Sumitomo Mitsui Financial (SMFG) 6-K Current report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE

13a-16

OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

For the month of December 2023

Commission file number

001-34919

SUMITOMO MITSUI FINANCIAL GROUP, INC.

(Translation of registrant’s name into English)

1-2,

Marunouchi

1-chome,

Chiyoda-ku,

Tokyo

100-0005,

Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form

20-F

or

Form 40-F:    Form

20-F    ☒    or    Form

40-F    ☐

THIS REPORT ON FORM

6-K

SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE INTO THE PROSPECTUS FORMING A PART OF SUMITOMO MITSUI FINANCIAL GROUP, INC.’S REGISTRATION STATEMENT ON FORM

F-3

(FILE NO. 333-273003) AND TO BE A PART OF SUCH PROSPECTUS FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

EXHIBITS

Exhibit number
101. INS	Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101. SCH	Inline XBRL Taxonomy Extension Schema
101. CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101. DEF	Inline XBRL Taxonomy Extension Definition Linkbase
101. LAB	Inline XBRL Taxonomy Extension Label Linkbase
101. PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	The cover page for the Company’s Interim Report on Form 6-K for the six months ended September 30, 2023, has been formatted in Inline XBRL

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sumitomo Mitsui Financial Group, Inc.
By:	/s/ Fumihiko Ito
	Name:  Fumihiko Ito
	Title:    Senior Managing Corporate Executive Officer              Group Chief Financial Officer

Date: December 22, 2023

This document contains a review of our financial condition and results of operations for the six months ended September 30, 2023.

TABLE OF CONTENTS

	Page
Cautionary Statement Regarding Forward-Looking Statements		1
Financial Review		2
Recent Developments		2
Operating Environment		2
Developments Related to Our Business		4
Accounting Changes		4
Operating Results and Financial Condition		5
Executive Summary		5
Operating Results		6
Business Segment Analysis		14
Financial Condition		18
Liquidity		32
Capital Management		34
Financial Risk Management		38
Risk Management System		38
Credit Risk		38
Market Risk		38

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” (as defined in the U.S. Private Securities Litigation Reform Act of 1995), regarding the intent, belief or current expectations of Sumitomo Mitsui Financial Group, Inc. (the “Company”) and its management with respect to the Company’s future financial condition and results of operations. In many cases but not all, these statements contain words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “probability,” “risk,” “project,” “should,” “seek,” “target,” “will,” and similar expressions. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those expressed in or implied by such forward-looking statements contained or deemed to be contained herein. The risks and uncertainties which may affect future performance include: deterioration of Japanese and global economic conditions and financial markets; declines in the value of the Company’s securities portfolio; incurrence of significant credit-related costs; the Company’s ability to successfully implement its business strategy through its subsidiaries, affiliates and alliance partners; and exposure to new risks as the Company expands the scope of its business. Given these and other risks and uncertainties, you should not place undue reliance on forward-looking statements, which speak only as of the date of this document. The Company undertakes no obligation to update or revise any forward-looking statements. Please refer to the Company’s most recent disclosure documents such as its annual report on

Form 20-F

and other documents submitted to the U.S. Securities and Exchange Commission, as well as its earnings press releases, for a more detailed description of the risks and uncertainties that may affect its financial conditions, its operating results, and investors’ decisions.

1

FINANCIAL REVIEW

Sumitomo Mitsui Financial Group, Inc. (“we,” “us,” “our,” the “Company” or “SMFG”) is a holding company for Sumitomo Mitsui Banking Corporation (“SMBC”), SMBC Trust Bank Ltd. (“SMBC Trust Bank”), Sumitomo Mitsui Finance and Leasing Company, Limited (“SMFL”), SMBC Nikko Securities Inc. (“SMBC Nikko Securities”), Sumitomo Mitsui Card Company, Limited (“Sumitomo Mitsui Card”), SMBC Finance Service Co., Ltd. (“SMBC Finance Service”), SMBC Consumer Finance Co., Ltd. (“SMBC Consumer Finance”), The Japan Research Institute, Limited (“The Japan Research Institute”), Sumitomo Mitsui DS Asset Management Company, Limited (“SMDAM”) and other subsidiaries and affiliates. Through our subsidiaries and affiliates, we offer a diverse range of financial services, including commercial banking, leasing, securities, consumer finance and other services. References to the “SMBC Group” are to us and our subsidiaries and affiliates taken as a whole.

RECENT DEVELOPMENTS

Operating Environment

Economic Environment

Our results of operations and financial condition are significantly affected by developments in Japan as well as the global economy.

The Japanese economy showed signs of recovery during the first half of the fiscal year ending March 31, 2024. This was primarily due to an increase in exports of goods and services supported by the easing supply chain constraints.

The following table presents the

quarter-on-quarter

growth rates of Japanese gross domestic product (“GDP”) from the third quarter of the fiscal year ended March 31, 2022, through the second quarter of the fiscal year ending March 31, 2024, based on data published in December 2023 by the Cabinet Office of the Government of Japan.

	For the fiscal year ended/ending March 31,
	2022				2023								2024
	3Q		4Q		1Q		2Q		3Q		4Q		1Q		2Q
Japanese GDP		1.1%		(0.6%)		1.1%		(0.1%)		0.2%		1.2%		0.9%		(0.7%)

Japanese GDP increased by 0.9% on a

quarter-on-quarter

basis for the first quarter of the fiscal year ending March 31, 2024, primarily due to an increase in exports of goods and services supported by the easing supply chain constraints. However, it decreased by 0.7% on a

quarter-on-quarter

basis for the second quarter of the fiscal year ending March 31, 2024, primarily due to changes in private inventories and an increase in imports of goods and services.

The employment situation, as a whole, improved gradually. The active job

openings-to-applicants

ratio published by the Ministry of Health, Labour and Welfare of Japan remained generally stable. According to the statistical data published by the Statistics Bureau of Japan, the unemployment rate in September 2023, was 2.6%, a decrease of 0.2 percentage points from March 2023. Further, the compensation of employees increased by 0.2% on a

quarter-on-quarter

basis for the first quarter of the fiscal year ending March 31, 2024. However, it decreased by 0.7% on a

quarter-on-quarter

basis for the second quarter of the fiscal year ending March 31, 2024.

According to Teikoku Databank, a research institution in Japan, there were approximately 4,200 corporate bankruptcies in Japan for the six months ended September 30, 2023, an increase of 34.7% from the same period in the previous year, involving approximately ¥1.6 trillion in total liabilities, a decrease of 10.1% from the same period in the previous year.

2

Interest rates in Japanese financial and capital markets are affected by the monetary policy measures of the Bank of Japan (“BOJ”). In January 2016, in addition to the existing provision of ample funds, the BOJ announced the introduction of “quantitative and qualitative monetary easing with a negative interest rate.” Thereafter, the BOJ announced the introduction of a new policy framework, “quantitative and qualitative monetary easing with yield curve control” in September 2016. Under this policy framework, the BOJ would keep short-term interest rates down by maintaining its policy of applying a negative interest rate of minus 0.1% to certain excess reserves of financial institutions held at the BOJ. Moreover, the BOJ indicated it would purchase Japanese government bonds so that the yield of the

10-year

Japanese government bonds would be close to around 0% to control long-term interest rates. In July 2018, the BOJ decided to introduce forward guidance for policy rates with a view to persistently continuing with powerful monetary easing. Further, in October 2019, the BOJ amended its forward guidance to indicate that it expects short-and long-term interest rates to remain at or below their present levels so long as the BOJ believes it is necessary to pay close attention to the possibility of a loss in momentum toward achieving its 2% price stability target. In March 2021, the BOJ announced the establishment of a scheme to apply interest rates, which would be linked to the short-term policy interest rate, as an incentive to financial institutions for part of their current account balances, based on the recognition of the importance of continuing with monetary easing in a sustainable manner and making nimble and effective responses to counter changes in developments in economic activity and prices, as well as in financial conditions. In addition, the BOJ made clear that the target range of the

10-year

Japanese government bonds yield fluctuations would be between plus and minus 0.25%. Moreover, in December 2022, in light of increased observed volatility in overseas financial and capital markets that affected markets in Japan, the BOJ expanded the range of

10-year

Japanese government bonds yield fluctuations to between plus and minus 0.5%. Under such circumstances, the uncollateralized overnight call rate, which is the benchmark for short-term interest rates, remained negative for the first half of the fiscal year ending March 31, 2024. The yield on newly issued

10-year

Japanese government bonds, which is the benchmark for long-term interest rates, was around 0.7% at September 29, 2023. On October 31, 2023, the BOJ announced adjustments to its yield curve control policy and will regard the upper bound of 1.0% for

10-year

Japanese government bonds yields as a reference in its market operations.

The yen depreciated against the U.S. dollar from ¥133.13 at March 31, 2023 to ¥148.77 at September 29, 2023, according to the statistical data published by the BOJ.

The Nikkei Stock Average, which is a price-weighted average of 225 stocks listed on the Tokyo Stock Exchange, rose from ¥28,041.48 at March 31, 2023 to ¥33,753.33 at July 3 2023, its highest closing level since March 1990. It subsequently dropped to ¥31,857.62 at September 29, 2023.

According to a report published by the Ministry of Land, Infrastructure, Transport and Tourism of Japan, the average residential land price and the average commercial land price in Japan increased by 0.7% and 1.5%, respectively, from July 1, 2022 to July 1, 2023.

