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SMFG's Management Strategy

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SMFG's Management Strategy SMFG’s Management Strategy Sumitomo Mitsui Financial Group, Inc. February & March , 2015 Today’s agenda 1 Sustainable growth under the low interest rate environment 2 Major growth drivers going forward 3 Well-managed asset portfolio 4 Capital policy 1 1. Sustainable growth under the low interest rate environment Revenue growth under the low interest rate environment SMFG’s consolidated Gross profit (JPY bn) 3,500 BOJ's policy interest rate 3,000 2,898 2,500 2,184 2,078 2,000 0.5% 0.15% 0.1% 1,500 FY3/02*1 3/03 3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15E Proportion within SMFG’s consolidated Gross profit FY3/03 1H, FY3/15 SMBC’s domestic loan related 32％ 15％ income International business 5％ 15％ Nikko Cordial Societe Generale Promise Securities (Dec. 2011) Private Banking Japan Consolidation (Oct. 2009) (Oct. 2013) Citibank Japan’s history Cedyna RBS Aviation retail banking (May 2010) Capital business (Jun. 2012) (plan Oct. 2015*2) *1 SMBC consolidated *2 Expected to be complete in Oct. 2015, subject to necessary regulatory approvals 2 1. Sustainable growth under the low interest rate environment Strong earnings capability SMFG’s consolidated Net income (JPY bn) 835 500 0 FY3/09 3/10 3/11 3/12 3/13 3/14 3/15E (500) (374) SMFG’s consolidated Gross profit (JPY bn) 3,000 2,000 1,000 FY3/09 3/10 3/11 3/12 3/13 3/14 3/15E SMFG’s consolidated Total credit cost / Gains (losses) on stocks (JPY bn) 0 FY3/09 3/10 3/11 3/12 3/13 3/14 3/15E (1,000) Total credit cost Gains (losses) on stocks 3 1. Sustainable growth under the low interest rate environment 3Q, FY3/2015 financial results (cumulative) Income statement Contribution of subsidiaries to SMFG’s Net income Apr. -Dec. FY3/15 (JPY bn) 2014 YOY Apr. -Dec. YOY targets (JPY bn) results change 2014 change *1 Consolidated gross profit USD 18.5 bn 2,230.3 +9.1 SMBC Nikko Securities 45 (8) Variance*2 999.5 (27.8) SMBC Consumer Finance 41 (9) General and administrative Sumitomo Mitsui Finance and Leasing 23 +1 d (1,224.7) (54.9) e expenses t a Cedyna 22 +3 d Consolidated net business profit 1,005.9 (55.1) FG li o M SMBC Guarantee 14 (4) s S Total credit cost 46.3 +16.4 (60) on *1 Sumitomo Mitsui Card 13 (2) c Ordinary profit USD 9.2 bn 1,106.8 (60.3) 1,200 SMBC Friend Securities 7 (4) Variance*2 339.2 (91.8) 400 *1 Net income USD 5.7 bn 682.2 (22.5) 700 Domestic loan-to-deposit spread Variance*2 151.8 (72.9) 170 (SMBC non-consolidated) *1 Apr.-Dec. USD bn (%) Apr. Jul. Oct. Gross banking profit 10.2 1,230.8 +36.9 1,540 2014 -Jun. -Sep. -Dec. *3 d Expenses (588.9) (31.2) (790) Interest earned on loans e 1.33 1.35 1.33 1.30 t *1 and bills discounted a *4 Banking profit USD 5.3 bn 641.9 +5.7 750 d Interest paid on li 0.03 0.03 0.03 0.04 C deposits, etc. o B Total credit cost 101.9 +21.2 50 s M Loan-to-deposit spread 1.30 1.32 1.30 1.26 on S Gains (losses) on stocks 59.7 (31.7) c - Other non-recurring gains Credit ratings (SMBC) (35.9) +36.3 non (losses) *1 Moody’s S&P Fitch R&I JCR Ordinary profit USD 6.4 bn 767.6 +31.5 800 *1 Net income USD 4.4 bn 530.4 +50.4 530 A1/P-1 A+/A-1 A-/F1 AA-/a-1+ AA/J-1+ *1 Translated into USD at period-end exchange rate of USD 1 = JPY 120.56 *2 SMFG consolidated figures minus SMBC non-consolidated figures *3 Excludes non-recurring losses *4 Before provision for general reserve for possible loan losses 4 1. Sustainable growth under the low interest rate environment Peer comparison (1) High ROE / Low OHR ROE*1 Overhead ratio on a group consolidated basis*4 (%) (%) 16 100 90 14 89 87 13.5 80 13.0 12 70 72 10.7 68 68 10 10.4 65 60 62 63 9.5 60 55 8 50 7.7 40 6 6.4 6.3 30 4 20 2 2.7 10 1.7 0 0 *2 *3 *2 i i G M G G C P it s B C G G G C M P s it B C F P F F N C y D F F F P N y C D M J U SB B la BA M U SB J B la BA S M ho H rc S ho M H rc u a u a iz B iz B M M *1 Based on each company’s disclosure. 3Q, FY3/15 results for SMFG and MUFG, 1H, FY3/15 result for Mizuho FG, 3Q, FY12/14 results for Barclays and HSBC, and FY12/14 results for others *2 ROTCE: Return on tangible common equity *3 Excluding exceptional *4 Based on each company’s disclosure. G&A expenses divided by top-line profit (net of insurance claims). 