Sumitomo Mitsui Financial : Earnings Document

Investor Meeting FY3/2024

May 17, 2024

Copyright © 2024 Sumitomo Mitsui Financial Group. All Rights Reserved.

Hello everyone, this is Nakashima.

I would like to express my gratitude for your continued support.

Since my appointoment as Group CEO last December, I have consistently stated on various occasions that the direction of management will remain unchanged, despite the change in CEO.

The current Medium-Term Management Plan, which was created in tandem with Mr. Ohta during my tenure as Group CFO and CSO, is a responsibility I am dedicated to advancing.

Additinonally, I have been reflecting on how to steer SMBC Group through the constantly changing business landscape as CEO and how to effectively communicate my vision to stakeholders.

This is my first Investor Meeting as Group CEO.

I am keen to outline my vision for the future of SMBC Group and our roadmap to realize these ambitions.

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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; incurrence of significant credit-related costs; our ability to successfully implement our business strategy through our subsidiaries, affiliates and alliance partners; and exposure to new risks as we expand the scope of our business. Given these and other risks and uncertainties, you should not place undue reliance on forward-looking statements, which speak only as of the date of this document. 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 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.

Exchange rates (TTM)

	Mar. 23	Mar. 24
USD	133.54	151.33
EUR	145.75	163.24

Definitions

SMFG	Sumitomo Mitsui Financial Group, Inc.
SMBC	Sumitomo Mitsui Banking Corporation
SMBC Trust	SMBC Trust Bank
SMFL	Sumitomo Mitsui Finance and Leasing
SMBC Nikko	SMBC Nikko Securities
SMCC	Sumitomo Mitsui Card Company
SMBCCF	SMBC Consumer Finance
SMDAM	Sumitomo Mitsui DS Asset Management
SMBCAC	SMBC Aviation Capital
SMICC	SMFG India Credit Company
(Former Fullerton India)
Major local subsidiaries	SMBC Bank International, SMBC Bank EU,
SMBC (China)
Expenses	Excl. non-recurring losses
(non-consolidated)
Net business profit	Before provision for general reserve for possible
loan losses
Retail Business Unit (RT)	Domestic retail business
Wholesale Business Unit (WS)	Domestic wholesale business
Global Business Unit (GB)	International business
Global Markets Business Unit	Market / Treasury related businesses
(GM)
	Copyright © 2024 Sumitomo Mitsui Financial Group.	2
	All Rights Reserved.

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Agenda

Ⅰ

Ⅱ

Ⅲ

Our Journey	///////////////////////////////////////////	4
Enhance Corporate Value		////////////////////////////	11
⚫	Improve ROE	/////////////////////////////////////////////////////////////	13
⚫	Control cost of capital		///////////////////////////	24
	and increase expected growth rate
	Capital Policy	///////////////////////////////////////////////////////////	33

Ⅳ	Financial Results of FY3/2024 /////////////////////////////////////////////////////	40
	Appendix	///////////////////////////////////////////////////////////	55

Copyright © 2024 Sumitomo Mitsui Financial Group.	3
All Rights Reserved.

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Our Journey

First of all, I want to describe the journey we will take to achieve SMBC Group's future vision.

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Our Vision
	Vision
A trusted global solution provider
committed to the growth of our customers
and advancement of society
Integrity	Engage with stakeholders fairly and sincerely
Passion	Challenge for future growth with courage
Solidarity	Unite the power of individuals as One Team
	Copyright © 2024 Sumitomo Mitsui Financial Group.	5
	All Rights Reserved.

The vision of SMBC Group is to be "a trusted global solution provider committed to the growth of our customers and advancement of society."

This vision was established in 2019 when Mr. Ohta became Group CEO and I assumed the roles of Group CFO and CSO.

As stated, my goal is to establish SMBC Group as the most trusted brand by committing to the growth of our customers and advancement of society.

The term "global solution provider" represents two key aspirations.

"Global" signifies our ambition to be a competitive player in the global market, while maintainning a solid business foundation in Japan.

"Solution provider," rather than a "financial institution," reflects our commitment to addressing the challenges faced by our customers and society, extending beyond financial services into non-financial areas.

To pursue this vision, I consisitenly empasize to our employees the importance of three core values celebrated in World Rugby: Integrity, Passion and Solidarity. "Integrity" is fundamental to becoming a true professional who not only complies with regulations and rules but also engages with stakeholders fairly and sincerely, striving to win with honor in the business arena.

"Passion" represnts the fervent desire to contribute to our customers and society, embracing risk-taking for growth.

"Solidarity" is my call for harnessing the diverse strengths of individuals to form a strong One Team.

With these three keywords at the forefront, I am committed to working together as a group to realize the vision we are strinving for.

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Business environment

Pursue opportunities for further growth as the environment has become more positive than our initial assumptions, while remaining aware of the potential for significant market and economic volatility.