During the first half of the fiscal year ending March 31, 2024, the global economy continued to recover gradually, but its pace of recovery slowed down primarily due to downward pressure on the global economy affected by persistent inflation and ongoing global monetary tightening. The U.S. economy continued to recover during the first half of the fiscal year ending March 31, 2024, primarily due to an increase in capital investments by business reflecting the easing supply chain constraints in the first three months of the period and an increase in private consumption supported by the positive employment situation in the latter three months of the period. The European economy, as a whole, had been at a standstill for the first half of the fiscal year ending March 31, 2024, primarily due to downward pressure on the European economy affected by persistent inflation and ongoing monetary tightening. In Asia, the Chinese economy slowed down for the first half of the fiscal year ending March 31, 2024, primarily due to the sluggish growth in employment and income of households, and the stalling momentum in the real estate market. Asian economies other than China, continued to recover gradually during the first half of the fiscal year ending March 31, 2024, primarily due to an increase in private consumption.

3

Regulatory Environment

In addition to economic factors and conditions, we expect that our results of operations and financial condition will be significantly affected by regulatory trends.

Capital Adequacy Requirements

Each year, the Financial Stability Board (“FSB”) publishes a list of global financial institutions that it has identified as Global Systemically Important Banks

(“G-SIBs”)

based on the methodology issued by the Basel Committee on Banking Supervision (“BCBS”).

G-SIBs

included on the list are required to maintain an amount of Common Equity Tier 1 (“CET1”) capital above the Basel III minimum requirement and applicable capital conservation buffer to discourage such financial institutions from becoming even more systemically important. This is commonly known as the

G-SIB

capital surcharge.

The

G-SIB

capital surcharge ranges from 1% to 2.5% of additional CET1 capital as a percentage of risk-weighted assets based on the organization’s size, interconnectedness, substitutability, complexity and cross-jurisdictional activity as determined by the FSB.

We have been included in the list of

G-SIBs

each year since the initial list was published in November 2011 and were included on the list published in November 2023. Based on that list, the additional CET1 capital as a percentage of risk-weighted assets we are currently required to maintain is 1%.

Developments Related to Our Business

Issuance of a Perpetual Subordinated Bond Qualified as Additional Tier 1 Capital

In September 2023, we issued ¥211 billion in aggregate principal amount of perpetual subordinated bonds. The bonds are Basel

III-compliant

Additional Tier 1 capital instruments and are classified as equity under International Financial Reporting Standards (“IFRS”). For further information, see Note 12 “Equity Attributable to Other Equity Instruments Holders” to our consolidated financial statements included elsewhere in this report.

Repurchase and Cancellation of Own Shares

On November 14, 2023, our board of directors resolved to repurchase shares of our common stock and cancel all the repurchased shares. The resolution authorized the repurchase of up to the lesser of (i) an aggregate of 26,000,000 shares of our common stock and (ii) an aggregate of ¥150 billion between November 15, 2023 and March 31, 2024. During November 2023, we entered into contracts to repurchase 3,568,800 shares of common stock for ¥26 billion in aggregate.

Changes in Management

On November 25, 2023, Jun Ohta passed away and stepped down from his position as our President and Group Chief Executive Officer (“CEO”). On November 27, 2023, we announced that Toru Nakashima, Deputy President and Corporate Executive Officer, would assume Jun Ohta’s duties in an acting capacity for the time being.

On December 1, 2023, Toru Nakashima was appointed as our new President and Group CEO. Toru Nakashima joined the Sumitomo Bank, a predecessor of SMBC, in April 1986, and previously held positions as our Group Chief Financial Officer and Group Chief Strategy Officer, among others. Subject to shareholder approval at the ordinary general meeting of shareholders to be held in June 2024, Toru Nakashima is also expected to join our board of directors.

Accounting Changes

See Note 2 “Summary of Material Accounting Policies” to our consolidated financial statements included elsewhere in this report.

4

OPERATING RESULTS AND FINANCIAL CONDITION

The figures in our operating results and financial condition presented below are prepared in accordance with IFRS as issued by the International Accounting Standards Board, except for the risk-weighted capital ratios, the segment results of operation and some other specifically identified information, which are prepared in accordance with Japanese banking regulations or accounting principles generally accepted in Japan (“Japanese GAAP”), and expressed in Japanese yen, unless otherwise stated or the context otherwise requires.

Executive Summary

Under the economic and financial circumstances described in “Recent Developments—Operating Environment,” we made a profit through our business activities including commercial banking and other financial services businesses. Our total operating income decreased by ¥15,091 million from ¥2,162,634 million for the six months ended September 30, 2022 to ¥2,147,543 million for the six months ended September 30, 2023, primarily due to decreases in net income from financial assets and liabilities at fair value through profit or loss and net trading income, which were partially offset by increases in net fee and commission income and net investment income. Our net profit decreased by ¥114,607 million from ¥777,394 million for the six months ended September 30, 2022 to ¥662,787 million for the six months ended September 30, 2023, primarily due to increases in impairment charges on financial assets and operating expenses.

Our total assets increased by ¥23,953,609 million from ¥257,687,038 million at March 31, 2023 to ¥281,640,647 million at September 30, 2023, primarily due to increases in investment securities, loans and advances and derivative financial instruments.

Our total liabilities increased by ¥22,425,939 million from ¥244,150,073 million at March 31, 2023 to ¥266,576,012 million at September 30, 2023, primarily due to increases in repurchase agreements and cash collateral on securities lent, deposits and derivative financial instruments.

Our total equity increased by ¥1,527,670 million from ¥13,536,965 million at March 31, 2023 to ¥15,064,635 million at September 30, 2023, primarily due to increases in other reserves, retained earnings and equity attributable to other equity instruments holders.

5

Operating Results

The following table presents information as to our income, expenses and net profit for the six months ended September 30, 2023 and 2022.

	For the six months ended September 30,
	2023		2022
	(In millions, except per share data)
Interest income	¥	2,776,392	¥	1,424,087
Interest expense		1,887,450		573,910
Net interest income		888,942		850,177
Fee and commission income		690,715		607,546
Fee and commission expense		119,089		112,737
Net fee and commission income		571,626		494,809
Net trading income		487,524		565,037
Net income from financial assets and liabilities at fair value through profit or loss		79,984		171,708
Net investment income (loss)		61,733		(4,915	)
Other income		57,734		85,818
Total operating income		2,147,543		2,162,634
Impairment charges on financial assets		130,253		88,025
Net operating income		2,017,290		2,074,609
General and administrative expenses		1,072,003		948,612
Other expenses		129,601		162,686
Operating expenses		1,201,604		1,111,298
Share of post-tax profit of associates and joint ventures		55,286		61,241
Profit before tax		870,972		1,024,552
Income tax expense		208,185		247,158
Net profit	¥	662,787	¥	777,394
Profit attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.	¥	651,127	¥	762,185
Non-controlling interests		5,891		9,603
Other equity instruments holders		5,769		5,606
Earnings per share:
Basic	¥	487.79	¥	555.91
Diluted		487.65		555.72

Total operating income decreased by ¥15,091 million, or 1%, from ¥2,162,634 million for the six months ended September 30, 2022 to ¥2,147,543 million for the six months ended September 30, 2023, primarily due to decreases in net income from financial assets and liabilities at fair value through profit or loss and net trading income, which were partially offset by increases in net fee and commission income and net investment income. In addition, due to an increase in impairment charges on financial assets, net operating income also decreased by ¥57,319 million from ¥2,074,609 million for the six months ended September 30, 2022, to ¥2,017,290 million for the six months ended September 30, 2023.

6

Net profit decreased by ¥114,607 million from ¥777,394 million for the six months ended September 30, 2022 to ¥662,787 million for the six months ended September 30, 2023, as a result of the decrease in net operating income described above and an increase in general and administrative expenses, which were partially offset by decreases in other expenses and income tax expense.

Net Interest Income

The following tables show the average balances of our statement of financial position items, related interest income, interest expense, net interest income and average annualized interest rates for the six months ended September 30, 2023 and 2022.

	For the six months ended September 30,
	2023						2022
	Average balance (3)		Interest income		Average rate		Average balance (3)		Interest income		Average rate
	(In millions, except percentages)
Interest-earning assets:
Interest-earning deposits with other banks:
Domestic offices	¥	853,733	¥	5,051		1.18%	¥	844,795	¥	2,371		0.56%
Foreign offices		10,461,026		241,478		4.62%		11,158,056		86,580		1.55%
Total		11,314,759		246,529		4.36%		12,002,851		88,951		1.48%
Call loans and bills bought, reverse repurchase agreements and cash collateral on securities borrowed:
Domestic offices		11,750,343		32,821		0.56%		9,949,229		3,817		0.08%
Foreign offices		8,710,275		150,503		3.46%		4,569,739		25,855		1.13%
Total		20,460,618		183,324		1.79%		14,518,968		29,672		0.41%
Investment securities (1) :
Domestic offices		16,930,897		93,214		1.10%		21,184,849		37,279		0.35%
Foreign offices		7,399,580		116,263		3.14%		6,147,879		55,133		1.79%
Total		24,330,477		209,477		1.72%		27,332,728		92,412		0.68%
Loans and advances (2) :
Domestic offices		68,597,905		595,707		1.74%		65,974,666		465,097		1.41%
Foreign offices		45,726,467		1,541,355		6.74%		45,378,263		747,955		3.30%
Total		114,324,372		2,137,062		3.74%		111,352,929		1,213,052		2.18%
Total interest-earning assets:
Domestic offices		98,132,878		726,793		1.48%		97,953,539		508,564		1.04%
Foreign offices		72,297,348		2,049,599		5.67%		67,253,937		915,523		2.72%
Total	¥	170,430,226	¥	2,776,392		3.26%	¥	165,207,476	¥	1,424,087		1.72%

