655 14,004 2,392 32,831 10,368 1,833 3,171 4,339 97 240 687 4,672 2,656 1,421 1 593 1,764 591 56,893 (4,406) $1,601,924

Supplemental Information

SMBC

(Continued)

Millions of U.S. dollars

Millions of yen

2015

2016

Liabilities and net assets: Liabilities: Deposits................................................................................................................ Negotiable certificates of deposit......................................................................... Call money and bills sold...................................................................................... Payables under repurchase agreements............................................................... Payables under securities lending transactions.................................................... Commercial paper................................................................................................. Trading liabilities.................................................................................................... Borrowed money................................................................................................... Foreign exchanges................................................................................................ Short-term bonds.................................................................................................. Bonds.................................................................................................................... Due to trust account.............................................................................................. Other liabilities....................................................................................................... Reserve for employee bonuses............................................................................. Reserve for executive bonuses............................................................................. Net defined benefit liability.................................................................................... Reserve for executive retirement benefits............................................................. Reserve for point service program........................................................................ Reserve for reimbursement of deposits................................................................ Reserve for losses on interest repayment............................................................. Reserve under the special laws............................................................................. Deferred tax liabilities............................................................................................ Deferred tax liabilities for land revaluation excess................................................ Acceptances and guarantees................................................................................ Total liabilities.......................................................................................................

¥101,503,889 14,032,798 5,873,123 991,860 7,833,219 3,352,662 5,636,406 8,223,808 1,110,822 545,700 5,663,566 718,133 5,098,781 59,893 2,567 12,641 759 1,798 20,870 632 755 514,070 34,550 6,289,881 167,523,193

¥111,238,673 14,740,434 1,220,455 1,761,822 5,309,003 3,018,218 6,105,982 8,058,848 1,083,450 367,000 5,450,145 944,542 4,853,664 54,925 1,767 17,844 743 1,249 16,979 234 1,129 275,887 32,203 6,407,272 170,962,478

$  987,735 130,886 10,837 15,644 47,141 26,800 54,218 71,558 9,620 3,259 48,394 8,387 43,098 488 16 158 7 11 151 2 10 2,450 286 56,893 1,518,047

Net assets : Capital stock......................................................................................................... Capital surplus...................................................................................................... Retained earnings................................................................................................. Treasury stock....................................................................................................... Total stockholders’ equity.................................................................................... Net unrealized gains (losses) on other securities.................................................. Net deferred gains (losses) on hedges.................................................................. Land revaluation excess........................................................................................ Foreign currency translation adjustments............................................................. Accumulated remeasurements of defined benefit plans....................................... Total accumulated other comprehensive income............................................... Stock acquisition rights......................................................................................... Non-controlling interests....................................................................................... Total net assets..................................................................................................... Total liabilities and net assets..............................................................................

1,770,996 2,717,421 2,751,080 (210,003) 7,029,494 1,756,894 (27,049) 38,943 114,413 44,216 1,927,419 198 1,078,891 10,036,003 ¥177,559,197

1,770,996 2,702,093 2,909,898 (210,003) 7,172,985 1,255,877 61,781 39,348 58,693 (65,290) 1,350,409 249 922,549 9,446,193 ¥180,408,672

15,725 23,993 25,838 (1,865) 63,692 11,151 549 349 521 (580) 11,991 2 8,192 83,877 $1,601,924

March 31

2016

2016 Annual Report

195

SMBC

Supplemental Information

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited) Sumitomo Mitsui Banking Corporation and Subsidiaries

(Consolidated Statements of Income) Millions of yen Year ended March 31

Ordinary income.................................................................................................... Interest income................................................................................................. Interest on loans and discounts.................................................................. Interest and dividends on securities........................................................... Interest on call loans and bills bought........................................................ Interest on receivables under resale agreements....................................... Interest on receivables under securities borrowing transactions................ Interest on deposits with banks.................................................................. Interest on lease transactions..................................................................... Other interest income.................................................................................. Trust fees.......................................................................................................... Fees and commissions.................................................................................... Trading income................................................................................................. Other operating income................................................................................... Lease-related income.................................................................................. Installment-related income.......................................................................... Other........................................................................................................... Other income.................................................................................................... Gains on reversal of reserve for possible loan losses................................. Recoveries of written-off claims.................................................................. Other........................................................................................................... Ordinary expenses........................................................................................... Interest expenses............................................................................................. Interest on deposits.................................................................................... Interest on negotiable certificates of deposit.............................................. Interest on call money and bills sold........................................................... Interest on payables under repurchase agreements................................... Interest on payables under securities lending transactions........................ Interest on commercial paper..................................................................... Interest on borrowed money....................................................................... Interest on short-term bonds...................................................................... Interest on bonds........................................................................................ Other interest expenses.............................................................................. Fees and commissions payments.................................................................... Trading losses.................................................................................................. Other operating expenses................................................................................ Lease-related expenses.............................................................................. Installment-related expenses...................................................................... Other........................................................................................................... General and administrative expenses.............................................................. Other expenses................................................................................................ Provision for reserve for possible loan losses............................................. Other........................................................................................................... Ordinary profit....................................................................................................... Extraordinary gains................................................................................................ Gains on disposal of fixed assets.................................................................... Gains on negative goodwill.............................................................................. Other extraordinary gains................................................................................. Extraordinary losses.............................................................................................. Losses on disposal of fixed assets.................................................................. Losses on impairment of fixed assets.............................................................. Provision for reserve for eventual future operating losses from financial instruments transactions................................................................................ Income before income taxes................................................................................. Income taxes-current Income taxes-deferred.......................................................................................... Income taxes......................................................................................................... Profit...................................................................................................................... Profit attributable to non-controlling interests....................................................... Profit attributable to owners of parent..................................................................

196 2016 Annual Report

Millions of U.S. dollars

2015 ¥3,199,409 1,690,086 1,170,833 335,694 19,600 9,640 7,813 42,649 7,494 96,359 2,795 782,349 235,239 279,857 13,882 18,956 247,018 209,080 73,566 6,619 128,894 2,000,453 365,074 126,966 44,065 4,200 4,921 5,029 8,047 29,312 433 99,581 42,516 145,171 57,856 94,424 2,022 11,148 81,253 1,261,746 76,179 — 76,179 1,198,955 452 452 — — 11,326 5,893 5,080

2016 ¥3,059,022 1,652,508 1,167,181 302,821 20,457 10,100 10,740 37,097 7,565 96,543 3,587 779,388 209,722 232,513 16,203 18,139 198,170 181,301 — 10,324 170,976 2,128,690 426,091 141,085 49,561 5,360 8,077 6,724 10,415 44,514 573 110,489 49,290 150,788 — 86,746 2,159 9,837 74,749 1,314,581 150,482 5,632 144,850 930,332 3,777 3,709 20 46 8,136 3,400 4,361

2016 $27,162 14,673 10,364 2,689 182 90 95 329 67 857 32 6,921 1,862 2,065 144 161 1,760 1,610 — 92 1,518 18,902 3,783 1,253 440 48 72 60 92 395 5 981 438 1,339 — 770 19 87 664 11,673 1,336 50 1,286 8,261 34 33 0 0 72 30 39

353 1,188,081 276,257 106,233 382,490 805,591 68,686 ¥  736,904

374 925,972 205,051 (24,868) 180,183 745,788 65,626 ¥  680,162

3 8,222 1,821 (221) 1,600 6,622 583 $ 6,039

Supplemental Information

SMBC

(Continued)

(Consolidated Statements of Comprehensive Income) Millions of yen Year ended March 31

Profit...................................................................................................................... Other comprehensive income (losses)................................................................ Net unrealized gains (losses) on other securities............................................. Net deferred gains (losses) on hedges............................................................ Land revaluation excess.................................................................................. Foreign currency translation adjustments........................................................ Remeasurements of defined benefit plans...................................................... Share of other comprehensive income of affiliates.......................................... Total comprehensive income............................................................................... Comprehensive income attributable to owners of parent................................ Comprehensive income attributable to non-controlling interests....................

2015 ¥  805,591 1,131,783 829,208 32,956 3,604 145,730 120,738 (454) 1,937,374 1,818,350 119,024

2016 ¥ 745,788 (602,702) (503,395) 89,188 1,705 (73,687) (113,411) (3,101) 143,086 104,454 38,631

Millions of U.S. dollars

2016 $ 6,622 (5,352) (4,470) 792 15 (654) (1,007) (28) 1,271 927 343

2016 Annual Report

197

SMBC

Supplemental Information

Non-consolidated Balance Sheets (Unaudited) Sumitomo Mitsui Banking Corporation

Millions of U.S. dollars

Millions of yen

2015

2016

Assets: Cash and due from banks..................................................................................... Call loans............................................................................................................... Receivables under resale agreements.................................................................. Receivables under securities borrowing transactions........................................... Monetary claims bought........................................................................................ Trading assets....................................................................................................... Securities............................................................................................................... Loans and bills discounted................................................................................... Foreign exchanges................................................................................................ Other assets.......................................................................................................... Tangible fixed assets............................................................................................. Intangible fixed assets........................................................................................... Prepaid pension cost............................................................................................ Customers’ liabilities for acceptances and guarantees........................................ Reserve for possible loan losses........................................................................... Reserve for possible losses on investments......................................................... Total assets...........................................................................................................

¥ 37,008,665 539,916 417,473 2,012,795 1,047,498 3,627,862 29,985,267 68,274,308 1,798,843 2,460,344 812,383 200,966 293,082 6,721,131 (394,140) (82,321) ¥154,724,079

¥ 38,862,725 899,594 359,318 2,798,855 950,106 3,511,957 25,602,156 69,276,735 1,558,252 2,131,869 831,326 220,174 279,917 6,737,089 (357,186) (21,465) ¥153,641,430

$  345,078 7,988 3,191 24,852 8,436 31,184 227,332 615,137 13,836 18,930 7,382 1,955 2,485 59,821 (3,172) (191) $1,364,246

Liabilities and net assets: Liabilities: Deposits................................................................................................................ Negotiable certificates of deposit......................................................................... Call money............................................................................................................. Payables under repurchase agreements............................................................... Payables under securities lending transactions.................................................... Commercial paper................................................................................................. Trading liabilities.................................................................................................... Borrowed money................................................................................................... Foreign exchanges................................................................................................ Short-term bonds.................................................................................................. Bonds.................................................................................................................... Due to trust account.............................................................................................. Other liabilities....................................................................................................... Reserve for employee bonuses............................................................................. Reserve for executive bonuses............................................................................. Reserve for point service program........................................................................ Reserve for reimbursement of deposits................................................................ Deferred tax liabilities............................................................................................ Deferred tax liabilities for land revaluation............................................................ Acceptances and guarantees................................................................................ Total liabilities.......................................................................................................

¥ 91,337,714 14,022,064 4,579,940 350,010 5,113,896 2,551,652 2,754,739 8,096,070 1,172,969 25,000 5,095,577 717,529 3,672,970 13,738 644 1,119 19,589 444,863 34,141 6,721,131 146,725,363

¥ 98,839,722 14,428,338 1,107,825 496,236 1,374,280 1,980,153 2,987,815 7,868,311 1,131,796 — 4,775,072 921,320 2,924,495 13,869 566 1,086 15,374 249,427 31,837 6,737,089 145,884,620

$  877,639 128,115 9,837 4,406 12,203 17,583 26,530 69,866 10,050 — 42,400 8,181 25,968 123 5 10 137 2,215 283 59,821 1,295,370

Net assets: Capital stock......................................................................................................... Capital surplus...................................................................................................... Retained earnings................................................................................................. Treasury stock....................................................................................................... Total stockholders’ equity.................................................................................... Net unrealized gains (losses) on other securities.................................................. Net deferred gains (losses) on hedges.................................................................. Land revaluation excess........................................................................................ Total valuation and translation adjustments....................................................... Total net assets..................................................................................................... Total liabilities and net assets..............................................................................

1,770,996 2,481,273 2,327,186 (210,003) 6,369,453 1,726,573 (124,906) 27,593 1,629,261 7,998,715 ¥154,724,079

1,770,996 2,470,198 2,414,989 (210,003) 6,446,181 1,233,910 48,706 28,011 1,310,628 7,756,810 ¥153,641,430

15,725 21,934 21,444 (1,865) 57,238 10,956 432 249 11,638 68,876 $1,364,246

March 31

198 2016 Annual Report

2016

SMBC

Supplemental Information

Non-consolidated Statements of Income (Unaudited) Sumitomo Mitsui Banking Corporation

Millions of U.S. dollars

Millions of yen Year ended March 31

2015

2016

2016

Ordinary income....................................................................................................

¥2,370,998

¥2,277,812

$20,226

Interest income.................................................................................................

1,455,992

1,422,367

12,630

Interest on loans and discounts..................................................................

990,485

980,604

8,707

Interest and dividends on securities...........................................................

356,754

326,077

2,895

Trust fees..........................................................................................................

1,872

2,589

23

Fees and commissions....................................................................................

517,528

527,316

4,682

Trading income.................................................................................................

12,799

66,593

591

Other operating income...................................................................................

194,059

123,606

1,098

Other Income...................................................................................................

188,745

135,338

1,202

Ordinary expenses................................................................................................

1,415,005

1,529,919

13,585

Interest expenses.............................................................................................

334,564

398,791

3,541

Interest on deposits....................................................................................

71,588

93,258

828

Fees and commissions payments....................................................................

167,548

168,796

1,499

Other operating expenses................................................................................

45,855

40,613

361

General and administrative expenses..............................................................

820,216

842,710

7,483

Other expenses................................................................................................

46,820

79,007

702

Ordinary profit.......................................................................................................

955,992

747,892

6,641

Extraordinary gains................................................................................................

356

3,706

33

Extraordinary losses..............................................................................................

8,700

5,379

48

Net income before taxes.......................................................................................

947,648

746,219

6,626

Income taxes - current..........................................................................................

224,845

170,558

1,514

Income taxes - deferred........................................................................................

79,787

(33,509)

(298)

Net income............................................................................................................

¥  643,015

¥  609,171

$ 5,409

Yen

2015

U.S. dollars

2016

2016

Per share data: Earnings per share.......................................................................................

¥6,052.00

¥5,733.46

$51

Earnings per share (diluted).........................................................................







2016 Annual Report

199

SMFG

Income Analysis (Consolidated) Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

Operating Income, Classified by Domestic and Overseas Operations

Domestic Year ended March 31 operations Interest income����������������������������������������������������� ¥1,241,523 Interest expenses�������������������������������������������������� 268,976 972,546 Net interest income��������������������������������������������������� Trust fees������������������������������������������������������������������� 3,681 Fees and commissions����������������������������������������� 946,124 Fees and commissions payments������������������������ 97,907 848,216 Net fees and commissions���������������������������������������� Trading income����������������������������������������������������� 221,701 Trading losses������������������������������������������������������� 5,655 216,045 Net trading income���������������������������������������������������� Other operating income���������������������������������������� 1,059,947 Other operating expenses������������������������������������ 939,328 120,619 Net other operating income��������������������������������������

Millions of yen 2016 2015 Overseas Domestic Overseas operations Elimination Total operations operations Elimination Total ¥699,307 ¥(72,518) ¥1,868,313 ¥1,288,486 ¥707,196 ¥(103,750) ¥1,891,932 445,385 254,843 209,420 (77,510) 386,753 228,429 (52,020) 470,878 (20,497) 1,422,928 1,033,643 497,775 (26,240) 1,505,178 3,681 2,890 — — 2,890 — — 934,396 206,274 (14,385) 1,126,285 202,621 (14,282) 1,134,463 37,190 (4,472) 130,625 92,048 40,906 (3,346) 129,609 165,431 (9,809) 1,003,838 842,347 165,367 (11,039) 996,676 37,330 (33,549) 225,481 297,967 44,531 (89,522) 252,976 — 95,388 51,990 (89,522) 57,856 27,894 (33,549) 9,436 — 225,481 202,578 (7,459) — 195,119 1,106,301 253,900 (1,092) 1,359,109 283,600 (882) 1,342,665 156,041 (738) 1,094,630 924,058 155,049 (536) 1,078,570 127,559 (144) 248,034 182,242 98,850 (555) 280,538

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries. 2. Inter-segment transactions are reported in the “Elimination” column.

Average Balance, Interest and Average Rate of Interest-Earning Assets and Interest-Bearing Liabilities Domestic Operations Year ended March 31 Average balance Interest-earning assets���������������������������������������������� ¥ 87,513,636 Loans and bills discounted����������������������������������� 52,187,299 Securities�������������������������������������������������������������� 22,510,229 Call loans and bills bought������������������������������������ 147,992 Receivables under resale agreements������������������ 32,450 Receivables under securities borrowing transactions��������������������������������������� 6,722,143 Deposits with banks���������������������������������������������� 826,050 Lease receivables and investment assets������������ 1,480,695 Interest-bearing liabilities������������������������������������������ ¥120,395,742 Deposits ��������������������������������������������������������������� 84,632,369 Negotiable certificates of deposit������������������������� 7,027,344 Call money and bills sold�������������������������������������� 2,295,334 Payables under repurchase agreements�������������� 1,281,321 Payables under securities lending transactions��� 6,795,925 Commercial paper������������������������������������������������ 145,053 Borrowed money��������������������������������������������������� 9,777,958 Short-term bonds�������������������������������������������������� 1,451,156 Bonds�������������������������������������������������������������������� 6,177,841

Millions of yen 2016 Interest ¥1,241,523 846,804 267,665 861 15 10,747 5,088 40,742 ¥ 268,976 40,303 5,466 1,523 3,714 6,726 203 77,974 1,400 119,326

Average rate 1.42% 1.62 1.19 0.58 0.05 0.16 0.62 2.75 0.22% 0.05 0.08 0.07 0.29 0.10 0.14 0.80 0.10 1.93

Average balance ¥ 84,712,912 51,247,709 23,023,102 226,408 22,061

2015 Interest ¥1,288,486 861,937 297,680 1,176 48

4,745,783 792,696 1,444,682

7,826 4,942 41,751

¥111,286,366 80,783,198 5,969,372 2,040,724 782,571 5,278,677 192,088 8,830,463 1,255,740 5,647,401

¥ 254,843 43,595 5,375 1,503 1,314 5,036 282 76,433 1,393 113,814

Average rate 1.52% 1.68 1.29 0.52 0.22 0.16 0.62 2.89 0.23% 0.05 0.09 0.07 0.17 0.10 0.15 0.87 0.11 2.02

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. 2. In principle, average balances are calculated by using daily balances. However, some consolidated subsidiaries use weekly, monthly or quarterly balances instead. 3. “Interest-earning assets” are shown after deduction of the average balance of noninterest-earning deposits (2016, ¥28,376,025 million; 2015, ¥22,049,623 million).

200 2016 Annual Report

Income Analysis (Consolidated)

Overseas Operations

Millions of yen

Year ended March 31 Average balance Interest-earning assets���������������������������������������������� ¥37,621,327 Loans and bills discounted����������������������������������� 22,365,670 Securities�������������������������������������������������������������� 3,154,767 Call loans and bills bought������������������������������������ 918,358 Receivables under resale agreements������������������ 1,521,170 Receivables under securities borrowing transactions��������������������������������������� — Deposits with banks���������������������������������������������� 5,678,537 Lease receivables and investment assets������������ 444,069 Interest-bearing liabilities������������������������������������������ Deposits ��������������������������������������������������������������� Negotiable certificates of deposit������������������������� Call money and bills sold�������������������������������������� Payables under repurchase agreements�������������� Payables under securities lending transactions��� Commercial paper������������������������������������������������ Borrowed money��������������������������������������������������� Short-term bonds�������������������������������������������������� Bonds��������������������������������������������������������������������

SMFG

¥28,979,734 15,827,172 6,502,114 525,808 1,934,523 — 2,807,578 752,364 — 77,162

2016 Interest ¥699,307 528,869 49,677 19,596 11,934 — 32,833 18,624 ¥228,429 100,722 43,853 3,836 6,212 — 10,211 10,861 — 3,934

Average rate 1.86% 2.36 1.57 2.13 0.78 — 0.58 4.19 0.79% 0.64 0.67 0.73 0.32 — 0.36 1.44 — 5.10

Average balance ¥36,521,313 21,676,966 3,328,456 1,046,258 921,297

2015 Interest ¥707,196 519,030 54,772 18,423 9,888

— 5,918,336 400,645

— 38,765 20,345

¥28,006,363 13,367,188 8,945,965 925,341 1,165,238 — 2,744,976 662,081 — 58,407

¥209,420 83,631 38,528 2,697 3,902 — 7,764 10,376 — 2,736

Average rate 1.94% 2.39 1.65 1.76 1.07 — 0.66 5.08 0.75% 0.63 0.43 0.29 0.33 — 0.28 1.57 — 4.69

Notes: 1. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries. 2. In principle, average balances are calculated by using daily balances. However, some consolidated subsidiaries use weekly, monthly or quarterly balances instead. 3. “Interest-earning assets” are shown after deduction of the average balance of noninterest-earning deposits (2016, ¥1,732,890 million; 2015, ¥1,519,693 million).

Total of Domestic and Overseas Operations Year ended March 31 Average balance Interest-earning assets���������������������������������������������� ¥123,153,560 Loans and bills discounted����������������������������������� 73,713,490 Securities�������������������������������������������������������������� 25,450,418 Call loans and bills bought������������������������������������ 1,066,351 Receivables under resale agreements������������������ 727,468 Receivables under securities 6,722,143 borrowing transactions��������������������������������������� Deposits with banks���������������������������������������������� 6,421,181 Lease receivables and investment assets������������ 1,924,764 Interest-bearing liabilities������������������������������������������ ¥148,078,275 Deposits ��������������������������������������������������������������� 100,364,107 Negotiable certificates of deposit������������������������� 13,529,459 Call money and bills sold�������������������������������������� 2,821,143 Payables under repurchase agreements�������������� 2,389,693 Payables under securities lending transactions��� 6,795,925 Commercial paper������������������������������������������������ 2,952,632 Borrowed money��������������������������������������������������� 9,731,272 Short-term bonds�������������������������������������������������� 1,451,156 Bonds�������������������������������������������������������������������� 6,698,959

Millions of yen 2016 Interest ¥1,868,313 1,326,402 303,132 20,457 10,100 10,747 37,537 59,366 ¥ 445,385 140,633 49,319 5,360 8,077 6,726 10,415 39,825 1,400 129,295

Average rate 1.52% 1.80 1.19 1.92 1.39 0.16 0.58 3.08 0.30% 0.14 0.36 0.19 0.34 0.10 0.35 0.41 0.10 1.93

Average balance ¥119,166,662 71,417,716 26,030,785 1,272,667 776,681

2015 Interest ¥1,891,932 1,312,629 336,345 19,599 9,640

4,745,783 6,645,194 1,845,302

7,826 43,147 62,097

¥138,047,887 94,110,334 14,915,337 2,966,065 1,781,132 5,278,677 2,937,065 8,624,212 1,255,740 5,588,700

¥ 386,753 126,371 43,904 4,201 4,921 5,036 8,047 34,814 1,393 110,461

Average rate 1.59% 1.84 1.29 1.54 1.24 0.16 0.65 3.37 0.28% 0.13 0.29 0.14 0.28 0.10 0.27 0.40 0.11 1.98

Notes: 1. The figures above comprise totals for domestic and overseas operations after inter-segment eliminations. 2. In principle, average balances are calculated by using daily balances. However, some consolidated subsidiaries use weekly, monthly or quarterly balances instead. 3. “Interest-earning assets” are shown after deduction of the average balance of noninterest-earning deposits (2016, ¥30,098,341 million; 2015, ¥23,551,730 million).