Economy

and

Market

Corporate

governance

Top risks

Domestic economy is improving /

Overseas economy remains stornger than expected

FY3/25

FY3/26

Strategies

NIRP continues

Policy

Japan

remains unchanged

0.1%

0.1%

Rate

3.5%

2.5%

(Maximum)

U.S.

Challenge for

5.0%

4.5%

FX rate

USD

JPY 120

JPY 120

Upper: Original

higher goals

Bottom: Revised

JPY 140

JPY 140

Accelerate reduction of

Benefit from

equity holdings

gains on stocks

⚫ Sale of U.S. freight car leasing

due to the high stock price

business

FY3/24

⚫

Impairment of goodwill on FE Credit

⚫

Forward looking provision

Volatile financial and

Change of globalism

Address risks

economic environment

Decline in the vitality of

Increasing external threats

proactively

Japanese society

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6

All Rights Reserved.

Next, I would like to discuss the current environment and risks.

When we announced the current Medium-Term Management Plan last May, there was a significant uncertainty in the global financial markets, triggerd by the collapse of Silicon Valley Bank in the U.S.

In retrospect, our initial assumptions regarding interest rates and exchange rates, made under such conditions, were quite conservative.

The current business environment has turned to be much more positive than expected.

The weakening of the yen, rising stock prices, and persistently high U.S. interest rates have created a favorable backdrop for our earnings.

Investment activities among companies and individuals in Japan are gaining momentum, and the world has finally begun to move toward Japan's regrowth as the negative interest rate policy was lifted.

While we need to remain cautious about inflation overseas, the U.S. economy continues to demonstrate strength.

Futhermore, the acceleration of equity holdings reduction, amid the adoption of corporate governance practices, has led to gains on sales of equity holdings that exceeded our expectaions, thanks to the rise in stock prices.

In light of these circumstances, we are revising our macroenocomic assumptions and are prepared to set even higher goals while enhancing our own competitiveness.

We will also proactively respond to changes in the financial and economic environment, as well as to social and geopolitical risks.

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Simulation of rise on JPY interest rates

B/S JPY 145 tn (Mar. 24)

Impact on net interest income*1

(JPY tn)

(JPY bn)

Lift of NIRP

per +10bps

Initiatives for

rising interest rates

JPY + 40 bn

JPY + 40 bn

Loan

Floating rate

200

Saving

⚫ Secure appropriate

30

150

spread and improve

Loans Prime rate

85

100

profitability

10

o/w

Fixed rate

Interest-

Deposits

50

20

bearing

JGB etc.

80

JGB etc.

0

10

⚫ Grasp market trends and

Time

(50)

flexibly control balances

BoJ's

20

Current

(100)

current

account

15

60

(150)

Mar. 24

Assumptions

Deposit

Other deposits

Capital funding

Floating rate loans

+10bps

⚫ Acquire sticky liquid

Yen swap etc.

Market funding

Prime rate loans

-

deposits with Olive

Fixed rate loans

-

+10bps increase

Investment

Funding

BoJ's current account

+10bps

in both short-term

JGB

+10bps

and long-term rate

Saving deposits

+2bps

Time deposits

+3bps

*1 Based on assumption of no change in balance sheet

Copyright © 2024 Sumitomo Mitsui Financial Group.

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All Rights Reserved.

We estimate that the impact on earnings from the lifting of negative interest rate policy will result a JPY 40 bn increase in net interest income.

If interest rates continue to rise, we anticipate an additional JPY 40 bn increase in profits for every +10 basis point increase in both short-term and long-term interest rates, based on certain assumptions.

Although we are not yet ready to present the data, we have observed that loans repriced after the lifting of negative interest rate policy have maintained their spread, even with the rise in the base rate.

We will continue to enhance our net interest income through our ongoing efforts to improve profitability.

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Results of FY3/24

Both consolidated net business profit and bottom-line profit saw a strong increase due to a favorable environment and the growth of every Business Unit, alongside proactive preparation for potential risks.

Breakdown of consolidated net business profit		Breakdown of bottom-line profit

(JPY bn)

	GM	1,560.2
GB	+49.8
+121.2
WS
+74.8
RT
+37.7
		Full-year
		target
		1,400
1,276.4
+283.8
o/w environment factors +140
(FX +80, FF rate +60)
FY3/23		FY3/24

(JPY bn)	Growth strategy	Gains of stocks*1
	+84	+66	962.9

		One-off
		items	Full-year
		(78)
		target
	Environment
805.8	• FX +45		920
• FF rate +40
FY3/23			FY3/24

(Major items)

• Impairment of FE Credit in Vietnam: (46)
• Additional impairment of Aircraft leasing*2: (11) Prepare for

⚫	Forward-looking provisions: (25)	potential risks

• Loss from sales of U.S. freight car leasing business: (82)
• Receipt of insurance claims on aircraft leasing*3 : +48
• Absence of one-off items in FY3/23*4 : +38

*1	Incl. an impairment of JPY 39 bn for overseas investment
*2	Impaired the entire remainig book value *3 Received for 19 of the 34 aircraft previously leased to Russian airlines	Copyright © 2024 Sumitomo Mitsui Financial Group.	8
*4	Gains on change in equity (Bank of East Asia), impairment of aircraft leasing, impairment of branches, etc.	All Rights Reserved.