7

	For the six months ended September 30,
	2023						2022
	Average balance (3)		Interest expense		Average rate		Average balance (3)		Interest expense		Average rate
	(In millions, except percentages)
Interest-bearing liabilities:
Deposits:
Domestic offices	¥	103,569,747	¥	102,102		0.20%	¥	100,678,351	¥	25,551		0.05%
Foreign offices		39,896,364		907,091		4.55%		35,785,345		261,739		1.46%
Total		143,466,111		1,009,193		1.41%		136,463,696		287,290		0.42%
Call money and bills sold, repurchase agreements and cash collateral on securities lent:
Domestic offices		10,840,508		146,194		2.70%		10,968,681		34,093		0.62%
Foreign offices		8,289,719		212,182		5.12%		8,290,399		53,582		1.29%
Total		19,130,227		358,376		3.75%		19,259,080		87,675		0.91%
Borrowings and other interest-bearing liabilities:
Domestic offices		16,117,799		59,045		0.73%		19,392,604		27,754		0.29%
Foreign offices		1,125,467		50,966		9.06%		818,075		25,231		6.17%
Total		17,243,266		110,011		1.28%		20,210,679		52,985		0.52%
Debt securities in issue:
Domestic offices		9,836,853		294,719		5.99%		8,160,989		112,072		2.75%
Foreign offices		2,203,388		55,908		5.07%		2,278,082		16,667		1.46%
Total		12,040,241		350,627		5.82%		10,439,071		128,739		2.47%
Premiums for deposit insurance and others:
Domestic offices		—		11,915		—		—		10,074		—
Foreign offices		—		47,328		—		—		7,147		—
Total		—		59,243		—		—		17,221		—
Total interest-bearing liabilities:
Domestic offices		140,364,907		613,975		0.87%		139,200,625		209,544		0.30%
Foreign offices		51,514,938		1,273,475		4.94%		47,171,901		364,366		1.54%
Total	¥	191,879,845	¥	1,887,450		1.97%	¥	186,372,526	¥	573,910		0.62%
Net interest income and interest rate spread			¥	888,942		1.29%			¥	850,177		1.10%

(1) Taxable investment securities and non-taxable investment securities are not disclosed separately because the aggregate effect of these average balances and interest income would not be material. In addition, the yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect of such calculation would not be material.

(2) Loans and advances include impaired loans and advances. The amortized portion of net loan origination fees (costs) is included in interest income on loans and advances.

(3) Average balances are generally based on a daily average. Weekly, month-end or quarter-end averages are used for certain average balances where it is not practical to obtain applicable daily averages. The allocations of amounts between domestic and foreign are based on the location of the office.

8

The following tables show changes in our interest income, interest expense and net interest income based on changes in volume and changes in rate for the six months ended September 30, 2023 compared to the six months ended September 30, 2022.

	Six months ended September 30, 2023 compared to six months ended September 30, 2022 Increase / (decrease)
	Volume			Rate		Net change
				(In millions)
Interest income:
Interest-earning deposits with other banks:
Domestic offices	¥	25		¥	2,655	¥	2,680
Foreign offices		(5,729	)		160,627		154,898
Total		(5,704	)		163,282		157,578
Call loans and bills bought, reverse repurchase agreements and cash collateral on securities borrowed:
Domestic offices		847			28,157		29,004
Foreign offices		38,120			86,528		124,648
Total		38,967			114,685		153,652
Investment securities:
Domestic offices		(8,811	)		64,746		55,935
Foreign offices		12,999			48,131		61,130
Total		4,188			112,877		117,065
Loans and advances:
Domestic offices		19,122			111,488		130,610
Foreign offices		5,789			787,611		793,400
Total		24,911			899,099		924,010
Total interest income:
Domestic offices		11,183			207,046		218,229
Foreign offices		51,179			1,082,897		1,134,076
Total	¥	62,362		¥	1,289,943	¥	1,352,305

9

	Six months ended September 30, 2023 compared to six months ended September 30, 2022 Increase / (decrease)
	Volume			Rate			Net change
	(In millions)
Interest expense:
Deposits:
Domestic offices	¥	743		¥	75,808		¥	76,551
Foreign offices		33,281			612,071			645,352
Total		34,024			687,879			721,903
Call money and bills sold, repurchase agreements and cash collateral on securities lent:
Domestic offices		(402	)		112,503			112,101
Foreign offices		(4	)		158,604			158,600
Total		(406	)		271,107			270,701
Borrowings and other interest-bearing liabilities:
Domestic offices		(5,470	)		36,761			31,291
Foreign offices		11,460			14,275			25,735
Total		5,990			51,036			57,026
Debt securities in issue:
Domestic offices		25,235			157,412			182,647
Foreign offices		(3,094	)		42,335			39,241
Total		22,141			199,747			221,888
Premiums for deposit insurance and others:
Domestic offices		1,841			—			1,841
Foreign offices		40,181			—			40,181
Total		42,022			—			42,022
Total interest expense:
Domestic offices		21,947			382,484			404,431
Foreign offices		81,824			827,285			909,109
Total	¥	103,771		¥	1,209,769		¥	1,313,540
Net interest income:
Domestic offices	¥	(10,764	)	¥	(175,438	)	¥	(186,202	)
Foreign offices		(30,645	)		255,612			224,967
Total	¥	(41,409	)	¥	80,174		¥	38,765

Interest Income

Our interest income increased by ¥1,352,305 million, or 95%, from ¥1,424,087 million for the six months ended September 30, 2022 to ¥2,776,392 million for the six months ended September 30, 2023. This increase was primarily due to an increase in interest income on loans and advances of ¥924,010 million, or 76%. Interest income on loans and advances increased by ¥130,610 million, or 28% at domestic offices and by ¥793,400 million, or 106% at foreign offices. The increases were primarily due to an increase in the average rate on loans at foreign offices, reflecting an increase in the market interest rate as well as the interest rate spread through the reduction of

low-margin

assets.

10

Interest Expense

Our interest expense increased by ¥1,313,540 million, or 229%, from ¥573,910 million for the six months ended September 30, 2022 to ¥1,887,450 million for the six months ended September 30, 2023, primarily due to an increase in interest expense on deposits. Our interest expense on deposits increased by ¥721,903 million, or 251%, from ¥287,290 million for the six months ended September 30, 2022 to ¥1,009,193 million for the six months ended September 30, 2023, primarily due to an increase in the average rate on deposits at foreign offices, reflecting an increase in the market interest rate.

Net Interest Income

Our net interest income increased by ¥38,765 million, or 5%, from ¥850,177 million for the six months ended September 30, 2022 to ¥888,942 million for the six months ended September 30, 2023. This was primarily due to an increase in the average rate on interest-earning assets, primarily loans and advances at foreign offices which was partially offset by an increase in the average rate on deposits at foreign offices.

From the six months ended September 30, 2022 to the six months ended September 30, 2023, the average rate on loans and advances at domestic offices increased by 0.33 percentage points from 1.41% to 1.74%. The average rate on loans and advances at foreign offices increased by 3.44 percentage points from 3.30% to 6.74%, resulting in the total for loans and advances increasing by 1.56 percentage points from 2.18% to 3.74%. On the other hand, the average rate on deposits increased by 0.99 percentage points from 0.42% to 1.41%, primarily due to an increase in the average rate on deposits at foreign offices of 3.09 percentage points from 1.46% to 4.55%.

Net Fee and Commission Income

The following table sets forth our net fee and commission income for the six months ended September 30, 2023 and 2022.

	For the six months ended September 30,
	2023		2022
	(In millions)
Fee and commission income from:
Loans	¥	71,500	¥	68,340
Credit card business		207,529		181,965
Guarantees		41,245		35,386
Securities-related business		88,549		55,537
Deposits		9,016		8,560
Remittances and transfers		74,658		73,526
Safe deposits		2,195		2,051
Trust fees		3,785		3,044
Investment trusts		82,543		74,220
Agency		4,746		4,630
Others		104,949		100,287
Total fee and commission income		690,715		607,546
Fee and commission expense from:
Remittances and transfers		14,871		14,309
Others		104,218		98,428
Total fee and commission expense		119,089		112,737
Net fee and commission income	¥	571,626	¥	494,809

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Fee and commission income increased by ¥83,169 million, or 14% from ¥607,546 million for the six months ended September 30, 2022 to ¥690,715 million for the six months ended September 30, 2023. Primary sources of fee and commission income are fees obtained through credit card business, fees and commissions obtained through securities-related business, fees and commissions obtained through investment trusts, remittance and transfer fees, and loan transaction fees. The increase in fee and commission income was primarily due to increases in fees obtained through credit card business, reflecting the increase in cashless payments, and fees and commissions obtained through securities-related business.

Fee and commission expense increased by ¥6,352 million, or 6%, from ¥112,737 million for the six months ended September 30, 2022 to ¥119,089 million for the six months ended September 30, 2023.

As a result, net fee and commission income increased by ¥76,817 million, or 16% from ¥494,809 million for the six months ended September 30, 2022 to ¥571,626 million for the six months ended September 30, 2023.

Net Income from Trading, Financial Assets and Liabilities at Fair Value Through Profit or Loss, and Investment Securities

The following table sets forth our net income from trading, financial assets and liabilities at fair value through profit or loss, and investment securities for the six months ended September 30, 2023 and 2022.

