Sumitomo Mitsui Banking
1. Financial Results (for the Six Months ended September 30, 2003) Amounts less
than one million yen have been omitted.
Amounts as of and for the six months ended Sept. 30, 2002 are those of the
former SMBC.
(1) Operating Results
Ordinary Profit Net Income Net Income Net Income
Ordinary Income (Loss) (Loss) (Loss) per per Share
Share (Diluted)
----------------------------------------------------------------------------------------------
Six Months Y million %Y million %Y million % Y Y
ended September 30,
2003 1,760,835 (0.1) 165,508 10.4 143,492 160.2 24,993.09 15,608.81
ended September 30,
2002 1,762,535 (2.2) 149,856 30.9 55,145 61.3 9.67 7.01
----------------------------------------------------------------------------------------------
Fiscal Year
ended March 31, 2003 3,506,386 (515,749) (465,359) (84,324.99) -
----------------------------------------------------------------------------------------------
Notes: 1. Equity in earnings of affiliates
(a) for the six months ended September 30, 2003 : 8,044 million yen (b) for the
six months ended September 30, 2002 : 2,807 million yen
(c) for the fiscal year ended March 31, 2003 : 5,718 million yen
2. Average number of common stocks outstanding (consolidated)
(a) for the six months ended September 30, 2003: 5,741,297 shares (b) for the
six months ended September 30, 2002: 5,702,239,307 shares
(c) for the fiscal year ended March 31, 2003 : 5,707,451 shares
3. There is a change in accounting methods. (Please refer to Notes to
Consolidated Interim Balance Sheet, 14)
4. Percentages shown in Ordinary Income, Ordinary Profit (Loss) and Net Income
(Loss) are the increase (decrease) from the previous interim term.
(2) Financial Position
Stockholders' Stockholders' Stockholders' Capital Ratio
Total Assets Equity Equity to Total Equity per (BIS
Assets Share Guidelines)
----------------------------------------------------------------------------------------------
Y million Y million % Y %
September 30, 2003 (Preliminary)
100,725,500 2,745,476 2.7 165,291.87 10.94
September 30, 2002 104,396,997 2,690,010 2.6 243.57 10.37
----------------------------------------------------------------------------------------------
March 31, 2003 104,607,449 2,424,074 2.3 106,577.05 10.10
----------------------------------------------------------------------------------------------
Note: Number of common stocks outstanding (consolidated)
(a) as of September 30, 2003 : 5,742,447 shares (b) as of September 30, 2002 :
5,702,816,487 shares (c) as of March 31, 2003: 5,740,942 shares
(3) Cash Flows
Cash Flows from Cash Flows from Cash Flows from Cash and Cash
Operating Investing Financing Equivalents at
Activities Activities Activities term-end
-----------------------------------------------------------------------------------------------
Six Months Y million Y million Y million Y million
ended September 30,
2003 (1,753,848) 1,711,298 77,465 2,934,143
ended September 30,
2002 2,562,490 (2,734,949) (222,546) 1,731,413
-----------------------------------------------------------------------------------------------
Fiscal Year
ended March 31, 2003 5,443,200 (4,623,917) (43,919) 2,900,991
-----------------------------------------------------------------------------------------------
(4) Scope of Consolidation and Application of the Equity Method
(a) Number of consolidated subsidiaries
: 169
(b) Number of unconsolidated subsidiaries accounted for by
the equity method: 4
(c) Number of affiliated companies accounted for by the
equity method : 44
(5) Changes in Scope of Consolidation and Application of the Equity Method
(change from March 2003)
Consolidation:Newly Equity Newly
consolidated 8 method: applied 2
Excluded 9 Excluded 1
2. Earnings Forecast (Fiscal Year ending March 31, 2004) (Millions of yen)
Ordinary Income Ordinary Profit Net Income
-----------------------------------------------------------------------------------------------
For the fiscal year ending March
31, 2004 3,500,000 320,000 230,000
-----------------------------------------------------------------------------------------------
(Reference) Forecasted net income per share for the fiscal year ending March 31,
2004 is 34,995.63 yen.
This document contains certain forward-looking statements. Such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and actual results may materially differ from those contained in
the forward-looking statements as a result of various factors.
The following items are among the factors that could cause actual results to
differ materially from the forward-looking statements in this material: business
conditions in the banking industry, the regulatory environment, new legislation,
competition with other financial services companies, changing technology and
evolving banking industry standards and similar matters.
Sumitomo Mitsui Financial Group, Inc. and Subsidiaries
Average number of shares outstanding during the term (year) (consolidated)
For the Six Months For the Six Months For the Fiscal Year
ended September 30, ended September 30, ended March 31, 2003
2003 2002
-----------------------------------------------------------------------------------------------
Common stock 5,741,297 5,702,239,307 5,707,451
-----------------------------------------------------------------------------------------------
Preferred stock (type 1)
[Preferred stock (first series
type 1)] 67,000 67,000,000 67,000
-----------------------------------------------------------------------------------------------
Preferred stock (type 2)
[Preferred stock (second series
type 1)] 100,000 100,000,000 100,000
-----------------------------------------------------------------------------------------------
Preferred stock (type 3)
[Preferred stock (type 5)] 800,000 800,000,000 800,000
-----------------------------------------------------------------------------------------------
Preferred stock (1st to 12th
series type 4) 50,100 - 7,138
-----------------------------------------------------------------------------------------------
Preferred stock (13th series
type 4) 114,999 - 6,301
-----------------------------------------------------------------------------------------------
(Notes)
1. As for the average numbers of shares outstanding for the fiscal year ended
March 31, 2003, former SMBC's stock before establishment of SMFG is included.
2. The average numbers of shares outstanding for the six months ended September
30, 2002 are those of the former SMBC.
3. Names of former SMBC's preferred stocks are shown in square brackets.
Number of shares outstanding as of term (year)-end (consolidated)
As of September 30, As of September 30, As of March 31, 2003
2003 2002
-----------------------------------------------------------------------------------------------
Common stock 5,742,447 5,702,816,487 5,740,942
-----------------------------------------------------------------------------------------------
Preferred stock (type 1)
[Preferred stock (first series
type 1)] 67,000 67,000,000 67,000
-----------------------------------------------------------------------------------------------
Preferred stock (type 2)
[Preferred stock (second series
type 1)] 100,000 100,000,000 100,000
-----------------------------------------------------------------------------------------------
Preferred stock (type 3)
[Preferred stock (type 5)] 800,000 800,000,000 800,000
-----------------------------------------------------------------------------------------------
Preferred stock (1st to 12th
series type 4) 50,100 - 50,100
-----------------------------------------------------------------------------------------------
Preferred stock (13th series
type 4) 114,999 - 115,000
-----------------------------------------------------------------------------------------------
(Notes)
1. The numbers of shares outstanding as of September 30, 2002 are those of the
former SMBC.
2. Names of former SMBC's preferred stocks are shown in square brackets.
Calculation for Index
- Forecasted Net Income Per Share:
Forecasted net income - Forecasted preferred stock dividends
-------------------------------------------------------------------------------
Number of common stocks outstanding as of the interim term-end (excluding
treasury stock)
I. Overview of SMFG
Group
-------------------------
SMFG Group conducts primary banking business through the following financial services: leasing,
securities, credit card business,
investment banking, financing and venture
capital.
SMFG has 169 consolidated subsidiaries and 48 companies accounted for by the equity method.
----------------------------------------------------------------------------------
Principal
subsidiaries
Domestic
*Sumitomo Mitsui Banking Corporation
*THE MINATO BANK, LTD.
(Listed on the First Section of Tokyo Stock Exchange
and Osaka Securities Exchange)
*The Bank of Kansai, Ltd. (Listed on the First Section of Osaka
Securities Exchange)
Banking *The Kansai Sawayaka Bank, Limited
Business *The Japan Net Bank, Limited (Internet banking)
----
*SMBC Guarantee Co., Ltd. (Credit guarantee)
Overseas
*Sumitomo Mitsui Banking Corporation Europe Limited
*Manufacturers
Bank
*Sumitomo Mitsui Banking Corporation of Canada
*Banco Sumitomo Mitsui Brasileiro S.A.
*PT Bank Sumitomo Mitsui Indonesia
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Principal
subsidiaries
Domestic
Leasing *SMBC Leasing Company, Limited
----
*SMBC Auto Leasing Company, Limited
Overseas
*SMBC Leasing and Finance, Inc.
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
----------
Principal subsidiaries and affiliated companies
Sumitomo Domestic
Mitsui *Sumitomo Mitsui Card Company, Limited (Credit card services)
--
Financial *SAKURA CARD CO., Ltd. (Credit card services)
Group, *At-Loan Co., Ltd. (Consumer loans)
Inc.