3Q, FY3/15 results for SMFG, MUFG and Mizuho FG, 5 3Q, FY12/14 results for Barclays and HSBC, and FY12/14 results for others 1. Sustainable growth under the low interest rate environment Peer comparison (2) High loan-to-deposit spread / Profit growth Domestic loan-to-deposit spread*1 Consolidated business profit*2 (JPY bn) 1.6% 2,000 SMFG MUFG Mizuho FG 1.4% 1.31% 1,500 1.2% 1,000 1.01% 1.00% 1.0% 500 SMFG MUFG Mizuho FG FY3/10 3/11 3/12 3/13 3/14 Proportion of loans to individuals 67.9% 58.0% 57.5% & SMEs *1 Based on each company’s 1H, FY3/15 disclosure. The figures shown in the graph are: non-consolidated figures of SMBC for SMFG, non-consolidated figures of The Bank of Tokyo-Mitsubishi UFJ for MUFG, and non-consolidated figures of Mizuho Bank for Mizuho FG *2 Based on each company’s disclosure. Consolidated business profit = Consolidated gross profit – G&A expenses + Equity in gains (losses) of affiliates. 6 2. Major growth drivers going forward Growth targets for FY3/2015-FY3/2017 SMFG’s consolidated Net income / ROE Consolidated gross profit* Aim to increase consolidated gross profit by 15% in 3 years (JPY bn) (FY3/14 JPY 2.9 tn → FY3/17 target JPY 3.3 tn) After adjustments for normalization of around Organic growth credit costs, JPY 800 bn 800 gains on equities, etc. Wholesale Banking Unit SMBC Nikko Securities (includes income related to collaboration with SMBC) around of which around JPY 600 bn large corporations +15% + 30% 600 JPY 320 bn +10% JPY 720 bn JPY 340 bn FY3/14 3/15 3/16 3/17 =100 (plan) (plan) (plan) 400 Retail Banking Unit Consumer finance / Credit card (includes income related to collaboration with SMBC) above + 10% +20% 200 JPY 490 bn JPY 540 bn International Banking Unit Treasury Unit 0 over FY3/14 3/17 of which + 15% target Asia JPY 180 bn JPY 340 bn around (20%) around + 15% ROE 10% Secure around 10% JPY 500 bn Inorganic growth * FY3/17 targeted consolidated gross profit in comparison with FY3/14 figure. After adjustments for changes in interest rates and exchange rates, etc. 7 2. Major growth drivers going forward Wholesale business Unique G-CIB model (large corporations) Loan balance of Wholesale Banking Unit*4, 5 (SMBC non-consolidated) Large corporate clients GLCBD (FY3/14) GLCBD (FY3/15) （(億JP円Y） tn) 3030 CBD (FY3/14) CBD (FY3/15) offer higher quality solutions Seamless operation Extensive 2020 Bank-securities of domestic / knowledge of collaboration overseas offices industries 1010 Strengthen Dua体l-ro制le, Expand RM client RM HRの e拡xchan充 ge coverage 0 0 coverage 1Q1Q 2Q2Q 3Q3Q 4Q4Q League tables (SMBC Nikko Securities, Apr. -Dec. 2014) Domestic corporate loan spread*4, 6 (SMBC non-consolidated) Mkt Rank Mid-sized corporations & SMEs share 1.4% Large corporations Global equity & equity-related #2 17.2% (book runner, underwriting amount)*1 1.2% JPY denominated bonds #5 15.5% 1.0% (lead manager, underwriting amount)*2 0.8% Financial advisor (M&A, No. of deals)*3 #3 2.5% 0.6% Financial advisor (M&A, transaction volume)*3 #10 6.3% 0.4% MAapr.r .1 133 Sep. 13 Mar. 14 Sep. 14 *1 Source: SMBC Nikko, based on data from Thomson Reuters. Japanese corporate related only *2 Source: SMBC Nikko, based on data from Thomson Reuters. Consisting of corporate bonds, FILP agency bonds, municipality bonds for proportional shares as lead manager, and samurai bonds *3 Source: Thomson Reuters. Japanese corporate related only. Excludes real estate deals *4 Managerial accounting basis. We revised managerial accounting rules since Apr. 2014, following revision of domestic business structure. Figures for FY3/14 were recalculated based on the new rules *5 Quarterly average. GLCBD stands for the Global Corporate 8 Banking Division and CBD stands for the Corporate Banking Division *6 Monthly average 2. Major growth drivers going forward Retail business Bank-securities retail integration Acquisition of Citibank Japan’s retail banking business Life stages and financial needs In Dec. 2014, SMBC and Citigroup reached an agreement 20s 30s 40s 50s 60s 70s - that SMBC Trust Bank will undertake the acquisition of Get a Home Retire- Pension the retail banking business of Citibank Japan first job Marriage purchase ment recipient Child-raising Citibank Japan’s retail banking business Asset building needs Asset succession needs • Total deposits: JPY 2,440 bn (as of Sep.
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