	For the six months ended September 30,
	2023			2022
	(In millions)
Net trading income:
Interest rate	¥	231,755		¥	284,254
Foreign exchange		239,041			335,488
Equity		18,017			(56,203	)
Credit		(415	)		830
Others		(874	)		668
Total net trading income	¥	487,524		¥	565,037
Net income from financial assets and liabilities at fair value through profit or loss:
Net income from financial assets at fair value through profit or loss:
Net income from debt instruments	¥	75,815		¥	102,831
Net income from equity instruments		3,177			464
Net income from financial liabilities designated at fair value through profit or loss		992			68,413
Total net income from financial assets and liabilities at fair value through profit or loss	¥	79,984		¥	171,708
Net investment income (loss):
Net gain (loss) from disposal of debt instruments	¥	3,122		¥	(54,143	)
Dividend income		58,611			49,228
Total net investment income (loss)	¥	61,733		¥	(4,915	)

Net trading income, which includes income and losses from trading assets and liabilities and derivative financial instruments, decreased by ¥77,513 million from ¥565,037 million for the six months ended September 30, 2022 to ¥487,524 million for the six months ended September 30, 2023. The decrease was primarily due to a decrease in net trading income from foreign exchange transactions and interest rate related transactions, which was partially offset by an increase in net trading income from equity related transactions.

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We have carried out hedging transactions mainly to hedge the interest rate risk of financial assets and liabilities and the foreign exchange risk of foreign currency denominated assets and liabilities. Of those hedges, economic hedges are economically effective for risk management but are not accounted for as hedge accounting under IFRS.

As for the economic hedges against interest rate risk, hedged items include loans and deposits and hedging instruments are derivative financial instruments such as interest rate swaps. As for the economic hedges against foreign exchange risk, hedged items are foreign currency denominated assets and liabilities and hedging instruments are currency derivatives. Economic hedge transactions may lead to accounting mismatches (i.e., when the gains or losses on the hedged items and hedging instruments do not arise at the same time, or the hedged items and hedging instruments do not offset each other either in profit or loss, or in other comprehensive income), and may result in significant fluctuations in net trading income.

Net income from financial assets and liabilities at fair value through profit or loss decreased by ¥91,724 million from ¥171,708 million for the six months ended September 30, 2022 to ¥79,984 million for the six months ended September 30, 2023. This was primarily due to a decrease in net gains from changes in the fair value of debt securities in issue designated at fair value through profit or loss.

Net investment income (loss) increased by ¥66,648 million from a net loss of ¥4,915 million for the six months ended September 30, 2022 to a net income of ¥61,733 million for the six months ended September 30, 2023. This was primarily due to a decrease in losses from sales of foreign bonds.

Impairment Charges on Financial Assets

The following table sets forth our impairment charges (reversals) on financial assets for the six months ended September 30, 2023 and 2022.

	For the six months ended September 30,
	2023			2022
	(In millions)
Loans and advances	¥	129,983		¥	86,989
Loan commitments		(5,132	)		(7,429	)
Financial guarantees		5,402			8,465
Total impairment charges on financial assets	¥	130,253		¥	88,025

Our impairment charges on financial assets consist of losses relating to loans and advances, loan commitments and financial guarantee contracts. Impairment charges on these financial assets are mainly affected by the economic environment and financial conditions of borrowers.

Impairment charges on financial assets increased by ¥42,228 million from ¥88,025 million for the six months ended September 30, 2022 to ¥130,253 million for the six months ended September 30, 2023, primarily due to an increase in impairment charges on loans and advances. The increase was primarily due to an increase in the provision for loan losses related to some large corporate borrowers and consumer loans. For detailed information on provision for loan losses, see “—Financial Condition—Allowance for Loan Losses.”

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General and Administrative Expenses

The following table sets forth our general and administrative expenses for the six months ended September 30, 2023 and 2022.

	For the six months ended September 30,
	2023		2022
	(In millions)
Personnel expenses	¥	501,002	¥	449,445
Depreciation and amortization		133,944		129,388
Building and maintenance expenses		4,798		3,460
Supplies expenses		8,008		7,002
Communication expenses		15,169		15,101
Publicity and advertising expenses		78,238		64,179
Taxes and dues		49,340		43,988
Outsourcing expenses		67,450		59,456
Office equipment expenses		39,477		34,737
Others		174,577		141,856
Total general and administrative expenses	¥	1,072,003	¥	948,612

General and administrative expenses increased by ¥123,391 million, or 13%, from ¥948,612 million for the six months ended September 30, 2022 to ¥1,072,003 million for the six months ended September 30, 2023. The increase was primarily due to the higher marketing costs in our credit card business which is successfully increasing new customers, the effects of inflation and the impact of the depreciation of the yen.

Share of

Post-tax

Profit of Associates and Joint Ventures

Share of

post-tax

profit of associates and joint ventures decreased by ¥5,955 million from ¥61,241 million for the six months ended September 30, 2022 to ¥55,286 million for the six months ended September 30, 2023, primarily due to a decrease in the share of profit from foreign associates and joint ventures.

Income Tax Expense

Income tax expense decreased by ¥38,973 million from ¥247,158 million for the six months ended September 30, 2022 to ¥208,185 million for the six months ended September 30, 2023. The decrease was primarily due to a decrease in deferred tax expense related to derivative financial instruments.

Business Segment Analysis

Our business segment information is prepared based on the internal reporting system utilized by our management to assess the performance of our business segments under Japanese GAAP.

We have four main business segments: the Wholesale Business Unit, the Retail Business Unit, the Global Business Unit and the Global Markets Business Unit, with the remaining operations recorded in Head office account and others.

Since figures reported to management are prepared under Japanese GAAP, the segment information does not agree to the figures in the consolidated financial statements under IFRS. This difference is addressed in Note 4 “Segment Analysis—Reconciliation of Segmental Results of Operations to Consolidated Income Statements” to our consolidated financial statements included elsewhere in this report.

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Description of Business Segments

Wholesale Business Unit

The Wholesale Business Unit provides comprehensive solutions primarily for corporate clients in Japan that respond to wide-ranging client needs in relation to financing, investment management, risk hedging, settlement, M&A and other advisory services, digital services and leasing services. This business unit mainly consists of the wholesale businesses of SMBC, SMBC Trust Bank, SMFL, SMBC Nikko Securities, Sumitomo Mitsui Card and SMBC Finance Service.

Retail Business Unit

The Retail Business Unit provides financial services to consumers residing in Japan and mainly consists of the retail businesses of SMBC, SMBC Trust Bank, SMBC Nikko Securities, Sumitomo Mitsui Card, SMBC Finance Service and SMBC Consumer Finance. This business unit offers a wide range of products and services for consumers, including wealth management services, settlement services, consumer finance and housing loans, in order to address the financial needs of all individual customers.

Global Business Unit

The Global Business Unit supports the global businesses of a diverse range of clients, such as Japanese companies operating overseas,

non-Japanese

companies, financial institutions and government agencies and public corporations of various countries. This business unit provides a variety of tailored products and services to meet customer and market requirements, including loans, deposits, clearing services, trade finance, project finance, loan syndication, derivatives, global cash management services, leasing services, equity and fixed income sales and trading, underwriting activities, Japanese stock brokerage and M&A advisory services. This business unit mainly consists of the global businesses of SMBC, SMBC Trust Bank, SMFL, SMBC Nikko Securities and their foreign subsidiaries.

Global Markets Business Unit

The Global Markets Business Unit offers solutions through foreign exchange products, derivatives, bonds, stocks and other marketable financial products, and also undertakes asset liability management operations, which help comprehensively control balance sheet liquidity risks and market risks. This business unit consists of the Global Markets and Treasury Unit of SMBC, which was renamed from the Treasury Unit in April 2023, and the Global Markets Division of SMBC Nikko Securities.

Head office account and others

The Head office account and others represent the difference between the aggregate of the Wholesale Business Unit, the Retail Business Unit, the Global Business Unit and the Global Markets Business Unit, and the Group as a whole. It mainly consists of administrative expenses related to headquarters operations and profit or loss from other subsidiaries including The Japan Research Institute and SMDAM. It also includes the elimination items related to internal transactions between the Group companies.

Segmental Results of Operations

The following tables show our results of operations by business segment for the six months ended September 30, 2023 and 2022. The comparative information for the fiscal year ended September 30, 2022 has been restated to reflect the changes to the allocation logic from the Head office account and others to other business segments in our managerial accounting, which became effective from April 1, 2023, and to eliminate the impact of factors such as changes in interest rates and exchange rates that may distort the comparison.

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For the six months ended September 30, 2023:

	Wholesale Business Unit			Retail Business Unit			Global Business Unit			Global Markets Business Unit			Head office account and others			Total
	(In billions)
Consolidated gross profit (1)	¥	396.9		¥	621.8		¥	670.5		¥	286.6		¥	(158.5	)	¥	1,817.3
General and administrative expenses		(151.9	)		(526.8	)		(391.0	)		(79.9	)		67.4			(1,082.2	)
Others (2)		53.6			3.4			31.8			15.8			(68.8	)		35.8
Consolidated net business profit	¥	298.6		¥	98.4		¥	311.3		¥	222.5		¥	(159.9	)	¥	770.9

For the six months ended September 30, 2022:

	Wholesale Business Unit			Retail Business Unit			Global Business Unit			Global Markets Business Unit			Head office account and others			Total
	(In billions)
Consolidated gross profit (1)	¥	353.4		¥	567.9		¥	589.5		¥	266.7		¥	(145.1	)	¥	1,632.4
General and administrative expenses		(143.3	)		(487.7	)		(330.2	)		(73.6	)		72.2			(962.6	)
Others (2)		48.8			2.1			47.1			15.4			(61.3	)		52.1
Consolidated net business profit	¥	258.9		¥	82.3		¥	306.4		¥	208.5		¥	(134.2	)	¥	721.9

(1) Consolidated gross profit = (Interest income – Interest expenses) + Trust fees + (Fee and commission income – Fee and commission expenses) + (Trading income – Trading losses) + (Other operating income – Other operating expenses).