*SMBC Capital Co., Ltd. (Venture capital)
----------
*SMBC Consulting Co., Ltd. (Management consulting)
*SMBC Finance Service Co., Ltd. (Loans, factoring and collecting agent)
*Financial Link Company, Limited (Data processing service and
consulting)
*SMBC Friend Securities Co., Ltd. (Securities)
(Listed on the First Section of Tokyo Stock Exchange,
Osaka Securities Exchange and Nagoya Stock Exchange)
*The Japan Research Institute, Limited
(System engineering, data processing, management
consulting and economic research)
Other *Sakura KCS Corporation (System engineering and data processing)
----
(Listed on the Second Section of Osaka Securities
Exchange)
*Sakura Information Systems Co., Ltd. (System engineering and data
processing)
**Daiwa Securities SMBC Co. Ltd. (Wholesale securities)
**Daiwa SB Investments Ltd. (Investment advisory and investment trust
management)
**Sumitomo Mitsui Asset Management Company, Limited
(Investment advisory and investment trust
management)
**DLJ direct SFG Securities Inc. (Securities via internet)
**Japan Pension Navigator Co., Ltd. (Operational management of defined
contribution pension plans)
**QUOQ Inc. (Purchase of monetary assets and credit guarantee)
Overseas
*SMBC Capital Markets, Inc. (Investments and derivatives)
*SMBC Capital Markets Limited (Derivatives)
*SMBC Securities, Inc. (Securities)
*Sumitomo Mitsui Finance Australia Limited (Investments)
----------------------------------------------------------------------------------
(Note) (*) means a consolidated subsidiary and (**) means an affiliated company accounted for
by the equity method.
Sumitomo Mitsui Financial Group, Inc. and Subsidiaries
- 9 -
II. Principles and Management
1. Management Policy
SMFG's group-wide management philosophy is as follows:
- To provide optimum added value to our customers and together with them achieve
growth
- To create sustainable shareholder value through business growth
- To provide a challenging and professionally rewarding work environment for our
dedicated employees
In line with this philosophy, SMFG's management policy is to strengthen the
Group's earnings power, to fortify its financial base, and to raise its net
worth.
2. Dividend Policy
SMFG subscribes to a fundamental policy of distributing appropriate dividends
while enhancing its Group's capital to maintain sound financial position.
3. Management Index to be Achieved
SMFG, while maintaining its BIS capital ratio of over 10%, will buildup its
retained earnings for early repayment of its public funds by enhancing its
profitability.
4. Mid- to Long-term Management Strategy
SMFG has been accelerating its effort to improve SMBC's asset quality in order
to achieve the goal of halving the non-performing loan ("NPL") ratio before the
end of FY2004. It has been proactively slashing cross-shareholdings, and
reducing NPLs by "off-balancing" and improving clients' financial performance.
Moreover, SMFG has been rationalizing its management system based on the
following policy for strengthening its earnings power:
- To expand business scale by grasping clients' unmet needs, and filling such
needs with high-quality services built on the group-wide capability
- To raise capital efficiency by improving the risk-return profile of businesses
and allocating resources to profitable areas
- To strengthen cost efficiency through thorough implementation of low-cost
operation
Anchored by this policy, SMFG will continue to strengthen its profitability and
steadily build up its retained earnings.
5. Issues to be Addressed
-- NPLs
Not satisfied with achieving the full-term NPL balance target of 3.9 trillion
yen in the six-month period ended September 30, 2003, through "off-balancing"
and revitalizing borrowers, SMBC will further reduce NPLs utilizing measures
such as the joint venture for corporate recovery and the loan purchasing fund
established with Goldman Sachs, Daiwa SMBC Principal Investments, and
Development Bank of Japan in November 2003.
-- Cross-shareholdings
FY2003 target for cross-shareholdings is 700 billion yen, but SMBC has already
sold about 80% of this amount in the six-month period ended September 30, 2003.
It will continue its effort to reduce risks from stock-price fluctuation.
-- Profitability
In addition to the various "Business Reform" initiatives, SMBC has implemented
the following to improve profitability:
(a) Corporate banking
SMBC, while further re-examining its domestic lending practices, is working to
expand its lineup of loan products. Just in the six-month period ended September
30, 2003, SMBC exceed the planned origination of 2.3 trillion yen in Business
Select Loan and other new unsecured loan products. It also standardized and
rationalized its credit supervision system. In the six-month period ended March
31, 2004, it will originate more new loan products, increase the volume of loans
with better spreads, and continue to expand solution-providing businesses, such
as loan syndication and investment banking for middle to large corporate
clients, by strengthening cooperation with Daiwa Securities SMBC and through
other measures.
(b) Consumer banking
SMBC will reinforce its prominent competitive advantage in sales of investment
trusts, pension-type insurances and mortgage loans by establishing new business
models such as financial consulting business. FY 2003 targets for investment
trusts, pension-type insurances and mortgage loans are higher than the FY 2002
targets, but SMBC was able to exceed its goals for the six-month period ended
September 30, 2003.
SMFG will put its effort to improve profitability of payment and settlement
services, as well as remote banking.
(c) Expenses
SMBC moved up its goal of establishing a 600-billion-yen-annual-cost structure
one year ahead to FY2003. In the six-month period ended September 30, 2003, it
successfully cut expenses through reduction of personnel cost, etc. and will
continue to take measures such as rationalization of procurement process in the
six-month period ended March 31, 2004.
(d) Group-wide effort
In April 2003, SMBC transferred and integrated its systems-related function to
Japan Research Institute. In November 2003, SMBC and Sumitomo Mitsui Card
launched their cooperatively developed new service for individual customers in
their 20s and 30s, "One's Style". Group companies will continue to collaborate
to reap significant synergies, and through such steadfast initiatives, SMFG
intends to raise the group-wide earnings potential by capitalizing on the
intrinsic strengths of each Group company.
6. Corporate Governance Policy and Structure
SMFG employs a corporate auditor system and three of the five auditors are
outside auditors. Moreover, to enhance the management's transparency and
soundness, SMFG has outside directors.
The Board of Directors consists of eight directors including two outside
directors, and under the Board are three subcommittees to reinforce its
oversight functions: the Risk Management Committee, which considers Group-wide
risk management and compliance, the Compensation Committee, and the Nominating
Committee. The two outside directors, one a certified public accountant and the
other a lawyer, are members of all the committees, and the accountant is the
Chairman of the Compensation Committee. This system allows supervision of our
operations to be conducted from a suitably objective perspective.
In addition to the above committees, SMFG has the following committees:
(a) Management Committee
Chaired by the president of SMFG, the committee acts as the top decision-making
body on business administration and management supervision of the entire Group.
The committee, composed of directors chosen by the president, considers
important matters relating to the execution of business, and the president has
the authority to make the final decision after considering the committee's
recommendations.
(b) Group Strategy Committee
The committee serves as a forum for the top management staff of all Group
companies to exchange opinions and information on their respective business
plans.
(c) Compliance Committee
The committee reinforces the Group-wide compliance system, and comprises of the
designated Board member responsible for compliance issues, the heads of
departments involved with compliance matters, and legal advisors from outside
the Group.
III. Operating Results and Financial Position
Amounts for the six months ended September 30, 2002 are those of the former
SMBC.
1. Overview of Consolidated Operating Results and Financial Position as of and
for the Six Months Ended September 30, 2003
(1) Operating Results
SMFG has continued to strengthen profitability through business restructuring
and reduce expenses by pursuing efficiency in the six months ended September 30,
2003.
Interest expenses decreased mainly due to lower interest on deposits, and there
were decreases in other expenses. However, interest income also fell because of
lower interest on loans. Consequently, Ordinary income dropped 0.1%
year-over-year to 1,760.8 billion yen and Ordinary expense dropped 1.1 %
year-over-year to 1,595.3 billion yen.
As a result, Ordinary profit and Net income (after adjusting for extraordinary
gains/losses and other factors) amounted to 165.5 billion yen (up 10.4% from the
previous interim term) and 143.4 billion yen (up 160.2%), respectively.
(2) Assets and Liabilities
Deposits amounted to 63,142.2 billion yen (up 211.2 billion yen from the
previous fiscal year-end) and Negotiable certificates of deposit amounted to
3,379.6 billion yen (down 1,473.4 billion yen).
Loans and bills discounted amounted to 59,666.3 billion yen (down 1,416.5
billion yen).
Total assets amounted to 100,725.5 billion yen (down 3,881.9 billion yen).
(3) Stockholders' Equity
Stockholders' equity increased by 321.4 billion yen from the fiscal year-end to
2,745.4 billion yen due mainly to recording of net income for this interim term
and the increase in Net unrealized gains on other securities.
(4) Cash Flows
SMFG used 1,753.8 billion yen of Cash flows from operating activities, and
generated 1,711.2 billion yen of Cash flows from investing activities and 77.4
billion yen of Cash flows from financing activities.
Consequently, Cash and cash equivalents amounted to 2,934.1 billion yen.
