| Financial Risk Management | 45 FINANCIAL RISK MANAGEMENT
The SMBC Group classifies risks into the following categories:
credit risk, market risk, liquidity risk and operational risk. This
note presents information about the SMBC Group’s exposure to
credit risk, market risk, and liquidity risk, and its policies and
processes for measuring and managing these risks.
On April 1, 2017, the SMBC Group introduced SMBC Group-wide
business units and a Group Chief Officers system (“CxO
system”). In addition, the SMBC Group transitioned to a
company with three statutory committees: a nominating committee, an
audit committee and a compensation committee from a board of
corporate auditors governance system, following approval at its
ordinary general meeting of shareholders held on June 29, 2017. In
connection with the foregoing, the SMBC Group changed its risk
management system, including by introducing a Group Chief Risk
Officer (“CRO”) who reports to the board of directors
and its internal committees and conducting various meetings for
business executions to centrally identify and manage risks.
Risk Management System
Top management plays an active role in the risk management process
out of recognition for the importance of risk management. The SMBC
Group-wide basic policies for risk management are determined by the
Management Committee before being authorized by the board of
directors.
In line with these basic policies for risk management, the
functions for managing major risks are consolidated within the Risk
Management Unit, which is independent from business units, and the
SMBC Group seeks to refine its risk management system through such
means as enhancing comprehensive reviews of each risk category. In
addition, the Internal Audit Unit conducts internal audits on the
status of risk management to verify that risk is appropriately
managed.
Risk management systems are in place at individual SMBC Group
companies that have been established based on the characteristics
of their particular businesses and in accordance with the basic
policies. Furthermore, the SMBC Group is sharing information on
SMBC Group-wide risk management and strengthening related systems
through the Group CRO Committee, which consists of the Group CRO
and risk management representatives from strategically important
SMBC Group companies.
The diagram below represents the risk management system of the SMBC
Group.
Risk Capital Management
In managing credit risk, market risk, and operational risk
affecting the entire SMBC Group, the SMBC Group applies a uniform
standard, risk capital based on value at risk (“VaR”),
for use in monitoring and managing risks. This standard is applied
while taking into account the characteristics of each risk and of
the businesses of SMBC Group companies. Specific risk capital
measures include setting upper limits for risk exposure based on
SMBC Group-wide and business unit risk appetite and SMBC Group-wide
management constitution. Each business unit operates business
operation within that limit. Through these precautions, the SMBC
Group practices management that maintains an appropriate balance
between risks and returns based on a comprehensive perspective and
secures sufficient financial soundness.
Credit Risk
Credit risk is the risk of incurring losses from decline or loss of
the value of an asset (including off-balance off-balance
Credit risk management system
Credit risk is the most significant risk to which the SMBC Group is
exposed. The purpose of credit risk management is to keep the
credit risk exposure to a permissible level relative to capital, to
maintain the quality of assets and to ensure returns commensurate
with risk.
At the SMBC Group, the Group CRO formulates credit risk management
policies each year on the basis of Group-wide basic policies for
risk management. The Credit & Investment Planning
Department, responsible for the comprehensive management of credit
risk, drafts and administers credit risk regulations including the
Group credit policies, manages non-performing
The following chart shows the credit risk management system of
SMBC, the SMBC Group’s significant banking subsidiary.
At SMBC, the Credit & Investment Planning Department
within the Risk Management Unit is responsible for the
comprehensive management of credit risk. This department drafts and
administers credit policies, the internal rating system, credit
authority guidelines, and credit application guidelines, and
manages NPLs, including impaired loans, and other aspects of credit
portfolio management. The department also cooperates with the
Corporate Risk Management Department in quantifying credit risk
(risk capital and risk-weighted assets) and controls SMBC’s
entire credit risk. Further, the Credit Portfolio Management
Department within the Credit & Investment Planning
Department strives to stabilize the credit portfolio and manage the
risk through credit derivatives, loan asset sales and other
instruments.