(2) “Others” includes share of profit or loss of equity-method associates and joint ventures and cooperated profit and loss, that is, profit and loss double counted within our business segments in the managerial accounting.

The following are explanations of our results of operations by business segment for the six months ended September 30, 2023. It also includes the changes from the same period in the previous year, which are adjusted by eliminating the impact of factors such as changes in interest rates and exchange rates that may distort the comparison.

Wholesale Business Unit

Consolidated gross profit for the six months ended September 30, 2023 was ¥396.9 billion and increased by ¥43.5 billion on an adjusted basis compared to the six months ended September 30, 2022. This was primarily due to increases in interest income on loans and fees and commission income of SMBC.

General and administrative expenses for the six months ended September 30, 2023 was ¥151.9 billion and increased by ¥8.6 billion on an adjusted basis compared to the six months ended September 30, 2022.

Others for the six months ended September 30, 2023 was ¥53.6 billion.

As a result, consolidated net business profit for the six months ended September 30, 2023 was ¥298.6 billion and increased by ¥39.7 billion on an adjusted basis compared to the six months ended September 30, 2022.

Retail Business Unit

Consolidated gross profit for the six months ended September 30, 2023 was ¥621.8 billion and increased by ¥53.9 billion on an adjusted basis compared to the six months ended September 30, 2022. This was primarily due to increases in income from the payment businesses of Sumitomo Mitsui Card and the wealth management businesses of SMBC Nikko Securities reflecting the recovery in the market environment.

General and administrative expenses for the six months ended September 30, 2023 was ¥526.8 billion and increased by ¥39.1 billion on an adjusted basis compared to the six months ended September 30, 2022. This was primarily due to an increase in the revenue-linked variable costs of Sumitomo Mitsui Card.

16

Others for the six months ended September 30, 2023 was ¥3.4 billion.

As a result, consolidated net business profit for the six months ended September 30, 2023 was ¥98.4 billion and increased by ¥16.1 billion on an adjusted basis compared to the six months ended September 30, 2022.

Global Business Unit

Consolidated gross profit for the six months ended September 30, 2023 was ¥670.5 billion and increased by ¥81.0 billion on an adjusted basis compared to the six months ended September 30, 2022. This was primarily due to increases in interest on loans and loan-related fees.

General and administrative expenses for the six months ended September 30, 2023 was ¥391.0 billion and increased by ¥60.8 billion on an adjusted basis compared to the six months ended September 30, 2022. This was primarily due to increases in expenses related to overseas business development and enhancement of the governance system.

Others for the six months ended September 30, 2023 was ¥31.8 billion and decreased by ¥15.3 billion on an adjusted basis compared to the six months ended September 30, 2022. This was primarily due to gains recognized in the same period in the previous year from changes in the ownership interest of The Bank of East Asia, Limited, which is our equity-method associate.

As a result, consolidated net business profit for the six months ended September 30, 2023 was ¥311.3 billion and increased by ¥4.9 billion on an adjusted basis compared to the six months ended September 30, 2022.

Global Markets Business Unit

Consolidated gross profit for the six months ended September 30, 2023 was ¥286.6 billion and increased by ¥19.9 billion on an adjusted basis compared to the six months ended September 30, 2022. This was primarily due to an increase in the sales and trading profits of SMBC Nikko Securities.

General and administrative expenses for the six months ended September 30, 2023 was ¥79.9 billion and increased by ¥6.3 billion on an adjusted basis compared to the six months ended September 30, 2022.

Others for the six months ended September 30, 2023 was ¥15.8 billion.

As a result, consolidated net business profit for the six months ended September 30, 2023 was ¥222.5 billion and increased by ¥14.0 billion on an adjusted basis compared to the six months ended September 30, 2022.

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Revenues by Region

The following table sets forth the percentage of our total operating income under IFRS for each indicated period, based on the total operating income of our offices in the indicated regions. For each of the periods presented, we earned the highest proportion of our total operating income in Japan among the indicated regions. We compete with other major Japanese banking groups and financial service providers in Japan. We earned the remainder in the Americas, Europe and Middle East, and Asia and Oceania, where we mainly compete with global financial institutions.

	For the six months ended September 30,
	2023			2022
Region:
Japan		39	%		51	%
Foreign:
Americas		27	%		21	%
Europe and Middle East		10	%		9	%
Asia and Oceania (excluding Japan)		24	%		19	%
Total		100	%		100	%

Financial Condition

Assets

Our total assets increased by ¥23,953,609 million from ¥257,687,038 million at March 31, 2023 to ¥281,640,647 million at September 30, 2023. The increase was primarily due to increases in investment securities, loans and advances and derivative financial instruments.

Our assets at September 30, 2023 and March 31, 2023 were as follows:

	At September 30, 2023		At March 31, 2023
	(In millions)
Cash and deposits with banks	¥	78,237,000	¥	76,465,511
Call loans and bills bought		6,088,010		5,684,812
Reverse repurchase agreements and cash collateral on securities borrowed		13,402,684		11,024,084
Trading assets		5,310,998		4,585,915
Derivative financial instruments		13,015,294		8,649,947
Financial assets at fair value through profit or loss		1,900,462		1,488,239
Investment securities		34,082,730		27,595,598
Loans and advances		116,285,384		111,891,134
Investments in associates and joint ventures		1,384,292		1,141,250
Property, plant and equipment		1,877,012		1,832,241
Intangible assets		973,871		905,028
Other assets		8,929,755		6,167,202
Current tax assets		71,559		190,267
Deferred tax assets		81,596		65,810
Total assets	¥	281,640,647	¥	257,687,038

Loans and Advances

Our main operating activity is the lending business. We make loans and extend other types of credit principally to corporate and individual customers in Japan and to corporate customers in foreign countries.

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At September 30, 2023, our loans and advances were ¥116,285,384 million, or 41% of total assets, representing an increase of ¥4,394,250 million, or 4%, from ¥111,891,134 million at March 31, 2023. The increase in loans and advances was primarily due to an increase in those to foreign customers. This was primarily due to the translation impact of the depreciation of the yen, although the balance of foreign currency-denominated loans decreased, reflecting a decline in loan demand and the reduction of

low-margin

assets.

Domestic

Through SMBC and other banking and

non-bank

subsidiaries, we make loans to a broad range of industrial, commercial and individual customers in Japan. The following table shows our outstanding loans and advances to customers whose domiciles are in Japan, classified by industry, before deducting the allowance for loan losses, and adjusting unearned income, unamortized

premiums-net

and deferred loan

fees-net

at the dates indicated.

	At September 30, 2023		At March 31, 2023
	(In millions)
Manufacturing	¥	10,831,278	¥	10,654,680
Agriculture, forestry, fisheries and mining		241,401		379,701
Construction		927,140		949,426
Transportation, communications and public enterprises		6,466,072		6,464,350
Wholesale and retail		5,924,557		6,143,314
Finance and insurance		3,979,410		3,901,580
Real estate and goods rental and leasing		16,103,691		15,604,512
Services		4,871,713		4,896,764
Municipalities		540,143		687,606
Lease financing		10,927		12,712
Consumer (1)		16,129,780		15,886,487
Others (2)		1,910,608		2,109,447
Total domestic	¥	67,936,720	¥	67,690,579

(1) The balance in Consumer mainly consists of housing loans. The housing loan balances amounted to ¥10,865,542 million and ¥10,784,572 million at September 30, 2023 and March 31, 2023, respectively.

(2) The balance in Others includes loans and advances to the Government of Japan.

Foreign

The following table shows the outstanding loans and advances to our customers whose domiciles are not in Japan, classified by industry, before deducting the allowance for loan losses, and adjusting unearned income, unamortized

premiums-net

and deferred loan

fees-net

at the dates indicated.

	At September 30, 2023		At March 31, 2023
	(In millions)
Public sector	¥	327,745	¥	291,238
Financial institutions		10,560,401		9,283,249
Commerce and industry		32,313,628		30,369,262
Lease financing		330,097		295,199
Others		6,212,814		5,214,300
Total foreign	¥	49,744,685	¥	45,453,248

Allowance for Loan Losses

We calculate the allowance for loan losses under the expected credit losses (“ECL”) model using the latest obligor grades (our internal credit rating) and supplementary data such as the borrowers’ operating cash flows, realizable value of collateral and recent economic conditions. We incorporate forward-looking information into the ECL measurement by obligor grading, macroeconomic factors and additional adjustments if the current circumstances, events or conditions at the relevant portfolio level are not fully reflected in the ECL model.

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We assumed that the Japanese economy would continue to recover during the fiscal years ending March 31, 2024 and 2025, driven by an increase in the consumption of services such as dining out and travel, which had been suppressed by the

COVID-19

pandemic. We also assumed that the global GDP growth would slow to around 3% for the fiscal year ending March 31, 2024, but would gradually recover during the fiscal year ending March 31, 2025, due to our expectation that global monetary tightening would peak in response to declining inflationary pressure. This assumption was considered in determining the base scenario. The upside and downside scenarios were developed based on the premises of the base scenario and past macroeconomic experience. The following table shows the growth rates of the Japanese and global GDP, which are the key factors of the macroeconomic scenarios, under the base scenario.