(5) Segments
The breakdown of Ordinary income before the elimination of internal transactions
is as follows:
By business
------------------
Banking business 69%(down 2 points from the previous interim term)
Leasing business 17%(up 2 points)
Other business 14%(up 0 point)
By country
------------------
Japan 90%(up 6 points from the previous interim term)
The Americas 5%(down 1 point)
Europe 3%(down 3 points)
Asia and Oceania 2%(down 2 points)
(6) Capital Ratio (BIS Guideline) (preliminary)
Capital ratio was 10.94% on a consolidated basis.
2. Earnings and Dividends Forecast for the Fiscal Year Ending March 31, 2004
(1) Earnings Forecast
In fiscal 2003, SMFG will continue to strengthen its financial base by reducing
the balance of non-performing loans through off balancing of problem assets and
revival of debt-ridden companies, and further reducing stockholdings.
Furthermore, SMFG aims to enhance profitability and achieve greater operational
efficiency.
As for earnings forecast on a consolidated basis, Ordinary income, Ordinary
profit and Net income are expected to amount to 3,500 billion yen, 320 billion
yen, and 230 billion yen, respectively. On a non-consolidated basis, Ordinary
income, Ordinary profit and Net income are expected to amount to 55 billion yen,
50 billion yen, and 50 billion yen, respectively.
(2) Dividends Forecast
SMFG will not pay interim dividends on common stock and preferred stock this
fiscal year mainly because of uncertain economic and stock market outlook. SMFG
will pay year-end dividends according to the level of retained earnings, as
follows:
Common stock 3,000 yen per share
Preferred stock (type 1) 10,500 yen per share
Preferred stock (type 2) 28,500 yen per share
Preferred stock (type 3) 13,700 yen per share
Preferred stock (1st series to 12th 135,000 yen per share
series type 4)
Preferred stock (13th series type 4) 67,500 yen per share
IV. Consolidated Interim Financial Statements
Significant Accounting Policies for Consolidated Interim Financial Statements
1. Scope of consolidation
(1) Consolidated subsidiaries 169 companies
Principal companies
Sumitomo Mitsui Banking Corporation
THE MINATO BANK, LTD.
The Bank of Kansai, Ltd.
Sumitomo Mitsui Banking Corporation Europe Limited
Manufacturers Bank
SMBC Leasing Company, Limited
Sumitomo Mitsui Card Company, Limited
SMBC Capital Co., Ltd.
SMBC Finance Service Co., Ltd.
SMBC Friend Securities Co., Ltd.
The Japan Research Institute, Limited
SMBC Capital Markets, Inc.
From this interim term:
-- - three companies including The Kansai Sawayaka Bank, Limited were newly
consolidated due to acquirement of shares, and five companies including
SMBC Leasing Investment L.L.C. were newly consolidated due to
establishment
-- - five companies including Sakura Friend Securities Co., Ltd., Mitsui
Finance Service Co., Ltd. and Sakura Finance Service Co., Ltd. were
excluded from consolidation due to merger, and Sakura Global Capital
Asia Limited was excluded from consolidation due to liquidation
-- - three companies including SMBCL CEPHEUS CO., LTD. became silent
partnership for lease transactions, and became non-consolidated
subsidiaries that are not accounted for by the equity method.
(2) Non-consolidated subsidiaries
Principal company
SBCS Co., Ltd.
105 subsidiaries including S.B.L. Mercury Co., Ltd. are silent partnership for
lease transactions and their assets and profits/losses do not belong to them
substantially. Therefore, pursuant to Article 5 Paragraph 1 Item 2 of Interim
Consolidated Financial Statements Regulation, they were excluded from
consolidation.
Other non-consolidated subsidiaries' total assets, ordinary income, net income
and retained earnings have no significant impact on the consolidated interim
financial statements.
2. Application of the equity method
(1) Non-consolidated subsidiaries accounted for by the equity method 4 companies
Principal company
SBCS Co., Ltd.
(2) Affiliates accounted for by the equity method 44 companies
Principal companies
Daiwa Securities SMBC Co. Ltd.
Daiwa SB Investments Ltd.
Sumitomo Mitsui Asset Management Company, Limited
QUOQ Inc.
From this interim term:
-- - two companies including Hokkaido Mother Land Capital, Ltd. were newly
applied due to establishment
-- - Daiwa Europe (Deutschland) GmbH was excluded due to liquidation.
(3) Non-consolidated subsidiaries and affiliates that are not accounted for by
the equity method
105 subsidiaries including S.B.L. Mercury Co., Ltd. are silent partnership for
lease transactions and their assets and profits/losses do not belong to them
substantially. Therefore, pursuant to Article 7 Paragraph 1 Item 2 of Interim
Consolidated Financial Statements Regulation, they are not treated as affiliated
companies accounted for by the equity method.
Net income and retained earnings of other non-consolidated subsidiaries and
affiliates that are not accounted for by the equity method have no significant
impact on the consolidated interim financial statements.
3. The interim balance sheet dates of consolidated subsidiaries
(1) The interim account closing dates of the consolidated subsidiaries are as
follows:
March 31 5 Companies
April 30 1 Company
June 30 65 Companies
July 31 2 Companies
September 30 96 Companies
(2) As for companies whose balance sheet dates are March 31 and April 30, the
accounts are provisionally closed for the purpose of consolidation as of
September 30 and July 31, respectively. The other companies are consolidated on
the basis of their respective balance sheet dates.
Appropriate adjustments were made for significant transactions during the
periods from their respective balance sheet dates to the consolidated interim
closing date.
4. Accounting policies
Please refer to the "Notes to Consolidated Interim Balance Sheet" and "Notes to
Consolidated Interim Statement of Income."
5. Scope of "Cash and cash equivalents" on Consolidated Interim Statements of
Cash Flows
Please refer to the "Notes to Consolidated Interim Statement of Cash Flows."
CONSOLIDATED INTERIM BALANCE SHEET
September 30, 2003 (Millions of
yen)
------------------------------------------------------------------------
Assets:
Cash and due from banks 3,898,506
Call loans and bills bought 654,263
Receivables under resale agreements 90,979
Receivables under securities borrowing transactions 625,010
Commercial paper and other debt purchased 444,540
Trading assets 3,485,349
Money held in trust 27,498
Securities 22,451,050
Loans and bills discounted 59,666,363
Foreign exchanges 774,597
Other assets 3,349,993
Premises and equipment 988,386
Lease assets 1,006,315
Deferred tax assets 1,845,975
Deferred tax assets for land revaluation 723
Goodwill 12,733
Customers' liabilities for acceptances and guarantees 3,102,644
Reserve for possible loan losses -1,699,431
--------------
Total assets 100,725,500
==============
Liabilities:
Deposits 63,142,263
Negotiable certificates of deposit 3,379,610
Call money and bills sold 8,019,874
Payables under repurchase agreements 1,897,172
Payables under securities lending transactions 4,624,779
Commercial paper 247,500
Trading liabilities 2,046,766
Borrowed money 2,476,833
Foreign exchanges 448,316
Bonds 3,779,852
Due to trust account 24,944
Other liabilities 3,551,051
Reserve for employee bonuses 20,908
Reserve for employee retirement benefits 93,220
Reserve for possible losses on loans sold 2,628
Reserve for exhibition at World Exposition 57
Other reserves 531
Deferred tax liabilities 58,494
Deferred tax liabilities for land revaluation 56,685
Acceptances and guarantees 3,102,644
--------------
Total liabilities 96,974,137
--------------
Minority interests 1,005,886
--------------
Stockholders' equity:
Capital stock 1,247,650
Capital surplus 854,798
Retained earnings 423,309
Land revaluation excess 97,914
Net unrealized gains on other securities 176,225
Foreign currency translation adjustments -41,189
Treasury stock -13,231
--------------
Total stockholders' equity 2,745,476
--------------
Total liabilities, minority interests and stockholders'
equity 100,725,500
==============
Sumitomo Mitsui Financial Group, Inc. and Subsidiaries
- 17 -
Sumitomo Mitsui Financial Group, Inc. and Subsidiaries
- 11 -
Notes to Consolidated Interim Balance Sheet
1. Amounts less than one million yen have been omitted.
2. 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
interim balance sheet on a contract date basis.
Securities and monetary claims purchased for trading purposes are stated at the
interim term-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 interim balance sheet date.
A consolidated subsidiary, Sumitomo Mitsui Banking Corporation ("SMBC") formerly
accounted for foreign currency translation differences arising from currency
swaps for trading purposes as "Other assets" or "Other liabilities" on the
balance sheet on a net basis. From this interim term, SMBC accounts for such
foreign currency differences as "Trading assets" and "Trading liabilities" on a
gross basis, pursuant to the "Treatment of Accounting and Auditing Concerning
Accounting for Foreign Currency Transactions in Banking Industry" (JICPA
Industry Audit Committee Report No.25). Consequently, "Other liabilities"
decreased by 83,790 million yen, and increased "Trading assets" and "Trading
liabilities" by 47,405 million yen and 131,196 million yen, respectively,
compared with the former manner.