2016 Annual Report

201

SMFG

Income Analysis (Consolidated)

Fees and Commissions

Domestic Year ended March 31 operations Fees and commissions���������������������������������������������� ¥946,124 Deposits and loans����������������������������������������������� 21,076 Remittances and transfers������������������������������������ 114,071 Securities-related business����������������������������������� 110,138 Agency������������������������������������������������������������������ 16,380 Safe deposits�������������������������������������������������������� 5,509 Guarantees������������������������������������������������������������ 74,257 Credit card business��������������������������������������������� 255,217 112,928 Investment trusts�������������������������������������������������� Fees and commissions payments����������������������������� Remittances and transfers������������������������������������

¥ 97,907 29,282

Millions of yen 2016 2015 Overseas Domestic Overseas operations Elimination Total operations operations Elimination Total ¥934,396 ¥206,274 ¥(14,385) ¥1,126,285 ¥ 202,621 ¥(14,282) ¥1,134,463 110,113 (5,079) 126,111 20,893 110,261 (4,711) 126,444 131,924 113,596 17,143 (15) 130,723 17,867 (14) 35,935 (3,194) 142,880 109,754 41,832 (5,124) 146,462 16,380 16,905 — — 16,905 — — — 5,749 2 — 5,512 5,746 2 12,369 (1,541) 85,085 70,065 15,275 (768) 84,572 1 — 255,218 243,633 3 — 243,636 3,128 — 116,057 145,016 2,009 (1) 147,024 ¥ 37,190 8,507

¥ (4,472) ¥ 130,625 (0) 37,789

¥ 92,048 28,219

¥ 40,906 9,335

¥ (3,346) ¥ 129,609 (236) 37,318

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries. 2. Inter-segment transactions are reported in the “Elimination” column.

Trading Income Millions of yen 2016 Domestic Overseas Year ended March 31 operations operations Elimination Trading income���������������������������������������������������������� ¥221,701 ¥37,330 ¥(33,549) Gains on trading securities����������������������������������� 77,921 — (5,795) Gains on securities related to trading transactions�������������������������������������������� 115 — (49) Gains on trading-related financial derivatives������� 143,554 37,330 (27,704) Others������������������������������������������������������������������� 110 — — Trading losses����������������������������������������������������������� Losses on trading securities��������������������������������� Losses on securities related to trading transactions�������������������������������������������� Losses on trading-related financial derivatives����� Others�������������������������������������������������������������������

Total ¥225,481 72,125

2015 Domestic Overseas operations operations Elimination ¥297,967 ¥44,531 ¥(89,522) 264,068 — (14,189)

Total ¥252,976 249,878

65 153,180 110

3,054 30,691 153

— 44,531 —

(109) (75,222) —

2,944 — 153

5,655 —

27,894 5,795

(33,549) (5,795)

— —

95,388 —

51,990 14,189

(89,522) (14,189)

57,856 —

— 5,655 —

49 22,048 —

(49) (27,704) —

— — —

— 95,388 —

109 37,691 —

(109) (75,222) —

— 57,856 —

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries. 2. Inter-segment transactions are reported in the “Elimination” column.

202 2016 Annual Report

SMFG

Assets and Liabilities (Consolidated) Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

Deposits and Negotiable Certificates of Deposit Year-End Balance

Millions of yen

March 31

Domestic operations: Liquid deposits�������������������������������������������������������������������������������������������� Fixed-term deposits������������������������������������������������������������������������������������ Others���������������������������������������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������������������������� Negotiable certificates of deposit���������������������������������������������������������������� Total������������������������������������������������������������������������������������������������������������� Overseas operations: Liquid deposits�������������������������������������������������������������������������������������������� Fixed-term deposits������������������������������������������������������������������������������������ Others���������������������������������������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������������������������� Negotiable certificates of deposit���������������������������������������������������������������� Total������������������������������������������������������������������������������������������������������������� Grand total������������������������������������������������������������������������������������������������������

2016

2015

¥ 62,436,739 22,898,011 7,242,799 92,577,550 6,451,869 ¥ 99,029,420

¥ 55,897,677 24,167,542 5,724,501 85,789,720 5,705,861 ¥ 91,495,582

¥ 11,763,251 6,222,716 105,310 18,091,277 7,798,564 ¥ 25,889,842 ¥124,919,262

¥ 10,243,488 4,897,880 116,829 15,258,197 8,120,036 ¥ 23,378,233 ¥114,873,816

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries. 2. Liquid deposits = Current deposits + Ordinary deposits + Savings deposits + Deposits at notice 3. Fixed-term deposits = Time deposits + Installment savings

Balance of Loan Portfolio, Classified by Industry Year-End Balance

Millions of yen

March 31

Domestic operations: Manufacturing��������������������������������������������������������������������������������������������� Agriculture, forestry, fisheries and mining��������������������������������������������������� Construction������������������������������������������������������������������������������������������������ Transportation, communications and public enterprises���������������������������� Wholesale and retail������������������������������������������������������������������������������������ Finance and insurance�������������������������������������������������������������������������������� Real estate, goods rental and leasing��������������������������������������������������������� Services������������������������������������������������������������������������������������������������������� Municipalities����������������������������������������������������������������������������������������������� Others���������������������������������������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������������������������� Overseas operations: Public sector������������������������������������������������������������������������������������������������ Financial institutions������������������������������������������������������������������������������������ Commerce and industry������������������������������������������������������������������������������ Others���������������������������������������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������������������������� Total�����������������������������������������������������������������������������������������������������������������

2016

2015

¥ 6,372,033 126,815 918,357 4,633,300 4,392,082 2,565,738 8,237,116 4,613,843 1,265,341 19,960,159 ¥53,084,789

12.00% 0.24 1.73 8.73 8.28 4.83 15.52 8.69 2.38 37.60 100.00%

¥ 5,975,126 135,284 913,596 4,606,952 4,429,816 2,721,873 7,642,781 4,232,714 1,243,108 19,949,501 ¥51,850,756

11.52% 0.26 1.76 8.89 8.54 5.25 14.74 8.16 2.40 38.48 100.00%

¥

0.79% 6.13 80.92 12.16 100.00% —

¥

0.34% 6.36 81.18 12.12 100.00% —

173,548 1,347,443 17,787,538 2,672,760 ¥21,981,290 ¥75,066,080

71,691 1,348,888 17,224,073 2,572,829 ¥21,217,483 ¥73,068,240

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries. 2. Japan offshore banking accounts are included in overseas operations’ accounts.

2016 Annual Report

203

SMFG

Assets and Liabilities (Consolidated)

Reserve for Possible Loan Losses Millions of yen March 31

2016

General reserve����������������������������������������������������������������������������������������������� Specific reserve����������������������������������������������������������������������������������������������� Loan loss reserve for specific overseas countries������������������������������������������ Reserve for possible loan losses��������������������������������������������������������������������� Amount of direct reduction������������������������������������������������������������������������������

2015

¥395,546 228,161 1,311 ¥625,019 ¥301,983

¥387,047 283,481 719 ¥671,248 ¥363,585

Risk-Monitored Loans Millions of yen March 31

2016

Bankrupt loans������������������������������������������������������������������������������������������������ Non-accrual loans������������������������������������������������������������������������������������������� Past due loans (3 months or more)����������������������������������������������������������������� Restructured loans������������������������������������������������������������������������������������������ Total����������������������������������������������������������������������������������������������������������������� Amount of direct reduction������������������������������������������������������������������������������

2015

¥ 44,748 594,077 19,845 266,698 ¥925,370 ¥273,009

¥

35,861 774,058 13,714 278,622 ¥1,102,256 ¥ 325,980

Notes: Definition of risk-monitored loan categories 1. Bankrupt loans: Credits for which accrued interest is not accounted in revenue; credits extended to borrowers that are undergoing bankruptcy, corporate reorganization and rehabilitation proceedings or debtors receiving orders of disposition by suspension of business at bill clearinghouses 2. Non-accrual loans: Credits for which accrued interest is not accounted in revenue; credits, excluding loans to bankrupt borrowers and loans with grace for interest payment to assist in corporate reorganization or to support business 3. Past due loans (3 months or more): Loans with payment of principal or interest in arrears for more than 3 months, calculated from the day following the contractual due date, excluding borrowers in categories 1. and 2. 4. Restructured loans: Loans to borrowers in severe financial condition given certain favorable terms and conditions to assist in corporate rehabilitation or to support business, excluding borrowers in categories 1. through 3.

Problem Assets Based on the Financial Reconstruction Act Millions of yen March 31

Bankrupt and quasi-bankrupt assets�������������������������������������������������������������� Doubtful assets����������������������������������������������������������������������������������������������� Substandard loans������������������������������������������������������������������������������������������ Total of problem assets����������������������������������������������������������������������������������� Normal assets������������������������������������������������������������������������������������������������� Total����������������������������������������������������������������������������������������������������������������� Amount of direct reduction������������������������������������������������������������������������������

2016

¥

178,059 526,763 287,921 992,743 85,579,406 ¥86,572,150 ¥ 301,983

2015

¥

152,036 727,986 294,756 1,174,779 83,475,568 ¥84,650,348 ¥ 363,585

Notes: Definition of problem asset categories 1. Bankrupt and quasi-bankrupt assets: Credits to borrowers undergoing bankruptcy, corporate reorganization, and rehabilitation proceedings, as well as claims of a similar nature 2. Doubtful assets: Credits for which final collection of principal and interest in line with original agreements is highly improbable due to deterioration of financial position and business performance, but not insolvency of the borrower 3. Substandard loans: Past due loans (3 months or more) and restructured loans, excluding 1. and 2. 4. Normal assets: Credits to borrowers with good business performance and in financial standing without identified problems and not classified into the 3 categories above

204 2016 Annual Report

Assets and Liabilities (Consolidated)

SMFG

Securities Year-End Balance

Millions of yen

March 31

Domestic operations: Japanese government bonds���������������������������������������������������������������������� Japanese local government bonds������������������������������������������������������������� Japanese corporate bonds������������������������������������������������������������������������� Japanese stocks������������������������������������������������������������������������������������������ Others���������������������������������������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������������������������� Overseas operations: Japanese government bonds���������������������������������������������������������������������� Japanese local government bonds������������������������������������������������������������� Japanese corporate bonds������������������������������������������������������������������������� Japanese stocks������������������������������������������������������������������������������������������ Others���������������������������������������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������������������������� Unallocated corporate assets: Japanese government bonds���������������������������������������������������������������������� Japanese local government bonds������������������������������������������������������������� Japanese corporate bonds������������������������������������������������������������������������� Japanese stocks������������������������������������������������������������������������������������������ Others���������������������������������������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������������������������� Total�����������������������������������������������������������������������������������������������������������������

2016

2015

¥10,346,596 52,070 2,679,706 3,698,605 5,087,628 ¥21,864,608

¥14,290,051 119,993 2,634,119 4,248,281 5,103,864 ¥26,396,309

¥ — — 82,314 — 3,263,832 ¥ 3,346,147

¥

¥ — — — 53,689 — ¥ 53,689 ¥25,264,445

¥

— — 52,548 — 3,133,532 ¥ 3,186,081 — — — 51,276 — ¥ 51,276 ¥29,633,667

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries. 2. “Others” include foreign bonds and foreign stocks.

Trading Assets and Liabilities

Domestic March 31 operations Trading assets����������������������������������������������������������� ¥7,176,926 Trading securities�������������������������������������������������� 3,431,314 Derivatives of trading securities���������������������������� 13,581 Securities related to trading transactions������������� — Derivatives of securities related to trading transactions�������������������������������������������� 18,098 Trading-related financial derivatives��������������������� 3,649,936 Other trading assets��������������������������������������������� 63,995 Trading liabilities�������������������������������������������������������� ¥5,361,628 Trading securities sold for short sales������������������ 2,153,965 Derivatives of trading securities���������������������������� 29,724 Securities related to trading transactions — sold for short sales��������������������������������������������� Derivatives of securities related to 17,275 trading transactions�������������������������������������������� Trading-related financial derivatives��������������������� 3,160,662 Other trading liabilities������������������������������������������ —

Millions of yen 2016 2015 Overseas Domestic Overseas operations Elimination Total operations operations Elimination Total ¥942,823 ¥(56,468) ¥8,063,281 ¥6,752,166 ¥787,124 ¥(55,609) ¥7,483,681 138,744 — 3,570,058 3,057,436 76,279 — 3,133,716 — — 13,581 16,803 — — 16,803 — — — — — — — 120 803,958 — ¥807,507 43,707 —

— (56,468) —

18,218 4,397,427 63,995

24,343 3,551,598 101,984

293 710,550 —

¥(56,468) ¥6,112,667 — 2,197,673 — 29,724

¥5,038,136 2,169,647 25,816

¥682,161 23,752 —

— (55,609) —

24,637 4,206,539 101,984

¥(55,609) ¥5,664,688 — 2,193,399 — 25,816















80 763,719 —

— (56,468) —

17,356 3,867,913 —

26,580 2,816,092 —

298 658,109 —

— (55,609) —

26,878 3,418,593 —

Notes: 1. Domestic operations comprise the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. Overseas operations comprise the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries. 2. Inter-segment transactions are reported in the “Elimination” column.

2016 Annual Report

205

SMFG

Capital (Non-consolidated) Sumitomo Mitsui Financial Group, Inc.

Changes in Number of Shares Issued and Capital Stock

April 1, 2011*�������������������������������������������

Number of shares issued Changes Balances (70,001) 1,414,055,625

Millions of yen Capital stock Capital reserve Changes Balances Changes Balances — 2,337,895 — 1,559,374

Remarks: * The number of shares of preferred stock (Type 6) decreased by 70,001 as a result of repurchase and cancellation of all the shares of preferred stock (1st series Type 6)

Number of Shares Issued March 31, 2016

Common stock��������������������������������������������������������������������������������������������������������������������������������������������������������������� Total��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

206 2016 Annual Report

Number of shares issued

1,414,055,625 1,414,055,625

Capital (Non-consolidated)

SMFG

Stock Exchange Listings Tokyo Stock Exchange (First Section) Nagoya Stock Exchange (First Section) New York Stock Exchange* * SMFG listed its ADRs on the New York Stock Exchange.

Number of Common Shares, Classified by Type of Shareholders March 31, 2016

Japanese government and local government������������������������������������������������������������������ Financial institutions��������������������������������������������������������������������������������������������������������� Securities companies������������������������������������������������������������������������������������������������������� Other institutions�������������������������������������������������������������������������������������������������������������� Foreign institutions����������������������������������������������������������������������������������������������������������� Foreign individuals����������������������������������������������������������������������������������������������������������� Individuals and others������������������������������������������������������������������������������������������������������ Total���������������������������������������������������������������������������������������������������������������������������������� Fractional shares (shares)�������������������������������������������������������������������������������������������������

Number of shareholders

7 350 102 7,097 1,108 337 278,835 287,836 —

Number of units

4,774 4,086,694 648,686 1,357,155 6,342,641 4,015 1,675,796 14,119,761 2,079,525

Percentage of total

0.03% 28.94 4.60 9.61 44.92 0.03 11.87 100.00% —

Notes: 1. Of 4,010,018 shares in treasury stock, 40,100 units are included in “Individuals and others” and the remaining 18 shares are included in “Fractional shares.” 2. “Other institutions” and “Fractional shares” includes 29 units and 48 shares, held at Japan Securities Depository Center, Incorporated. 3. In the row “Fractional shares,” title in the Register of Shareholders is in the name of Sumitomo Mitsui Banking Corporation, but 60 of the shares listed are not substantially in the ownership of the bank.

Principal Shareholders March 31, 2016

Japan Trustee Services Bank, Ltd. (Trust Account)������������������������������������������������������������������������������������� The Master Trust Bank of Japan, Ltd. (Trust Account)�������������������������������������������������������������������������������� Sumitomo Mitsui Banking Corporation������������������������������������������������������������������������������������������������������� STATE STREET BANK AND TRUST COMPANY 505223*��������������������������������������������������������������������������� Japan Trustee Services Bank, Ltd. (Trust Account 9)���������������������������������������������������������������������������������� THE BANK OF NEW YORK MELLON SA/NV 10**�������������������������������������������������������������������������������������� NATSCUMCO***������������������������������������������������������������������������������������������������������������������������������������������ STATE STREET BANK AND TRUST COMPANY 505001****����������������������������������������������������������������������� STATE STREET BANK WEST CLIENT - TREATY 505234*****��������������������������������������������������������������������� STATE STREET BANK AND TRUST COMPANY******���������������������������������������������������������������������������������� Total�������������������������������������������������������������������������������������������������������������������������������������������������������������

Number of shares

Percentage of shares outstanding

71,063,600 51,171,600 42,820,924 35,764,641 27,917,100 27,518,378 24,593,200 19,426,073 18,341,126 17,518,902 336,135,544

5.02% 3.61 3.02 2.52 1.97 1.94 1.73 1.37 1.29 1.23 23.77%

* Standing agent: Mizuho Bank, Ltd. Settlement Service Department ** Standing agent: The Bank of Tokyo-Mitsubishi UFJ, Ltd. *** Standing agent: Sumitomo Mitsui Banking Corporation **** Standing agent: Mizuho Bank, Ltd. Settlement Service Department ***** Standing agent: Mizuho Bank, Ltd. Settlement Service Department ****** Standing agent: The Hongkong and Shanghai Banking Corporation Limited, Tokyo Branch Custody Department Notes: 1. Pursuant to Article 67 of the Enforcement Ordinance of the Companies Act, the exercise of voting rights of common shares held by Sumitomo Mitsui Banking Corporation is restricted. Likewise, for common shares held by the bank, title in the Register of Shareholders is in the name of the bank, but 60 of the shares listed are not substantially in the ownership of the bank. 2. BlackRock Japan Co., Ltd. has submitted a Report of Possession of Large Volume regarding its shareholding as of January 21, 2015. It stated that BlackRock Japan Co., Ltd. and eight other shareholders hold common shares in SMFG as of January 15, 2015. But these nine are not included in the above Principal Shareholders because SMFG was unable to confirm the number of shares owned by them at the end of the fiscal year under review. The Report of Possession of Large Volume is detailed as follows: Principal Shareholder: BlackRock Japan Co., Ltd. (and eight other joint holders) Number of share held: 70,812,990 shares (including joint ownership) Shareholding ratio: 5.01%

2016 Annual Report

207

SMFG

Capital (Non-consolidated)

Stock Options March 31

2016

Number of shares granted������������������������������������������������������������������������������������������������������� Type of stock���������������������������������������������������������������������������������������������������������������������������� Issue price�������������������������������������������������������������������������������������������������������������������������������� Amount capitalized when shares are issued���������������������������������������������������������������������������� Exercise period of stock options����������������������������������������������������������������������������������������������

89,600 shares Common stock ¥2,216 per share ¥1,108 per share From August 13, 2010 to August 12, 2040

Date of resolution: Meeting of the Board of Directors held on July 28, 2010 March 31

2016

Number of shares granted������������������������������������������������������������������������������������������������������� Type of stock���������������������������������������������������������������������������������������������������������������������������� Issue price�������������������������������������������������������������������������������������������������������������������������������� Amount capitalized when shares are issued���������������������������������������������������������������������������� Exercise period of stock options����������������������������������������������������������������������������������������������

259,600 shares Common stock ¥1,873 per share ¥937 per share From August 16, 2011 to August 15, 2041

Date of resolution: Meeting of the Board of Directors held on July 29, 2011 March 31

2016

Number of shares granted������������������������������������������������������������������������������������������������������� Type of stock���������������������������������������������������������������������������������������������������������������������������� Issue price�������������������������������������������������������������������������������������������������������������������������������� Amount capitalized when shares are issued���������������������������������������������������������������������������� Exercise period of stock options����������������������������������������������������������������������������������������������

268,100 shares Common stock ¥2,043 per share ¥1,022 per share From August 15, 2012 to August 14, 2042

Date of resolution: Meeting of the Board of Directors held on July 30, 2012 March 31

2016

Number of shares granted������������������������������������������������������������������������������������������������������� Type of stock���������������������������������������������������������������������������������������������������������������������������� Issue price�������������������������������������������������������������������������������������������������������������������������������� Amount capitalized when shares are issued���������������������������������������������������������������������������� Exercise period of stock options����������������������������������������������������������������������������������������������

114,400 shares Common stock ¥4,160 per share ¥2,080 per share From August 14, 2013 to August 13, 2043

Date of resolution: Meeting of the Board of Directors held on July 29, 2013 March 31

2016

Number of shares granted������������������������������������������������������������������������������������������������������� Type of stock���������������������������������������������������������������������������������������������������������������������������� Issue price�������������������������������������������������������������������������������������������������������������������������������� Amount capitalized when shares are issued���������������������������������������������������������������������������� Exercise period of stock options����������������������������������������������������������������������������������������������

120,300 shares Common stock ¥3,662 per share ¥1,831 per share From August 15, 2014 to August 14, 2044

Date of resolution: Meeting of the Board of Directors held on July 30, 2014 March 31

2016

Number of shares granted������������������������������������������������������������������������������������������������������� Type of stock���������������������������������������������������������������������������������������������������������������������������� Issue price�������������������������������������������������������������������������������������������������������������������������������� Amount capitalized when shares are issued���������������������������������������������������������������������������� Exercise period of stock options����������������������������������������������������������������������������������������������

132,400 shares Common stock ¥4,905 per share ¥2,453 per share From August 18, 2015 to August 17, 2045

Date of resolution: Meeting of the Board of Directors held on July 31, 2015

Common Stock Price Range Stock Price Performance Yen Year ended March 31

2016

High��������������������������������������������������������������������������������������� Low����������������������������������������������������������������������������������������

2015

¥5,770.0 2,819.5

¥4,915.0 3,800

2014

2013

2012

¥5,470 3,545

¥4,255 2,231

¥2,933 2,003

January 2016

February 2016

Note: Stock prices of common shares as quoted on the Tokyo Stock Exchange (First Section).

Six-Month Performance Yen October 2015

High�������������������������������������������������������������� Low���������������������������������������������������������������

¥4,950.0 4,549.0

November 2015

¥5,220.0 4,691.0

December 2015

¥4,833.0 4,471.0

Note: Stock prices of common shares as quoted on the Tokyo Stock Exchange (First Section).

208 2016 Annual Report

¥4,640.0 3,781.0

¥3,745.0 2,819.5

March 2016

¥3,802.0 3,126.0

SMFG

Basel III Information Capital Ratio Information (Consolidated) Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

The consolidated capital ratio is calculated using the method stipulated in “Standards for Bank Holding Company to Examine the Adequacy of Its Capital Based on Assets, Etc. Held by It and Its Subsidiaries Pursuant to Article 52-25 of the Banking Act” (Notification No. 20 issued by the Japanese Financial Services Agency in 2006; hereinafter referred to as “the Notification”). In addition to the method stipulated in the Notification to calculate the consolidated capital ratio (referred to as “International Standard” in the Notification), SMFG has adopted the Advanced Internal Ratings-Based (AIRB) approach for calculating credit risk-weighted asset amounts and the Advanced Measurement Approach (AMA) for calculating the operational risk equivalent amount. “Consolidated Capital Ratio Information” was prepared principally based on the Notification, and the terms and details in the section may differ from those in other sections of this report.