	For the fiscal year ending March 31,
	2024		2025
	(%)
Japanese GDP		6.2		2.6
Global GDP		3.0		3.1

In determining the need for making additional ECL adjustments, we considered whether there is an increase in the credit risk for some portfolios which had a material adverse impact resulting from the sanctions imposed in connection with Russia’s aggression against Ukraine, the rising interest rates in foreign countries due to the global monetary tightening, or the subsequent effects following the mitigation of the

COVID-19

pandemic and whether the increased risk, if any, was not fully incorporated in the ECL model. For the Russian exposure, we evaluated the forward-looking impact on credit risks and losses based on factors such as the possibility that payment of principal or interest would be delayed or the request for loan restructuring would be made due to the prolonged impact of sanctions targeting Russia imposed by the Japanese government and authorities in several other jurisdictions, Russia’s measures to defend its economy and mitigate the effect of sanctions, and a deterioration of credit condition of Russia. In addition, we also considered the prolonged difficulty in collecting payments from Russian customers through remittances out of Russia due to orders by the Russian authorities. For the rising interest rates in foreign countries from the global monetary tightening, we evaluated the forward-looking impact on credit risks and losses in light of the increased interest payment burden on borrowers. For the subsequent effects following the mitigation of the

COVID-19

pandemic, additional ECL adjustments included the consideration of the termination of the government support measures and the establishment of new lifestyles. We evaluated the forward-looking impact on credit risks and losses of certain industry-related portfolios selected based on changes in factors such as the market conditions and bankruptcy trends. As a consequence, we decided to maintain ECL adjustments for the above portfolios affected by the situation in Russia and Ukraine, the rising interest rates in foreign countries due to the global monetary tightening and the subsequent effects following the mitigation of the

COVID-19

pandemic. At September 30, 2023, our credit risk exposure to Russian borrowers was approximately ¥334 billion and the ECL for that exposure was ¥95,564 million. In addition, the additional adjustments to the ECL allowance for the portfolios affected by the rising interest rates in foreign countries due to the global monetary tightening were ¥26,545 million.

For the six months ended September 30, 2023, the allowance for loan losses increased by ¥85,517 million from ¥864,114 million at beginning of the period to ¥949,631 million at end of period. The balance of the allowance for loan losses increases when a provision for loan losses is recognized, and decreases when charge-offs are recognized through the sales of loans and write-offs. As we recorded a provision for loan losses of ¥129,983 million and charge-offs of ¥91,512 million for the six months ended September 30, 2023, the provision for loan losses exceeded charge-offs and the overall allowance for loan losses increased.

20

The provision for loan losses increased by ¥42,994 million from ¥86,989 million for the six months ended September 30, 2022 to ¥129,983 million for the six months ended September 30, 2023, primarily due to an increase in the provision for loan losses related to some large corporate borrowers. Charge-offs decreased by ¥50,686 million from ¥142,198 million for the six months ended September 30, 2022 to ¥91,512 million for the six months ended September 30, 2023, primarily due to charge-offs related to some other large borrowers recognized in the previous year.

The following tables show the analysis of our allowance for loan losses for the six months ended September 30, 2023 and 2022.

	At September 30, 2023
	12-month ECL			Lifetime ECL not credit- impaired			Lifetime ECL credit-impaired		Total
	(In millions)
Allowance for loan losses:
Balance at April 1, 2023	¥	187,455		¥	240,494		¥	436,165	¥	864,114
Net transfers between stages		(1,301	)		(9,373	)		10,674		—
Provision for loan losses		12,665			18,250			99,068		129,983
Charge-offs (1)		—			—			91,512		91,512
Recoveries		—			—			8,049		8,049
Net charge-offs		—			—			83,463		83,463
Others (2)		7,235			8,117			23,645		38,997
Balance at September 30, 2023	¥	206,054		¥	257,488		¥	486,089	¥	949,631
	At September 30, 2022
	12-month ECL			Lifetime ECL not credit- impaired			Lifetime ECL credit-impaired		Total
	(In millions)
Allowance for loan losses:
Balance at April 1, 2022	¥	162,919		¥	247,020		¥	583,115	¥	993,054
Net transfers between stages		(7,616	)		(8,529	)		16,145		—
Provision for loan losses		12,104			5,737			69,148		86,989
Charge-offs (1)		—			—			142,198		142,198
Recoveries		—			—			10,467		10,467
Net charge-offs		—			—			131,731		131,731
Others (2)		7,882			14,052			19,922		41,856
Balance at September 30, 2022	¥	175,289		¥	258,280		¥	556,599	¥	990,168

(1) Charge-offs consist of the reduction of the allowance through the sales of loans and write-offs.

(2) Others mainly include foreign exchange translations for the six months ended September 30, 2023 and 2022.

Impaired Loans and Advances

A portion of the total domestic and foreign loans and advances consists of impaired loans and advances, which are comprised of “potentially bankrupt, virtually bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” “restructured (loans)” and “other impaired (loans and advances).” The loans and advances for which management has serious doubts about the ability of the borrowers to comply in the near future with the repayment terms are wholly included in impaired loans and advances.

21

“Potentially bankrupt, virtually bankrupt and bankrupt (loans and advances)” comprise loans and advances to borrowers that are perceived to have a high risk of falling into bankruptcy, may not have been legally or formally declared bankrupt but are essentially bankrupt, or have been legally or formally declared bankrupt.

Loans classified as “past due three months or more (loans)” represent those loans that are three months or more past due as to principal or interest, which are not included in “potentially bankrupt, virtually bankrupt and bankrupt (loans and advances).”

The category “restructured (loans)” comprises loans not included above for which the terms of the loans have been modified to grant concessions because of problems with the borrower.

“Other impaired (loans and advances)” represent impaired loans and advances, which are not included in “potentially bankrupt, virtually bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” or “restructured (loans),” but are classified by management as impaired loans and advances due to certain information about credit problems.

22

The following table shows the distribution of impaired loans and advances by “potentially bankrupt, virtually bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” “restructured (loans)” and “other impaired (loans and advances)” at September 30, 2023 and March 31, 2023 classified by domicile and type of industry of the borrowers. At September 30, 2023, gross impaired loans and advances were ¥1,207,957 million, an increase of ¥37,295 million from ¥1,170,662 million at March 31, 2023. The ratio of gross impaired loans and advances to the outstanding loans and advances before deducting the allowance for loan losses, and adjusting unearned income, unamortized

premiums-net

and deferred loan

fees-net

was 1.0% at September 30, 2023, which was unchanged from March 31, 2023.

	At September 30, 2023			At March 31, 2023
	(In millions)
Potentially bankrupt, virtually bankrupt and bankrupt (loans and advances):
Domestic:
Manufacturing	¥	46,817		¥	47,760
Agriculture, forestry, fisheries and mining		2,540			2,415
Construction		6,865			7,085
Transportation, communications and public enterprises		38,298			47,951
Wholesale and retail		65,083			55,636
Finance and insurance		1,302			1,412
Real estate and goods rental and leasing		28,553			30,191
Services		74,910			78,124
Consumer		138,753			128,853
Others		8,562			6,539
Total domestic		411,683			405,966
Foreign:
Financial institutions		22,306			18,048
Commerce and industry		342,975			281,326
Others		33,352			31,609
Total foreign		398,633			330,983
Total		810,316			736,949
Past due three months or more (loans):
Domestic		46,734			29,589
Foreign		—			3,962
Total		46,734			33,551
Restructured (loans):
Domestic		196,202			199,370
Foreign		55,550			94,443
Total		251,752			293,813
Other impaired (loans and advances):
Domestic		75,398			103,206
Foreign		23,757			3,143
Total		99,155			106,349
Gross impaired loans and advances		1,207,957			1,170,662
Less: Allowance for loan losses for impaired loans and advances		(486,089	)		(436,165	)
Net impaired loans and advances	¥	721,868		¥	734,497

23

Investment Securities

Our investment securities, consisting of debt instruments at amortized cost, debt instruments at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income, totaled ¥34,082,730 million at September 30, 2023, an increase of ¥6,487,132 million, or 24%, from ¥27,595,598 million at March 31, 2023. The increase in our investment securities was primarily due to increases in our holdings of U.S. Treasury and other U.S. government agency bonds and mortgage-backed securities.

Our bond portfolio is principally held for asset and liability management purposes. It mostly consisted of Japanese government bonds, U.S. Treasury securities and bonds issued or guaranteed by foreign governments, government agencies or official institutions.

Our debt instruments at amortized cost amounted to ¥290,051 million at September 30, 2023, an increase of ¥54,484 million, or 23%, from ¥235,567 million at March 31, 2023, primarily due to increases in our holdings of Japanese government bonds and Japanese municipal bonds.

Domestic debt instruments at fair value through other comprehensive income amounted to ¥11,500,722 million at September 30, 2023, a decrease of ¥110,239 million, or 1%, from ¥11,610,961 million at March 31, 2023. The decrease was primarily due to a decrease in our holdings of Japanese government bonds. As for our foreign debt instruments at fair value through other comprehensive income, we had ¥17,045,084 million of foreign debt instruments at September 30, 2023, which was an increase of ¥5,844,622 million, or 52%, from ¥11,200,462 million at March 31, 2023. Most of our foreign debt instruments, including mortgage-backed securities, are issued or guaranteed by foreign governments, government agencies or official institutions. The increase was primarily due to increases in our holdings of U.S. Treasury and other U.S. government agency bonds and mortgage-backed securities.