The credit departments of SMBC within each business unit conduct
credit risk management for loans handled by its unit and manage
portfolios of its unit. The credit limits they use are based on the
baseline amounts that the Credit & Investment Planning
Department establishes for each grading category, with particular
attention paid to evaluating and managing customers or loans
perceived to have particularly high credit risk. The Corporate
Research Department engages in research on industries and analyzes
the business and financial conditions of borrower enterprises to
detect early signs of problems or growth potential. The Credit
Administration Department is responsible for handling NPLs of
borrowers classified as potentially bankrupt or lower, and
formulates plans for workouts, including write-offs, and corporate
rehabilitation. The department closely liaises with SMBC Servicer
Co., Ltd., an SMBC Group company, which engages in related services
to efficiently reduce the amount of NPLs, including through the
sale of loans.
The Internal Audit Unit of SMBC, operating independently of the
business units, audits asset quality, accuracy of grading and state
of credit risk management, and reports the results directly to the
board of directors and the Management Committee.
SMBC has established the Credit Risk Committee to undertake control
of credit risk and to ensure the overall soundness of the loan
operations.
Credit risk management methods
To effectively manage the risk involved in individual loans as well
as the credit portfolio as a whole, the SMBC Group first
acknowledges that every loan entails credit risk, assesses the
credit risk posed by each borrower and loan using an internal
rating system, and quantifies that risk for control purposes.
Credit risk evaluation
At SMBC, the Credit & Investment Planning Department
manages an internal rating system for each asset control category
set according to portfolio characteristics. For example, credits to
commercial and industrial (“C&I”) companies,
individuals for business purposes (domestic only), sovereigns,
public sector entities, and financial institutions are assigned an
“obligor grade,” which indicates the borrower’s
creditworthiness, and/or “facility grade,” which
indicates the collectability of assets taking into account the
transaction conditions such as guarantee/collateral, and tenor. The
business units determine an obligor grade by first assigning a
financial grade using a financial strength grading model and data
obtained from the obligor’s financial statements, including
net worth and cash flows. The financial grade is then adjusted
taking into account the actual state of the obligor’s
financial position and qualitative factors to derive the obligor
grade. The qualitative factors mainly include the expected future
cash flows taking into account factors such as historical loss
information, the appropriateness of the borrower’s business
plan or operational improvement plan, the status of progress of its
plan, and the overall support from financial institutions. In the
event that the borrower is domiciled overseas, internal ratings for
credit are made after taking into consideration the country rank,
which represents an assessment of the credit quality of each
country based on its political and economic situation, as well as
its current account balance and external debt. Obligor grades and
facility grades are reviewed once a year and as otherwise
necessary, such as when there are changes in the credit situation.
The SMBC Group’s subsidiaries carry out credit risk
evaluations in line with SMBC.
The table below shows the corporate obligor grading system of
SMBC.
Obligor Grade
Definition
Borrower Category
Domestic (C&I), etc.
Overseas (C&I), etc.
J1
G1 Very high certainty of debt repayment
Normal
J2
G2
High certainty of debt repayment
J3
G3
Satisfactory certainty of debt repayment
J4
G4
Debt repayment is likely, but this could change in
cases of significant changes in economic trends or business
environment
J5
G5
No problem with debt repayment over the short term,
but not satisfactory over the mid to long term, and the situation
could change in cases of significant changes in economic trends or
business environment
J6
G6
Currently no problem with debt repayment, but there
are unstable business and financial factors that could lead to debt
repayment problems
J7
G7
Close monitoring is required due to problems in
meeting loan terms and conditions, sluggish/unstable business, or
financial problems Borrowers
J7R
G7R
Obligors with loans that are more than three months
past due or with restructured loans within the “Borrowers
Requiring Caution” category
Substandard
J8
G8
Currently not bankrupt, but experiencing business
difficulties, making insufficient progress in restructuring and
highly likely to go bankrupt
Potentially
J9
G9
Though not yet legally or formally bankrupt, has
serious business difficulties and rehabilitation is unlikely; thus,
effectively bankrupt
Effectively
J10
G10
Legally or formally bankrupt
Bankrupt
There are also grading systems for loans to individuals such as
housing loans and structured finance including project finance,
where the repayment source is limited to the cash flows generated
by a particular business or asset. For example, the obligor grade
of housing loans is determined taking into account various relevant
factors such as proportion of the repayment to revenue, proportion
of down payment to the value and past due information.