■ Scope of Consolidation 1. Consolidated Capital Ratio Calculation • Number of consolidated subsidiaries: 341 Please refer to “Principal Subsidiaries and Affiliates” on page 104 for their names and business outline. • Scope of consolidated subsidiaries for calculation of the consolidated capital ratio is based on the scope of consolidated subsidiaries for preparing consolidated financial statements. • There are no affiliates to which the proportionate consolidation method is applied. 2. Restrictions on Movement of Funds and Capital within Holding Company Group There are no special restrictions on movement of funds and capital among SMFG and its group companies. 3. Names of companies among subsidiaries of bank-holding companies (other financial institutions), with the Basel Capital Accord required amount, and total shortfall amount Not applicable.

■ Capital Structure Information (Consolidated Capital Ratio (International Standard)) Regarding the calculation of the capital ratio, certain procedures were performed by KPMG AZSA LLC pursuant to “Treatment of Inspection of the Capital Ratio Calculation Framework Based on Agreed-Upon Procedures” (JICPA Industry Committee Practical Guideline No. 30). The certain procedures performed by the external auditor are not part of the audit of consolidated financial statements. The certain procedures performed on our internal control framework for calculating the capital ratio are based on procedures agreed upon by SMFG and the external auditor and are not a validation of appropriateness of the capital ratio itself or opinion on the internal controls related to the capital ratio calculation.

2016 Annual Report

209

SMFG

Basel III Information



(Millions of yen, except percentages)

As of March 31, 2016 Basel III Items Template No.

Common Equity Tier 1 capital: instruments and reserves Directly issued qualifying common share capital plus related capital surplus and retained 1a+2-1c-26 earnings 1a of which: capital and capital surplus 2 of which: retained earnings 1c of which: treasury stock (–) 26 of which: cash dividends to be paid (–) of which: other than the above 1b Stock acquisition rights to common shares 3 Accumulated other comprehensive income and other disclosed reserves Adjusted non-controlling interests, etc. (amount allowed to be included in group Common Equity 5 Tier 1) Total of items included in Common Equity Tier 1 capital: instruments and reserves subject to transitional arrangements of which: non-controlling interests and other items corresponding to common share capital issued by consolidated subsidiaries (amount allowed to be included in group Common Equity Tier 1) 6 Common Equity Tier 1 capital: instruments and reserves (A) Common Equity Tier 1 capital: regulatory adjustments 8+9 Total intangible assets (excluding those relating to mortgage servicing rights) 8 of which: goodwill (including those equivalent) 9 of which: other intangible assets other than goodwill and mortgage servicing rights Deferred tax assets that rely on future profitability excluding those arising from temporary 10 differences (net of related tax liability) 11 Net deferred gains or losses on hedges 12 Shortfall of eligible provisions to expected losses 13 Gain on sale on securitization transactions 14 Gains and losses due to changes in own credit risk on fair valued liabilities 15 Net defined benefit asset 16 Investments in own shares (excluding those reported in the Net assets section) 17 Reciprocal cross-holdings in common equity Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation (“Other Financial Institutions”), net of eligible short positions, 18 where the bank does not own more than 10% of the issued share capital (“Non-significant Investment”) (amount above the 10% threshold) 19+20+21 Amount exceeding the 10% threshold on specified items of which: significant investments in the common stock of Other Financial Institutions, net of 19 eligible short positions 20 of which: mortgage servicing rights 21 of which: deferred tax assets arising from temporary differences (net of related tax liability) 22 Amount exceeding the 15% threshold on specified items of which: significant investments in the common stock of Other Financial Institutions, net of 23 eligible short positions 24 of which: mortgage servicing rights 25 of which: deferred tax assets arising from temporary differences (net of related tax liability) Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 27 and Tier 2 to cover deductions 28 Common Equity Tier 1 capital: regulatory adjustments  (B) Common Equity Tier 1 capital (CET1) 29 Common Equity Tier 1 capital (CET1) ((A)-(B))  (C)

210 2016 Annual Report

As of March 31, 2015

Amounts excluded under transitional arrangements

7,351,752 3,095,202 4,534,472 175,381 102,541 — 2,635 875,680

Amounts excluded under transitional arrangements

6,909,010 3,095,225 4,098,425 175,261 109,379 — 2,085 583,787 801,543 1,202,315

164,550

153,863

48,257

70,451

48,257

70,451

8,442,875

7,936,954

451,805 223,573 228,232

301,203 149,048 152,154

303,449 174,118 129,330

455,174 261,177 193,996

1,282

855

2,003

3,004

34,278 34,496 30,051 5,089 84,995 4,424 —

22,852 22,997 20,034 3,392 56,663 2,949 —

(11,477) 12,822 18,683 2,597 102,160 3,954 —

(17,216) 19,233 28,025 3,896 153,241 5,931 —





26,239

39,359

















— — —

— — —

— — —

— — —









— —

— —

— —

— —





646,423

460,433

7,796,451

7,476,520

Basel III Information



SMFG

(Millions of yen, except percentages)

As of March 31, 2016 Basel III Items Template No.

Additional Tier 1 capital: instruments Directly issued qualifying Additional Tier 1 instruments plus related capital surplus of which: 31a classified as equity under applicable accounting standards and the breakdown 31b Stock acquisition rights to Additional Tier 1 instruments 30 Directly issued qualifying Additional Tier 1 instruments plus related capital surplus of which: 32 classified as liabilities under applicable accounting standards Qualifying Additional Tier 1 instruments plus related capital surplus issued by special purpose vehicles and other equivalent entities Adjusted non-controlling interests, etc. (amount allowed to be included in group Additional 34-35 Tier 1) Eligible Tier 1 capital instruments subject to transitional arrangements included in Additional 33+35 Tier 1 capital: instruments 33 of which: instruments issued by bank holding companies and their special purpose vehicles of which: instruments issued by subsidiaries (excluding bank holding companies’ special 35 purpose vehicles) Total of items included in Additional Tier 1 capital: items subject to transitional arrangements of which: foreign currency translation adjustments 36 Additional Tier 1 capital: instruments  (D) Additional Tier 1 capital: regulatory adjustments 37 Investments in own Additional Tier 1 instruments 38 Reciprocal cross-holdings in Additional Tier 1 instruments Non-significant Investments in the Additional Tier 1 capital of Other Financial Institutions, net of 39 eligible short positions (amount above 10% threshold) Significant investments in the Additional Tier 1 capital of Other Financial Institutions (net of 40 eligible short positions) Total of items included in Additional Tier 1 capital: regulatory adjustments subject to transitional arrangements of which: goodwill and others of which: gain on sale on securitization transactions of which: amount equivalent to 50% of shortfall of eligible provisions to expected losses Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover 42 deductions 43 Additional Tier 1 capital: regulatory adjustments  (E) Additional Tier 1 capital (AT1) 44 Additional Tier 1 capital ((D)-(E))  (F) Tier 1 capital (T1 = CET1 + AT1) 45 Tier 1 capital (T1 = CET1 + AT1) ((C)+(F))  (G) Tier 2 capital: instruments and provisions Directly issued qualifying Tier 2 instruments plus related capital surplus of which: classified as equity under applicable accounting standards and its breakdown Stock acquisition rights to Tier 2 instruments 46 Directly issued qualifying Tier 2 instruments plus related capital surplus of which: classified as liabilities under applicable accounting standards Qualifying Tier 2 instruments plus related capital surplus issued by special purpose vehicles and other equivalent entities 48-49 Adjusted non-controlling interests, etc. (amount allowed to be included in group Tier 2) Eligible Tier 2 capital instruments subject to transitional arrangements included in Tier 2: 47+49 instruments and provisions 47 of which: instruments issued by bank holding companies and their special purpose vehicles of which: instruments issued by subsidiaries (excluding bank holding companies’ special 49 purpose vehicles) 50 Total of general reserve for possible loan losses and eligible provisions included in Tier 2 50a of which: general reserve for possible loan losses 50b of which: eligible provisions Total of items included in Tier 2 capital: instruments and provisions subject to transitional arrangements of which: unrealized gains on other securities after 55% discount of which: land revaluation excess after 55% discount 51 Tier 2 capital: instruments and provisions  (H)

As of March 31, 2015

Amounts excluded under transitional arrangements

Amounts excluded under transitional arrangements









300,000







183,267

182,251

961,997

1,124,296

961,997

1,124,296





34,817 34,817 1,480,082

93,785 93,785 1,400,333

— —

— —

— —

— —





203

304

48,032

32,021

63,453

95,180

196,827

284,571

165,294 20,034 11,498

246,929 28,025 9,616





244,860

348,227

1,235,221

1,052,105

9,031,672

8,528,626









655,064

374,988





42,036

39,348

1,220,569

1,423,997





1,220,569

1,423,997

78,017 78,017 —

64,776 64,776 —

345,673

699,394

332,809 12,863 2,341,360

679,578 19,816 2,602,505 2016 Annual Report

211

SMFG

Basel III Information



(Millions of yen, except percentages)

As of March 31, 2016 Basel III Items Template No.

Tier 2 capital: regulatory adjustments 52 Investments in own Tier 2 instruments 53 Reciprocal cross-holdings in Tier 2 instruments Non-significant Investments in the Tier 2 capital of Other Financial Institutions, net of eligible 54 short positions (amount above the 10% threshold) Significant investments in the Tier 2 capital of Other Financial Institutions (net of eligible short 55 positions) Total of items included in Tier 2 capital: regulatory adjustments subject to transitional arrangements of which: Tier 2 and deductions under Basel II 57 Tier 2 capital: regulatory adjustments  (I) Tier 2 capital (T2) 58 Tier 2 capital (T2) ((H)-(I))  (J) Total capital (TC = T1 + T2) 59 Total capital (TC = T1 + T2) ((G) + (J))  (K) Risk weighted assets Total of items included in risk weighted assets subject to transitional arrangements of which: intangible assets (excluding those relating to mortgage servicing rights) of which: net defined benefit asset of which: Non-significant Investments in the capital of Other Financial Institutions, net of eligible short positions (amount above the 10% threshold) of which: significant investments in Additional Tier 1 capital of Other Financial Institutions (net of eligible short positions) of which: significant investments in Tier 2 capital of Other Financial Institutions (net of eligible short positions) 60 Risk weighted assets  (L) Capital ratio (consolidated) 61 Common Equity Tier 1 risk-weighted capital ratio (consolidated) ((C)/(L)) 62 Tier 1 risk-weighted capital ratio (consolidated) ((G)/(L)) 63 Total risk-weighted capital ratio (consolidated) ((K)/(L)) Regulatory adjustments Non-significant Investments in the capital of Other Financial Institutions that are below the 72 thresholds for deduction (before risk weighting) Significant investments in the common stock of Other Financial Institutions that are below the 73 thresholds for deduction (before risk weighting) 74 Mortgage servicing rights that are below the thresholds for deduction (before risk weighting) Deferred tax assets arising from temporary differences that are below the thresholds for 75 deduction (before risk weighting) Provisions included in Tier 2 capital: instruments and provisions 76 Provisions (general reserve for possible loan losses) 77 Cap on inclusion of provisions (general reserve for possible loan losses) Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal 78 ratings-based approach (prior to application of cap) 79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach Capital instruments subject to transitional arrangements 82 Current cap on Additional Tier 1 instruments subject to transitional arrangements Amount excluded from Additional Tier 1 due to cap (excess over cap after redemptions and 83 maturities) 84 Current cap on Tier 2 instruments subject to transitional arrangements 85 Amount excluded from Tier 2 due to cap (excess over cap after redemptions and maturities)

Required capital ((L) ✕ 8%)

212 2016 Annual Report

Amounts excluded under transitional arrangements

— —

— —

— —

— —





4,043

6,065

75,000

50,000

50,023

75,034

62,109

111,149

62,109 137,109

111,149 165,216

2,204,250

2,437,289

11,235,923

10,965,916

68,865 31,824 16,093

210,891 32,434 33,867



64,835

83

52,936

16,156

17,981

66,011,621

66,136,801

11.81% 13.68% 17.02%

11.30% 12.89% 16.58%

620,209

798,335

522,466

477,320





9,700

5,285

78,017 88,359

64,776 84,065





309,031

312,347

975,514

1,138,100





1,220,569 30,203

1,423,997 43,258

As of March 31, 2016 5,280,929

As of March 31, 2015 5,290,944

 Items

As of March 31, 2015

Amounts excluded under transitional arrangements

(Millions of yen)

Basel III Information

SMFG

■ Capital Requirements Billions of yen March 31

Capital requirements for credit risk: Internal ratings-based approach������������������������������������������������������������������������������������������������������������ Corporate exposures: ������������������������������������������������������������������������������������������������������������������������ Corporate exposures (excluding specialized lending)�������������������������������������������������������������������� Sovereign exposures���������������������������������������������������������������������������������������������������������������������� Bank exposures������������������������������������������������������������������������������������������������������������������������������ Specialized lending������������������������������������������������������������������������������������������������������������������������� Retail exposures:�������������������������������������������������������������������������������������������������������������������������������� Residential mortgage exposures���������������������������������������������������������������������������������������������������� Qualifying revolving retail exposures���������������������������������������������������������������������������������������������� Other retail exposures��������������������������������������������������������������������������������������������������������������������� Equity exposures:������������������������������������������������������������������������������������������������������������������������������� PD/LGD approach�������������������������������������������������������������������������������������������������������������������������� Market-based approach����������������������������������������������������������������������������������������������������������������� Simple risk weight method��������������������������������������������������������������������������������������������������������� Internal models method�������������������������������������������������������������������������������������������������������������� Credit risk-weighted assets under Article 145 of the Notification������������������������������������������������������ Securitization exposures�������������������������������������������������������������������������������������������������������������������� Other exposures��������������������������������������������������������������������������������������������������������������������������������� Standardized approach�������������������������������������������������������������������������������������������������������������������������� Amount corresponding to CVA risk�������������������������������������������������������������������������������������������������������� CCP-related exposures�������������������������������������������������������������������������������������������������������������������������� Total capital requirements for credit risk������������������������������������������������������������������������������������������������ Capital requirements for market risk: Standardized method����������������������������������������������������������������������������������������������������������������������������� Interest rate risk���������������������������������������������������������������������������������������������������������������������������������� Equity position risk����������������������������������������������������������������������������������������������������������������������������� Foreign exchange risk������������������������������������������������������������������������������������������������������������������������ Commodities risk�������������������������������������������������������������������������������������������������������������������������������� Options����������������������������������������������������������������������������������������������������������������������������������������������� Internal models approach����������������������������������������������������������������������������������������������������������������������� Securitization exposures������������������������������������������������������������������������������������������������������������������������ Total capital requirements for market risk���������������������������������������������������������������������������������������������� Capital requirements for operational risk: Advanced measurement approach�������������������������������������������������������������������������������������������������������� Basic indicator approach������������������������������������������������������������������������������������������������������������������������ Total capital requirements for operational risk��������������������������������������������������������������������������������������� Total amount of capital requirements�������������������������������������������������������������������������������������������������������

2016

2015

4,954.4 3,102.8 2,645.2 43.1 136.5 278.1 623.1 373.1 134.9 115.1 459.5 317.6 141.9 92.4 49.4 252.6 78.6 437.8 547.2 197.0 8.3 5,706.9

5,093.8 3,091.1 2,588.4 42.1 183.2 277.4 661.2 404.9 127.4 128.9 498.3 374.7 123.6 87.7 35.9 324.0 75.5 443.6 519.6 179.5 8.2 5,801.1

64.7 38.0 17.6 2.2 0.2 6.7 52.3 — 116.9

74.6 42.0 26.0 1.9 1.4 3.3 82.7 — 157.3

226.7 40.6 267.2 6,091.1

193.3 33.1 226.4 6,184.8

Notes: 1. Capital requirements for credit risk are capital equivalents to “credit risk-weighted assets ✕ 8%” under the standardized approach and “credit risk-weighted assets ✕ 8% + expected loss amount” under the Internal-Ratings Based (IRB) approach. 2. Portfolio classification is after CRM. 3. “Securitization exposures” includes such exposures based on the standardized approach. 4. “Other exposures” includes estimated lease residual values, purchased receivables (including exposures to qualified corporate enterprises and others), long settlement transactions and other assets.

■ Internal Ratings-Based (IRB) Approach 1. Scope SMFG and the following consolidated subsidiaries have adopted the Advanced Internal Ratings-Based (AIRB) approach for exposures as of March 31, 2009. (1) Domestic Operations Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Card Company, Limited and SMBC Guarantee Co., Ltd. (2) Overseas Operations Sumitomo Mitsui Banking Corporation Europe Limited, Sumitomo Mitsui Banking Corporation (China) Limited, Sumitomo Mitsui Banking Corporation of Canada, Banco Sumitomo Mitsui Brasileiro S.A., JSC Sumitomo Mitsui Rus Bank, PT Bank Sumitomo Mitsui Indonesia, Sumitomo Mitsui Banking Corporation Malaysia Berhad, SMBC Leasing and Finance, Inc., SMBC Capital Markets, Inc., SMBC Nikko Capital Markets Limited, SMBC Derivative Products Limited and SMBC Capital Markets (Asia) Limited THE MINATO BANK, LTD., Kansai Urban Banking Corporation, SMBC Finance Service Co., Ltd. and Sumitomo Mitsui Finance and Leasing Co., Ltd. have adopted the Foundation Internal Ratings-Based (FIRB) approach. Note: Directly controlled SPCs and limited partnerships for investment of consolidated subsidiaries using the AIRB approach have also adopted the AIRB approach. Further, the AIRB approach is applied to equity exposures on a group basis, including equity exposures of consolidated subsidiaries applying the standardized approach.

2016 Annual Report

213

SMFG

Basel III Information

2. Exposures by Asset Class (1) Corporate Exposures A. Corporate, Sovereign and Bank Exposures (A) Rating Procedures • “Corporate, sovereign and bank exposures” includes credits to domestic and overseas commercial/industrial (C&I) companies, individuals for business purposes (domestic only), sovereigns, public sector entities, and financial institutions. Business loans such as apartment construction loans are, in principle, included in “retail exposures.” However, credits of more than ¥100 million are treated as corporate exposures in accordance with the Notification. • An obligor is assigned an obligor grade by first assigning a financial grade using a financial strength grading model and data obtained from the obligor’s financial statements. The financial grade is then adjusted taking into account the actual state of the obligor’s balance sheet and qualitative factors to derive the obligor grade (for details, please refer to “Credit Risk Assessment and Quantification” on page 81). Different rating series are used for domestic and overseas obligors — J1 ~ J10 for domestic obligors and G1 ~ G10 for overseas obligors — as shown in the table below due to differences in actual default rate levels and portfolios’ grade distribution. Different Probability of Default (PD) values are applied also. • In addition to the above basic rating procedure which builds on the financial grade assigned at the beginning, in some cases, the obligor grade is assigned based on the parent company’s credit quality or credit ratings published by external rating agencies. The Japanese government, local authorities and other public sector entities with special basis for existence and unconventional financial statements are assigned obligor grades based on their attributes (for example, “local municipal corporations”), as the data on these obligors are not suitable for conventional grading models. Further, credits to individuals for business purposes and business loans are assigned obligor grades using grading models developed specifically for these exposures. • PDs used for calculating credit risk-weighted assets are estimated based on the default experience for each grade and taking into account the possibility of estimation errors. In addition to internal data, external data are used to estimate and validate PDs. The definition of default is the definition stipulated in the Notification (an event that would lead to an exposure being classified as “substandard loans,” “doubtful assets” or “bankrupt and quasi-bankrupt assets” occurring to the obligor). • Loss Given Defaults (LGDs) and exposure at default (EAD) used in the calculation of credit risk-weighted assets are estimated based on historical loss experience of credits in default, taking into account the possibility of estimation errors. Obligor Grade Domestic Overseas Corporate Corporate

J1 J2 J3 J4 J5

J6 J7 J7R J8 J9 J10

214 2016 Annual Report

G1 G2 G3 G4

Definition

Very high certainty of debt repayment High certainty of debt repayment Satisfactory certainty of debt repayment Debt repayment is likely but this could change in cases of significant changes in economic trends or business environment G5 No problem with debt repayment over the short term, but not satisfactory over the mid to long term and the situation could change in cases of significant changes in economic trends or business environment G6 Currently no problem with debt repayment, but there are unstable business and financial factors that could lead to debt repayment problems G7 Close monitoring is required due to problems in meeting loan terms and conditions, sluggish/unstable business, or financial problems G7R Of which Substandard Borrowers G8 Currently not bankrupt, but experiencing business difficulties, making insufficient progress in restructuring, and highly likely to go bankrupt G9 Though not yet legally or formally bankrupt, has serious business difficulties and rehabilitation is unlikely; thus, effectively bankrupt G10 Legally or formally bankrupt

Borrower Category

Normal Borrowers

Borrowers Requiring Caution Substandard Borrowers Potentially Bankrupt Borrowers Effectively Bankrupt Borrowers Bankrupt Borrowers

SMFG

Basel III Information

(B) Portfolio a. Domestic Corporate, Sovereign and Bank Exposures Billions of yen Exposure amount

March 31, 2016

J1-J3����������������������������������� J4-J6����������������������������������� J7 (excluding J7R)��������������� Japanese government and local municipal corporations����� Others���������������������������������� Default (J7R, J8-J10)����������� Total�������������������������������������

On-balance Off-balance sheet assets sheet assets

Total

25,425.1 16,856.1 791.2

20,176.1 14,637.0 745.3

5,249.0 2,219.1 45.9

5,214.0 1,070.1 24.2

49.47% 49.97 49.39

45,890.5 4,874.7 732.3 94,570.0

45,414.0 4,346.0 692.3 86,010.6

476.5 528.7 40.1 8,559.4

106.1 253.7 0.6 6,668.8

49.39 49.86 96.36 —

Billions of yen Exposure amount

March 31, 2015

J1-J3����������������������������������� J4-J6����������������������������������� J7 (excluding J7R)��������������� Japanese government and local municipal corporations����� Others���������������������������������� Default (J7R, J8-J10)����������� Total�������������������������������������

Undrawn amount Weighted average Total CCF

On-balance Off-balance sheet assets sheet assets

Total

Undrawn amount Weighted average Total CCF

24,669.4 16,265.1 936.5

19,660.6 14,077.4 894.2

5,008.8 2,187.7 42.2

4,323.8 844.1 9.8

50.41% 50.85 50.72

47,942.0 5,070.3 914.4 95,797.7

47,447.1 4,575.3 873.8 87,528.3

494.9 495.1 40.7 8,269.4

237.9 158.7 1.3 5,575.6

50.32 50.41 98.50 —

Weighted average PD

0.07% 0.74 15.69 0.00 0.81 100.00 —

Weighted average PD

0.07% 0.78 15.42 0.00 0.84 100.00 —

Weighted average LGD

35.03% 34.65 34.24

Weighted average EL default

Weighted average risk weight

—% 19.36% — 50.60 — 149.46

35.31 44.36 47.52 —

— — 46.87 —

0.01 54.86 8.15 —

Weighted average LGD

Weighted average EL default

Weighted average risk weight

34.52% 33.10 33.77 35.31 43.50 46.88 —

—% 19.82% — 49.61 — 146.52 — — 45.98 —

0.03 50.10 11.21 —

Note: “Others” includes exposures guaranteed by credit guarantee corporations, exposures to public sector entities and voluntary organizations, exposures to obligors not assigned obligor grades because they have yet to close their books (for example, newly established companies), as well as business loans of more than ¥100 million.

b. Overseas Corporate, Sovereign and Bank Exposures Billions of yen Exposure amount