3. Held-to-maturity debt securities are debt securities that consolidated
subsidiaries have the positive intent and ability to hold to maturity, and are
carried at amortized cost (straight-line method) using the moving-average
method.
Investments in non-consolidated subsidiaries and affiliates that are not
accounted for by the equity method are carried at cost using the moving-average
method.
Securities other than trading purpose securities, held-to-maturity debt
securities and investments in non-consolidated subsidiaries and affiliates are
classified as "other securities" (available-for-sale securities). Stocks in
other securities that have market value are carried at the average market prices
during the final month of the interim term, and bonds and others that have
market prices are carried at their interim term-end market prices (cost of
securities sold is calculated using primarily the moving-average method). Other
securities with no available market prices are carried at cost or amortized cost
using the moving-average method. Net unrealized gains (losses) on other
securities, net of income taxes, are included in "Stockholders' equity," after
deducting the amount that is reflected in the interim term's earnings because of
application of fair value hedge accounting.
4. Securities included in "Money held in trust" are carried in the same way as
in Notes 2 and 3.
5. Derivative transactions, excluding those classified as trading derivatives,
are carried at fair value, though some consolidated overseas subsidiaries
account for derivative transactions in accordance with their local accounting
standards.
6. Premises and equipment owned by Sumitomo Mitsui Financial Group, Inc.
("SMFG") and SMBC are depreciated using the straight-line method for premises
and the declining-balance method for equipment. For the six months ended
September 30, 2003, SMBC calculated the depreciation cost by proportionally
allocating the estimated annual costs to the interim term. The estimated useful
lives of major items are as follows:
Buildings: 7 to 50 years
Equipment: 2 to 20 years
Other consolidated subsidiaries depreciate premises and equipment, and lease
assets primarily using the straight-line method over the estimated useful lives
of the respective assets and the straight-line method over the lease term based
on the residual value of assets at the end of the lease term, respectively.
7. Capitalized software for internal use owned by SMFG and its consolidated
domestic subsidiaries is depreciated using the straight-line method over its
estimated useful life (basically five years).
8. SMBC's assets and liabilities denominated in foreign currencies and overseas
branches' accounts are translated into Japanese yen mainly at the exchange rate
prevailing at the consolidated interim balance sheet date, with the exception of
stocks of subsidiaries and affiliates translated at rates prevailing at the time
of acquisition.
As for the accounting method of foreign currency transactions, in the previous
fiscal year, domestic consolidated banking subsidiaries applied the temporary
treatment stipulated in JICPA Industry Audit Committee Report No.25 to currency
swaps and foreign exchange swaps for the purpose of lending or borrowing funds
in different currencies. From this interim term, they apply the hedge accounting
pursuant to the full treatment of JICPA Industry Audit Committee Report No.25.
Consequently, for this interim term, the domestic consolidated banking
subsidiaries valuated such foreign exchange swaps, for which profits or losses
for the term were formerly accounted for, at fair value and included their
fair-valued claims and debts on the consolidated interim balance sheet. As a
result, "Other assets" and "Other liabilities" each increased by 2,846 million
yen as compared with the former manner. On the other hand, this accounting
change had no impact on profit or loss.
Foreign currency translation differences arising from currency swaps and forward
foreign exchange transactions were formerly accounted for as "Other assets" or
"Other liabilities" on a net basis, but from this interim term they are
accounted for as "Other assets" or "Other liabilities" on a gross basis pursuant
to JICPA Industry Audit Committee Report No.25. Consequently, "Other assets" and
"Other liabilities" increased by 737,724 million yen each.
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.
9. Reserve for possible loan losses of SMBC and other major consolidated
subsidiaries is provided as detailed below in accordance with the internal
standards for write-offs and reserves.
For claims on borrowers who 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 likely to become
bankrupt in the future, a reserve is provided in the amount deemed necessary
based on an overall solvency assessment of the claims, net of the expected
amount of recoveries from collateral and guarantees.
Of the claims on borrowers requiring close monitoring, SMBC applies the
Discounted Cash Flows method ("DCF method") to the claims on borrowers whose all
or some of the loans are classified as "Past due loans (3 months or more)" or
"Restructured loans" and whose total loans exceed a certain amount. SMBC
establishes reserve for possible loan losses using the DCF method for such
claims in the amount of the differences between their present values of
principals and interests (calculated by discounting the rationally estimated
cash flows at the initial contractual using the interest rate) and their book
values.
For other claims, a reserve is provided based on the historical loan-loss ratio.
For claims originated in specific countries, an additional reserve is provided
for by 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 rule for self-assessment of assets, and the Credit Review
Department, independent from these operating sections, audits their assessment.
The reserves are provided based on the results of these assessments.
Reserve for possible loan losses of other consolidated subsidiaries for general
claims is provided in the amount deemed necessary based on the historical
loan-loss ratio, 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 charged off against the total
outstanding amount of the claims. The amount of write-off was 1,693,302 million
yen.
10. Reserve for employee bonuses is provided, in provision for payment of
bonuses to employees, by the amount of estimated bonuses, which are attributable
to this interim term.
11. Reserve for employee retirement benefits is provided, in provision for
payment of retirement benefits to employees, by the amount deemed accrued at
interim term-end, based on the projected retirement benefit obligation and fair
value of plan assets at the fiscal year-end.
Prior service cost is amortized using the straight-line method over primarily 10
years within the employees' average remaining service period at incurrence.
Unrecognized net actuarial gain (loss) is amortized using the straight-line
method over primarily 10 years within the employees' average remaining service
period, commencing from the next fiscal year of incurrence.
Unrecognized net transition obligation from initial application of the new
accounting standard for employee retirement benefits is amortized using the
straight-line method over five years and is charged 50% of the annual amortized
cost to its income for the six months ended September 30, 2003.
12. Reserve for possible losses on loans sold is provided for contingent losses
arising from decline of market value of underlying collateral for loans sold to
the Cooperative Credit Purchasing Company, Limited. This reserve is provided in
accordance with Article 43 of the Ordinance of the Commercial Code.
13. Financing leases of SMFG and its consolidated domestic subsidiaries,
excluding those in which the ownership of the property is transferred to the
lessee, are accounted for in the same manner as operating leases.
14. 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 or fair value hedge accounting.
In the previous year, SMBC applied the temporary treatment stipulated in the
"Treatment for Accounting and Auditing of Application of Accounting Standard for
Financial Instruments in Banking Industry" (JICPA Industry Audit Committee
Report No.24) to the "macro hedge," which is management of interest rate risk
arising from huge transactions in loans, deposits and other interest-earning
assets and interest-bearing liabilities as a whole using derivatives. From this
interim term, SMBC applies the full treatment of JICPA Industry Audit Committee
Report No.24 to hedges on groups of large-volume, small-value monetary claims
and debts with similar risk characteristics. SMBC assesses the effectiveness of
such hedge for offsetting changes in interest rate, by classifying the hedged
items (such as deposits and loans) and the hedging instruments (such as interest
rate swaps) by their maturity. SMBC assesses the effectiveness of such hedges
for fixing cash flows by verifying the correlation between the hedged items and
the hedging instruments. SMBC also assesses the effectiveness of individual
hedges.
As a result of changing the designation of hedge relationship pursuant to JICPA
Industry Audit Committee Report No.24, SMBC applies fair value hedge accounting
to hedging transactions for reducing the exposure to market volatility of bonds
classified as other securities that are held for the purpose of Asset and
Liability Management in order to more properly reflect the effectiveness of
hedging transactions in the financial statements. Consequently, "Other assets"
and "Net unrealized gains on other securities" decreased by 21,462 million yen
and 13,521 million yen, respectively and "Deferred tax assets" increased by
8,507 million yen, compared with the former manner.
Of the deferred hedge losses and gains on macro hedge, the amounts related to
hedging instruments to which SMBC discontinued applying hedge accounting or
applied fair value hedge accounting as a result of the change mentioned above
are allocated to "Interest income" or "Interest expenses" over a 12-year period
(maximum) from this interim term according to their maturity. Gross amounts of
deferred hedge losses and gains on "macro hedge" are 422,999 million yen and
410,931 million yen, respectively.
Other certain consolidated subsidiaries use the deferred hedge accounting or the
special treatment for interest rate swaps. A consolidated domestic subsidiary (a
leasing company) partly applies the accounting method that is permitted by the
Industry Audit Committee Report No.19 "Temporary Treatment for Accounting and
Auditing of Application of Accounting Standard for Financial Instruments in
Leasing Industry" issued by JICPA.