In FY3/24, we achieved record highs in both consolidated net business profit and bottom-line profit, significantly exceeding our revised targets while proactively preparing for potential risks.

I believe that our core earnings have been steadily increased, as we have made progress on each measure in the Medium-Term Management Plan, bolstered by a favorable business environment.

In Japan, we have expanded our retail customer base through Olive and have closely met the financial needs of wholesale clients who are increasingly engaging in corporate actions.

Our oversea business is making steady progress in the CIB business through collaboration with Jefferies and in the Multi-Franchise Strategy in Asia.

We have also been working to improve ROE through the reallocation of our business portfolio, including the reduction of equity holdings that significantly exceeded our plan and the sale of the U.S. freight car leasing business.

When Mr. Ohta passed away last November and I was appointed as the new CEO, I told my employees, "Let's deliver outstanding performance for FY3/24, which marks the final fiscal year under Mr. Ohta."

Thanks to their efforts, we achieved the results we aimed for and made a very good start in the first year of the Medium-Term Management Plan.

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Target of FY3/25

Aim to achieve a bottom-line profit exceeding JPY 1 tn for the first time

by further strengthening core earnings on top of capturing a favorable business environment.

				Result		Target
	(JPY bn)		FY3/24		FY3/25	YoY
Consolidated net	1,560.2		1,620	+59.8)
business profit
Credit cost		274.0		260	(14.0)
Ordinary profit		1,466.1		1,560	+93.9)
Profit attributable to	962.9		1,060	+97.1)
owner of parent
[Assumption]			（Mar. 24）	(FY3/25)
Policy rate		Japan		0.1%			0.1％
(Max)		U.S.		5.5%			5.0%
FX		USD		JPY 151.33			JPY 140

Breakdown of bottom-line profit

(JPY bn)	1,060

Growth

strategy

＋70

Others

962.9

Environment
•	FX	(30)
•	Policy rate (Japan)	+30)
•	Policy rate (U.S.)	(7)

FY3/24	FY3/25
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	All Rights Reserved.

In FY3/25, we aim to break our record for profits and reach a net income of over JPY 1 tn for the first time by further advancing the measures of our Medium-Term Management Plan, assuming that the current positive business conditions continue.

Previously, we set our targets at levels we believed we could achieve even under a downside scenario, and we reviesed our targets upward during the fiscal year if the anticipated risks did not materialize.

However, I have come to realize that our approach to guidance may have appeared overly conservative to investors and could have been interpreted as a lack of confidence in our future performance.

This time, our target reflects our determination to ambitiously strive for better outcomes and represents a forecast that is more in line with what we realistically expect to happen, compared to our past targets.

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Financial goal in five years

12%

11%

10%

ROCET1	10.5％
9.4％		9%
		9%
ROE*1	8.3％	8%
excl. unrealized gains

7.5％

Final year of the next Medium-Term Management Plan

ROE of 9%

Bottom-line profits

6.5％	7.0％	JPY	↓
Interest rate ↑
ROE		Stock price	↑
		Mid-1,100bn
		1,060 bn
JPY 805.8 bn	962.9 bn	JPY	↑
	Interest rate ↓
		Stock price	↓

Bottom-line profit

far exceeding JPY 1 tn

[Assumption]	FY3/26	FY3/29
Policy	Japan	0.1%	0.1-0.5%
rate	U.S.	4.5%	2.0-3.0%
(max)
FX	USD	140	120-140

FY3/23

FY3/24

FY3/25

FY3/26

FY3/29

*1	Profits attributable to owners of parent	× 100

{(Total shareholders equity at the beginning of period + Foreign currency adjustments at the beginning of the period) + (Total shareholders equity at the end of the period + Foreign currency adjustments at the end of the period)} /2

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All Rights Reserved.

Next, I would like to share the financial projections I aim to achieve in five years through the next Medium-Term Management Plan.

Improving ROE is a key objective in our current plan.

Based on our current business performance and environment, we are raising our target to achieve an 8% of ROE in FY3/26, the final year of the current plan, a goal we initially set for the subsequent plan.

Furthermore, we aim to reach 9% in FY3/29, the final year of the next plan.

We also aim to increase our bottom-line profit, the numerator of ROE, to JPY 1.06 tn in FY3/25 and to the mid-1.1 tn in FY3/26, well above the JPY 1 tn mark.

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