March 31, 2016

On-balance Off-balance sheet assets sheet assets

Total

G1-G3���������������������������������� 38,146.3 G4-G6���������������������������������� 2,100.5 G7 (excluding G7R)������������� 490.0 Others���������������������������������� 314.3 119.3 Default (G7R, G8-G10)�������� Total������������������������������������� 41,170.4

28,329.7 1,461.7 386.6 117.8 89.8 30,385.5

9,816.6 638.9 103.4 196.5 29.6 10,785.0

Billions of yen Exposure amount

March 31, 2015

Total

G1-G3���������������������������������� 36,212.6 G4-G6���������������������������������� 2,610.0 396.6 G7 (excluding G7R)������������� Others���������������������������������� 341.8 Default (G7R, G8-G10)�������� 114.6 Total������������������������������������� 39,675.6

On-balance Off-balance sheet assets sheet assets

26,970.0 1,255.5 355.2 143.3 86.7 28,810.6

9,242.7 1,354.5 41.4 198.5 27.8 10,865.0

Undrawn amount Weighted average Total CCF

8,977.6 347.0 129.0 193.3 26.6 9,673.5

49.39% 0.14% 49.39 2.87 49.39 14.86 49.39 2.59 100.00 100.00 — —

Undrawn amount Weighted average Total CCF

8,406.7 383.2 58.1 49.0 25.4 8,922.4

Weighted average PD

Weighted average PD

50.32% 0.13% 50.32 3.07 50.32 13.98 50.32 2.44 100.00 100.00 — —

Weighted average LGD

30.26% 24.37 26.66 25.04 54.56 —

Weighted average LGD

30.44% 18.42 27.59 31.65 48.94 —

Weighted average EL default

—% — — — 50.41 —

Weighted average EL default

Weighted average risk weight

17.98% 69.62 132.5 73.14 51.88 —

Weighted average risk weight

—% 17.93% — 50.47 — 132.48 — 92.25 44.68 53.25 — —

2016 Annual Report

215

SMFG

Basel III Information

B. Specialized Lending (SL) (A) Rating Procedures • “Specialized lending” is sub-classified into “project finance,” “object finance,” “commodity finance,” “income-producing real estate” (IPRE) and “high-volatility commercial real estate” (HVCRE) in accordance with the Notification. Project finance is financing of a single project, such as a power plant or transportation infrastructure, and cash flows generated by the project are the primary source of repayment. Object finance includes aircraft finance and ship finance, and IPRE and HVCRE include real estate finance (a primary example is non-recourse real estate finance). There were no commodity finance exposures as of March 31, 2016. • Each SL product is classified as either a facility assigned a PD grade and LGD grade or a facility assigned a grade based primarily on the expected loss ratio, both using grading models and qualitative assessment. The former has the same grading structure as that of corporate, and the latter has ten grade levels as with obligor grades but the definition of each grade differs from that of the obligor grade which is focused on PD. For the credit risk-weighted asset amount for the SL category, the former facility is calculated in a manner similar to corporate exposures, while the latter facility is calculated by mapping the expected loss-based facility grades to the below five categories (hereinafter the “slotting criteria”) of the Notification because it does not satisfy the requirements for PD application specified in the Notification. (B) Portfolio a. Slotting Criteria Applicable Portion (a) Project Finance, Object Finance and Income-Producing Real Estate (IPRE) Billions of yen March 31

Strong: Residual term less than 2.5 years����� Residual term 2.5 years or more������� Good: Residual term less than 2.5 years����� Residual term 2.5 years or more������� Satisfactory������������������������������������������� Weak������������������������������������������������������ Default��������������������������������������������������� Total�������������������������������������������������������

Risk weight

2016

2015

Project finance Object finance

IPRE

Strong: Residual term less than 2.5 years����� Residual term 2.5 years or more������� Good: Residual term less than 2.5 years����� Residual term 2.5 years or more������� Satisfactory������������������������������������������� Weak������������������������������������������������������ Default��������������������������������������������������� Total�������������������������������������������������������

216 2016 Annual Report

IPRE

50% 70%

0.0 28.2

— 2.8

2.5 11.5

0.0 15.5

— 3.0

0.3 12.2

70% 90% 115% 250% —

33.2 20.6 4.5 20.9 3.5 110.8

— — 0.9 — — 3.6

5.0 5.4 23.4 0.7 0.0 48.6

35.9 27.8 29.2 — 3.8 112.4

— — — — — 3.0

2.7 4.7 10.3 — 1.6 31.7

(b) High-Volatility Commercial Real Estate (HVCRE) March 31

Project finance Object finance

Risk weight

Billions of yen

2016

2015

70% 95%

8.7 4.8

3.6 6.6

95% 120% 140% 250% —

113.7 71.1 156.5 1.8 — 356.7

94.9 48.7 103.0 — — 256.7

Basel III Information

SMFG

b. PD/LGD Approach Applicable Portion, Other Than Slotting Criteria Applicable Portion (a) Project Finance Billions of yen Exposure amount

March 31, 2016

Total

G1-G3���������������������������������� 3,279.4 G4-G6���������������������������������� 214.3 21.8 G7 (excluding G7R)������������� Others���������������������������������� — Default (G7R, G8-G10)�������� 29.3 Total������������������������������������� 3,544.9

On-balance Off-balance sheet assets sheet assets

2,279.7 168.8 21.2 — 29.1 2,498.8

999.8 45.5 0.6 — 0.1 1,046.0

Billions of yen Exposure amount

March 31, 2015

Total

G1-G3���������������������������������� 3,069.8 G4-G6���������������������������������� 210.5 G7 (excluding G7R)������������� 33.0 Others���������������������������������� — 15.1 Default (G7R, G8-G10)�������� Total������������������������������������� 3,328.3

On-balance Off-balance sheet assets sheet assets

2,184.3 178.8 30.9 — 15.1 2,409.0

885.5 31.7 2.1 — — 919.3

Undrawn amount Weighted average Total CCF

1,039.7 44.4 — — 0.1 1,084.2

49.39% 0.29% 49.39 3.16 — 19.28 — — 100.00 100.00 — —

Undrawn amount Weighted average Total CCF

914.9 41.8 0.1 — — 956.8

Weighted average PD

Weighted average PD

50.32% 0.29% 50.32 2.46 50.32 17.45 — — — 100.00 — —

Weighted average LGD

27.51% 33.98 27.45 — 53.30 —

Weighted average LGD

29.91% 22.83 45.64 — 62.68 —

Weighted average EL default

Weighted average risk weight

—% 42.48% — 113.01 — 148.59 — — 49.15 51.88 — —

Weighted average EL default

Weighted average risk weight

—% 41.97% — 74.63 — 254.13 — — 58.42 53.25 — —

(b) Object Finance Billions of yen Exposure amount

March 31, 2016

Total

G1-G3���������������������������������� G4-G6���������������������������������� G7 (excluding G7R)������������� Others���������������������������������� Default (G7R, G8-G10)�������� Total�������������������������������������

226.1 19.2 0.6 — 0.0 246.0

On-balance Off-balance sheet assets sheet assets

183.8 18.2 0.6 — 0.0 202.6

42.4 1.0 — — — 43.4

Billions of yen Exposure amount

March 31, 2015

Total

G1-G3���������������������������������� G4-G6���������������������������������� G7 (excluding G7R)������������� Others���������������������������������� Default (G7R, G8-G10)�������� Total�������������������������������������

198.9 11.0 0.7 — 1.3 211.8

On-balance Off-balance sheet assets sheet assets

151.0 11.0 0.7 — 1.3 163.9

47.9 — — — — 47.9

Undrawn amount Weighted average Total CCF

33.8 — — — — 33.8

49.39% 0.32% — 3.43 — 14.44 — — — 100.00 — —

Undrawn amount Weighted average Total CCF

42.0 — — — — 42.0

Weighted average PD

Weighted average PD

50.32% 0.26% — 4.05 — 13.71 — — — 100.00 — —

Weighted average LGD

13.04% 22.46 45.00 — 91.00 —

Weighted average LGD

17.70% 14.31 5.00 — 62.77 —

Weighted average EL default

Weighted average risk weight

—% 19.02% — 83.48 — 246.61 — — 86.85 51.88 — —

Weighted average EL default

—% — — — 58.51 —

Weighted average risk weight

25.08% 50.86 22.09 — 53.25 —

(c) Income-Producing Real Estate (IPRE) Billions of yen Exposure amount

March 31, 2016

Total

J1-J3����������������������������������� 850.1 J4-J6����������������������������������� 469.2 J7 (excluding J7R)��������������� 12.6 Others���������������������������������� 301.7 Default (J7R, J8-J10)����������� 20.4 Total������������������������������������� 1,654.0

On-balance Off-balance sheet assets sheet assets

746.8 376.8 5.4 290.7 — 1,419.8

103.3 92.4 7.2 11.0 20.4 234.3

Undrawn amount Weighted average Total CCF

2.6 1.2 — 14.5 — 18.4

Weighted average PD

49.39% 0.04% 49.39 1.16 — 25.57 49.39 0.81 — 100.00 — —

Weighted average LGD

22.28% 27.60 19.95 30.05 35.12 —

Weighted average EL default

Weighted average risk weight

—% 9.95% — 61.50 — 110.47 — 26.31 34.27 10.63 — —

2016 Annual Report

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Billions of yen Exposure amount

March 31, 2015

On-balance Off-balance sheet assets sheet assets

Total

J1-J3����������������������������������� 504.9 J4-J6����������������������������������� 859.5 J7 (excluding J7R)��������������� 5.5 Others���������������������������������� 250.1 Default (J7R, J8-J10)����������� 27.0 Total������������������������������������� 1,647.0

459.1 717.1 5.5 242.6 0.7 1,425.0

45.8 142.4 — 7.5 26.3 222.0

Undrawn amount Weighted average Total CCF

2.2 — — 11.7 — 13.9

Weighted average PD

Weighted average LGD

50.32% 0.05% — 1.20 — 10.38 50.32 1.18 — 100.00 — —

29.91% 33.11 1.00 33.84 37.73 —

Weighted average EL default

Weighted average risk weight

—% — — — 36.55 —

14.12% 76.26 4.45 30.59 14.75 —

(2) Retail Exposures A. Residential Mortgage Exposures (A) Rating Procedures • “Residential mortgage exposures” includes mortgage loans to individuals and some real estate loans in which the property consists of both residential and commercial facilities such as a store or rental apartment units, but excludes apartment construction loans. • Mortgage loans are rated as follows. Mortgage loans are allocated to a portfolio segment with similar risk characteristics in terms of (a) default risk determined using loan contract information, results of an exclusive grading model and a borrower category under self-assessment executed in accordance with the financial inspection manual of the Japanese FSA, and (b) recovery risk at the time of default determined using Loan To Value (LTV) calculated based on the assessment value of collateral real estate. PDs and LGDs are estimated based on the default experience for each segment and taking into account the possibility of estimation errors. Further, the portfolio is subdivided based on the lapse of years from the contract date, and the effectiveness of segmentation in terms of default risk and recovery risk is validated periodically. Internal data are used to estimate and validate PDs and LGDs. The definition of default is the definition stipulated in the Notification. (B) Portfolio

March 31, 2016

Mortgage loans PD segment: Not delinquent Use model������������������������� Others������������������������������� Delinquent����������������������������� Default������������������������������������������ Total����������������������������������������������

March 31, 2015

Mortgage loans PD segment: Not delinquent Use model������������������������� Others������������������������������� Delinquent����������������������������� Default������������������������������������������ Total����������������������������������������������

Total

12,005.4 428.3 86.5 184.0 12,704.3

Total

12,134.0 473.2 97.2 201.0 12,905.4

Billions of yen Exposure amount On-balance Off-balance sheet assets sheet assets

11,980.6 428.3 82.3 183.9 12,675.1

24.9 — 4.2 0.1 29.2

Billions of yen Exposure amount On-balance Off-balance sheet assets sheet assets

12,104.3 473.2 92.4 200.8 12,870.6

29.8 — 4.8 0.2 34.8

Weighted average PD

0.45% 1.05 19.54 100.00 —

Weighted average PD

0.45% 1.07 20.59 100.00 —

Weighted average LGD

34.20% 51.55 37.29 35.15 —

Weighted average LGD

35.37% 53.26 38.08 36.70 —

Weighted average EL default

—% — — 33.64 —

Weighted average EL default

—% — — 34.86 —

Weighted average risk weight

23.75% 69.54 194.86 18.95 —

Weighted average risk weight

24.77% 73.55 202.39 22.99 —

Notes: 1. “Others” includes loans guaranteed by employers. 2. “Delinquent” loans are past due loans and loans to obligors categorized as “Borrowers Requiring Caution” that do not satisfy the definition of default stipulated in the Notification.

218 2016 Annual Report

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SMFG

B. Qualifying Revolving Retail Exposures (QRRE) (A) Rating Procedures • “Qualifying revolving retail exposures” includes card loans and credit card balances. • Card loans and credit card balances are rated as follows. Card loans and credit card balances are allocated to a portfolio segment with similar risk characteristics determined based, for card loans, on the credit quality of the loan guarantee company, credit limit, settlement account balance and payment history, and, for credit card balances, on repayment history and frequency of use. PDs and LGDs used to calculate credit risk-weighted asset amounts are estimated based on the default experience for each segment and taking into account the possibility of estimation errors. Further, the effectiveness of segmentation in terms of default risk and recovery risk is validated periodically. Internal data are used to estimate and validate PDs and LGDs. The definition of default is the definition stipulated in the Notification. (B) Portfolio

March 31, 2016

Card loans PD segment: Not delinquent����� Delinquent������������ Credit card balances PD segment: Not delinquent����� Delinquent������������ Default������������������������� Total�����������������������������

March 31, 2015

Card loans PD segment: Not delinquent����� Delinquent������������ Credit card balances PD segment: Not delinquent����� Delinquent������������ Default������������������������� Total�����������������������������

Total

Billions of yen Exposure amount On-balance Off-balance sheet assets sheet Balance Increase assets

Undrawn amount

Total

846.6 16.0

736.4 15.4

108.4 0.6

1.8 —

233.1 3.1

1,514.6 6.2 25.7 2,409.2

893.4 5.3 22.9 1,673.4

334.0 0.9 2.8 446.8

287.2 — — 289.0

4,368.5 — — 4,604.7

Total

Billions of yen Exposure amount On-balance Off-balance sheet assets sheet Balance Increase assets

Weighted average CCF

Weighted average PD

Weighted average LGD

46.51% 20.67

2.63% 28.09

83.31% 77.69

7.65 — — —

1.00 77.63 100.00 —

Weighted average EL default

Weighted average risk weight

—% 62.07% — 213.34

71.74 72.21 80.60 —

— — 74.17 —

22.63 122.12 80.39 —

Weighted average EL default

Weighted average risk weight

Undrawn amount

Total

789.4 15.0

683.5 14.4

103.9 0.6

2.0 —

221.3 3.1

1,506.1 6.8 24.6 2,341.9

845.6 5.7 21.7 1,570.9

333.8 1.1 2.9 442.3

326.7 — — 328.7

4,243.4 — — 4,467.8

Weighted average CCF

Weighted average PD

Weighted average LGD

46.97% 19.50

2.49% 26.61

83.32% 77.40

7.87 — — —

0.99 76.40 100.00 —

72.92 72.98 80.99 —

—% 59.90% — 210.88

— — 74.75 —

22.93 126.20 77.94 —

Notes: 1. The on-balance sheet exposure amount is estimated by estimating the amount of increase in each transaction balance and not by multiplying the undrawn amount by the CCF. 2. “Weighted average CCF” is “On-balance sheet exposure amount ÷ Undrawn amount” and provided for reference only. It is not used for estimating on-balance sheet exposure amounts. 3. Past due loans of less than three months are recorded in “Delinquent.”

2016 Annual Report

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Basel III Information

C. Other Retail Exposures (A) Rating Procedures • “Other retail exposures” includes business loans such as apartment construction loans and consumer loans such as My Car Loan. • Business loans and consumer loans are rated as follows. a. Business loans are allocated to a portfolio segment with similar risk characteristics in terms of (a) default risk determined using loan contract information, results of exclusive grading model and borrower category under self-assessment executed in accordance with the financial inspection manual of the Japanese FSA, and (b) recovery risk determined based on LTV for business loans.  PDs and LGDs are estimated based on the default experience for each segment and taking into account the possibility of estimation errors. b. Rating procedures for consumer loans depends on whether the loan is collateralized. Collateralized consumer loans are allocated to a portfolio segment using the same standards as for mortgage loans of “A. Residential Mortgage Exposures.” Uncollateralized consumer loans are allocated to a portfolio segment based on account history. PDs and LGDs are estimated based on the default experience for each segment and taking into account the possibility of estimation errors. Further, the effectiveness of segmentation in terms of default risk and recovery risk is validated periodically. Internal data are used to estimate and validate PDs and LGDs. The definition of default is the definition stipulated in the Notification. (B) Portfolio

March 31, 2016

Business loans PD segment: Not delinquent Use model������������������������� Others������������������������������� Delinquent����������������������������� Consumer loans PD segment: Not delinquent Use model������������������������� Others������������������������������� Delinquent����������������������������� Default������������������������������������������ Total����������������������������������������������

March 31, 2015

Business loans PD segment: Not delinquent Use model������������������������� Others������������������������������� Delinquent����������������������������� Consumer loans PD segment: Not delinquent Use model������������������������� Others������������������������������� Delinquent����������������������������� Default������������������������������������������ Total����������������������������������������������

Total

Billions of yen Exposure amount On-balance Off-balance sheet assets sheet assets

1,024.3 214.4 92.5

1,006.1 213.3 91.1

18.1 1.1 1.4

323.6 133.3 24.5 67.1 1,879.7

323.1 131.9 24.3 67.0 1,856.9

0.5 1.5 0.2 0.1 22.8

Total

Billions of yen Exposure amount On-balance Off-balance sheet assets sheet assets

1,029.5 210.5 111.0

1,012.5 209.2 109.6

17.0 1.3 1.4

324.2 138.5 30.6 80.1 1,924.3

323.5 136.8 30.5 79.9 1,901.9

0.7 1.7 0.2 0.2 22.5

Weighted average PD

0.93% 0.78 6.43

0.78 1.64 16.94 100.00 —

Weighted average PD

0.99% 0.82 6.50

0.87 1.67 16.69 100.00 —

Weighted average LGD

48.13% 41.51 42.63

Weighted average EL default

—% — —

Weighted average risk weight

41.99% 33.56 67.78

42.07 53.77 45.78 52.55 —

— — — 48.90 —

33.84 64.94 94.52 45.60 —

Weighted average LGD

Weighted average EL default

Weighted average risk weight

47.87% 42.77 43.40

43.25 55.52 46.73 53.54 —

—% — —

— — — 49.81 —

43.26% 35.64 69.19

36.25 67.59 95.47 46.69 —

Notes: 1. “Business loans” includes apartment construction loans. Following implementation of our domestic business structure revision started in April 2014, “Domestic Corporate Exposures” includes SME loans because their grading system is integrated into that of Corporate loans. 2. “Others” includes loans guaranteed by employers. 3. “Delinquent” loans are past due loans and loans to obligors categorized as “Borrowers Requiring Caution” that do not satisfy the definition of default stipulated in the Notification.

220 2016 Annual Report

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SMFG

(3) Equity Exposures and Credit Risk-Weighted Assets under Article 145 of the Notification A. Equity Exposures (A) Rating Procedures When acquiring equities subject to the PD/LGD approach, issuers are assigned obligor grades using the same rules as those of general credits to C&I companies, sovereigns and financial institutions. The obligors are monitored (for details, please refer to page 83) and their grades are revised if necessary (credit risk-weighted asset amount is set to 1.5 times when they are not monitored individually). In the case there is no credit transaction with the issuer or it is difficult to obtain financial information, internal grades are assigned using ratings of external rating agencies if it is a qualifying investment. In the case it is difficult to obtain financial information and it is not a qualifying investment, the simple risk weight method under the market-based approach is applied. (B) Portfolio a. Equity Exposure Amounts Billions of yen March 31

2016

Market-based approach������������������������������������������������������������������������������������������������������������ Simple risk weight method���������������������������������������������������������������������������������������������������� Listed equities (300%)������������������������������������������������������������������������������������������������������� Unlisted equities (400%)���������������������������������������������������������������������������������������������������� Internal models method��������������������������������������������������������������������������������������������������������� PD/LGD approach��������������������������������������������������������������������������������������������������������������������� Total�������������������������������������������������������������������������������������������������������������������������������������������

2015

532.6 322.0 197.9 124.1 210.6 3,514.6 4,047.2

809.1 305.2 185.9 119.3 503.9 4,093.4 4,902.5

Note: The above exposures are “equity exposures” stipulated in the Notification and differ from “stocks” described in the consolidated financial statements.

b. PD/LGD Approach Billions of yen

2016 March 31

Exposure amount

Weighted average PD

J1-J3������������������������������������������������������� J4-J6������������������������������������������������������� J7 (excluding J7R)����������������������������������� Others������������������������������������������������������ Default (J7R, J8-J10)������������������������������� Total���������������������������������������������������������

3,229.5 195.5 2.5 86.7 0.4 3,514.6

0.05% 0.45 10.56 0.45 100.00 —

2015 Weighted average risk weight

Exposure amount

Weighted average PD

100.45% 161.79 561.96 192.60 1,125.00 —

3,687.2 240.5 5.0 160.4 0.3 4,093.4

0.06% 0.47 10.88 0.36 100.00 —

Weighted average risk weight

100.55% 166.81 570.39 172.78 1,125.00 —

Notes: 1. The above exposures are “equity exposures” stipulated in the Notification to which the PD/LGD approach is applied and differ from “stocks” described in the consolidated financial statements. 2. “Others” includes exposures to overseas corporate entities. 3. Weighted average risk weight is calculated by including the amount derived by multiplication of the expected loss by a risk weight of 1250% in the credit risk-weighted assets.