The Credit & Investment Planning Department of SMBC
centrally manages the internal rating systems, and designs,
operates, supervises and validates the grading models. It validates
the grading models (including statistical validation) of main
assets following the procedure manual once a year to ensure their
effectiveness and suitability.
Quantification of credit risk
At SMBC, credit risk quantification refers to the process of
estimating the degree of credit risk of a portfolio or individual
loan taking into account not just the obligor’s probability
of default (“PD”), but also the concentration of risk
in a specific customer or industry and the loss impact of
fluctuations in the value of collateral, such as real estate and
securities.
Specifically, the PD by grade, loss given default
(“LGD”), credit quality correlation among obligors, and
other parameter values are estimated using the historical data of
obligors and facilities stored in a database to calculate the
credit risk. Then, based on these parameters, SMBC runs a
simulation of simultaneous default using the Monte Carlo Simulation
to calculate SMBC’s maximum loss exposure to the estimated
amount of the maximum losses that may be incurred. Based on these
quantitative results, SMBC allocates risk capital.
Risk quantification is also executed for purposes such as to
determine the portfolio’s risk concentration or to simulate
economic movements (stress tests), and the results are used for
making optimal decisions across the whole range of business
operations, including formulating business plans and providing a
standard against which individual credit applications are
assessed.
Credit assessment
At SMBC, the credit assessment of corporate loans involves a
variety of financial analyses, including cash flows, to predict an
enterprise’s capability of loan repayment and its growth
prospects. These quantitative measures, when combined with
qualitative analyses of industrial trends, the enterprise’s
research and development capabilities, the competitiveness of its
products or services, and its management caliber, result in a
comprehensive credit assessment. The loan application is analyzed
in terms of the intended utilization of the funds and the repayment
schedule. In the assessment of housing loans for individuals, SMBC
employs a credit assessment model based on credit data amassed and
analyzed by SMBC over many years, taking into account various
relevant factors including proportion of the repayment to revenue,
proportion of down payment to the value and past due
information.
Credit monitoring
At SMBC, in addition to analyzing loans at the application stage,
the Credit Monitoring System is utilized to reassess obligor
grades, and review credit policies for each obligor so that
problems can be detected at an early stage, and quick and effective
action can be taken. The system includes annual monitoring that is
carried out each time the financial results of the obligor
enterprise are obtained, as well as ad-hoc
Credit portfolio management
Risk-taking within the scope of capital
To keep the credit risk exposure to a permissible level relative to
capital, the Corporate Risk Management Department of the Company
sets a credit risk capital limit for internal control purposes.
Under this limit, sub-limits
Controlling concentration risk
As the SMBC Group’s equity capital may be materially impaired
in the event that the credit concentration risk becomes apparent,
the Credit & Investment Planning Department of the Company
therefore takes measures to manage concentration risks, such as
introducing large exposure limits and conducting intensive loan
reviews for obligors with large exposures, with an increased focus
on industrial sectors with an excessive concentration of credit
risk. Further, to manage country risk, SMBC’s Credit
Department of the International Banking Unit has credit limit
guidelines based on each country’s creditworthiness.
Toward active portfolio management
SMBC’s Credit Portfolio Management Department makes use of
credit derivatives, loan asset sales, and other instruments to
proactively and flexibly manage its portfolio to stabilize credit
risk.
Maximum exposure to credit risk before collateral held or
other credit enhancements
The following table shows the maximum exposure to credit risk
before taking into account any collateral held or other credit
enhancements at March 31, 2018 and 2017.