We had ¥4,071,827 million of domestic equity instruments and ¥1,175,046 million of foreign equity instruments at September 30, 2023, for which we made an irrevocable election at initial recognition to present subsequent changes in fair value in other comprehensive income under IFRS 9 “Financial Instruments.” Our domestic equity instruments, which consisted principally of publicly traded Japanese stocks and included common and preferred stocks issued by our customers, increased by ¥483,863 million, or 13%, from ¥3,587,964 million at March 31, 2023. Net unrealized gains on our domestic equity instruments increased by ¥509,582 million, or 23%, from ¥2,250,969 million at March 31, 2023 to ¥2,760,551 million at September 30, 2023. The increase was primarily due to an increase in the fair value of publicly traded Japanese stocks. Net unrealized gains on our foreign equity instruments increased by ¥173,298 million, or 25%, from ¥697,032 million at March 31, 2023 to ¥870,330 million at September 30, 2023, mainly reflecting favorable conditions in overseas stock markets.

We have no transactions pursuant to repurchase agreements, securities lending transactions or other transactions involving the transfer of financial assets with an obligation to repurchase such transferred assets that are treated as sales for accounting purposes.

24

The following tables show the amortized cost, gross unrealized gains and losses, and fair value of our investment securities, which were classified as debt instruments at amortized cost, debt instruments at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income at September 30, 2023 and March 31, 2023.

	At September 30, 2023
	Amortized cost (1)		Gross unrealized gains		Gross unrealized losses		Fair value
	(In millions)
Debt instruments at amortized cost:
Domestic:
Japanese government bonds	¥	78,556	¥	—	¥	458	¥	78,098
Japanese municipal bonds		128,649		12		1,235		127,426
Japanese corporate bonds		4,990		—		26		4,964
Total domestic		212,195		12		1,719		210,488
Foreign:
Bonds issued by other governments and official institutions (2)		72,689		201		68		72,822
Mortgage-backed securities		1,926		7		26		1,907
Other debt instruments		3,241		46		—		3,287
Total foreign		77,856		254		94		78,016
Total	¥	290,051	¥	266	¥	1,813	¥	288,504
Debt instruments at fair value through other comprehensive income:
Domestic:
Japanese government bonds	¥	9,576,194	¥	981	¥	65,048	¥	9,512,127
Japanese municipal bonds		1,108,218		8		30,783		1,077,443
Japanese corporate bonds		940,198		11		29,370		910,839
Other debt instruments		313		—		—		313
Total domestic		11,624,923		1,000		125,201		11,500,722
Foreign:
U.S. Treasury and other U.S. government agency bonds		10,530,227		84		704,910		9,825,401
Bonds issued by other governments and official institutions (2)		3,557,235		726		141,328		3,416,633
Mortgage-backed securities		3,438,284		—		286,427		3,151,857
Other debt instruments		656,145		824		5,776		651,193
Total foreign		18,181,891		1,634		1,138,441		17,045,084
Total	¥	29,806,814	¥	2,634	¥	1,263,642	¥	28,545,806
Equity instruments at fair value through other comprehensive income:
Domestic	¥	1,311,276	¥	2,783,761	¥	23,210	¥	4,071,827
Foreign		304,716		907,532		37,202		1,175,046
Total	¥	1,615,992	¥	3,691,293	¥	60,412	¥	5,246,873

25

	At March 31, 2023
	Amortized cost (1)		Gross unrealized gains		Gross unrealized losses		Fair value
	(In millions)
Debt instruments at amortized cost:
Domestic:
Japanese government bonds	¥	72,549	¥	2	¥	32	¥	72,519
Japanese municipal bonds		93,044		113		468		92,689
Total domestic		165,593		115		500		165,208
Foreign:
Bonds issued by other governments and official institutions (2)		68,121		375		50		68,446
Other debt instruments		1,853		34		—		1,887
Total foreign		69,974		409		50		70,333
Total	¥	235,567	¥	524	¥	550	¥	235,541
Debt instruments at fair value through other comprehensive income:
Domestic:
Japanese government bonds	¥	9,612,190	¥	2,449	¥	38,341	¥	9,576,298
Japanese municipal bonds		1,106,862		10		19,247		1,087,625
Japanese corporate bonds		963,913		187		17,374		946,726
Other debt instruments		312		—		—		312
Total domestic		11,683,277		2,646		74,962		11,610,961
Foreign:
U.S. Treasury and other U.S. government agency bonds		5,690,346		3,377		461,267		5,232,456
Bonds issued by other governments and official institutions ( 2 )		3,101,964		767		111,459		2,991,272
Mortgage-backed securities		2,507,683		11,259		139,692		2,379,250
Other debt instruments		600,675		547		3,738		597,484
Total foreign		11,900,668		15,950		716,156		11,200,462
Total	¥	23,583,945	¥	18,596	¥	791,118	¥	22,811,423
Equity instruments at fair value through other comprehensive income:
Domestic	¥	1,336,995	¥	2,310,239	¥	59,270	¥	3,587,964
Foreign		263,612		730,789		33,757		960,644
Total	¥	1,600,607	¥	3,041,028	¥	93,027	¥	4,548,608

(1) Amortized cost for equity instruments at fair value through other comprehensive income represents the difference between the fair value and gross unrealized gains or losses.

(2) Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agencies.

26

The following tables show the fair value and gross unrealized losses of our investment securities, aggregated by the length of time that the individual securities have been in a continuous unrealized loss position at September 30, 2023 and March 31, 2023.

	At September 30, 2023
	Less than twelve months				Twelve months or more				Total
	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
	(In millions)
Debt instruments at amortized cost:
Domestic:
Japanese government bonds	¥	78,098	¥	458	¥	—	¥	—	¥	78,098	¥	458
Japanese municipal bonds		81,059		482		39,055		753		120,114		1,235
Japanese corporate bonds		4,964		26		—		—		4,964		26
Total domestic		164,121		966		39,055		753		203,176		1,719
Foreign:
Bonds issued by other governments and official institutions (1)		10,001		68		—		—		10,001		68
Mortgage-backed securities		1,591		26		—		—		1,591		26
Other debt instruments		—		—		—		—		—		—
Total foreign		11,592		94		—		—		11,592		94
Total	¥	175,713	¥	1,060	¥	39,055	¥	753	¥	214,768	¥	1,813
Debt instruments at fair value through other comprehensive income:
Domestic:
Japanese government bonds	¥	2,301,004	¥	2,901	¥	2,350,189	¥	62,147	¥	4,651,193	¥	65,048
Japanese municipal bonds		19,010		67		1,040,212		30,716		1,059,222		30,783
Japanese corporate bonds		31,791		293		745,005		29,077		776,796		29,370
Other debt instruments		—		—		—		—		—		—
Total domestic		2,351,805		3,261		4,135,406		121,940		6,487,211		125,201
Foreign:
U.S. Treasury and other U.S. government agency bonds		6,729,200		175,266		2,989,838		529,644		9,719,038		704,910
Bonds issued by other governments and official institutions (1)		2,330,832		6,428		516,562		134,900		2,847,394		141,328
Mortgage-backed securities		2,320,376		70,659		831,410		215,768		3,151,786		286,427
Other debt instruments		242,007		4,090		118,029		1,686		360,036		5,776
Total foreign		11,622,415		256,443		4,455,839		881,998		16,078,254		1,138,441
Total	¥	13,974,220	¥	259,704	¥	8,591,245	¥	1,003,938	¥	22,565,465	¥	1,263,642
Equity instruments at fair value through other comprehensive income:
Domestic	¥	41,211	¥	3,146	¥	38,937	¥	20,064	¥	80,148	¥	23,210
Foreign		44,281		29,995		10,228		7,207		54,509		37,202
Total	¥	85,492	¥	33,141	¥	49,165	¥	27,271	¥	134,657	¥	60,412

27

	At March 31, 2023
	Less than twelve months				Twelve months or more				Total
	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
	(In millions)
Debt instruments at amortized cost:
Domestic:
Japanese government bonds	¥	67,522	¥	32	¥	—	¥	—	¥	67,522	¥	32
Japanese municipal bonds		37,976		81		25,355		387		63,331		468
Total domestic		105,498		113		25,355		387		130,853		500
Foreign:
Bonds issued by other governments and official institutions (1)		6,290		50		—		—		6,290		50
Other debt instruments		—		—		—		—		—		—
Total foreign		6,290		50		—		—		6,290		50
Total	¥	111,788	¥	163	¥	25,355	¥	387	¥	137,143	¥	550
Debt instruments at fair value through other comprehensive income:
Domestic:
Japanese government bonds	¥	1,862,342	¥	240	¥	2,371,765	¥	38,101	¥	4,234,107	¥	38,341
Japanese municipal bonds		26,288		386		1,031,020		18,861		1,057,308		19,247
Japanese corporate bonds		51,747		884		728,026		16,490		779,773		17,374
Other debt instruments		—		—		—		—		—		—
Total domestic		1,940,377		1,510		4,130,811		73,452		6,071,188		74,962
Foreign:
U.S. Treasury and other U.S. government agency bonds		2,228,676		82,189		2,694,198		379,078		4,922,874		461,267
Bonds issued by other governments and official institutions (1)		1,954,081		4,666		497,300		106,793		2,451,381		111,459
Mortgage-backed securities		277,156		5,008		772,299		134,684		1,049,455		139,692
Other debt instruments		239,798		1,362		132,854		2,376		372,652		3,738
Total foreign		4,699,711		93,225		4,096,651		622,931		8,796,362		716,156
Total	¥	6,640,088	¥	94,735	¥	8,227,462	¥	696,383	¥	14,867,550	¥	791,118
Equity instruments at fair value through other comprehensive income:
Domestic	¥	148,021	¥	15,374	¥	112,651	¥	43,896	¥	260,672	¥	59,270
Foreign		55,586		28,578		7,413		5,179		62,999		33,757
Total	¥	203,607	¥	43,952	¥	120,064	¥	49,075	¥	323,671	¥	93,027

(1) Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agencies.