B. Credit Risk-Weighted Assets under Article 145 of the Notification (A) Outline of Method for Calculating Credit Risk Assets Exposures under Article 145 of the Notification include credits to funds. In the case of such exposures, in principle, each underlying asset of the fund is assigned an obligor grade to calculate the asset’s credit risk-weighted asset amount and the amounts are totaled to derive the credit risk-weighted asset amount of the fund. When equity exposures account for more than half of the underlying assets of the fund, or it is difficult to directly calculate the credit risk-weighted asset amount of individual underlying assets, the credit risk-weighted asset amount of the fund is calculated using the simple majority adjustment method, in which credit risk-weighted assets are calculated using a risk weight of 400% (when the risk-weighted average of individual assets underlying the portfolio is less than 400%) or a risk weight of 1250% (in other cases). (B) Portfolio Billions of yen March 31

Exposures under Article 145 of the Notification������������������������������������������������������������������������

2016 1,317.3

2015 1,763.4

2016 Annual Report

221

SMFG

Basel III Information

(4) Analysis of Actual Losses A. Year-on-Year Comparison of Actual Losses SMFG recorded an increase of ¥95.0 billion in total credit costs (the total of the general reserve, non-performing loan write-offs and gains on collection of written-off claims) compared to the previous fiscal year, amounting to ¥102.8 billion on a consolidated basis for fiscal year 2015. SMBC recorded an increase of ¥76.9 billion in total credit costs compared to the previous fiscal year, which resulted in a gain on reversal of allowance for loan losses of ¥3.2 billion on a non-consolidated basis in fiscal year 2015. This was due primarily to a decrease in a gain on reversal of allowance for loan losses and the recognition of expenses derived from the deterioration in credit quality of natural resources-related borrowers, mainly overseas. Total Credit Costs Billions of yen Fiscal 2015 (A)

SMFG (consolidated) total����������������������������������������������������� SMBC (consolidated) total���������������������������������������������������� SMBC (non-consolidated) total��������������������������������������������� Corporate exposures��������������������������������������������������������� Sovereign exposures��������������������������������������������������������� Bank exposures����������������������������������������������������������������� Residential mortgage exposures��������������������������������������� QRRE��������������������������������������������������������������������������������� Other retail exposures�������������������������������������������������������

102.8 13.9 (3.2) 0.1 (1.7) (0.1) 0.0 0.0 (1.8)

Fiscal 2014 (B)

7.8 (65.4) (80.1) (40.6) (6.0) (0.7) (0.3) (0.1) (2.6)

Fiscal 2013

Increase (decrease) (A) – (B)

(49.1) (113.3) (123.9) (122.8) 0.3 (0.9) (0.1) (0.0) (0.5)

95.0 79.3 76.9 40.7 4.3 0.6 0.4 0.1 0.8

Notes: 1. The above amounts do not include gains/losses on “equity exposures,” “exposures on capital market-driven transactions (such as bonds)” and “exposures under Article 145 of the Notification” that were recognized as gains/losses on bonds and stocks in the statements of income. 2. Exposure category amounts do not include general reserve for Normal Borrowers. 3. Bracketed fiscal year amounts indicate gains generated by the reversal of reserve, etc. 4. Credit costs for “Residential mortgage exposures” and “QRRE” guaranteed by consolidated subsidiaries are not included in the total credit costs of SMBC (non-consolidated).

222 2016 Annual Report

SMFG

Basel III Information

B. Comparison of Estimated and Actual Losses Billions of yen

Fiscal 2015 Estimated loss amounts After deduction of reserves

SMFG (consolidated) total�������������������������������� SMBC (consolidated) total������������������������������� SMBC (non-consolidated) total������������������������ Corporate exposures������������������������������������ Sovereign exposures������������������������������������ Bank exposures�������������������������������������������� Residential mortgage exposures������������������ QRRE������������������������������������������������������������ Other retail exposures����������������������������������

— — 513.1 483.0 9.1 10.7 3.9 0.0 6.4

— — 153.9 139.0 3.8 7.2 3.5 0.0 5.5

Fiscal 2014 Actual loss amounts

102.8 13.9 (3.2) 0.1 (1.7) (0.1) 0.0 0.0 (1.8)

Estimated loss amounts After deduction of reserves

— — 642.5 523.6 12.7 8.5 2.9 0.0 94.8

— — 171.1 128.1 1.4 4.2 2.3 (0.0) 40.7

Actual loss amounts

7.8 (65.4) (80.1) (40.6) (6.0) (0.7) (0.3) (0.1) (2.6)

Billions of yen

Fiscal 2013 Estimated loss amounts After deduction of reserves

SMFG (consolidated) total�������������������������������� SMBC (consolidated) total������������������������������� SMBC (non-consolidated) total������������������������ Corporate exposures������������������������������������ Sovereign exposures������������������������������������ Bank exposures�������������������������������������������� Residential mortgage exposures������������������ QRRE������������������������������������������������������������ Other retail exposures����������������������������������

— — 871.2 734.0 5.6 11.4 5.2 0.0 114.9

— — 171.2 123.6 4.1 6.1 4.3 (0.0) 38.2

Fiscal 2012 Actual loss amounts

(49.1) (113.3) (123.9) (122.8) 0.3 (0.9) (0.1) (0.0) (0.5)

Estimated loss amounts After deduction of reserves

— — 940.1 765.9 22.0 14.9 3.7 0.1 133.5

— — 245.4 164.9 11.4 5.5 2.9 (0.0) 65.6

Actual loss amounts

173.1 70.6 19.5 10.7 (0.3) (0.4) 0.2 0.1 9.7

Billions of yen

Fiscal 2011 Estimated loss amounts After deduction of reserves

SMFG (consolidated) total�������������������������������� SMBC (consolidated) total������������������������������� SMBC (non-consolidated) total������������������������ Corporate exposures������������������������������������ Sovereign exposures������������������������������������ Bank exposures�������������������������������������������� Residential mortgage exposures������������������ QRRE������������������������������������������������������������ Other retail exposures����������������������������������

— — 1,062.7 889.3 12.4 14.9 3.8 0.1 142.3

— — 213.9 132.2 1.8 4.7 2.9 (0.0) 77.4

Fiscal 2010 Actual loss amounts

121.3 91.7 58.6 57.5 (0.2) (0.0) 0.2 (0.0) 10.5

Estimated loss amounts After deduction of reserves

— — 1,204.3 1,021.1 7.8 30.5 4.1 0.1 140.8

— — 417.2 277.4 6.3 19.2 3.2 (0.0) 111.2

Actual loss amounts

217.3 159.8 94.3 71.9 5.4 (14.0) 0.3 (0.1) 34.0

Notes: 1. Amounts on consumer loans guaranteed by consolidated subsidiaries or affiliates as well as on “equity exposures” and “exposures under Article 145 of the Notification” are excluded. 2. “Estimated loss amounts” are the EL at the beginning of the term. 3. “After deduction of reserves” represents the estimated loss amounts after deduction of reserves for possible losses on substandard borrowers or below.

2016 Annual Report

223

SMFG

Basel III Information

■ Standardized Approach 1. Scope The following consolidated subsidiaries have adopted the standardized approach for exposures as of March 31, 2016 (i.e. consolidated subsidiaries not listed in the “Internal Ratings-Based (IRB) Approach: 1. Scope” on page 213). (1) Consolidated Subsidiaries Planning to Adopt Phased Rollout of the IRB Approach Cedyna Financial Corporation, SMBC Aviation Capital Limited (2) Other Consolidated Subsidiaries These are consolidated subsidiaries judged not to be significant in terms of credit risk management based on the type of business, scale, and other factors. These subsidiaries will adopt the standardized approach on a permanent basis. 2. Credit Risk-Weighted Asset Calculation Methodology A 100% risk weight is applied to claims on corporates in accordance with Article 45 of the Notification, and risk weights corresponding to country risk scores published by the Organization for Economic Co-operation and Development (OECD) are applied to claims on sovereigns and financial institutions. 3. Exposure Balance by Risk Weight Segment Billions of yen

2016 March 31

0%�������������������������������������������������������������������������������������������� 10%������������������������������������������������������������������������������������������ 20%������������������������������������������������������������������������������������������ 35%������������������������������������������������������������������������������������������ 50%������������������������������������������������������������������������������������������ 75%������������������������������������������������������������������������������������������ 100%���������������������������������������������������������������������������������������� 150%���������������������������������������������������������������������������������������� 250%���������������������������������������������������������������������������������������� 1250%�������������������������������������������������������������������������������������� Others��������������������������������������������������������������������������������������� Total������������������������������������������������������������������������������������������

2015

Of which assigned country risk score

8,337.8 0.2 1,209.2 51.5 109.0 3,381.0 3,589.6 96.6 117.5 0.1 0.0 16,892.6

598.7 — 724.8 — 10.6 — 3.9 0.0 — — — 1,338.1

Of which assigned country risk score

6,992.0 0.1 1,189.6 0.5 99.5 3,231.1 3,446.3 93.1 97.5 0.1 0.0 15,149.7

639.0 — 639.6 — 20.2 — 2.2 0.0 — — — 1,300.9

Notes: 1. The above amounts are exposures after CRM (but before deduction of direct write-offs). Please note that for off-balance sheet assets the credit equivalent amount has been included. 2. “Securitization exposures” have not been included.

224 2016 Annual Report

Basel III Information

SMFG

■ Credit Risk Mitigation (CRM) Techniques 1. Risk Management Policy and Procedures In calculating credit risk-weighted asset amounts, SMFG takes into account credit risk mitigation (CRM) techniques. Specifically, amounts are adjusted for eligible financial or real estate collateral, guarantees, and credit derivatives. The methods and scope of these adjustments and methods of management are as follows. (1) Scope and Management A. Collateral (Eligible Financial or Real Estate Collateral) SMBC designates deposits and securities as eligible financial collateral, and land and buildings as eligible real estate collateral. Real estate collateral is evaluated by taking into account its fair value, appraisal value, and current condition, as well as our lien position. Real estate collateral must maintain sufficient collateral value in the event security rights must be exercised due to delinquency. However, during the period from acquiring the rights to exercising the rights, the property may deteriorate or suffer damage from earthquakes or other natural disasters, or there may be changes in the lien position due to, for example, attachment or establishment of liens by a third party. Therefore, the regular monitoring of collateral is implemented according to the type of property and the type of security interest. B. Guarantees and Credit Derivatives Guarantors are sovereigns, municipal corporations, credit guarantee corporations and other public entities, financial institutions, and C&I companies. Counterparties to credit derivative transactions are mostly domestic and overseas banks and securities companies. Credit risk-weighted asset amounts are calculated taking into account credit risk mitigation of guarantees and credit derivatives acquired from entities with sufficient ability to provide protection such as sovereigns, municipal corporations and other public sector entities of comparable credit quality, and financial institutions and C&I companies with sufficient credit ratings. (2) Concentration of Credit Risk and Market Risk Accompanying Application of Credit Risk Mitigation Techniques At SMBC, there is a framework in place for controlling concentration of risk in obligors with large exposures which includes large exposure limit lines, risk concentration monitoring, and reporting to the Credit Risk Committee (please refer to pages 80 to 84). Further, exposures to these obligors are monitored on a group basis, taking into account risk concentration in their parent companies in cases of guaranteed exposures. When marketable financial products (for example, credit derivatives) are used as credit risk mitigants, market risk generated by these products is controlled by setting upper limits. 2. Exposure Balance after CRM Billions of yen

2016 March 31

Advanced Internal Ratings-Based (AIRB) approach................. Foundation Internal Ratings-Based (FIRB) approach............... Corporate exposures............................................................. Sovereign exposures............................................................. Bank exposures..................................................................... Standardized approach............................................................. Total...........................................................................................

Eligible financial collateral

2015 Other eligible IRB collateral

— 134.3 46.4 — 87.8 5,409.5 5,543.8

Eligible financial collateral

— 56.0 56.0 — — — 56.0

Other eligible IRB collateral

— 84.3 44.9 — 39.5 5,040.9 5,125.2

— 55.0 55.0 — — — 55.0

Note: For exposures to which the AIRB approach was applied, eligible collateral is separately taken into account in Loss Given Default (LGD) estimates. Billions of yen

2016 March 31

Internal Ratings-Based (IRB) approach������������������������������������ Corporate exposures������������������������������������������������������������ Sovereign exposures������������������������������������������������������������ Bank exposures�������������������������������������������������������������������� Residential mortgage exposures������������������������������������������ QRRE������������������������������������������������������������������������������������ Other retail exposures���������������������������������������������������������� Standardized approach������������������������������������������������������������ Total������������������������������������������������������������������������������������������

Guarantee

8,955.9 8,377.2 305.7 168.1 104.9 — — 34.1 8,990.0

2015 Credit derivative

373.8 373.8 — — — — — — 373.8

Guarantee

8,966.1 8,083.1 522.7 242.1 118.3 — — 43.3 9,009.4

Credit derivative

374.2 374.2 — — — — — — 374.2

2016 Annual Report

225

SMFG

Basel III Information

■ Derivative Transactions and Long Settlement Transactions 1. Risk Management Policy and Procedures (1) Policy on Collateral Security and Impact of Deterioration of Our Credit Quality Collateralized derivative is a CRM technique in which collateral is delivered or received regularly in accordance with replacement cost. The Group conducts collateralized derivative transactions as necessary, thereby reducing credit risk. In the event our credit quality deteriorates, however, the counterparty may demand additional collateral, but its impact is deemed to be insignificant. (2) Netting Netting is another CRM technique, and “close-out netting” is the main type of netting. In close-out netting, when a default event, such as bankruptcy, occurs to the counterparty, all claims against, and obligations to, the counterparty, regardless of maturity and currency, are netted out to create a single claim or obligation. Close-out netting is applied to foreign exchange and swap transactions covered under a master agreement with a net-out clause or other means of securing legal effectiveness, and the effect of CRM is taken into account only for such claims and obligations. 2. Credit Equivalent Amounts (1) Derivative Transactions and Long Settlement Transactions A. Calculation Method Current exposure method B. Credit Equivalent Amounts Billions of yen March 31

Gross replacement cost���������������������������������������������������������������������������������������������������������������� Gross add-on amount������������������������������������������������������������������������������������������������������������������� Gross credit equivalent amount���������������������������������������������������������������������������������������������������� Foreign exchange related transactions������������������������������������������������������������������������������������� Interest rate related transactions����������������������������������������������������������������������������������������������� Gold related transactions���������������������������������������������������������������������������������������������������������� Equities related transactions����������������������������������������������������������������������������������������������������� Precious metals (excluding gold) related transactions�������������������������������������������������������������� Other commodity related transactions�������������������������������������������������������������������������������������� Credit default swaps������������������������������������������������������������������������������������������������������������������ Reduction in credit equivalent amount due to netting������������������������������������������������������������������ Net credit equivalent amount�������������������������������������������������������������������������������������������������������� Collateral amount�������������������������������������������������������������������������������������������������������������������������� Eligible financial collateral��������������������������������������������������������������������������������������������������������� Other eligible IRB collateral������������������������������������������������������������������������������������������������������� Net credit equivalent amount (after taking into account the CRM effect of collateral)���������������������������������������������������������������

2016 6,182.7 4,302.9 10,485.6 3,397.0 6,809.2 — 158.7 — 75.3 45.3 4,895.2 5,590.3 20.9 20.9 —

2015 6,629.6 4,718.7 11,348.4 3,365.0 7,680.5 — 194.5 — 74.6 33.8 5,869.0 5,479.3 35.2 35.2 —

5,569.4

5,444.1

(2) Notional Principal Amounts of Credit Derivatives Credit Default Swaps Billions of yen

2016

2015

March 31

Notional principal amount Of which Total for CRM

Notional principal amount Of which Total for CRM

Protection purchased��������������������������������������������������������� Protection provided������������������������������������������������������������

719.8 373.4

605.4 332.9

373.8 —

Note: “Notional principal amount” is defined as the total of “amounts subject to calculation of credit equivalents” and “amounts employed for CRM.”

226 2016 Annual Report

370.2 —

Basel III Information

SMFG

■ Securitization Exposures 1. Risk Management Policy Definition of securitization exposure has been clarified in order to properly identify, measure, evaluate and report risks, and a risk management department, independent of business units, has been established to centrally manage risks from recognizing securitization exposures to measuring, evaluating and reporting risks. Securitization transactions are subject to the following policies. • Undertake those which allow separate assessment of underlying short-term assets by making credit decisions on individual underlying assets. • Undertake those which cover short-term receivables, etc., by creating a framework mainly to estimate the default rate of the underlying assets based on the historical loan-loss ratio and ensure that they have sufficient subordination. • Undertake others such as those requiring special management by implementing additional management, such as an analysis of the market environment. Particularly, with respect to securitization transactions backed by retail loans whose creditworthiness is relatively inferior, such as subprime loans in the U.S., the Group deals only with transactions that are sufficiently structured by taking into account not only the above policies, but others such as the underlying asset selection criteria of the originator and the average life. The Group shall basically not conduct resecuritization transactions. Its policy is to conduct securitization transactions by verifying effectiveness in mitigating credit risk through the use of the asset transfer type or synthetic type securitization transactions covering domestic and foreign exposures and using them as underlying exposures if securitization transactions are used as an approach for credit risk mitigation. The Group takes one of the following positions for securitization transactions. • Originator (a direct or indirect originator of underlying assets or a sponsor of an ABCP conduit or a similar program that acquires exposures from third-party entities) • Investor • Others (for example, provider of swap for preventing a mismatch between the dividend on trust beneficiary rights and cash flows generated by underlying assets on which the rights are issued) 2. Overview of Risk Characteristics Securitization exposures have, in addition to credit risk and market risk, the following intrinsic risks, which are properly managed based on the nature of each risk. (1) Dilution Risk Means the risk of a decrease in purchased receivables due to cancellation or termination of the original contract for the purchased receivables, or netting of debts between the original obligor and the original obligee. (2) Servicer Risk A. Commingling Risk Means the risk of uncollectible funds, which should be collected from the underlying assets, due to the bankruptcy of the servicer before the delivery of the funds collected from the obligor of the receivables. B. Performance Risk Means the risk of difficulty in maintenance and collection due to the servicer’s failure to properly and accurately perform its clerical duties and procedures. (3) Liquidity Risk Means the risk that cash flows related to the underlying assets may be insufficient for paying the principal and interest of the securitization exposure due to a timing mismatch between the securitization conduit’s receipt of the cash flows related to the underlying assets and payment of the securitization exposure of the principal and interest, etc. (4) Fraud Risk Means the risk of a decrease in or complete loss of the receivables subject to collection due to a fraud, prejudicial or other malicious act by a customer or a third-party obligor.

2016 Annual Report

227

SMFG

Basel III Information

3. Calculation Methodology for Credit Risk-Weighted Assets and Market Risk Equivalent Amount There are three methods of calculating the credit risk-weighted asset amount of securitization exposures subject to the IRB approach: the ratings-based approach, the supervisory formula, and the internal assessment approach. The methods are used as follows. • First, securitization exposures are examined and the ratings-based approach is applied to qualifying exposures. • The remaining exposures are examined and the supervisory formula is applied to qualifying exposures. • In cases where neither the ratings-based approach nor the supervisory formula can be applied, a risk weight of 1250% is applied. Note that the application of the ratings-based approach is subject to monitoring in accordance with the “Regulations Concerning the Distribution, etc. of Securitized Products” and the “Standardized Information Reporting Package (SIRP)” published by the Japan Securities Dealers Association. The same applies to resecuritized products. The credit risk-weighted asset amount for securitization exposures subject to the standardized approach is calculated mostly using ratings published by qualifying rating agencies or based on weighted average risk weights of underlying assets as stipulated in the Notification. In order to determine market risk equivalent amounts of “securitization exposures,” general market risk is subject to the standardized measurement method while specific risk is based on the risk weights corresponding to the ratings published by qualifying rating agencies pursuant to the regulations set forth in the Notification. 4. Type of Securitization Conduit Used in Securitization Transactions Associated with Third Party Assets and Status of Holdings of Securitization Exposures Related to Such Transactions In order to undertake securitization transactions related to third-party assets, the Group mainly uses a special purpose company (SPC) as a securitization conduit. If such transactions are undertaken, the following securitization exposures result. • Backup line to the ABCP issued by the securitization conduit (off-balance sheet assets) • ABL to the securitization conduit (on-balance sheet assets), etc. 5. Names of Subsidiaries and Affiliated Companies Holding Securitization Exposures Related to Securitization Transactions Conducted by Holding Company Group No securitization exposures related to the security transactions conducted by the Holding Company Group are held by the subsidiaries or affiliated companies excluding consolidated subsidiaries. 6. Accounting Policy on Securitization Transactions The recognition of the generation and extinguishment of financial assets and financial liabilities associated with securitization transactions and the valuation and accounting treatment thereof are mainly governed by the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10). 7. Qualifying External Ratings Agencies In order to apply the rating-based approach under the IRB approach or standardized approach or to calculate an amount of market risk associated with specific risk, the risk weights are determined by mapping the ratings of qualifying rating agencies to the risk weights stipulated in the Notification. The qualifying rating agencies are Rating and Investment Information, Inc. (R&I), Japan Credit Rating Agency, Ltd. (JCR), Moody’s Investors Service, Inc. (Moody’s), Standard & Poor’s Ratings Services (S&P), and Fitch Ratings Ltd. (Fitch). When more than one rating is available for an exposure, the second smallest risk weight is used, in accordance with the Notification.

228 2016 Annual Report

SMFG

Basel III Information

8. Portfolio (Credit Risk) (1) Securitization Transactions as Originator A. As Originator (Excluding as Sponsor) (A) Underlying Assets Billions of yen

March 31, 2016

Fiscal 2015

Underlying asset amount Asset Synthetic Total transfer type type

Claims on corporates���������������� Mortgage loans������������������������� Retail loans (excluding mortgage loans)����� Other claims������������������������������ Total�������������������������������������������

Securitized amount

Default amount

Loss amount

Gains/losses on sales

9.1 1,278.1

0.0 1,278.1

9.1 —

— 164.7

4.4 1.5

24.3 0.4

— 12.5

— 0.4 1,287.5

— 0.4 1,278.5

— — 9.1

— — 164.7

— — 5.9

— — 24.7

— — 12.5

Billions of yen

March 31, 2015

Fiscal 2014

Underlying asset amount Asset Synthetic Total transfer type type

Claims on corporates���������������� Mortgage loans������������������������� Retail loans (excluding mortgage loans)����� Other claims������������������������������ Total�������������������������������������������

Securitized amount

Default amount

Loss amount

Gains/losses on sales

10.8 1,277.6

0.1 1,277.6

10.7 —

— 182.6

4.9 1.4

24.1 0.3

— 14.5

— 87.6 1,376.0

— 2.5 1,280.2

— 85.1 95.8

— — 182.6

— — 6.3

— — 24.4

— — 14.5

Notes: 1. The above amounts include the amount of underlying assets securitized during the term without entailing “securitization exposures.” 2. “Default amount” is the total of underlying assets which are past due three months or more and defaulted underlying assets. 3. Asset type classification is based on the major items in the underlying assets for each transaction. 4. “Other claims” includes claims on Private Finance Initiative (PFI) businesses and lease fees. 5. Following Articles 230 and 248 of the Notification, there are no amounts that represent “exposure to products subject to early amortization provisions” to investors. 6. There are no amounts that represent “assets held for securitization transactions.”