At March 31,
2018 2017
(In
millions)
Credit risk exposures relating to assets on the consolidated
statement of financial position:
Deposits with banks ¥ 53,992,931 ¥ 46,207,027
Call loans and bills bought 1,881,880 1,872,209
Reverse repurchase agreements and cash collateral on securities
borrowed 8,491,703 8,924,385
Trading assets 2,841,148 3,339,928
Derivative financial instruments 3,885,271 4,063,982
Financial assets at fair value through profit or loss 1,528,921 1,582,957
Investment securities:
Held-to-maturity 372,459 1,173,419
Available-for-sale 14,282,706 12,123,770
Loans and advances 85,129,070 95,273,845
Other financial assets 3,598,642 3,424,591
Financial assets included in assets held for sale 3,099,888
—
Credit risk exposures relating to off-balance (1)
Loan commitments 60,107,128 62,357,210
Financial guarantees and other credit-related contingent
liabilities 8,426,245 7,924,711
Total ¥ 247,637,992 ¥ 248,268,034
(1) The off-balance
Based on the table above, excluding loan commitments (refer to Note
41 “Contingency and Capital Commitments”), the majority
of the total exposure to credit risk is derived from “Loans
and advances” and “Available-for-sale
Collateral and other credit enhancements
The SMBC Group considers the acquisition of collateral and
guarantees as a secondary repayment source to further enhance loan
recovery and minimize credit risk. Based on the assessment of a
borrower’s real financial condition and potential future cash
flows, the SMBC Group shall analyze the borrower’s repayment
ability and require sufficient collateral in the form of an asset
or third-party obligation. This serves to mitigate the inherent
credit risk in the exposure, by either improving recoveries in the
event of a default or transferring the borrower’s obligation
to guarantors. Collateral received is mainly segregated into
(1) financial collateral such as cash, deposits and
securities, (2) real estate collateral such as land and
buildings, and (3) guarantees received from sovereigns,
municipal corporations, credit guarantee corporations and other
public entities, financial institutions, and other companies.
The SMBC Group’s credit risk management is mainly based on an
analysis of the repayment ability from the cash flows of the
borrower’s business performance, and the collateral and other
credit enhancements are considered as secondary repayment sources
in the SMBC Group’s business practice. At the time of the
primary lending decision, the SMBC Group evaluates the collateral
on an individual borrower basis to consider its financial effect
for mitigating credit risk. The re-evaluation
The following table shows the financial effect of collateral and
other credit enhancements on loans and advances for borrowers
requiring caution and impaired loans and advances at March 31,
2018 and 2017. The maximum collateral amounts included in the
disclosure are limited to the carrying value of loans and advances
where the credit exposure is over-collateralized.
At March 31,
2018 2017
(In
millions)
Loans and advances for borrowers requiring caution and impaired
loans and advances ¥ 1,965,681 ¥ 3,212,447
Financial effect of collateral and other credit enhancements 959,015 1,422,996
Concentration of risks of loans and advances with credit risk
exposure
An analysis of concentrations of credit risk from loans and
advances by geographical sector and industry sector at
March 31, 2018 and 2017 is shown below. The concentration by
geographical sector is measured based on the domicile of the
borrower.