15. SMBC applies deferred hedge accounting stipulated in the full treatment of
JICPA Industry Audit Committee Report No.25 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 currency, SMBC applies deferred hedge accounting or fair value hedge
accounting, on the conditions that the hedged security is designated in advance
and that enough on-balance (actual) or off-balance (forward) liability exposure
exists to cover the cost of the hedged security in foreign currency base.
16. 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 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.
17. National and local consumption taxes of SMFG and its consolidated domestic
subsidiaries are accounted for using the tax-excluded method.
18. SMBC accounts for the exhibition expenses related to "The 2005 World
Exposition, Aichi, Japan" that will be held in Aichi Prefecture in 2005 as
"Reserve for exhibition at World Exposition." This reserve is stipulated in the
Article 43 of the Ordinance of the Commercial Code and includes the reserve that
is stipulated in Article 57-2 of the Specific Taxation Measures Law.
19. Other reserves required by special laws are reserve for contingent
liabilities from financial futures transaction (18 million yen) in accordance
with Article 82 of the Financial Futures Transaction Law, and reserve for
contingent liabilities from securities transaction (513 million yen) in
accordance with Article 51 of the Securities Exchange Law.
20. Accumulated depreciation on premises and equipment and accumulated
depreciation on lease assets were 604,089 million yen and 1,508,565 million yen,
respectively.
21. Bankrupt loans and non-accrual loans were 179,497 million yen and 2,287,238
million yen, respectively. These amounts include trust with The Resolution and
Collection Corporation, a measure regarded as off-balancing, of 38,941 million
yen.
"Bankrupt loans" are loans on which consolidated subsidiaries do not currently
accrue interest income, as substantial doubt is judged to exist as to the
ultimate collectability of either principal or interest as they are past due for
a considerable period of time or for other reasons, and meet conditions defined
in Article 96-1-3 and 96-1-4 of the Enforcement Ordinance No.97 of the Japanese
Corporate Tax Law, issued in 1965. "Non-accrual loans" are loans on which
consolidated subsidiaries do not currently accrue interest income, excluding
bankrupt loans and loans for which consolidated subsidiaries are forbearing
interest payments to support the borrowers' recovery from financial
difficulties.
22. Past due loans (3 months or more) totaled 101,630 million yen.
Past due loans (3 months or more) are loans other than "Bankrupt loans" and
"Non-accrual loans" on which the principal or interest is past due for three
months or more.
23. Restructured loans totaled 1,853,890 million yen.
Restructured loans are loans other than "Bankrupt loans," "Non-accrual loans"
and "Past due loans (3 months or more)" for which consolidated subsidiaries have
relaxed lending terms, such as reduction of the original interest rate,
forbearance of interest payments or principal repayments or has made agreements
in favor of borrowers such as debt forgiveness, to support the borrowers'
recovery from financial difficulties.
24. The total amount of bankrupt loans, non-accrual loans, past due loans (3
months or more) and restructured loans was 4,422,255 million yen. This amount
includes trust with The Resolution and Collection Corporation, a measure
regarded as off-balancing, of 38,941 million yen.
The amounts of loans presented in Notes 21 to 24 are amounts before deduction of
reserve for possible loan losses.
25. Bills discounted are accounted for as financial transactions in accordance
with JICPA Industry Audit Committee Report No.24. SMFG's banking subsidiaries
have rights to sell or pledge bank acceptance bought, commercial bills
discounted, documentary bills and foreign exchanges bought without restrictions.
The total face value was 966,761 million yen.
26. Assets pledged as collateral were as follows:
(Millions of yen)
Assets pledged
Cash and due from banks 124,638
Trading assets 570,857
Securities 9,794,664
Loans and bills discounted 3,760,959
Other assets (installment account
receivable etc.) 1,180
Premises and equipment 529
Liabilities corresponding to assets pledged
Deposits 14,910
Call money and bills sold 7,054,900
Payables under repurchase agreements 1,857,026
Payables under securities lending
transactions 4,355,513
Trading liabilities 144,062
Borrowed money 4,216
Other liabilities 10,979
Acceptances and guarantees 149,297
In addition, cash and due from banks of 44,798 million yen, trading assets of
4,204 million yen, securities of 3,966,901 million yen, loans and bills
discounted of 968,383 million yen were pledged as collateral for cash
settlements, variation margins of futures markets and certain other purposes.
Premises and equipment include surety deposits and intangible of 118,028 million
yen, and other assets include initial margins of futures markets of 7,036
million yen.
27. Net amount of deferred unrealized gains (losses) on hedging instruments to
which deferred hedge accounting is applied is reported as deferred loss on hedge
and are included in "Other assets." Gross deferred unrealized losses and gross
deferred unrealized gains on hedging instruments were 1,735,996 million yen and
1,609,388 million yen, respectively.
28. SMBC revaluated its own land for business activities in accordance with the
"Law Concerning Land Revaluation" (the "Law") effective March 31, 1998 and the
law concerning amendment of the Law effective March 31, 2001. The income taxes
corresponding to the net unrealized gains are deferred and reported in
"Liabilities" as "Deferred tax liabilities for land revaluation," and the net
unrealized gains, net of deferred taxes, are reported as "Land revaluation
excess" in "Stockholders' equity."
Certain consolidated subsidiaries revaluated their own land for business
activities in accordance with the Law. The income taxes corresponding to the net
unrealized gains (losses) are deferred and reported in "Liabilities" or "Assets"
as "Deferred tax liabilities for land revaluation" or "Deferred tax assets for
land revaluation," and the net unrealized gains (losses), net of deferred taxes,
are reported as "Land revaluation excess" in "Stockholders' equity."
Date of the revaluation
SMBC March 31, 1998 and March 31, 2002
Certain consolidated subsidiaries March 31, 1999 and March 31, 2002
Method of revaluation (stipulated in Article 3-3 of the Law)
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 the Enforcement Ordinance of the Law concerning Land Revaluation (the
Enforcement Ordinance No.119) effective March 31, 1998.
Certain consolidated subsidiaries: Fair values were determined based on the
values specified in Article 2-3 and 2-5 of the Enforcement Ordinance No.119.
29. The balance of subordinated debt included in "Borrowed money" was 811,510
million yen.
30. The balance of subordinated bonds included in "Bonds" was 1,583,839 million
yen.
31. Stockholders' equity per share was 165,291.87 yen.
32. Market value and unrealized gains (losses) on securities are shown as below:
In addition to "Securities" in the consolidated interim balance sheet, trading
securities, commercial paper and short-term corporate bonds (electronic
commercial paper) classified as "Trading assets," negotiable certificates of
deposit bought classified as "Cash and due from banks," and commercial paper and
beneficiary claim on loan trust classified as "Commercial paper and other debt
purchased" are also included in the amounts of the following tables. This
definition is applied up to Notes 37.
(1) Securities classified as trading purposes
As of and the six months ended September 30, 2003 (Millions of yen)
Consolidated interim balance sheet amount 1,205,895
Valuations gains (losses) included in profit/loss during the
interim term (1,705)
(2) Bonds classified as held-to-maturity with market value
As of September 30, 2003 (Millions of yen)
Consolidated Market Net unrealized
balance sheet Value gains (losses)UnrealizedUnrealized
amount gains losses
------------------------------------------------------------------------------------------
Japanese government bonds 510,142 498,990 (11,152) 884 12,037
Other 21,329 22,379 1,049 1,166 117
------------------------------------------------------------------------------------------
Total 531,472 521,369 (10,103) 2,051 12,155
(3) Other securities with market value
As of September 30, 2003 (Millions of yen)
Acquisition Consolidated Net unrealized
cost balance sheet gains UnrealizedUnrealized
amount (losses) gains losses
---------------------------------------------------------------------------------------------
Stocks 2,606,121 3,077,101 470,979 578,166 107,187
Bonds 12,436,715 12,281,842 (154,872) 6,597 161,470
Japanese government bonds 11,240,557 11,103,803 (136,754) 2,865 139,619
Japanese local government
bonds 413,692 403,548 (10,143) 924 11,067
Japanese corporate bonds 782,465 774,489 (7,975) 2,808 10,783
Other 4,187,030 4,174,553 (12,477) 20,171 32,649
---------------------------------------------------------------------------------------------
Total 19,229,867 19,533,496 303,629 604,936 301,307
Of the total net unrealized gains shown above, 22,029 million yen is included in
this term's profit because of the application of fair value hedge accounting.
"Net unrealized gains on other securities" includes 176,269 million yen that is
the sum of the following items:
(Millions of yen)
Net unrealized gains to be included in stockholders' equity, as
a result of applying fair value hedge accounting (a) 281,599
(-) Deferred tax liabilities (b) 110,395
------------------------------------------------------------------------------------
(c) = (a) - (b) 171,203
(- ) Minority interests corresponding to (c) (4,343)
(+) SMFG's interests of net unrealized gains (losses) on other
securities held by affiliates accounted for by the equity method 722
------------------------------------------------------------------------------------
Total 176,269
Other securities with market value are considered as impaired if the market
value decreases significantly below the acquisition cost and such decline is not
considered as recoverable. The market value is recognized as the consolidated
interim balance sheet amount and the amount of write-down is accounted for as
valuation loss (impaired) for this interim term. Valuation loss for this interim
term was 530 million yen. The rule for determining "significant decline" is as
follows and is based on the classification of issuing company under
self-assessment of assets.