(B) Securitization Exposures (Excluding Resecuritization Exposures) a. Underlying Assets by Asset Type Billions of yen

2016

2015

Amounts subject to Increase On-balance Off-balance a 1250% in capital sheet assets sheet assets risk weight equivalent

Term-end balance

Amounts subject to Increase On-balance Off-balance a 1250% in capital sheet assets sheet assets risk weight equivalent

Term-end balance

March 31

Total

Claims on corporates����� Mortgage loans�������������� Retail loans (excluding mortgage loans)������������ Other claims������������������� Total��������������������������������

4.7 289.2

1.5 289.2

3.2 —

2.1 24.0

— 50.1

Total

4.9 272.7

1.6 272.7

3.4 —

2.3 25.7

— 46.7

— 0.3 294.2

— 0.3 291.0

— — 3.2

— 0.0 26.1

— — 50.1

— 36.1 313.8

— 0.5 274.8

— 35.6 39.0

— 0.7 28.7

— — 46.7

b. Risk Weights Billions of yen

2016 March 31

Total

20% or less�������������������� 100% or less������������������ 650% or less������������������ Less than 1250%����������� 1250%���������������������������� Total��������������������������������

0.0 0.3 0.7 0.0 293.2 294.2

2015

Term-end balance On-balance Off-balance sheet assets sheet assets

— — — — 291.0 291.0

0.0 0.3 0.7 0.0 2.2 3.2

Required capital

0.0 0.0 0.1 0.0 27.7 27.8

Total

34.6 0.3 1.1 — 277.7 313.8

Term-end balance On-balance Off-balance sheet assets sheet assets

— — — — 274.8 274.8

34.6 0.3 1.1 — 3.0 39.0

Required capital

0.1 0.0 0.2 — 30.4 30.7

2016 Annual Report

229

SMFG

Basel III Information

(C) Resecuritization Exposures There are no amounts that represent “resecuritization exposures.” B. As Sponsor (A) Underlying Assets Billions of yen

March 31, 2016 Total

Claims on corporates������������������������������ Mortgage loans��������������������������������������� Retail loans (excluding mortgage loans)���� Other claims�������������������������������������������� Total���������������������������������������������������������

Fiscal 2015

Underlying asset amount Asset Synthetic transfer type type

883.6 — 583.5 10.4 1,477.6

883.6 — 583.5 10.4 1,477.6

Securitized amount

— — — — —

Default amount

7,138.8 — 477.7 10.6 7,627.1

Loss amount

75.8 — 2.7 0.0 78.5

104.0 — 7.3 0.0 111.4

Billions of yen

March 31, 2015 Total

Claims on corporates������������������������������ Mortgage loans��������������������������������������� Retail loans (excluding mortgage loans)���� Other claims�������������������������������������������� Total���������������������������������������������������������

Fiscal 2014

Underlying asset amount Asset Synthetic transfer type type

1,059.5 — 404.5 31.8 1,495.8

1,059.5 — 404.5 31.8 1,495.8

Securitized amount

— — — — —

Default amount

7,849.0 — 300.2 10.7 8,160.0

Loss amount

63.3 — 0.6 1.2 65.2

91.4 — 3.0 0.3 94.7

Notes: 1. The above amounts include the amount of underlying assets securitized during the term without entailing “securitization exposures.” 2. “Default amount” is the total of underlying assets which are past due three months or more and defaulted underlying assets. 3. “Default amount” and “Loss amount” when acting as a sponsor of securitization of customer claims are estimated using the following methods and alternative data, as in some cases it can be difficult to obtain relevant data in a timely manner because the underlying assets have been recovered by the customer. (1) “Default amount” estimation method • For securitization transactions subject to the ratings-based approach, the amount is estimated based on information on underlying assets obtainable from customers, etc. • For securitization transactions subject to the supervisory formula, the amount is estimated based on obtainable information on, or default rate of, each obligor. Further, when it is difficult to estimate the amount using either method, it is conservatively estimated by assuming that the underlying asset is a default asset. (2) “Loss amount” estimation method • For securitization transactions subject to the ratings-based approach, the amount is the same amount as the “Default amount” estimated conservatively in (1) above. • For securitization transactions subject to the supervisory formula, when expected loss ratios of defaulted underlying assets can be determined, the amount is estimated using the ratios. When it is difficult to determine the ratios, the amount is the same amount as the “Default amount” estimated conservatively in (1) above. 4. Asset type classification is based on the major items in the underlying assets for each transaction. 5. “Other claims” includes lease fees. 6. Following Articles 230 and 248 of the Notification, there are no amounts that represent “exposure to products subject to early amortization provisions” to investors. 7. There are no amounts that represent “assets held for securitization transactions.”

(B) Securitization Exposures (Excluding Resecuritization Exposures) a. Underlying Assets by Asset Type Billions of yen

2016

2015

Amounts subject to Increase On-balance Off-balance a 1250% in capital sheet assets sheet assets risk weight equivalent

Term-end balance March 31

Total

Claims on corporates����� 681.7 Mortgage loans�������������� — Retail loans (excluding mortgage loans)������������� 497.7 Other claims������������������� 5.9 Total�������������������������������� 1,185.2

230 2016 Annual Report

Amounts subject to Increase On-balance Off-balance a 1250% in capital sheet assets sheet assets risk weight equivalent

Term-end balance Total

681.7 —

— —

1.5 —

— —

826.3 —

826.3 —

— —

0.3 —

— —

497.7 5.9 1,185.2

— — —

— — 1.5

— — —

375.0 25.1 1,226.4

375.0 25.1 1,226.4

— — —

— — 0.3

— — —

SMFG

Basel III Information

b. Risk Weights Billions of yen

2016 March 31

20% or less�������������������� 100% or less������������������ 650% or less������������������ Less than 1250%����������� 1250%���������������������������� Total��������������������������������

Total

1,158.9 24.9 — — 1.5 1,185.2

2015

Term-end balance On-balance Off-balance sheet assets sheet assets

1,158.9 24.9 — — 1.5 1,185.2

Required capital

— — — — — —

7.1 0.9 — — 1.6 9.7

Total

1,218.7 7.5 — — 0.3 1,226.4

Term-end balance On-balance Off-balance sheet assets sheet assets

1,218.7 7.5 — — 0.3 1,226.4

— — — — — —

Required capital

7.3 0.4 — — 0.3 8.0

(C) Resecuritization Exposures There are no amounts that represent “resecuritization exposures.” (2) Securitization Transactions in which the Group is the Investor (A) Securitization Exposures (Excluding Resecuritization Exposures) a. Underlying Assets by Asset Type Billions of yen

2016

2015

Amounts subject to Increase On-balance Off-balance a 1250% in capital sheet assets sheet assets risk weight equivalent

Term-end balance March 31

Total

Claims on corporates����� 685.5 Mortgage loans�������������� 83.6 Retail loans (excluding mortgage loans)������������� 338.1 Other claims������������������� 8.4 Total�������������������������������� 1,115.6

Amounts subject to Increase On-balance Off-balance a 1250% in capital sheet assets sheet assets risk weight equivalent

Term-end balance Total

303.2 83.6

382.3 —

32.1 —

— —

533.6 76.9

201.0 76.9

332.6 —

30.9 —

— —

325.5 8.2 720.5

12.5 0.3 395.2

— 0.1 32.2

— — —

192.4 — 802.9

190.0 — 467.9

2.4 — 335.0

— — 30.9

— — —

Notes: 1. Asset type classification is based on the major items in the underlying assets for each transaction. 2. “Retail loans (excluding mortgage loans)” includes balances of ¥5.6 billion as of March 31, 2016 and ¥3.6 billion as of March 31, 2015 for the securitization exposures which includes loans whose credit risk are relatively high, such as U.S. subprime loans.

b. Risk Weights Billions of yen

2016 March 31

20% or less�������������������� 100% or less������������������ 650% or less������������������ Less than 1250%����������� 1250%���������������������������� Total��������������������������������

Total

976.3 31.7 — — 107.6 1,115.6

2015

Term-end balance On-balance Off-balance sheet assets sheet assets

688.7 31.7 — — 0.1 720.5

287.6 — — — 107.5 395.2

Required capital

5.1 1.7 — — 34.2 41.0

Total

682.7 5.5 — — 114.7 802.9

Term-end balance On-balance Off-balance sheet assets sheet assets

462.4 5.5 — — — 467.9

220.3 — — — 114.7 335.0

Required capital

3.4 0.3 — — 32.8 36.4

Note: The risk weight of “100% or less” includes balances of ¥5.6 billion as of March 31, 2016 and ¥3.6 billion as of March 31, 2015 for the securitization exposures which includes loans whose credit risk are relatively high, such as U.S. subprime loans.

2016 Annual Report

231

SMFG

Basel III Information

(B) Resecuritization Exposures a. Underlying Assets by Asset Type Billions of yen

2016

2015

Amounts subject to Increase On-balance Off-balance a 1250% in capital sheet assets sheet assets risk weight equivalent

Term-end balance March 31

Claims on corporates����� Mortgage loans�������������� Retail loans (excluding mortgage loans)������������� Other claims������������������� Total��������������������������������

Total

Amounts subject to Increase On-balance Off-balance a 1250% in capital sheet assets sheet assets risk weight equivalent

Term-end balance Total

0.2 —

0.1 —

0.1 —

0.1 —

— —

0.5 —

0.5 —

— —

0.1 —

— —

0.3 0.1 0.6

— 0.1 0.3

0.3 — 0.4

— 0.0 0.1

— — —

— 0.7 1.2

— 0.3 0.9

— 0.4 0.4

— 0.3 0.4

— — —

Notes: 1. Asset type classification is based on the major items in the underlying assets for each transaction. 2. “Other claims” includes securitization products. 3. Credit risk mitigation (CRM) techniques are not applied to the resecuritization exposures.

b. Risk Weights Billions of yen

2016 March 31

20% or less�������������������� 100% or less������������������ 650% or less������������������ Less than 1250%����������� 1250%���������������������������� Total��������������������������������

Total

0.4 — — — 0.2 0.6

2015

Term-end balance On-balance Off-balance sheet assets sheet assets

0.1 — — — 0.2 0.3

0.4 — — — — 0.4

Required capital

0.0 — — — 0.1 0.1

Total

0.7 0.1 0.1 — 0.4 1.2

Term-end balance On-balance Off-balance sheet assets sheet assets

0.5 — — — 0.4 0.9

9. Portfolio (Market Risk) (1) Securitization Transactions as Originator There are no amounts that represent “securitization transactions where the Group serves as the originator.” (2) Securitization Transactions as Investor There are no amounts that represent “securitization transactions where the Group serves as the investor.”

232 2016 Annual Report

0.2 0.1 0.1 — — 0.4

Required capital

0.0 0.0 0.0 — 0.4 0.5

Basel III Information

SMFG

■ Equity Exposures in Banking Book 1. Risk Management Policy and Procedures Securities in the banking book are properly managed, for example, by setting upper limits on the allowable amount of risk under the market or credit risk management framework selected according to their holding purpose and risk characteristics. For securities held as “available-for-sale securities,” the upper limits are also set in terms of price fluctuation risk and default risk. Regarding stocks of subsidiaries, assets and liabilities of subsidiaries are risk-managed on a consolidated basis. As for stocks of affiliates, risks related to gains and losses from investments are recognized separately. As in each case maximum allowable amount of risk is managed individually, risks as stocks are not measured. The limits are established within the “risk capital limit” of SMFG, taking into account the financial and business situations of the subsidiaries and affiliates. 2. Valuation of Securities in Banking Book and Other Significant Accounting Policies Stocks of subsidiaries and affiliates are carried at amortized cost using the moving-average method. Available-for-sale securities with market prices (including foreign stocks) are carried at their average market prices during the final month of the fiscal year. Securities other than these securities are carried at their fiscal year-end market prices (cost of securities sold is calculated using primarily the moving-average method), and those with no available market prices are carried at cost using the moving-average method. Net unrealized gains (losses) on available-for-sale securities and net of income taxes are reported as a component of “net assets.” Derivative transactions are carried at fair value. 3. Consolidated Balance Sheet Amounts and Fair Values Billions of yen

2016 March 31

Balance sheet amount

Listed equity exposures����������������������������������������������������������� Equity exposures other than above������������������������������������������ Total������������������������������������������������������������������������������������������

3,811.3 227.2 4,038.5

2015 Fair value

3,811.3 — —

Balance sheet amount

4,383.7 276.9 4,660.6

Fair value

4,383.7 — —

4. Gains (Losses) on Sale and Devaluation of Equity Exposures Billions of yen

Gains (losses)����������������������������������������������������������������������������������������������������������������������������������������� Gains on sale���������������������������������������������������������������������������������������������������������������������������������� Losses on sale�������������������������������������������������������������������������������������������������������������������������������� Devaluation�������������������������������������������������������������������������������������������������������������������������������������

Fiscal 2015 69.0 100.3 20.8 10.4

Fiscal 2014 66.7 83.5 4.0 12.8

Note: The above amounts are gains (losses) on stocks and available-for-sale securities in the consolidated statements of income.

5. Unrealized Gains (Losses) Recognized on Consolidated Balance Sheets but Not on Consolidated Statements of Income Billions of yen March 31

Unrealized gains (losses) recognized on consolidated balance sheets but not on consolidated statements of income������������������������������������������������������������������������������������

2016

2015

1,734.3

2,259.1

Note: The above amount is for stocks of Japanese companies and foreign stocks with market prices.

6. Unrealized Gains (Losses) Not Recognized on Consolidated Balance Sheets or Consolidated Statements of Income Billions of yen March 31

Unrealized gains (losses) not recognized on consolidated balance sheets or consolidated statements of income��������������������������������������������������

2016 (25.6)

2015 (50.1)

Note: The above amount is for stocks of affiliates with market prices.

2016 Annual Report

233

SMFG

Basel III Information

■ Exposure Balance by Type of Assets, Geographic Region, Industry and Residual Term 1. Exposure Balance by Type of Assets, Geographic Region and Industry March 31, 2016

Domestic operations (excluding offshore banking accounts) Manufacturing��������������������������������������������������������������������������� Agriculture, forestry, fishery and mining������������������������������������ Construction������������������������������������������������������������������������������ Transport, information, communications and utilities���������������� Wholesale and retail������������������������������������������������������������������ Financial and insurance������������������������������������������������������������� Real estate, goods rental and leasing��������������������������������������� Services������������������������������������������������������������������������������������� Local municipal corporations���������������������������������������������������� Other industries������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������� Overseas operations and offshore banking accounts Sovereigns��������������������������������������������������������������������������������� Financial institutions������������������������������������������������������������������ C&I companies�������������������������������������������������������������������������� Others���������������������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������� Total�����������������������������������������������������������������������������������������������

March 31, 2015

Domestic operations (excluding offshore banking accounts) Manufacturing��������������������������������������������������������������������������� Agriculture, forestry, fishery and mining������������������������������������ Construction������������������������������������������������������������������������������ Transport, information, communications and utilities���������������� Wholesale and retail������������������������������������������������������������������ Financial and insurance������������������������������������������������������������� Real estate, goods rental and leasing��������������������������������������� Services������������������������������������������������������������������������������������� Local municipal corporations���������������������������������������������������� Other industries������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������� Overseas operations and offshore banking accounts Sovereigns��������������������������������������������������������������������������������� Financial institutions������������������������������������������������������������������ C&I companies�������������������������������������������������������������������������� Others���������������������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������� Total�����������������������������������������������������������������������������������������������

Loans, etc.

Bonds

Billions of yen Derivatives

Others

Total

9,649.7 368.2 1,238.9 6,124.1 6,130.8 42,235.4 9,438.2 5,627.8 1,558.8 27,111.3 109,483.2

140.2 8.2 22.8 51.3 38.1 418.2 411.9 30.9 56.8 13,380.7 14,559.1

240.4 3.1 4.6 164.0 182.7 1,637.7 64.7 59.1 11.8 338.7 2,706.7

2,661.0 30.1 242.5 1,131.7 898.2 1,382.3 422.9 649.9 20.7 5,630.9 13,070.2

12,691.3 409.7 1,508.8 7,471.2 7,249.8 45,673.7 10,337.7 6,367.7 1,648.1 46,461.5 139,819.3

7,755.5 5,882.2 22,624.1 5,288.5 41,550.2 151,033.4

1,190.7 557.9 164.0 829.4 2,742.0 17,301.2

21.8 1,849.3 903.0 84.4 2,858.5 5,565.3

21.8 915.7 899.6 2,356.9 4,194.0 17,264.2

8,989.7 9,205.2 24,590.7 8,559.2 51,344.7 191,164.0

Loans, etc.

Bonds

Billions of yen Derivatives

Others

Total

9,095.1 189.5 1,217.2 6,018.7 6,119.0 39,834.8 8,784.0 5,244.2 1,864.7 27,552.6 105,919.6

143.2 3.7 18.3 54.6 37.5 358.6 394.0 36.4 156.0 16,690.0 17,892.4

204.1 8.1 2.9 115.6 148.1 1,919.6 47.8 63.5 10.4 189.7 2,709.9

2,980.0 36.7 221.6 1,052.6 859.8 1,804.0 442.6 668.0 18.4 6,115.3 14,199.2

12,422.4 238.1 1,460.0 7,241.5 7,164.4 43,917.1 9,668.4 6,012.1 2,049.5 50,547.6 140,721.1

7,453.1 6,008.0 21,393.5 5,050.7 39,905.3 145,824.9

1,080.3 429.3 233.1 879.7 2,622.4 20,514.9

22.7 1,762.6 850.2 98.3 2,733.7 5,443.6

22.7 801.3 841.1 2,447.9 4,113.0 18,312.2

8,578.7 9,001.2 23,317.8 8,476.6 49,374.4 190,095.6

Notes: 1. The above amounts are exposures after CRM. 2. The above amounts do not include “securitization exposures” and “credit risk-weighted assets under Article 145 of the Notification.” 3. “Loans, etc.” includes loans, commitments and off-balance sheet assets except derivatives, and “Others” includes equity exposures, standardized approach applied funds, and CVA risk equivalent amount exposures, etc. 4. “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries.

234 2016 Annual Report

SMFG

Basel III Information

2. Exposure Balance by Type of Assets and Residual Term March 31, 2016

Loans, etc.

To 1 year���������������������������������������������������������������������������������������� More than 1 year to 3 years���������������������������������������������������������� More than 3 years to 5 years��������������������������������������������������������� More than 5 years to 7 years��������������������������������������������������������� More than 7 years�������������������������������������������������������������������������� No fixed maturity��������������������������������������������������������������������������� Total�����������������������������������������������������������������������������������������������

39,469.8 18,046.6 17,316.5 7,318.5 25,408.3 43,473.7 151,033.4

March 31, 2015

Loans, etc.

To 1 year���������������������������������������������������������������������������������������� More than 1 year to 3 years���������������������������������������������������������� More than 3 years to 5 years��������������������������������������������������������� More than 5 years to 7 years��������������������������������������������������������� More than 7 years�������������������������������������������������������������������������� No fixed maturity��������������������������������������������������������������������������� Total�����������������������������������������������������������������������������������������������

40,443.4 16,895.6 16,656.4 6,652.4 25,508.1 39,669.0 145,824.9

Bonds

4,442.1 3,550.6 5,449.0 564.1 3,295.4 — 17,301.2

Bonds

4,621.5 7,981.9 4,787.3 1,006.1 2,117.9 — 20,514.9

Billions of yen Derivatives

826.9 1,243.0 1,356.7 576.6 1,562.1 — 5,565.3

Others

Total

1,003.6 1,393.3 1,256.8 507.3 1,363.4 11,739.8 17,264.2

Billions of yen Derivatives

750.0 1,494.2 1,364.7 512.6 1,322.3 — 5,443.6

45,742.3 24,233.5 25,379.0 8,966.4 31,629.2 55,213.5 191,164.0

Others

Total

891.5 1,660.5 1,314.0 524.3 1,134.6 12,787.3 18,312.2

46,706.4 28,032.1 24,122.4 8,695.4 30,082.9 52,456.3 190,095.6

Notes: 1. The above amounts are exposures after CRM. 2. The above amounts do not include “securitization exposures” and “credit risk-weighted assets under Article 145 of the Notification.” 3. “Loans, etc.” includes loans, commitments and off-balance sheet assets except derivatives, and “Others” includes equity exposures, standardized approach applied funds, and CVA risk equivalent amount exposures, etc. 4. “No fixed maturity” includes exposures not classified by residual term.

3. Term-End Balance of Exposures Past Due 3 Months or More or Defaulted and Their Breakdown (1) By Geographic Region Billions of yen March 31

Domestic operations (excluding offshore banking accounts) �������������������������������������������������������� Overseas operations and offshore banking accounts��������������������������������������������������������������������� Asia���������������������������������������������������������������������������������������������������������������������������������������������� North America����������������������������������������������������������������������������������������������������������������������������� Other regions������������������������������������������������������������������������������������������������������������������������������� Total�������������������������������������������������������������������������������������������������������������������������������������������������

2016 1,301.9 177.9 47.3 67.8 62.8 1,479.8

2015 1,526.4 171.5 46.8 42.9 81.8 1,697.9

Notes: 1. The above amounts are credits subject to self-assessment, including mainly off-balance sheet credits to obligors categorized as “Substandard Borrowers” or lower under self-assessment. 2. The above amounts include partial direct write-offs (direct reductions). 3. “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries, and the term-end balances are calculated based on the obligor’s domicile country.

(2) By Industry Billions of yen March 31

Domestic operations (excluding offshore banking accounts) Manufacturing���������������������������������������������������������������������������������� Agriculture, forestry, fishery and mining������������������������������������������� Construction������������������������������������������������������������������������������������� Transport, information, communications and utilities����������������������� Wholesale and retail������������������������������������������������������������������������� Financial and insurance�������������������������������������������������������������������� Real estate, goods rental and leasing���������������������������������������������� Services�������������������������������������������������������������������������������������������� Other industries�������������������������������������������������������������������������������� Subtotal�������������������������������������������������������������������������������������������� Overseas operations and offshore banking accounts Financial institutions������������������������������������������������������������������������� C&I companies��������������������������������������������������������������������������������� Others����������������������������������������������������������������������������������������������� Subtotal�������������������������������������������������������������������������������������������� Total������������������������������������������������������������������������������������������������������

2016

2015

173.1 3.0 34.0 130.9 171.6 9.1 233.7 137.6 408.9 1,301.9

190.0 7.4 44.5 185.7 191.1 10.4 304.1 169.0 424.2 1,526.4

2.8 123.8 51.3 177.9 1,479.8

1.0 152.5 18.0 171.5 1,697.9

Notes: 1. The above amounts are credits subject to self-assessment, including mainly off-balance sheet credits to obligors categorized as “Substandard Borrowers” or lower under self-assessment. 2. The above amounts include partial direct write-offs (direct reductions). 3. “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries.

2016 Annual Report

235

SMFG

Basel III Information

4. Term-End Balances of General Reserve for Possible Loan Losses, Specific Reserve for Possible Loan Losses and Loan Loss Reserve for Specific Overseas Countries (1) By Geographic Region Billions of yen March 31

General reserve for possible loan losses���������������������������������������� Loan loss reserve for specific overseas countries�������������������������� Specific reserve for possible loan losses���������������������������������������� Domestic operations (excluding offshore banking accounts)����� Overseas operations and offshore banking accounts����������������� Asia������������������������������������������������������������������������������������������ North America�������������������������������������������������������������������������� Other regions��������������������������������������������������������������������������� Total�������������������������������������������������������������������������������������������������

2016 (A)

395.5 1.3 530.1 457.9 72.2 19.0 15.3 37.9 926.9

2015 (B)

Increase (decrease) (A) – (B)

2014

387.0 0.7 647.1 590.0 57.1 28.6 5.4 23.1 1,034.8

473.2 0.7 784.6 745.6 39.0 14.3 3.3 21.4 1,258.5

8.5 0.6 (117.0) (132.1) 15.1 (9.6) 9.9 14.8 (107.9)

Notes: 1. “Specific reserve for possible loan losses” includes partial direct write-offs (direct reductions). 2. “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries, and the term-end balances are calculated based on the obligor’s domicile country.

(2) By Industry Billions of yen March 31

General reserve for possible loan losses���������������������������������������� Loan loss reserve for specific overseas countries�������������������������� Specific reserve for possible loan losses���������������������������������������� Domestic operations (excluding offshore banking accounts)����� Manufacturing�������������������������������������������������������������������������� Agriculture, forestry, fishery and mining���������������������������������� Construction���������������������������������������������������������������������������� Transport, information, communications and utilities�������������� Wholesale and retail���������������������������������������������������������������� Financial and insurance����������������������������������������������������������� Real estate, goods rental and leasing������������������������������������� Services����������������������������������������������������������������������������������� Other industries����������������������������������������������������������������������� Overseas operations and offshore banking accounts����������������� Financial institutions���������������������������������������������������������������� C&I companies������������������������������������������������������������������������ Others�������������������������������������������������������������������������������������� Total�������������������������������������������������������������������������������������������������

2016 (A)

395.5 1.3 530.1 457.9 60.0 2.6 13.7 69.8 63.9 6.7 81.3 48.0 111.9 72.2 0.3 65.9 6.0 926.9

2015 (B)

Increase (decrease) (A) – (B)

2014

387.0 0.7 647.1 590.0 83.7 2.9 20.0 81.9 79.2 8.2 109.1 68.1 136.9 57.1 0.3 43.7 13.1 1,034.8

473.2 0.7 784.6 745.6 110.0 3.0 38.4 63.7 115.1 10.9 173.0 89.9 141.6 39.0 2.9 34.1 2.0 1,258.5

8.5 0.6 (117.0) (132.1) (23.7) (0.3) (6.3) (12.1) (15.3) (1.5) (27.8) (20.1) (25.0) 15.1 0.0 22.2 (7.1) (107.9)

Notes: 1. “Specific reserve for possible loan losses” includes partial direct write-offs (direct reductions). 2. “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries.