Geographical sector
At March 31,
2018 2017
(In
millions)
Domestic ¥ 57,830,627 ¥ 68,020,094
Foreign:
Americas 11,221,244 11,417,162
Europe 4,949,471 5,031,197
Asia 8,423,747 8,412,109
Others 3,434,838 3,310,164
Total foreign 28,029,300 28,170,632
Gross loans and advances 85,859,927 96,190,726
Adjust: Unearned income, unamortized premiums—net and
deferred loan (239,181 ) (236,425 )
Less: Allowance for loan losses (491,676 ) (680,456 )
Net loans and advances ¥ 85,129,070 ¥ 95,273,845
Industry sector
At March 31,
2018 2017
(In
millions)
Domestic:
Manufacturing ¥ 7,961,620 ¥ 9,578,147
Agriculture, forestry, fisheries and mining 145,957 174,021
Construction 947,765 1,151,989
Transportation, communications and public enterprises 5,424,054 5,365,225
Wholesale and retail 5,288,767 5,721,005
Finance and insurance 2,777,862 2,844,546
Real estate and goods rental and leasing 9,017,664 10,101,846
Services 4,255,228 4,885,247
Municipalities 1,000,286 1,216,211
Lease financing 14,629 2,706,641
Consumer (1) 16,363,489 19,096,755
Others 4,633,306 5,178,461
Total domestic 57,830,627 68,020,094
Foreign:
Public sector 372,008 299,746
Financial institutions 4,496,646 4,588,001
Commerce and industry 21,023,885 21,041,905
Lease financing 357,660 404,658
Others 1,779,101 1,836,322
Total foreign 28,029,300 28,170,632
Gross loans and advances 85,859,927 96,190,726
Adjust: Unearned income, unamortized premiums—net and
deferred loan (239,181 ) (236,425 )
Less: Allowance for loan losses (491,676 ) (680,456 )
Net loans and advances ¥ 85,129,070 ¥ 95,273,845
(1) The balance in Consumer mainly
consists of housing loans. The housing loan balances amounted to
¥11,482,678 million and ¥13,766,771 million at
March 31, 2018 and 2017, respectively.
The following tables show a disaggregation of the structured
finance loans and advances balances, where the repayment source is
limited to the cash flows generated by a particular business or
asset, and the balances of secured or unsecured consumer loans at
March 31, 2018 and 2017. These loans and advances are included
in the preceding tables.
Structured finance:
At March 31,
2018 2017
(In
millions)
Real estate finance ¥ 2,421,408 ¥ 2,222,530
Project finance 3,976,222 3,859,424
Other structured finance 374,430 370,160
Total structured finance ¥ 6,772,060 ¥ 6,452,114
Consumer:
At March 31,
2018 2017
(In
millions)
Secured loans (1) ¥ 12,255,845 ¥ 14,994,042
Unsecured loans 4,107,644 4,102,713
Total consumer ¥ 16,363,489 ¥ 19,096,755
(1) The secured loans and advances mainly
represent housing loans. The housing loan balances amounted to
¥11,482,678 million and ¥13,766,771 million at
March 31, 2018 and 2017, respectively.
Loans and advances by credit quality category
Loans and advances are summarized as follows:
At March 31,
2018 2017
(In
millions)
Neither past due nor impaired ¥ 84,856,335 ¥ 94,825,134
Past due but not impaired 124,724 136,904
Impaired (1) 878,868 1,228,688
Gross loans and advances 85,859,927 96,190,726
Adjust: Unearned income, unamortized premiums—net and
deferred loan (239,181 ) (236,425 )
Less: Allowance for loan losses (491,676 ) (680,456 )
Net loans and advances ¥ 85,129,070 ¥ 95,273,845
(1) Loans and advances to borrowers who
are classified in the borrower categories of substandard borrowers,
potentially bankrupt borrowers, effectively bankrupt borrowers, and
bankrupt borrowers described in the obligor grading system
represent impaired loans and advances.
Loans and advances neither past due nor impaired
The following tables show the credit quality of the portfolio of
loans and advances that were neither past due nor impaired, by
geography and by industry based on the corporate obligor grading
system of SMBC at March 31, 2018 and 2017. Since the internal
rating system of SMBC’s consumer portfolio differs from the
corporate obligor grading system, the balances of loans and
advances to consumers are included in the grade category of
“Other.” Additionally, as the SMBC Group’s
subsidiaries are adopting various internal rating systems which
differ from SMBC, the grade category of “Other” also
includes some balances of loans and advances held by those
subsidiaries.