Bankrupt/ Effectively bankrupt/ Potentially Market value is lower than acquisition cost.
bankrupt issuers:
Issuers requiring caution: Market value is 30% or more lower than
acquisition cost.
Normal issuers: Market value is 50% or more 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 four categories of issuers
33. Held-to-maturity bonds sold during the interim term is as follows:
Six months ended September 30, 2003 (Millions of yen)
Acquisition Sales Gains Reason for sales
Cost Amount on sales
---------------------------------------------------------------------------------------------
Japanese government bonds 21,063 21,709 645 A consolidated subsidiary, THE
Japanese local government MINATO BANK, LTD. ("Minato")
bonds 23,060 23,796 736 changed its investment policy
--------------------------------------------------------------
Total 44,123 45,506 1,382
-------------------------------
34. The amount of other securities sold during the interim term is as follows:
Six months ended September 30, 2003 (Millions of yen)
Sales amount Gains on sales Losses on sales
------------------------------------------------------------
15,761,524 145,995 95,693
35. Summary information on securities that do not have market value is as
follows:
As of September 30, 2003 (Millions of yen)
Consolidated
balance sheet
amount
---------------------------------------------------------
Bonds classified as held-to-maturity
Unlisted foreign securities 5,411
Other 10,112
Other securities
Unlisted stocks (except for OTC
stocks) 338,389
Unlisted bonds 1,457,321
Unlisted foreign securities 325,123
Other 109,236
36. Minato changed its investment policy and sold some of the held-to-maturity
bonds during this interim term. As a result, Minato changed the classification
of the remaining bonds that Minato holds, 28,281 million yen, from
"held-to-maturity" to "other securities" pursuant to Article 83 of the
"Practical Guidelines for Accounting for Financial Instruments" (JICPA
Accounting Committee Report No.14). According to this change of classification,
"Securities" increased by 66 million yen and "Deferred tax assets" decreased by
26 million yen, and "Minority interests" and "Net unrealized gains on other
securities" increased by 36 million yen and 2 million yen, respectively,
compared with the former classification of bonds.
37. Redemption schedule of other securities that have maturities and bonds
classified as held-to-maturity is as follows:
As of September 30, 2003 (Millions of yen)
1 year or less More than 1 year More than 5 Over
to 5 years years 10 years
to 10 years
---------------------------------------------------------------------------------------------
Bonds 2,916,076 6,936,933 3,780,495 615,803
Japanese government bonds 2,717,215 5,160,392 3,125,480 610,858
Japanese local government
bonds 6,726 197,435 198,853 533
Japanese corporate bonds 192,133 1,579,106 456,162 4,411
Other 471,659 2,977,811 434,399 606,081
---------------------------------------------------------------------------------------------
Total 3,387,735 9,914,745 4,214,895 1,221,884
38. Information on money held in trust is as follows:
Money held in trust classified as trading purposes
As of and the six months ended September 30, 2003 (Millions of yen)
Consolidated interim balance sheet amount 7,443
Valuation gains included in profit/loss during the
interim term -
Other money held in trust
As of September 30, 2003 (Millions of yen)
Acquisition Consolidated Net
cost balance sheet unrealized
amount gains Unrealized Unrealized
(losses) gains losses
---------------------------------------------------------------------------
20,070 20,054 (16) 249 265
Net unrealized losses of 9 million yen (after the deduction of 6 million yen in
deferred tax assets from the above 16 million yen in net unrealized losses) are
included in "Net unrealized gains on other securities."
39. "Japanese Government Bonds" as a sub-account of "Securities" include 6,002
million yen of unsecured loaned securities for which borrowers have the rights
to sell or pledge and loaned securities of 119 million yen for which borrowers
only have the rights to pledge and not to sell.
As for the unsecured borrowed securities for which SMBC has the rights to sell
or pledge and the securities which SMBC purchased under resale agreements, that
are permitted to sell or pledge without restrictions, 654,394 million yen of
securities are pledged, 136,090 million yen of securities are held in hand as of
the consolidated interim balance sheet date.
40. Commitment line contracts on overdrafts and loans are agreements to lend to
customers when they apply for borrowing, to a prescribed amount, as long as
there is no violation of any condition established in the contracts. The amount
of unused commitments was 29,801,082 million yen, and the amount of unused
commitments whose original contract terms are within one year or unconditionally
cancelable at any time was 27,261,498 million yen. 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 have clauses that SMBC and other
consolidated subsidiaries can reject an application from customers or reduce the
contract amounts in case economic conditions are changed, SMBC and other
consolidated subsidiaries need to secure claims or other events occur. In
addition, SMBC and other consolidated subsidiaries request the customers to
pledge collateral such as premises and securities at the conclusion of the
contracts, and take necessary measures such as grasping customers' financial
positions, revising contracts when need arises and securing claims after the
conclusion of the contracts.
--------------------------------------------------
Notes to Consolidated Interim Statement of Income
----------------------------------------------------------------------------------
1. Amounts less than one million yen have been omitted.
2.�Net income per share is 24,993.09 yen.
3.�Net income per share (diluted) is 15,608.81 yen.
4. Profits and losses on trading transactions are recognized on a trade date basis, and recorded
as "Trading profits" and
"Trading losses." Both accounts include interest received or paid during the interim term. The
valuation differences of
securities and money claims between the previous fiscal year-end and this interim term-end are
recorded in the
above-mentioned accounts. As for the derivatives, assuming that the settlement will be made in
cash, the valuation
differences between this interim term-end and the previous fiscal year-end are recorded in the
above-mentioned
accounts.
5.�Standards for recognizing rental income on lease transactions and income/expenses on
installment sales are as follows:
(1) Recognition of lease-related income on lease transactions
Primarily, lease-related income is recognized on a straight-line basis over the full term
of the lease, based
on the monthly rent revenue.
(2) 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 term of the installment sales.
6. "Other income" includes gains on sales of stocks and other securities of 56,039 million yen.
7. "Other expenses" includes write-off of loans of 388,924 million yen.
8. "Extraordinary gains" include the tax refund from Tokyo Metropolitan Government of 38,236
million yen and the
interest on the tax refund of 2,097 million yen.
9. "Extraordinary losses" include amortized cost of unrecognized net obligation from initial
application of the new
accounting standard for employee retirement benefits of 11,021 million yen and losses on
disposition on premises and
equipment of 8,408 million yen.
CONSOLIDATED INTERIM STATEMENT OF RETAINED EARNINGS
Six months ended September 30, 2003 (Millions of
yen)
------------------------------------------------------------------------------
Capital surplus:
Capital surplus at beginning of term 856,237
Decrease of capital surplus 1,439
Losses on disposition of treasury stocks 1,439
-------------
Capital surplus at end of interim term 854,798
=============
Retained earnings:
Retained earnings at beginning of term 311,664
Increase of retained earnings 147,018
Net income 143,492
Increase due to transfer of land revaluation excess 3,525
Decrease of retained earnings 35,373
Dividends paid 33,306
Decrease due to merger of consolidated subsidiaries 2,066
-------------
Retained earnings at end of interim term 423,309
=============
(Note) Amounts less than one million yen have been omitted.