5. Loan Write-Offs by Industry Billions of yen

Domestic operations (excluding offshore banking accounts) Manufacturing���������������������������������������������������������������������������������������� Agriculture, forestry, fishery and mining������������������������������������������������� Construction������������������������������������������������������������������������������������������� Transport, information, communications and utilities����������������������������� Wholesale and retail������������������������������������������������������������������������������� Financial and insurance�������������������������������������������������������������������������� Real estate, goods rental and leasing���������������������������������������������������� Services�������������������������������������������������������������������������������������������������� Other industries�������������������������������������������������������������������������������������� Subtotal�������������������������������������������������������������������������������������������������� Overseas operations and offshore banking accounts Financial institutions������������������������������������������������������������������������������� C&I companies��������������������������������������������������������������������������������������� Others����������������������������������������������������������������������������������������������������� Subtotal�������������������������������������������������������������������������������������������������� Total������������������������������������������������������������������������������������������������������������

Fiscal 2015

Fiscal 2014

(0.3) 0.0 0.1 1.3 0.5 (0.1) 0.1 (0.0) 64.8 66.4

(0.3) (0.0) (0.1) 0.1 (0.9) 0.0 0.1 0.2 74.5 73.6

— 0.6 7.2 7.8 74.2

— 0.0 3.4 3.4 77.0

Note: “Domestic operations” comprises the operations of SMFG, its domestic consolidated banking subsidiaries (excluding overseas branches) and other domestic consolidated subsidiaries. “Overseas operations” comprises the operations of the overseas branches of domestic consolidated banking subsidiaries and overseas consolidated subsidiaries.

236 2016 Annual Report

Basel III Information

SMFG

■ Market Risk 1. Scope The following approaches are used to calculate market risk equivalent amounts. (1) Internal Models Method General market risk of SMBC, Sumitomo Mitsui Banking Corporation Europe Limited, Sumitomo Mitsui Banking Corporation (China) Limited, SMBC Capital Markets, Inc., SMBC Nikko Capital Markets Limited, SMBC Derivative Products Limited, and SMBC Capital Markets (Asia) Limited (2) Standardized Measurement Method • Specific risk • General market risk of consolidated subsidiaries other than SMBC, Sumitomo Mitsui Banking Corporation Europe Limited, Sumitomo Mitsui Banking Corporation (China) Limited, SMBC Capital Markets, Inc., SMBC Nikko Capital Markets Limited, SMBC Derivative Products Limited, and SMBC Capital Markets (Asia) Limited • A portion of general market risk of SMBC 2. Valuation Method Corresponding to Transaction Characteristics All assets and liabilities held in the trading book — therefore, subject to calculation of the market risk equivalent amount — are transactions with high market liquidity. Securities and monetary claims are carried at the fiscal year-end market price, and derivatives such as swaps, futures and options are stated at amounts that would be settled if the transactions were terminated at the consolidated balance sheet date. 3. VaR Results (Trading Book) Billions of yen

Fiscal 2015 VaR

Fiscal year-end������������������������������������������������������������������������� Maximum���������������������������������������������������������������������������������� Minimum����������������������������������������������������������������������������������� Average������������������������������������������������������������������������������������

1.7 5.9 1.2 2.6

Fiscal 2014

Stressed VaR

1.9 11.7 1.8 4.4

VaR

Stressed VaR

2.7 5.6 1.7 3.2

3.5 13.2 2.3 7.1

Notes: 1. The VaR results for a one-day holding period with a one-sided confidence interval of 99.0%, computed daily using the historical simulation method based on four years of historical observations. 2. The stressed VaR is calculated on a daily basis by using the historical simulation method for the holding period of one day, one-sided confidence interval of 99.0%, and measurement period of 12 months (including the stress period). 3. Specific risks for the trading book are excluded. 4. Principal consolidated subsidiaries are included.

■ Interest Rate Risk in Banking Book Interest rate risk in the banking book fluctuates significantly depending on the method of recognizing maturity of demand deposits (such as current accounts and ordinary deposits from which funds can be withdrawn on demand) and the method of predicting early withdrawal from fixed-term deposits and prepayment of consumer loans. Key assumptions made by SMBC in measuring interest rate risk in the banking book are as follows. 1. Method of Recognizing Maturity of Demand Deposits The total amount of demand deposits expected to remain with the bank for the long term (with 50% of the lowest balance during the past 5 years as the upper limit) is recognized as a core deposit amount and interest rate risk is measured for each maturity with 5 years as the maximum term (the average is 2.5 years). 2. Method of Estimating Early Withdrawal from Fixed-term Deposits and Prepayment of Consumer Loans The rate of early withdrawal from fixed-term deposits and the rate of prepayment of consumer loans are estimated and the rates are used to calculate cash flows used for measuring interest rate risk. 3. VaR Results (Banking Book) Billions of yen

Fiscal year-end��������������������������������������������������������������������������������������������������������������������������������������� Maximum������������������������������������������������������������������������������������������������������������������������������������������������ Minimum������������������������������������������������������������������������������������������������������������������������������������������������� Average��������������������������������������������������������������������������������������������������������������������������������������������������

Fiscal 2015 34.0 48.9 23.5 38.7

Fiscal 2014 39.0 46.1 36.6 41.7

Notes: 1. The VaR results for a one-day holding period with a one-sided confidence interval of 99.0%, computed daily using the historical simulation method based on four years of historical observations. 2. Principal consolidated subsidiaries are included.

2016 Annual Report

237

SMFG

Basel III Information

■ Operational Risk 1. Operational Risk Equivalent Amount Calculation Methodology SMFG adopted the Advanced Measurement Approach (AMA) for exposures as of March 31, 2008. The following consolidated subsidiaries have also adopted the AMA, and the remaining consolidated subsidiaries have adopted the Basic Indicator Approach (BIA). Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Card Company, Limited, The Japan Research Institute, Limited, SMBC Friend Securities Co., Ltd., Sumitomo Mitsui Finance and Leasing Co., Ltd., SMBC Finance Service Co., Ltd., Kansai Urban Banking Corporation, SMBC Guarantee Co., Ltd., THE MINATO BANK, LTD., SMBC Center Service Co., Ltd., SMBC Delivery Service Co., Ltd., SMBC Green Service Co., Ltd., SMBC International Business Co., Ltd., SMBC Loan Business Service Co., Ltd., SMBC Loan Administration and Operations Service Co., Ltd., Sumitomo Mitsui Banking Corporation Europe Limited, Sumitomo Mitsui Banking Corporation (China) Limited, SMBC Nikko Securities Inc., Cedyna Financial Corporation and SMBC Consumer Finance Co., Ltd. 2. Outline of the AMA For the “Outline of the AMA,” please refer to pages 88 to 90. 3. Usage of Insurance to Mitigate Risk SMFG had not taken measures to mitigate operational risk through insurance coverage for exposures.

238 2016 Annual Report

Basel III Information

SMFG

■ Reconciliation of Regulatory Capital Elements Back to the Balance Sheet (As of March 31, 2015 and 2016) Sumitomo Mitsui Financial Group, Inc. and Subsidiaries (Millions of yen)

Items

(Assets) Cash and due from banks Call loans and bills bought Receivables under resale agreements Receivables under securities borrowing transactions Monetary claims bought Trading assets Money held in trust Securities Loans and bills discounted Foreign exchanges Lease receivables and investment assets Other assets Tangible fixed assets Intangible fixed assets Net defined benefit asset Deferred tax assets Customers’ liabilities for acceptances and guarantees Reserve for possible loan losses Total assets (Liabilities) Deposits Negotiable certificates of deposit Call money and bills sold Payables under repurchase agreements Payables under securities lending transactions Commercial paper Trading liabilities Borrowed money Foreign exchanges Short-term bonds Bonds Due to trust account Other liabilities Reserve for employee bonuses Reserve for executive bonuses Net defined benefit liability Reserve for executive retirement benefits Reserve for point service program Reserve for reimbursement of deposits Reserve for losses on interest repayment Reserve under the special laws Deferred tax liabilities Deferred tax liabilities for land revaluation Acceptances and guarantees Total liabilities (Net assets) Capital stock Capital surplus Retained earnings Treasury stock Total stockholders’ equity Net unrealized gains on other securities Net deferred gains or losses on hedges Land revaluation excess Foreign currency translation adjustments Remeasurements of defined benefit plans Total accumulated other comprehensive income Stock acquisition rights Non-controlling interests Total net assets Total liabilities and net assets

Consolidated balance sheet as in published financial statements As of March 31, 2016

As of March 31, 2015

42,789,236 1,291,365 494,949 7,972,918 4,350,012 8,063,281 5,163 25,264,445 75,066,080 1,577,167 1,987,034 6,702,774 2,919,424 878,265 203,274 125,832 7,519,635 (625,019) 186,585,842

39,748,979 1,326,965 746,431 6,477,063 4,286,592 7,483,681 7,087 29,633,667 73,068,240 1,907,667 1,909,143 6,156,091 2,770,853 819,560 376,255 127,841 7,267,713 (671,248) 183,442,585

110,668,828 14,250,434 1,220,455 1,761,822 5,309,003 3,017,404 6,112,667 8,571,227 1,083,450 1,271,300 7,006,357 944,542 6,632,027 68,476 2,446 48,570 2,202 19,706 16,979 228,741 1,498 348,190 32,203 7,519,635 176,138,173

101,047,918 13,825,898 5,873,123 991,860 7,833,219 3,351,459 5,664,688 9,778,095 1,110,822 1,370,800 6,222,918 718,133 6,728,951 73,359 3,344 38,096 2,128 19,050 20,870 166,793 1,124 601,393 34,550 7,267,713 172,746,314

2,337,895 757,306 4,534,472 (175,381) 7,454,294 1,347,689 55,130 39,416 87,042 (69,811) 1,459,467 2,884 1,531,022 10,447,669 186,585,842

2,337,895 757,329 4,098,425 (175,261) 7,018,389 1,791,049 (30,180) 39,014 156,309 47,667 2,003,859 2,284 1,671,738 10,696,271 183,442,585

Cross-reference to Appended Table

Reference # of Basel III common disclosure template under the Composition of Capital Disclosure (Basel III Template)

7-a 3-b, 7-b 7-c

3-a 4 5-a

7-d 9-a

9-b

5-b 5-c

1-a 1-b 1-c 1-d

6

3 2, 8-a 8-b

Note: The regulatory scope of consolidation is the same as the accounting scope of consolidation.

2016 Annual Report

239

SMFG

Basel III Information

(Appended Table) 1. Stockholders’ equity (1) Consolidated balance sheet Consolidated balance sheet items Capital stock Capital surplus Retained earnings Treasury stock Total stockholders’ equity

(Millions of yen) As of March 31, 2016 2,337,895 757,306 4,534,472 (175,381) 7,454,294

As of March 31, 2015 2,337,895 757,329 4,098,425 (175,261) 7,018,389

As of March 31, 2016

As of March 31, 2015

Remarks

1-a 1-b 1-c 1-d

(2) Composition of capital Composition of capital disclosure Directly issued qualifying common share capital plus related capital surplus and retained earnings of which: capital and capital surplus of which: retained earnings of which: treasury stock (–) of which: other than the above Directly issued qualifying Additional Tier 1 instruments plus related capital surplus of which: classified as equity under applicable accounting standards and the breakdown

(Millions of yen)

7,454,294

7,018,389

3,095,202 4,534,472 175,381 —

3,095,225 4,098,425 175,261 —





As of March 31, 2016 2,884

As of March 31, 2015 2,284

Stock acquisition rights of which: Stock acquisition rights issued by bank holding company

2,635

2,085

Stockholders’ equity attributable to common shares (before adjusting national specific regulatory adjustments (earnings to be distributed)) 1a 2 1c Stockholders’ equity attributable to preferred shares with a loss absorbency clause upon entering into effectively bankruptcy

Stock acquisition rights to common shares Stock acquisition rights to Additional Tier 1 instruments Stock acquisition rights to Tier 2 instruments

Consolidated balance sheet items

Income taxes related to above

(Millions of yen) As of March 31, 2016

As of March 31, 2015

2,635 — —

2,085 — —

As of March 31, 2016 878,265 25,264,445 46,540

As of March 31, 2015 819,560 29,633,667 92,771

171,796

153,707

As of March 31, 2016 372,622 380,386 — — —

As of March 31, 2015 435,296 323,327 — — —

Goodwill (including those equivalent) Other intangible assets other than goodwill and mortgage servicing rights Mortgage servicing rights Amount exceeding the 10% threshold on specified items Amount exceeding the 15% threshold on specified items Mortgage servicing rights that are below the thresholds for deduction (before risk weighting)





As of March 31, 2016 203,274

As of March 31, 2015 376,255

61,615

120,853

1b 31b 46

(Millions of yen) Remarks

Consolidated balance sheet items

Income taxes related to above

240 2016 Annual Report

Ref. No. 3-a 3-b

(Millions of yen) Basel III Template No. 8 9

Remarks Software and other

20 24 74

4. Net defined benefit asset (1) Consolidated balance sheet Net defined benefit asset

Basel III Template No.

Remarks

(2) Composition of capital Composition of capital disclosure

Ref. No. 2

3. Intangible assets (1) Consolidated balance sheet Intangible fixed assets Securities of which: goodwill attributable to equity-method investees

31a

(Millions of yen) Remarks

(2) Composition of capital Composition of capital disclosure

Basel III Template No.

Remarks

2. Stock acquisition rights (1) Consolidated balance sheet Consolidated balance sheet items

Ref. No.

(Millions of yen) Remarks

Ref. No. 4

SMFG

Basel III Information

(2) Composition of capital Composition of capital disclosure Net defined benefit asset

(Millions of yen) As of March 31, 2016

As of March 31, 2015

141,659

255,401

As of March 31, 2016 125,832 348,190 32,203

As of March 31, 2015 127,841 601,393 34,550

171,796 61,615

153,707 120,853

15

5. Deferred tax assets (1) Consolidated balance sheet Consolidated balance sheet items Deferred tax assets Deferred tax liabilities Deferred tax liabilities for land revaluation Tax effects on other intangible assets Tax effects on net defined benefit asset

(Millions of yen) Remarks

Ref. No. 5-a 5-b 5-c

(2) Composition of capital Composition of capital disclosure

Basel III Template No.

Remarks

(Millions of yen) As of March 31, 2016

As of March 31, 2015

Remarks

Basel III Template No. 10

Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability)

2,137

5,008

This item does not agree with the amount reported on the consolidated balance sheet due to offsetting of assets and liabilities.

Deferred tax assets arising from temporary differences (net of related tax liability)

9,700

5,285

This item does not agree with the amount reported on the consolidated balance sheet due to offsetting of assets and liabilities.

— —

— —

21 25

9,700

5,285

75

Amount exceeding the 10% threshold on specified items Amount exceeding the 15% threshold on specified items Deferred tax assets arising from temporary differences that are below the thresholds for deduction (before risk weighting)

6. Deferred gains or losses on derivatives under hedge accounting (1) Consolidated balance sheet Consolidated balance sheet items Net deferred gains or losses on hedges

(Millions of yen)

As of March 31, 2016 55,130

As of March 31, 2015 (30,180)

As of March 31, 2016

As of March 31, 2015

Remarks

6

(2) Composition of capital Composition of capital disclosure Net deferred gains or losses on hedges

(Millions of yen)

Excluding those items whose valuation differences (28,694) arising from hedged items are recognized as “Accumulated other comprehensive income”

57,131

Trading assets Securities Loans and bills discounted Trading liabilities

As of March 31, 2016

Basel III Template No.

Remarks

7. Items associated with investments in the capital of financial institutions (1) Consolidated balance sheet Consolidated balance sheet items

Ref. No.

As of March 31, 2015

8,063,281

7,483,681

25,264,445 75,066,080

29,633,667 73,068,240

6,112,667

5,664,688

11

(Millions of yen) Remarks

Ref. No.

Including trading account securities and derivatives for trading assets

7-a

Including subordinated loans Including trading account securities sold and derivatives for trading liabilities

7-b 7-c 7-d

2016 Annual Report

241

SMFG

Basel III Information

(2) Composition of capital Composition of capital disclosure Investments in own capital instruments Common Equity Tier 1 capital Additional Tier 1 capital Tier 2 capital Reciprocal cross-holdings in the capital of banking, financial and insurance entities Common Equity Tier 1 capital Additional Tier 1 capital Tier 2 capital Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation (“Other Financial Institutions”), net of eligible short positions, where the bank does not own more than 10% of the issued share capital (“Non-significant Investment”) (amount above the 10% threshold) Common Equity Tier 1 capital Additional Tier 1 capital Tier 2 capital Non-significant investments in the capital of Other Financial Institutions that are below the thresholds for deductions (before risk weighting) Significant investments in the capital of Other Financial Institutions, net of eligible short positions Amount exceeding the 10% threshold on specified items Amount exceeding the 15% threshold on specified items Additional Tier 1 capital Tier 2 capital Significant investments in the common stocks of Other Financial Institutions that are below the thresholds for deductions (before risk weighting)

(Millions of yen) As of March 31, 2015 9,886 9,886 — —





— — —

— — —

620,209

874,552

— — —

65,599 507 10,109

18 39 54

620,209

798,335

72

727,520

761,011

— — 80,053 125,000

— — 158,633 125,057

19 23 40 55

522,466

477,320

73

As of March 31, 2016 2,884 1,531,022

As of March 31, 2015 2,284 1,671,738

As of March 31, 2016

As of March 31, 2015

Remarks

16 37 52

17 38 53

8. Non-controlling interests (1) Consolidated balance sheet Consolidated balance sheet items Stock acquisition rights Non-controlling interests

(Millions of yen) Remarks

Amount allowed to be included in group Common Equity Tier 1 Qualifying Additional Tier 1 instruments plus related capital surplus issued by special purpose vehicles and other equivalent entities Amount allowed to be included in group Additional Tier 1 Qualifying Tier 2 instruments plus related capital surplus issued by special purpose vehicles and other equivalent entities Amount allowed to be included in group Tier 2

(Millions of yen)

Borrowed money Bonds

164,550

153,863





183,267

182,251





42,036

39,348

As of March 31, 2016 8,571,227 7,006,357

As of March 31, 2015 9,778,095 6,222,918

Remarks

As of March 31, 2016

As of March 31, 2015

Remarks

5 30-31ab-32 34-35 46 48-49

(Millions of yen)

Directly issued qualifying Additional Tier 1 instruments plus related capital surplus of which: classified as liabilities under applicable accounting standards Directly issued qualifying Tier 2 instruments plus related capital surplus of which: classified as liabilities under applicable accounting standards

Ref. No. 9-a 9-b

(2) Composition of capital Composition of capital disclosure

Basel III Template No.

Remarks

9. Other capital instruments (1) Consolidated balance sheet Consolidated balance sheet items

Ref. No. 8-a 8-b

(2) Composition of capital Composition of capital disclosure

Basel III Template No.

As of March 31, 2016 7,374 7,374 — —

(Millions of yen) Basel III Template No.

300,000



32

655,064

374,988

46

Note: Amounts in the “Composition of capital disclosure” are based on those before considering under transitional arrangements and includes “Amounts excluded under transitional arrangements” disclosed in “Capital Structure Information” as well as amounts included as regulatory capital. In addition, items for regulatory purpose under transitional arrangement are excluded from this table.

242 2016 Annual Report

SMFG

Basel III Information

Leverage Ratio Information (Consolidated) Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

■ Composition of Leverage Ratio (In million yen, %) Corresponding line # Corresponding line # on Basel III disclosure on Basel III disclosure Item template (Table2) template (Table1) On-balance sheet exposures (1) 1 On-balance sheet exposures before deducting adjustment items 1a 1 Total assets reported in the consolidated balance sheet The amount of assets of subsidiaries that are not included in the scope 1b 2 of the leverage ratio on a consolidated basis (-) The amount of assets of subsidiaries that are included in the scope of 1c 7 the leverage ratio on a consolidated basis (except those included in the total assets reported in the consolidated balance sheet) The amount of assets that are deducted from the total assets reported 1d 3 in the consolidated balance sheet (except adjustment items) (-) 2 7 The amount of adjustment items pertaining to Tier 1 capital (-) (a) 3 Total on-balance sheet exposures  Exposures related to derivative transactions (2) 4 Replacement cost associated with derivatives transactions, etc. 5 Add-on amount associated with derivatives transactions, etc. The amount of receivables arising from providing cash margin in relation to derivatives transactions, etc. The amount of receivables arising from providing cash margin, 6 provided where deducted from the consolidated balance sheet pursuant to the operative accounting framework The amount of deductions of receivables (out of those arising from 7 providing cash variation margin) (-) The amount of client-cleared trade exposures for which a bank or bank 8 holding company acting as clearing member is not obliged to make any indemnification (-) 9 Adjusted effective notional amount of written credit derivatives The amount of deductions from effective notional amount of written 10 credit derivatives (-) (b) 11 4 Total exposures related to derivative transactions  Exposures related to repo transactions (3) 12 The amount of assets related to repo transactions, etc. 13 The amount of deductions from the assets above (line 12) (-) 14 The exposures for counterparty credit risk for repo transactions, etc. 15 The exposures for agent repo transaction (c) 16 5 Total exposures related to repo transactions, etc.  Exposures related to off-balance sheet transactions (4) 17 Notional amount of off-balance sheet transactions The amount of adjustments for conversion in relation to off-balance 18 sheet transactions (-) (d) 19 6 Total exposures related to off-balance sheet transactions  Leverage ratio on a consolidated basis (5) 20 The amount of capital (Tier 1 capital)  (e) 21 8 Total exposures ((a)+(b)+(c)+(d))  (f) 22 Leverage ratio on a consolidated basis ((e)/(f))

As of March 31, 2016

As of March 31, 2015

162,192,848 186,585,842

160,371,631 183,442,585









24,392,993

23,070,954

625,036 161,567,811

514,287 159,857,344

2,296,889 3,047,557

2,197,309 3,322,792

533,429

615,854





533,429

615,854

583,300

491,723

459,631

294,754

5,468,116

5,717,070

8,467,867 — 52,386

7,223,495 — 59,050

8,520,253

7,282,545

59,207,893

56,677,029

39,001,675

38,217,588

20,206,217

18,459,440

9,031,672 195,762,400 4.61%

8,528,626 191,316,401 4.45%

2016 Annual Report

243

SMFG

Basel III Information

Liquidity Risk Information (Consolidated) Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

Since March 31, 2015, the “Liquidity Coverage Ratio” (hereinafter referred to as “LCR”), the liquidity regulation under the Basel III, has been introduced in Japan. In addition to the application of uniform international standards, SMFG calculates its consolidated LCR using the calculation formula stipulated in the “Criteria for Evaluating the Soundness of Liquidity Status Set Forth by a Bank Holding Company as a Benchmark for Judging the Soundness of Management of Itself and its Subsidiaries, etc., Based on the Provision of Article 52-25 of the Banking Act, and Which Are Also the Criteria to be Referred to for Judging the Soundness of Management in Banks” (Notification No. 62 issued by the Japanese Financial Services Agency in 2014; hereinafter referred to as the “LCR Notification”). Meanwhile, SMFG discloses its liquidity risk management and LCR in compliance with “Matters Related to the Status of the Soundness of Management Concerning Liquidity Separately Specified by the Commissioner of the Japanese Financial Services Agency, Based on the Provision of Article 19-2, Paragraph 1, Item 5 (e) of the Ordinance for Enforcement of the Banking Act, etc.” (Notification No. 7 issued by the Japanese Financial Services Agency in 2015).