At March 31, 2018
Normal Requiring Caution
J 1-3 J 4-6 Japanese government and local municipal corporations Other J 7 Other Total
(In
millions)
Domestic:
Manufacturing ¥ 4,275,861 ¥ 2,190,117 ¥ — ¥ 1,196,566 ¥ 199,616 ¥ 22,681 ¥ 7,884,841
Agriculture, forestry, fisheries and mining 81,900 42,892 13,973 207 599
— 139,571
Construction 319,394 468,222
— 119,439 26,779 459 934,293
Transportation, communications and public enterprises 4,069,995 1,066,246 86,932 133,132 46,657 148 5,403,110
Wholesale and retail 2,333,434 2,399,747
— 297,583 155,584 1,421 5,187,769
Finance and insurance 1,801,410 349,934 2,785 618,935 1,630 5 2,774,699
Real estate and goods rental and leasing 5,696,289 3,082,764 13,696 95,634 87,218 7 8,975,608
Services 1,599,011 2,355,545 37,693 94,218 96,498 115 4,183,080
Municipalities
—
— 1,000,286
—
—
— 1,000,286
Lease financing
—
—
— 14,629
—
— 14,629
Consumer (1)
— 234
— 15,900,425 1,669 73,180 15,975,508
Others 53,633 2,057,571 1,685,694 728,206 69,005 680 4,594,789
Total domestic 20,230,927 14,013,272 2,841,059 19,198,974 685,255 98,696 57,068,183
G 1-3 G 4-6 — Other G 7 Other Total
Foreign:
Public sector 191,678 81,448
— 97,890 30 941 371,987
Financial institutions 2,381,927 338,659
— 1,752,693
— 7,891 4,481,170
Commerce and industry 14,009,273 2,425,819
— 4,114,066 222,395 53,793 20,825,346
Lease financing 23,290
—
— 330,406
— 3,964 357,660
Others 1,194,334 161,795
— 383,463 9,964 2,433 1,751,989
Total foreign 17,800,502 3,007,721
— 6,678,518 232,389 69,022 27,788,152
Total ¥ 38,031,429 ¥ 17,020,993 ¥ 2,841,059 ¥ 25,877,492 ¥ 917,644 ¥ 167,718 ¥ 84,856,335
(1) The balance in the grade category of
“Other” in Consumer includes housing loans, which
amounted to ¥11,302,350 million and
¥51,189 million for the borrower category of Normal and
Requiring Caution, respectively.
At March 31, 2017
Normal Requiring Caution
J 1-3 J 4-6 Japanese Other J 7 Other Total
(In
millions)
Domestic:
Manufacturing ¥ 5,220,451 ¥ 2,294,471 ¥ — ¥ 1,528,465 ¥ 371,365 ¥ 34,956 ¥ 9,449,708
Agriculture, forestry, fisheries and mining 111,241 45,573 500 5,955 7,905 588 171,762
Construction 271,321 479,408
— 323,281 33,050 16,279 1,123,339
Transportation, communications and public enterprises 3,000,896 1,805,631 129,708 317,943 58,684 18,869 5,331,731
Wholesale and retail 2,182,359 2,483,635
— 733,264 155,778 36,234 5,591,270
Finance and insurance 1,897,381 346,939 3,243 575,688 1,344 15,702 2,840,297
Real estate and goods rental and leasing 5,188,687 3,028,913 35,078 1,496,839 99,237 104,524 9,953,278
Services 1,552,427 2,350,110 34,826 690,201 97,651 45,520 4,770,735
Municipalities
—
— 1,042,346 157,144
— 16,721 1,216,211
Lease financing
—
—
— 2,610,519
— 87,533 2,698,052
Consumer (1)
— 146
— 18,470,768 3,012 183,247 18,657,173
Others 53,091 2,090,278 2,298,829 590,353 94,415 6,101 5,133,067
Total domestic 19,477,854 14,925,104 3,544,530 27,500,420 922,441 566,274 66,936,623
G 1-3 G 4-6 — Other G 7 Other Total
Foreign:
Public sector 220,796 72,198
— 6,516
— 211 299,721
Financial institutions 2,586,295 431,372
— 1,538,913
— 24,481 4,581,061
Commerce and industry 14,068,055 2,546,812
— 3,778,524 306,315 106,831 20,806,537
Lease financing 24,592
—
— 355,141
— 12,763 392,496
Others 1,219,303 181,808
— 386,418 10,914 10,253 1,808,696
Total foreign 18,119,041 3,232,190
— 6,065,512 317,229 154,539 27,888,511
Total ¥ 37,596,895 ¥ 18,157,294 ¥ 3,544,530 ¥ 33,565,932 ¥ 1,239,670 ¥ 720,813 ¥ 94,825,134
(1) The balance in the grade category of
“Other” in Consumer includes housing loans, which
amounted to ¥13,519,680 million and
¥70,963 million for the borrower category of Normal and
Requiring Caution, respectively.