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
Six months ended September 30, 2003 (Millions of
yen)
----------------------------------------------------------------------------------------------
1. Cash flows from operating activities:
Income before income taxes and minority interests 186,880
Depreciation of premises, equipment and others 41,894
Depreciation of lease assets 167,285
Amortization of goodwill 4,191
Equity in earnings of affiliates -8,044
Net change in reserve for possible loan losses -550,977
Net change in reserve for possible losses on loans sold -18,036
Net change in reserve for employee bonuses -1,134
Net change in reserve for employee retirement benefits 7,969
Net change in reserve for exhibition at World Exposition 57
Interest income -826,407
Interest expenses 163,169
Net (gains) losses on securities -40,431
Net (gains) loss from money held in trust 1,007
Net exchange (gains) losses 221,477
Net (gains) losses from disposition of premises and equipment 7,985
Net (gains) losses from disposition of lease assets 49
Net change in trading assets 1,003,098
Net change in trading liabilities -802,432
Net change in loans and bills discounted 1,985,803
Net change in deposits -428,206
Net change in negotiable certificates of deposit -1,479,196
Net change in borrowed money (excluding subordinated debt) -51,542
Net change in deposits with banks -432,383
Net change in call loans, bills bought and receivables under resale
agreements -508,664
Net change in receivables under securities borrowing transactions 1,356,233
Net change in call money, bills sold and payables under repurchase
agreements -3,181,690
Net change in commercial paper 59,700
Net change in payables under securities lending transactions -182,466
Net change in foreign exchanges (Assets) -24,440
Net change in foreign exchanges (Liabilities) 50,442
Issuance and redemption of bonds (excluding subordinated bonds) 8,655
Net change in due to trust account 18,990
Interest received 856,081
Interest paid -174,330
Other, net 809,744
---------------
Subtotal -1,759,666
Income taxes paid 5,817
---------------
Net cash used in operating activities -1,753,848
2. Cash flows from investing activities:
Purchases of securities -23,707,428
Proceeds from sale of securities 15,807,610
Proceeds from maturity of securities 9,806,287
Purchases of money held in trust -21,111
Proceeds from sale of money held in trust 17,268
Purchases of premises and equipment -22,248
Proceeds from sale of premises and equipment 17,330
Purchases of lease assets -192,936
Proceeds from sale of lease assets 15,526
Purchases of stocks of subsidiaries -8,999
---------------
Net cash provided by investing activities 1,711,298
3. Cash flows from financing activities:
Proceeds from issuance of subordinated debt 34,500
Repayment of subordinated debt -95,500
Proceeds from issuance of subordinated bonds, bonds with subscription
rights for shares 238,362
Repayment of subordinated bonds, bonds with subscription rights for
shares -42,962
Dividends paid -33,330
Dividends paid to minority stockholders -24,388
Purchases of treasury stock -152
Proceeds from sale of treasury stock 936
---------------
Net cash provided by financing activities 77,465
4. Foreign currency translation adjustments on cash and cash equivalents -1,763
---------------
5. Net change in cash and cash equivalents 33,151
6. Cash and cash equivalents at beginning of term 2,900,991
7. Change in cash and cash equivalents due to exclusion of consolidated
subsidiaries (0)
---------------
8. Cash and cash equivalents at end of term 2,934,143
===============
Sumitomo Mitsui Financial Group, Inc. and Subsidiaries
- 22 -
Notes to Consolidated Interim Statement of Cash Flows
1. Amounts less than one million yen have been omitted.
2. For the purposes of presenting the consolidated interim statement of cash
flows, "Cash and cash equivalents" are cash on hand and non-interest earning
deposits with banks.
3. Reconciliation of "Cash and due from banks" of the consolidated interim
balance sheet to "Cash and cash equivalents" at this interim term-end is as
follows:
September 30, 2003
(Millions of yen)
Cash and due from banks 3,898,506
Interest-earning deposits (964,363)
------------------------------------------------
Cash and cash equivalents 2,934,143
===================
4. Reconciliation of the opening balance and the expense (net) for acquisition
with respect to acquisition of three companies including The Kansai Sawayaka
Bank, Limited is as follows:
(Millions of yen)
Assets 800,118 [including Loans and bills
discounted of 593,042 million
yen]
Liabilities (724,759)[including Deposits of (682,774)
million yen]
Minority interests (23,450)
Goodwill (13,136)
--------------------------------------------------------------
Acquisition costs for the three companies' (a)
stocks 38,773
The three companies' Cash and cash equivalents (b) (29,773)
--------------------------------------------------------------
(a) - (b) Expense for acquisition of the three
companies 8,999
==========
COMPARATIVE CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED)
(Millions of
yen)
Six months Year
ended September 30 ended March 31
------------------------------------ --------------
Six months ended September 30, 2003 and 2002, 2002 [SMBC] Difference
and 2003 2003
Year ended March 31, 2003 (A) (B) (A-B)
--------------------------------------------------------------------------------- --------------
Ordinary income:
Interest income 826,407 954,856 -128,449 1,816,908
Interest on loans and discounts 585,813 639,943 -54,130 1,262,092
Interest and dividends on securities 138,520 140,090 -1,570 268,261
Trust fees 84 84 7
Fees and commissions 237,159 204,619 32,540 424,238
Trading profits 163,904 110,534 53,370 206,496
Other operating income 459,685 444,096 15,589 946,957
Other income 73,594 48,429 25,165 111,776
----------- ----------- ------------ --------------
Total ordinary income 1,760,835 1,762,535 -1,700 3,506,386
----------- ----------- ------------ --------------
Ordinary expenses:
Interest expenses 163,169 220,912 -57,743 417,404
Interest on deposits 56,717 83,905 -27,188 152,373
Fees and commissions 41,969 42,195 -226 71,338
Trading losses 718 -718 725
Other operating expenses 432,980 333,888 99,092 721,134
General and administrative expenses 448,094 446,103 1,991 889,237
Other expenses 509,112 568,862 -59,750 1,922,296
----------- ----------- ------------ --------------
Total ordinary expenses 1,595,326 1,612,679 -17,353 4,022,136
----------- ----------- ------------ --------------
Ordinary profit (loss) 165,508 149,856 15,652 (515,749)
----------- ----------- ------------ --------------
Extraordinary gains 41,421 2,942 38,479 11,906
Extraordinary losses 20,050 42,448 -22,398 87,071
----------- ----------- ------------ --------------
Income (loss) before income taxes and
minority interests 186,880 110,349 76,531 (590,914)
Income taxes, Current 22,436 26,700 -4,264 66,068
Income taxes, Deferred (5,137) 10,333 -15,470 (225,190)
Minority interests in net income 26,087 18,170 7,917 33,567
----------- ----------- ------------ --------------
Net income (loss) 143,492 55,145 88,347 (465,359)
=========== =========== ============ ==============
(Notes)
1. Amounts for the six months ended September 30, 2002 are those of the former SMBC.
2. Amounts less than one million yen have been
omitted.
[2] Money Held in Trust
1. As of September 30, 2003
(1) Money held in trust classified as trading purposes
As of and for the six months ended September 30, 2003 (Millions of
yen)
---------------------------------------------------------------------------------------------
Consolidated balance Valuation gains (losses)
included in profit/loss
sheet amount during the term
---------------------------------------------------------------------------------------------
Money held in trust classified as trading
purposes 7,443
(2) Money held in trust classified as held-to-maturity
There are no corresponding transactions.
(3) Other money held in trust
As of September 30, 2003 (Millions of
yen)
---------------------------------------------------------------------------------------------
Acquisition Consolidated Net Unrealized Unrealized
cost balance unrealized gains losses
sheet gains
amount (losses)
---------------------------------------------------------------------------------------------
Other money held in trust 20,070 20,054 -16 249 265
(Note) Consolidated interim balance sheet amount is calculated using the market price at the
interim term-end.
2. As of March 31, 2003
(1) Money held in trust classified as trading
purposes
As of and for the year ended March 31, 2003 (Millions of
yen)
---------------------------------------------------------------------------------------------
Consolidated balance Valuation gains (losses)
included in profit/loss
sheet amount during the year
---------------------------------------------------------------------------------------------
Money held in trust classified as trading
purposes 1,629 12
(2) Money held in trust classified as held-to-maturity
There are no corresponding transactions.
(3) Other money held in trust
As of March 31, 2003 (Millions of
yen)
---------------------------------------------------------------------------------------------
Acquisition Consolidated Net Unrealized Unrealized
cost balance unrealized gains losses
sheet gains
amount (losses)
---------------------------------------------------------------------------------------------
Other money held in trust 23,044 23,000 -44 510 555
(Note) Market value is calculated by using market prices at the
fiscal year-end.
-41-
1
November 25, 2003
Sumitomo Mitsui Financial Group, Inc.
Sumitomo Mitsui Financial Group, Inc. (SMFG)
Non-consolidated Financial Results for the Six Months ended September 30, 2003
Head Office: 1-2, Yurakucho 1-chome, Chiyoda-ku, Tokyo, Japan
Stock Exchange Listings: Tokyo, Osaka, Nagoya (code: 8316)
URL: http://www.smfg.co.jp
President and CEO: Yoshifumi Nishikawa
Date of Approval by the Board of Directors: November 25, 2003
1. Financial Results (for the Six Months ended September 30, 2003)
(1) Operating Results Amounts less than one million yen have been omitted.
Operating Operating Ordinary Profit Net Income Net Income
Income Profit (Loss) per Share
---------------------------------------------------------------------------------------------
Six Months Y million %Y million %Y million %Y million % Y
ended September 30,
2003 7,146 - 5,637 - 5,035 - 4,829 - 833.45
ended September 30,
2002 - - - - - - - - -
---------------------------------------------------------------------------------------------
Fiscal Year
ended March 31, 2003 131,519 130,547 119,634 124,738 18,918.33
---------------------------------------------------------------------------------------------
Notes: 1. Average number of common stocks outstanding
(a) for the six months ended September 30, 2003: 5,794,872 (b) for the six
months ended September 30, 2002: -
(c) for the fiscal year ended March 31, 2003 : 5,751,902
2. There is no change in accounting methods.
3. Percentage shown in Operating Income, Operating Profit, Ordinary Profit and
Net Income are the increase (decrease) from the previous interim term.