■ Disclosure of Liquidity Risk Management

1. Liquidity Risk Management Policy and Procedures At SMFG, liquidity risk is centrally managed by the Corporate Risk Management Department, which is operated independently of business units engaged in market transactions. The department is responsible for the measurement of funding gaps and monitoring of the risk status through stress tests and other means, in addition to the development and analysis of risk appetite indicators, with a view to maintaining a stable balance between the lending and funding structure. It reports these sets of information to the Management Committee and Board of Directors, etc. In addition, in accordance with SMFG’s “Principal Policy for Group Risk Management,” principle policies of liquidity risk management and important risk-related matters, such as a risk tolerance, are determined by the Management Committee before they are approved by the Board of Directors. 2. Indicators for Assessing Liquidity Risk and Other Liquidity Risk Management (1) Risk appetite indicator This indicator demonstrates the degree of deviance from the quantitative risks (e.g. LCR) estimated at the beginning of the fiscal year. SMFG has set three alert levels of deviance to monitor the status of the liquidity risk it exposes. (2) Maintaining supplementary liquidity Supplementary liquidity is maintained by holding assets, such as U.S. government bonds, which can be immediately converted to cash in order to smoothly raise the required funds even during market disruption, and these asset holdings are monitored regularly. (3) Funding gap management A funding gap is defined as the maturity mismatch between source of funds and use of funds and shows forthcoming funding requirements. SMFG manages this funding gap properly by setting limits on the size of the gap and limiting reliance on short-term funding. These limits are set in place on both a bank-wide basis and individual branch basis, and take into account funding status, cash management planning, economic environments, and individual currency characteristics and other factors. Additionally, funding gap limits are set for individual currencies if necessary. SMFG monitors the funding gap on a daily basis. (4) Stress tests Stress tests are designed to ensure the development of a robust liquidity structure to cope with substantial cash outflows in a stress period. The test is regularly carried out by simulating the impact triggered, for example, by deposit outflows or difficulties in money market funding, in order to appraise and manage the amount of funding required when liquidity risk is realized. (5) Measures against realized liquidity stress Contingency plans are developed to respond to the liquidity risk when being realized, by creating detailed action plans such as lowering the upper limit for the funding gap, depending on the existing situation (i.e. normal, concerned, or critical) and the respective circumstances.

■ Disclosure of Qualitative Information about Liquidity Coverage Ratio

1. Intra-period Changes in Consolidated LCR As described in “Disclosure of Quantitative Information about Liquidity Coverage Ratio (Consolidated)” on the following page, the LCR has remained stable with no significant fluctuation following the introduction of the liquidity regulation on March 31, 2015. 2. Assessment of Consolidated LCR The LCR Notification stipulates that the minimum requirement of LCR for 2016 is set at 70.0% and from 2017 onwards, the LCR is raised in increments of 10.0% in stages, reaching 100.0% in and after 2019 (see table below). 2015

The minimum requirement of LCR����������������������������������������������

60.0%

2016

70.0%

2017

80.0%

2018

90.0%

2019 onwards

100.0%

Consolidated LCR of SMFG exceeds the minimum requirements of LCR for 2016 (70.0%) and for 2019 onwards (100.0%), having no cause for concern. SMFG does not expect that the future LCR forecasts will differ significantly from the announced ratios. In addition, the actual LCR does not differ significantly from the initial forecast.

244 2016 Annual Report

Basel III Information

SMFG

3. Composition of High-Quality Liquid Assets The consolidated high-quality liquid assets held by SMFG that are allowed to be included in the calculation of LCR include deposits with central banks, highly-rated bonds and cash. As described in “Disclosure of Quantitative Information about Liquidity Coverage Ratio (Consolidated)” in the following table, the amount of such high-quality liquid assets exceed the amount of net cash outflows. Meanwhile, currency denominations, categories and location, etc. of the high-quality liquid assets allowed to be included in the calculation have not shown any significant changes. In addition, in respect of major currencies (those of which the aggregate amount of liabilities denominated in a certain currency accounts for 5.0 % or more of SMFG’s total liabilities on the consolidated basis), there is no significant mismatch in currency denomination between the total amount of the high-quality liquid assets allowed to be included in the calculation and the amount of net cash outflows. 4. Other Information Concerning Consolidated LCR SMFG has not applied “special provisions concerning qualifying operational deposits” prescribed in Article 28 of the LCR Notification and “increased liquidity needs related to market valuation changes on derivative or other transactions simulated through Scenario Approach” prescribed in Article 37 of the same Notification. Meanwhile, SMFG records “cash outflows related to small-sized consolidated subsidiaries,” etc. under “cash outflows based on other contracts” prescribed in Article 59 of the same Notification.

■ Disclosure of Quantitative Information about Liquidity Coverage Ratio (Consolidated) 

(In million yen, %, the number of data)

Current Quarter (From 2016/1/1 To 2016/3/31)

Item

High-Quality Liquid Assets (1) 1 Total high-quality liquid assets (HQLA) Cash Outflows (2) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Cash outflows related to unsecured retail funding of which, Stable deposits of which, Less stable deposits Cash outflows related to unsecured wholesale funding of which, Qualifying operational deposits of which, Cash outflows related to unsecured wholesale funding other than qualifying operational deposits and debt securities of which, Debt securities Cash outflows related to secured funding, etc. Cash outflows related to derivative transactions, etc. funding programs, credit and liquidity facilities of which, Cash outflows related to derivative transactions, etc. of which, Cash outflows related to funding programs of which, Cash outflows related to credit and liquidity facilities Cash outflows related to contractual funding obligations, etc. Cash outflows related to contingencies Total cash outflows

Cash Inflows (3) 17 Cash inflows related to secured lending, etc. 18 Cash inflows related to collection of loans, etc. 19 Other cash inflows 20 Total cash inflows Consolidated Liquidity Coverage Ratio (4) 21 Total HQLA allowed to be included in the calculation 22 Net cash outflows 23 Consolidated liquidity coverage ratio (LCR) 24 The number of data used to calculate the average value

Prior Quarter (From 2015/10/1 To 2015/12/31)

49,664,698 TOTAL UNWEIGHTED VALUE

TOTAL WEIGHTED VALUE

48,621,338 TOTAL UNWEIGHTED VALUE

TOTAL WEIGHTED VALUE

49,743,188 15,459,536 34,283,652 55,311,931 —

3,892,979 463,846 3,429,132 30,862,377 —

48,865,918 14,915,420 33,950,498 54,687,009 —

3,843,214 447,463 3,395,751 31,318,058 —

48,108,832

23,659,278

47,298,845

23,929,893

7,203,099

7,203,099 64,128

7,388,165

7,388,165 71,137

20,118,571

6,911,940

20,510,320

6,848,060

1,845,259 582,882 17,690,430 8,969,609 65,635,893

1,845,259 582,882 4,483,799 5,828,019 917,321 48,476,765

1,588,137 632,800 18,289,383 8,008,212 64,204,284

1,588,137 632,800 4,627,123 5,286,320 919,477 48,286,266

TOTAL UNWEIGHTED VALUE

4,900,450 4,372,853 4,276,699 13,550,002

TOTAL WEIGHTED VALUE

262,466 2,918,343 2,210,086 5,390,895 49,664,698 43,085,870 115.2% 3

TOTAL UNWEIGHTED VALUE

4,018,112 4,523,449 3,988,910 12,530,470

TOTAL WEIGHTED VALUE

221,480 2,985,454 2,042,753 5,249,686 48,621,338 43,036,580 112.9% 3

The data following the introduction of the liquidity regulation on March 31, 2015 is available on SMFG’s website. (http://www.smfg.co.jp/english/investor/financial/basel_3.html)

2016 Annual Report

245

SMFG

Basel III Information

Indicators for assessing Global Systemically Important Banks (G-SIBs) Sumitomo Mitsui Financial Group, Inc. and Subsidiaries

■ Indicators for assessing Global Systemically Important Banks (G-SIBs) (In 0.1 billion yen) Item No.

Description

1

Total exposures (a + b + c + d): a. On-balance sheet assets (other than assets specifically identified below b., c. and contra-account of guarantees) b. Sum of counterparty exposure of derivatives contracts, capped notional amount of written credit derivatives and potential future exposure of derivatives contracts c. Adjusted gross value of securities financing transactions (SFTs) and counterparty exposure of SFTs d. Gross notional amount of off-balance sheet items (other than derivatives contracts and SFTs)

2

As of March 31, 2016

As of March 31, 2015

1,967,830

1,911,845

Intra-financial system assets (a + b + c + d): a. Funds deposited with or lent to other financial institutions and undrawn committed lines extended to other financial institutions b. Holdings of securities issued by other financial institutions (Note 1) c. Net positive current exposure of SFTs with other financial institutions d. Over-the-counter (OTC) derivatives with other financial institutions that have a net positive fair value

290,434

298,339

3

Intra-financial system liabilities (a + b + c): a. Deposits due to, and loans and undrawn committed lines obtained from, other financial institutions b. Net negative current exposure of SFTs with other financial institutions c. OTC derivatives with other financial institutions that have a net negative fair value

184,610

216,396

4

Securities outstanding (Note 1)

303,703

312,779

5

Assets under custody

121,293

128,754

6

Notional amount of OTC derivatives

6,237,931

6,569,083

7

Held-for-trading (HFT) securities and available-for-sale (AFS) securities, excluding HFT and AFS securities that meet the definition of Level 1 assets and Level 2 assets with haircuts (Note 2)

99,021

118,027

8

Level 3 assets (Note 3)

8,309

10,938

9

Cross-jurisdictional claims

442,652

424,438

10

Cross-jurisdictional liabilities

222,418

213,958

Item No.

Description

11

Payments (settled through the BOJ-NET, the Japanese Banks’ Payment Clearing Network and other similar settlement systems, excluding intragroup payments)

12

Underwritten transactions in debt and equity markets (Note 4)

Notes: 1. 2. 3. 4.

FY ended March 31, 2016

FY ended March 31, 2015

31,745,875

27,326,202

72,413

47,619

Securities refer to secured debt securities, senior unsecured debt securities, subordinated debt securities, commercial paper, certificate of deposits, and common equities. Level 1 and Level 2 assets with haircuts are defined in the Basel III Liquidity Coverage Ratio (LCR). The amount is calculated in accordance with the International Financial Reporting Standards. This refers to underwriting of securities defined in article 2 paragraph 8 item 6 of the Financial Instruments and Exchange Act.

246 2016 Annual Report

SMBC

Financial Highlights Sumitomo Mitsui Banking Corporation Consolidated Year ended March 31 For the Year: Ordinary income����������������������������������������������������������� Ordinary profit�������������������������������������������������������������� Profit attributable to owners of parent������������������������� Comprehensive income����������������������������������������������� At Year-End: Total net assets������������������������������������������������������������ Total assets������������������������������������������������������������������ Capital ratio (International standard)���������������������������� Total capital ratio (International standard)�������������������� Tier 1 capital ratio (International standard)������������������ Common equity Tier 1 capital ratio (International standard)���������������������������������������������� Number of employees��������������������������������������������������

2016

2015

¥

3,059,022 930,332 680,162 143,086

¥

3,199,409 1,198,955 736,904 1,937,374

¥

9,446,193 180,408,672 / 18.19% 14.58%

¥ 10,036,003 177,559,197 / 17.93% 13.91%

13.04% 54,192

12.61% 50,249

Millions of yen 2014

2013

2012

¥

3,105,992 1,298,738 785,687 1,174,292

¥

2,810,681 928,713 734,514 1,373,623

¥

2,687,911 857,919 533,816 632,889

¥

8,640,763 155,824,141 / 17.08% 13.43%

¥

8,257,091 143,203,127 / 16.84% 12.69%

¥

7,276,706 138,251,602 19.63% / /

12.27% 48,824

11.26% 47,852

/ 50,768

Note: “Number of employees” has been reported on the basis of full-time workers. “Number of employees” includes locally hired overseas staff members but excludes contract employees and temporary staff.

Non-consolidated Year ended March 31 For the Year: Ordinary income����������������������������������������������������������� Trust fees����������������������������������������������������������������� Gross banking profit (A)����������������������������������������������� Expenses (excluding nonrecurring losses) (B)������������� Overhead ratio (B) / (A)������������������������������������������������� Banking profit��������������������������������������������������������������� Banking profit (before provision for general reserve for possible loan losses)����������������������������� Ordinary profit�������������������������������������������������������������� Net income������������������������������������������������������������������� At Year-End: Total net assets������������������������������������������������������������ Total assets������������������������������������������������������������������ Deposits����������������������������������������������������������������������� Loans and bills discounted������������������������������������������ Securities��������������������������������������������������������������������� Trust assets and liabilities�������������������������������������������� Loans and bills discounted�������������������������������������� Securities����������������������������������������������������������������� Capital stock���������������������������������������������������������������� Number of shares issued (in thousands) Common stock���������������������������������������������������� Preferred stock���������������������������������������������������� Dividend payout ratio��������������������������������������������������� Capital ratio (International standard)���������������������������� Total capital ratio (International standard)������������������� Tier 1 capital ratio (International standard)������������������ Common equity Tier 1 capital ratio (International standard)�������������������������������������������� Number of employees��������������������������������������������������

2016 ¥

2,277,812 2,589 1,534,271 805,483 52.5% 728,787

2015 ¥

728,787 747,892 609,171 ¥

7,756,810 153,641,430 98,839,722 69,276,735 25,602,156 3,394,170 537,839 1,305,284 1,770,996

2,370,998 1,872 1,634,284 791,211 48.4% 843,073

Millions of yen 2014 ¥

843,073 955,992 643,015 ¥

7,998,715 154,724,079 91,337,714 68,274,308 29,985,267 3,542,957 373,230 1,451,206 1,770,996

2,342,582 1,972 1,558,184 745,745 47.9% 812,438

2013 ¥

812,438 952,516 605,255 ¥

7,077,360 135,966,434 84,137,339 63,370,678 27,317,549 3,108,012 143,469 1,420,372 1,770,996

2012

2,121,369 1,823 1,540,095 727,736 47.3% 812,358

¥

812,358 670,852 617,791 ¥

2,018,585 1,736 1,532,511 719,495 46.9% 856,796 813,015 695,342 477,973

6,554,446 125,910,020 80,006,438 59,770,763 41,347,000 2,693,092 131,913 1,076,225 1,770,996

¥

5,709,663 119,037,469 75,804,088 56,411,492 42,441,134 1,891,853 235,829 424,478 1,770,996

106,248 70 67.02% / 19.47% 15.29%

106,248 70 77.18% / 18.89% 14.26%

106,248 70 75.92% / 18.30% 14.02%

106,248 70 29.04% / 18.62% 13.92%

106,248 70 33.00% 21.91% / /

13.44% 28,002

12.80% 26,416

12.47% 22,915

11.75% 22,569

/ 22,686

Note: “Number of employees” has been reported on the basis of full-time workers. “Number of employees” includes locally hired overseas staff members but excludes contract employees, temporary staff, and executive officers who are not also Board members.

2016 Annual Report

247

SMBC

Income Analysis (Consolidated) Sumitomo Mitsui Banking Corporation and Subsidiaries

Operating Income, Classified by Domestic and Overseas Operations

Domestic Year ended March 31 operations Interest income����������������������������������������������������� ¥1,035,709 Interest expenses�������������������������������������������������� 263,226 Net interest income��������������������������������������������������� 772,483 Trust fees������������������������������������������������������������������� 3,587 Fees and commissions����������������������������������������� 590,211 Fees and commissions payments������������������������ 117,909 Net fees and commissions���������������������������������������� 472,302 Trading income����������������������������������������������������� 205,942 Trading losses������������������������������������������������������� 5,655 Net trading income���������������������������������������������������� 200,286 Other operating income���������������������������������������� 176,824 Other operating expenses������������������������������������ 80,709 Net other operating income�������������������������������������� 96,115

Millions of yen 2016 2015 Overseas Domestic Overseas operations Elimination Total operations operations Elimination Total ¥678,627 ¥(61,828) ¥1,652,508 ¥1,098,229 ¥667,869 ¥(76,011) ¥1,690,086 222,074 (59,208) 426,091 238,131 202,461 (75,518) 365,074 860,097 465,407 (493) 1,325,011 456,552 (2,619) 1,226,416 3,587 2,795 — — 2,795 — — 202,620 (13,444) 779,388 589,311 206,271 (13,233) 782,349 37,190 (4,310) 150,788 107,477 40,906 (3,212) 145,171 165,430 (9,133) 628,599 481,834 165,364 (10,021) 637,178 37,330 (33,549) 209,722 280,230 44,531 (89,522) 235,239 — 95,388 51,990 (89,522) 57,856 27,894 (33,549) 9,436 — 209,722 184,842 (7,459) — 177,382 56,453 (764) 232,513 246,129 34,401 (673) 279,857 6,674 (637) 86,746 85,867 8,946 (389) 94,424 49,779 (126) 145,767 160,262 25,455 (284) 185,433

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches) and its domestic consolidated subsidiaries. Overseas operations comprise the operations of SMBC’s overseas branches and its overseas consolidated subsidiaries. 2. Inter-segment transactions are reported in the “Elimination” column.

Average Balance, Interest and Average Rate of Interest-Earning Assets and Interest-Bearing Liabilities Domestic Operations Year ended March 31 Average balance Interest-earning assets���������������������������������������������� ¥ 87,277,238 Loans and bills discounted����������������������������������� 53,632,502 Securities�������������������������������������������������������������� 22,503,531 Call loans and bills bought������������������������������������ 147,527 Receivables under resale agreements������������������ 32,450 Receivables under securities borrowing transactions��������������������������������������� 6,694,461 Deposits with banks���������������������������������������������� 763,613 Interest-bearing liabilities������������������������������������������ ¥119,039,647 Deposits���������������������������������������������������������������� 84,841,300 Negotiable certificates of deposit������������������������� 7,422,076 Call money and bills sold�������������������������������������� 2,295,143 Payables under repurchase agreements�������������� 1,281,197 Payables under securities lending transactions������������������������������������������� 6,791,583 Commercial paper������������������������������������������������ 145,053 Borrowed money��������������������������������������������������� 9,157,549 Short-term bonds�������������������������������������������������� 598,174 Bonds�������������������������������������������������������������������� 5,700,673

Millions of yen 2016 Interest ¥1,035,709 683,057 267,401 861 15

Average rate 1.19% 1.27 1.19 0.58 0.05

Average balance ¥ 84,231,395 52,422,192 22,967,038 226,408 22,061

2015 Interest ¥1,098,229 711,603 297,093 1,177 48

10,740 5,001

0.16 0.65

4,712,301 761,822

7,813 4,818

¥263,226 40,376 5,708 1,523 3,714

0.22 0.05 0.08 0.07 0.29

¥109,010,312 80,981,456 6,207,049 2,040,532 782,372

¥ 238,131 43,657 5,536 1,503 1,314

6,724 203 88,978 573 106,825

0.10 0.14 0.97 0.10 1.87

5,267,621 192,088 7,529,796 430,553 5,064,906

5,029 282 77,864 433 96,844

Average rate 1.30% 1.36 1.29 0.52 0.22 0.17 0.63 0.22% 0.05 0.09 0.07 0.17 0.10 0.15 1.03 0.10 1.91

Notes: 1. Domestic operations comprise the operations of SMBC (excluding overseas branches) and its domestic consolidated subsidiaries. 2. In principle, average balances are calculated by using daily balances. However, some consolidated subsidiaries use weekly, monthly or quarterly balances instead. 3. “Interest-earning assets” are shown after deduction of the average balance of noninterest-earning deposits (2016, ¥28,295,713 million; 2015, ¥21,948,242 million).

248 2016 Annual Report

Income Analysis (Consolidated)

Overseas Operations

Millions of yen

Year ended March 31 Average balance Interest-earning assets���������������������������������������������� ¥37,624,624 Loans and bills discounted����������������������������������� 22,900,739 Securities�������������������������������������������������������������� 2,886,777 Call loans and bills bought������������������������������������ 918,358 Receivables under resale agreements������������������ 1,521,170 Receivables under securities borrowing transactions��������������������������������������� — Deposits with banks���������������������������������������������� 5,645,875 Interest-bearing liabilities������������������������������������������ Deposits ��������������������������������������������������������������� Negotiable certificates of deposit������������������������� Call money and bills sold�������������������������������������� Payables under repurchase agreements�������������� Payables under securities lending transactions������������������������������������������� Commercial paper������������������������������������������������ Borrowed money��������������������������������������������������� Short-term bonds�������������������������������������������������� Bonds��������������������������������������������������������������������

SMBC

2016 Interest ¥678,627 534,084 38,103 19,596 11,934 — 32,480

¥28,578,720 15,875,574 6,502,114 525,808 1,934,523

¥222,074 101,157 43,853 3,836 6,212

— 2,807,578 310,574 — 67,592

— 10,211 5,495 — 3,664

Average rate 1.80% 2.33 1.32 2.13 0.78 — 0.58 0.78% 0.64 0.67 0.73 0.32 — 0.36 1.77 — 5.42

Average balance ¥35,770,885 21,538,900 2,957,732 1,046,258 921,297

2015 Interest ¥667,869 512,068 39,150 18,423 9,888

— 5,874,640

— 38,325

¥27,687,592 13,447,542 8,945,965 925,341 1,165,238

¥202,461 83,859 38,528 2,697 3,902

— 2,744,976 263,837 — 57,527

— 7,764 4,284 — 2,736

Average rate 1.87% 2.38 1.32 1.76 1.07 — 0.65 0.73% 0.62 0.43 0.29 0.33 — 0.28 1.62 — 4.76

Notes: 1. Overseas operations comprise the operations of SMBC’s overseas branches and its overseas consolidated subsidiaries. 2. In principle, average balances are calculated by using daily balances. However, some consolidated subsidiaries use weekly, monthly or quarterly balances instead. 3. “Interest-earning assets” are shown after deduction of the average balance of noninterest-earning deposits (2016, ¥1,730,410 million; 2015, ¥1,518,716 million).

Total of Domestic and Overseas Operations Year ended March 31 Average balance Interest-earning assets���������������������������������������������� ¥123,077,998 Loans and bills discounted����������������������������������� 75,626,679 Securities�������������������������������������������������������������� 25,390,309 Call loans and bills bought������������������������������������ 1,065,886 Receivables under resale agreements������������������ 727,468 Receivables under securities 6,694,461 borrowing transactions��������������������������������������� Deposits with banks���������������������������������������������� 6,335,306 Interest-bearing liabilities������������������������������������������ ¥145,790,207 Deposits���������������������������������������������������������������� 100,632,418 Negotiable certificates of deposit������������������������� 13,924,191 Call money and bills sold������������