Loans and advances past due but not impaired
The SMBC Group assesses the credit quality of loans and advances
taking into account past due information on a borrower basis, and
does not comprehensively collate the data related to the age
analysis of loans and advances that were past due but not impaired
on an individual basis. The aggregate balances of loans and
advances of borrowers with one or more facilities, where any of the
facilities are past due for less than three months but not impaired
as at March 31, 2018 and 2017 were ¥163,902 million
and ¥167,159 million, respectively. Those aggregate
balances therefore include individual loans and advances which are
not past due. Thus, in the tables below, the SMBC Group provides
the amount of loans and advances where the final payment at
contractual maturity is past due, by geography and by industry, at
March 31, 2018 and 2017. For reference, since all the loans
and advances that are past due over three months are treated as
impaired, those loans and advances are not included in the tables
below.
At March 31, 2018
Past due up to Past due 1-2 Past due 2-3 Total
(In
millions)
Domestic:
Manufacturing ¥ 476 ¥ 50 ¥ — ¥ 526
Agriculture, forestry, fisheries and mining
—
—
—
—
Construction 1 10 51 62
Transportation, communications and public enterprises 45
—
— 45
Wholesale and retail 2,240 318 21 2,579
Finance and insurance 65 76
— 141
Real estate and goods rental and leasing 73 44
— 117
Services 245
—
— 245
Lease financing
—
—
—
—
Consumer 55,020 10,298 3,378 68,696
Others 2,791 44 21 2,856
Total domestic 60,956 10,840 3,471 75,267
Foreign:
Financial institutions 11,934 165 1,548 13,647
Commerce and industry 14,822 2,705 13,554 31,081
Others 2,402 1,676 651 4,729
Total foreign 29,158 4,546 15,753 49,457
Total ¥ 90,114 ¥ 15,386 ¥ 19,224 ¥ 124,724
At March 31,
2017
Past due up to Past due 1-2 Past due 2-3 Total
(In
millions)
Domestic:
Manufacturing ¥ 701 ¥ 153 ¥ 4 ¥ 858
Agriculture, forestry, fisheries and mining 8
—
— 8
Construction 423 118 27 568
Transportation, communications and public enterprises 612 2
— 614
Wholesale and retail 5,436 1,345 235 7,016
Finance and insurance 59 55
— 114
Real estate and goods rental and leasing 832 164 56 1,052
Services 1,421 306 212 1,939
Lease financing 523 51 46 620
Consumer 41,103 12,508 22,666 76,277
Others 3,617
— 531 4,148
Total domestic 54,735 14,702 23,777 93,214
Foreign:
Financial institutions 2,313 234 2,022 4,569
Commerce and industry 17,326 8,418 9,641 35,385
Others 1,822 1,293 621 3,736
Total foreign 21,461 9,945 12,284 43,690
Total ¥ 76,196 ¥ 24,647 ¥ 36,061 ¥ 136,904
Impaired loans and advances
The following table shows the impaired loans and advances, by
geography and by industry, at March 31, 2018 and 2017.