(2) Dividends (Common stock) Please see the next page for information of the
preferred stock.
Interim Dividends per Annual Dividends per
Share Share
------------------------------------------------------------------
Six Months
ended September 30, Y 0
2003 -
ended September 30,
2002 - -
------------------------------------------------------------------
Fiscal Year
ended March 31, 2003 - Y 3,000
------------------------------------------------------------------
(3) Financial Position
Stockholders' Stockholders' Stockholders'
Total Assets Equity Equity to Total Equity per
Assets Share
---------------------------------------------------------------------------------
Y million Y million % Y
September 30, 2003 3,357,722 3,127,494 93.1 229,727.04
September 30, 2002 - - - -
---------------------------------------------------------------------------------
March 31, 2003 3,413,529 3,156,086 92.5 231,899.30
---------------------------------------------------------------------------------
Notes: 1. Number of common stocks outstanding
(a) as of September 30, 2003: 5,794,692 (b) as of September 30, 2002: - (c) as
of March 31, 2003: 5,795,037
2. Number of treasury stocks
(a) as of September 30, 2003: 1,318 (b) as of September 30, 2002: - (c) as of
March 31, 2003: 963
2. Earnings Forecast (Fiscal Year ending March 31, 2004)
Operating Ordinary Profit Net Income Dividends per Share (Annual)
Income Year-end
-----------------------------------------------------------------------------------------------
Fiscal Year Y million Y million Y million Y Y
ending March 31, 2004 55,000 50,000 50,000 3,000 3,000
-----------------------------------------------------------------------------------------------
(Reference) Forecasted net income per share for the fiscal year ending March 31,
2004 is 3,617.20 yen.
This document contains certain forward-looking statements. Such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and actual results may materially differ from those contained in
the forward-looking statements as a result of various factors.
The following items are among the factors that could cause actual results to
differ materially from the forward-looking statements in this material: business
conditions in the banking industry, the regulatory environment, new legislation,
competition with other financial services companies, changing technology and
evolving banking industry standards and similar matters.
Sumitomo Mitsui Financial Group, Inc.
Average number of shares outstanding during the term (year)
For the six months For the fiscal year
ended September 30, ended March 31, 2003
2003
-------------------------------------------------------------------------
Common stock 5,794,872 5,751,902
-------------------------------------------------------------------------
Preferred stock (type 1) 67,000 67,000
-------------------------------------------------------------------------
Preferred stock (type 2) 100,000 100,000
-------------------------------------------------------------------------
Preferred stock (type 3) 800,000 800,000
-------------------------------------------------------------------------
Preferred stock (1st to 12th
series type 4) 50,100 21,710
-------------------------------------------------------------------------
Preferred stock (13th series
type 4) 114,999 19,166
-------------------------------------------------------------------------
Number of shares outstanding as of term (year)-end
As of September 30, As of March 31, 2003
2003
-------------------------------------------------------------------------
Common stock 5,794,692 5,795,037
-------------------------------------------------------------------------
Preferred stock (type 1) 67,000 67,000
-------------------------------------------------------------------------
Preferred stock (type 2) 100,000 100,000
-------------------------------------------------------------------------
Preferred stock (type 3) 800,000 800,000
-------------------------------------------------------------------------
Preferred stock (1st to 12th
series type 4) 50,100 50,100
-------------------------------------------------------------------------
Preferred stock (13th series
type 4) 114,999 115,000
-------------------------------------------------------------------------
(Note) Change in the number of shares outstanding during the interim term is as
follows:
Number of Issue Capitalized
shares price amount
issued
---------------------------------------------------------------------------------------------
Conversion of Preferred Common stock 9.61 shares - -
stock (13th series type 4)------------------------------------------------------------------
to Common stock Preferred stock (13th
series type 4) (1) share - -
---------------------------------------------------------------------------------------------
Dividends per share
For the six months For the fiscal year
ended September 30, ended March 31, 2003
2003
------------------------------------------
Interim dividends Annual dividends
-------------------------------------------------------------------------
Common stock Y 0 Y 3,000
-------------------------------------------------------------------------
Preferred stock (type 1) Y 0 Y 10,500
-------------------------------------------------------------------------
Preferred stock (type 2) Y 0 Y 28,500
-------------------------------------------------------------------------
Preferred stock (type 3) Y 0 Y 13,700
-------------------------------------------------------------------------
Preferred stock (1st to 12th Y 0 Y 19,500
series type 4)
-------------------------------------------------------------------------
Preferred stock (13th series Y 0 Y 3,750
type 4)
-------------------------------------------------------------------------
Forecast of Dividends per Share
Dividends per Share (Annual)
Year-end
-------------------------------------------------------------------------
Common stock Y 3,000 Y 3,000
Preferred stock (type 1) Y 10,500 Y 10,500
Preferred stock (type 2) Y 28,500 Y 28,500
Preferred stock (type 3) Y 13,700 Y 13,700
Preferred stock (1st to 12th Y 135,000 Y 135,000
series type 4)
Preferred stock (13th series Y 67,500 Y 67,500
type 4)
-------------------------------------------------------------------------
Calculation for Index
- Forecasted Net Income per Share:
Forecasted net income - Forecasted preferred stock dividends
----------------------------------------------------------------------------------
Number of common stocks outstanding as of the interim term-end (excluding treasury
stock)
NON-CONSOLIDATED BALANCE SHEET
(Millions
of yen,
%)
--------------------------------------------
September 30, 2003 March 31,
2003
(Condensed)
------------------------------------------------------------------------------------------
Assets % %
Current assets
Cash and due from banks 61,841 64,725
Other current assets 3,613 41,383
------------ ------------
Total current assets 65,455 2.0 106,108 3.1
Fixed assets
Premises and equipment 0 0
Intangible assets 34 26
Investments and other assets 3,291,175 3,306,185
Investments in subsidiaries and affiliates 3,246,072 3,260,957
Long-term loans to subsidiaries and
affiliates 40,000 40,000
Deferred tax assets 5,102 5,227
------------ ------------
Total fixed assets 3,291,210 98.0 3,306,213 96.9
Deferred charges 1,056 0.0 1,207 0.0
------------ ------------
Total assets 3,357,722 100.0 3,413,529 100.0
============ ============
Liabilities
Current liabilities
Short-term borrowings 230,000 256,501
Reserve for employees bonuses 76 83
Other current liabilities 151 857
------------ ------------
Total current liabilities 230,228 6.9 257,442 7.5
------------ ------------
Total liabilities 230,228 6.9 257,442 7.5
------------ ------------
Stockholders' equity
Capital stock 1,247,650 37.1 1,247,650 36.6
Capital surplus
Capital reserve 1,247,762 1,747,266
Other capital surplus 499,501
------------ ------------
Total capital surplus 1,747,263 52.0 1,747,266 51.2
Retained earnings
Earned surplus reserve 496
Voluntary reserve 30,420 30,420
Unappropriated retained earnings 102,624 130,605
------------ ------------
Total retained earnings 133,044 4.0 161,521 4.7
Treasury stock -463 (0.0) -351 (0.0)
------------ ------------
Total stockholders' equity 3,127,494 93.1 3,156,086 92.5
------------ ------------
Total liabilities and stockholders' equity 3,357,722 100.0 3,413,529 100.0
============ ============
Sumitomo Mitsui Financial Group, Inc.
- 44 -
Significant Accounting Policies for Non-consolidated Interim Financial
Statements
1. Valuation of securities
Investments in subsidiaries and affiliates, and other securities without market
value are carried at cost using the moving-average method.
2. Depreciation of fixed assets
(1) Premises and equipment
SMFG computes depreciation for buildings using the straight-line method.
(2) Intangible assets
SMFG computes depreciation for capitalized software for internal use using the
straight-line method over its estimated useful life (five years).
3. Reserve
Reserve for employee bonuses is provided, in provision for payment of bonuses to
employees, by the amount of estimated bonuses attributable to this interim term.
4. Lease transactions
Financing leases, excluding those in which the ownership of the property is
transferred to the lessee, are accounted for in the same manner as operating
leases.
5. Consumption taxes
National and local consumption taxes are accounted for using the tax-excluded
method.
Notes to Non-consolidated Interim Balance Sheet
1. Amounts less than one million yen have been omitted.
2. Accumulated depreciation of premises and equipment was 0 million yen.
3. Long-term loans to subsidiaries and affiliates are subordinated loans.
Notes to Non-consolidated Interim Statement of Income
1. Amounts less than one million yen have been omitted.
2. Non-operating expenses include interest on borrowings of 436 million yen and
amortization of organization costs of 150 million yen.
3. Depreciation for the interim term is as follows:
fixed assets 0 million yen
intangible assets 3 million yen.
Securities
SMFG has no investments in subsidiaries and affiliates that have market value.