At March 31,
2018 2017
(In
millions)
Domestic:
Manufacturing ¥ 76,253 ¥ 127,581
Agriculture, forestry, fisheries and mining 6,386 2,251
Construction 13,410 28,082
Transportation, communications and public enterprises 20,899 32,880
Wholesale and retail 98,419 122,719
Finance and insurance 3,022 4,135
Real estate and goods rental and leasing 41,939 147,516
Services 71,903 112,573
Lease financing
— 7,969
Consumer 319,285 363,305
Others 35,661 41,246
Total domestic 687,177 990,257
Foreign:
Public sector 21 25
Financial institutions 1,829 2,371
Commerce and industry 167,458 199,983
Lease financing
— 12,162
Others 22,383 23,890
Total foreign 191,691 238,431
Total impaired loans and advances before allowance for loan
losses 878,868 1,228,688
Less: Allowance for loan losses for impaired loans and advances (369,386 ) (532,451 )
Net impaired loans and advances ¥ 509,482 ¥ 696,237
Renegotiated loans and advances
The following table shows loans and advances at March 31, 2018
and 2017 that would otherwise be past due or impaired, but whose
terms have been renegotiated without providing any financial
concessions. These loans and advances are mainly classified as
requiring caution in the table of “Loans and advances neither
past due nor impaired” in the section “Loans and
advances by credit quality category.”
The SMBC Group continually assesses the creditworthiness of a
borrower for whom terms of the loans and advances have been
renegotiated, taking into account the actual state of the
borrower’s financial position and qualitative factors.
Further details are described in “Credit risk
evaluation” in the section “Credit risk management
methods.” Loans and advances whose terms have been
renegotiated and financial concessions have been provided are
reported as impaired and included in the table of “Impaired
loans and advances” in the section “Loans and advances
by credit quality category.”
At March 31,
2018 2017
(In
millions)
Renegotiated loans and advances ¥292,466 ¥463,092
Trading assets and investment securities
The following table shows an analysis of trading assets, financial
assets at fair value through profit or
loss, held-to-maturity available-for-sale
At March 31, 2018
Trading
assets
Financial assets at Held-to-maturity Available-for-sale Total
(In
millions)
AAA ¥ 190,650 ¥ — ¥ — ¥ 4,865,723 ¥ 5,056,373
AA- 2,399,644 1,518,748 372,459 8,538,879 12,829,730
A- 192,943
—
— 276,042 468,985
Lower than A- 56,458
—
— 532,626 589,084
Unrated 1,453 10,173
— 69,436 81,062
Total ¥ 2,841,148 ¥ 1,528,921 ¥ 372,459 ¥ 14,282,706 ¥ 19,025,234
Impaired available-for-sale
At March 31, 2017
Trading assets
Financial assets at Held-to-maturity Available-for-sale Total
(In
millions)
AAA ¥ 242,240 ¥ — ¥ — ¥ 4,666,664 ¥ 4,908,904
AA- 2,803,467 1,570,904 1,173,419 6,822,953 12,370,743
A- 236,348
—
— 132,943 369,291
Lower than A- 39,380
—
— 482,097 521,477
Unrated 18,493 12,053
— 19,113 49,659
Total ¥ 3,339,928 ¥ 1,582,957 ¥ 1,173,419 ¥ 12,123,770 ¥ 18,220,074
Impaired available-for-sale
Credit risk from derivative financial instruments
The SMBC Group maintains control limits on derivative positions, by
both amount and term. At any one time, the amount subject to credit
risk is limited to the fair value of derivative financial
instruments that are favorable to the SMBC Group (i.e., assets
where their fair value is positive).
The SMBC Group’s credit risk from derivatives is mitigated
where possible through netting agreements whereby derivative assets
and liabilities with the same counterparty can be offset. Netting
agreements, such as the ISDA master agreement, allow the netting of
obligations arising under all of the derivative transactions that
the agreement covers upon the counterparty’s default,
regardless of maturity and currency, re |