28

Trading Assets

The following table shows our trading assets at September 30, 2023 and March 31, 2023. Our trading assets were ¥5,310,998 million at September 30, 2023, an increase of ¥725,083 million from ¥4,585,915 million at March 31, 2023. The increase was primarily due to an increase in our holdings of U.S. Treasury and other U.S. government agency bonds.

	At September 30, 2023		At March 31, 2023
	(In millions)
Debt instruments	¥	4,949,235	¥	4,229,845
Equity instruments		361,763		356,070
Total trading assets	¥	5,310,998	¥	4,585,915

Financial Assets at Fair Value Through Profit or Loss

The following table shows the fair value of our financial assets at fair value through profit or loss at September 30, 2023 and March 31, 2023. The fair value was ¥1,900,462 million at September 30, 2023, an increase of ¥412,223 million from ¥1,488,239 million at March 31, 2023. The increase was primarily due to an increase in our holdings of investment funds.

	At September 30, 2023		At March 31, 2023
	(In millions)
Debt instruments	¥	1,814,029	¥	1,392,889
Equity instruments		86,433		95,350
Total financial assets at fair value through profit or loss	¥	1,900,462	¥	1,488,239

Liabilities

Our total liabilities increased by ¥22,425,939 million from ¥244,150,073 million at March 31, 2023 to ¥266,576,012 million at September 30, 2023, primarily due to increases in repurchase agreements and cash collateral on securities lent, deposits and derivative financial instruments.

The following table shows our liabilities at September 30, 2023 and March 31, 2023.

	At September 30, 2023		At March 31, 2023
	(In millions)
Deposits	¥	178,121,198	¥	172,927,810
Call money and bills sold		2,161,558		2,569,056
Repurchase agreements and cash collateral on securities lent		23,604,811		17,786,026
Trading liabilities		4,187,152		3,291,089
Derivative financial instruments		15,298,715		10,496,855
Financial liabilities designated at fair value through profit or loss		421,392		414,106
Borrowings		16,060,190		15,371,801
Debt securities in issue		13,725,816		11,984,994
Provisions		225,396		247,344
Other liabilities		12,273,302		8,703,413
Current tax liabilities		46,800		41,649
Deferred tax liabilities		449,682		315,930
Total liabilities	¥	266,576,012	¥	244,150,073

29

Deposits

We offer a wide range of standard banking accounts through the offices of our banking subsidiaries in Japan, including

non-interest-bearing

demand deposits, interest-bearing demand deposits, deposits at notice, time deposits, and negotiable certificates of deposit. Domestic deposits, approximately 75% of total deposits, are our principal source of funds for our domestic operations. The deposits in the domestic offices of our banking subsidiaries are principally from individuals and private corporations, governmental bodies (including municipal authorities), and financial institutions.

SMBC’s foreign offices accept deposits mainly in U.S. dollars, but also in yen and other currencies, and are active participants in the Euro-currency market as well as the United States domestic money market. Foreign deposits mainly consist of stable types of deposits, such as deposits at notice, time deposits and negotiable certificates of deposit.

Our deposit balances at September 30, 2023 were ¥178,121,198 million, an increase of ¥5,193,388 million from ¥172,927,810 million at March 31, 2023. The increase was primarily due to an increase in deposits at foreign offices, reflecting the effects of changes in foreign exchange rates resulting from the depreciation of the yen.

The following table shows a breakdown of our domestic and foreign offices’ deposits at September 30, 2023 and March 31, 2023.

	At September 30, 2023		At March 31, 2023
	(In millions)
Domestic offices:
Non-interest-bearing demand deposits	¥	31,829,535	¥	30,778,301
Interest-bearing demand deposits		71,138,848		70,401,409
Deposits at notice		707,795		828,110
Time deposits		16,955,975		17,245,011
Negotiable certificates of deposit		3,771,043		4,470,206
Others		9,503,673		9,058,983
Total domestic offices		133,906,869		132,782,020
Foreign offices:
Non-interest-bearing demand deposits		3,008,759		2,771,762
Interest-bearing demand deposits		5,276,635		4,783,003
Deposits at notice		13,437,519		13,618,520
Time deposits		12,373,010		10,278,686
Negotiable certificates of deposit		10,001,016		8,555,350
Others		117,390		138,469
Total foreign offices		44,214,329		40,145,790
Total deposits	¥	178,121,198	¥	172,927,810

Borrowings

Borrowings include unsubordinated borrowings, subordinated borrowings, liabilities associated with securitization transactions of our own assets, and lease liabilities. At September 30, 2023, our borrowings were ¥16,060,190 million, an increase of ¥688,389 million, or 4%, from ¥15,371,801 million at March 31, 2023, primarily due to an increase in unsubordinated borrowings.

30

The following table shows the balances with respect to our borrowings at September 30, 2023 and March 31, 2023.

	At September 30, 2023		At March 31, 2023
	(In millions)
Unsubordinated borrowings	¥	14,247,306	¥	13,532,217
Subordinated borrowings		177,412		186,218
Liabilities associated with securitization transactions		1,210,393		1,236,369
Lease liabilities		425,079		416,997
Total borrowings	¥	16,060,190	¥	15,371,801

Debt Securities in Issue

Debt securities in issue at September 30, 2023 were ¥13,725,816 million, an increase of ¥1,740,822 million, or 15%, from ¥11,984,994 million at March 31, 2023, primarily due to an increase in unsubordinated bonds.

	At September 30, 2023		At March 31, 2023
	(In millions)
Commercial paper	¥	2,874,209	¥	2,585,889
Unsubordinated bonds		9,572,275		8,285,355
Subordinated bonds		1,279,332		1,113,750
Total debt securities in issue	¥	13,725,816	¥	11,984,994

Total Equity

Our total equity increased by ¥1,527,670 million from ¥13,536,965 million at March 31, 2023 to ¥15,064,635 million at September 30, 2023, primarily due to increases in other reserves, retained earnings and equity attributable to other equity instruments holders. The increase in other reserves was primarily due to an increase in the exchange differences on translating the foreign operations reserve reflecting the depreciation of the yen. The increase in retained earnings mainly reflected our net profit. The increase in equity attributable to other equity instruments holders was primarily due to the issuances of perpetual subordinated bonds qualified as Additional Tier 1 capital.

	At September 30, 2023			At March 31, 2023
	(In millions)
Capital stock	¥	2,344,038		¥	2,342,537
Capital surplus		635,915			645,774
Retained earnings		7,563,151			7,199,479
Treasury stock		(17,722	)		(151,799	)
Equity excluding other reserves		10,525,382			10,035,991
Other reserves		3,288,687			2,629,000
Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc.		13,814,069			12,664,991
Non-controlling interests		123,871			106,172
Equity attributable to other equity instruments holders		1,126,695			765,802
Total equity	¥	15,064,635		¥	13,536,965

31

Liquidity

We derive funding for our operations both from domestic and international sources. Our domestic funding is derived primarily from deposits placed with SMBC by its corporate and individual customers, and also from call money (inter-bank), bills sold (inter-bank promissory notes), repurchase agreements, borrowings, and negotiable certificates of deposit issued by SMBC to domestic and international customers. Our international sources of funds are principally from deposits from corporate customers and foreign central banks, negotiable certificates of deposit, bonds, commercial paper, and also from repurchase agreements and cash collateral on securities lent. We closely monitor maturity gaps and foreign exchange exposure in order to manage our liquidity profile.

As shown in the following table, total deposits increased by ¥5,193,388 million from ¥172,927,810 million at March 31, 2023 to ¥178,121,198 million at September 30, 2023. The balance of deposits at September 30, 2023 exceeded the balance of loans and advances by ¥61,835,814 million, primarily due to the stable deposit base in Japan. Our

loan-to-deposit

ratio (total loans and advances divided by total deposits) in the same period was 65%, which contributed greatly to the reduction of our liquidity risk. Our balances of large-denomination domestic yen time deposits are stable due to the historically high rollover rate of our corporate customers and individual depositors.

	At September 30, 2023		At March 31, 2023
	(In millions)
Loans and advances	¥	116,285,384	¥	111,891,134
Deposits		178,121,198		172,927,810

We have invested the excess balance of deposits against loans and advances primarily in marketable securities and other highly liquid assets, such as Japanese government bonds. SMBC’s Treasury Unit actively monitors the movement of interest rates and maturity profile of its bond portfolio as part of SMBC’s overall risk management. The bonds can be used to enhance liquidity. When needed, they can be used as collateral for call money or other money market funding or short-term borrowings from the BOJ.

Secondary sources of liquidity include short-term debts, such as call money, bills sold, and commercial paper issued at an inter-bank or other wholesale markets. We also issue long-term debts, including both senior and subordinated debts, as additional sources of liquidity. With short- and long-term debts, we can diversify our funding sources, effectively manage our funding costs and enhance our capital adequacy ratios when appropriate.

We source our funding in foreign currencies primarily from financial institutions, general corporations, and institutional investors, through short- and long-term financing. Even if we encounter declines in our credit quality or that of Japan in the future, we expect to be able to purchase foreign currencies in sufficient amounts using the yen funds raised through our domestic customer base. As further measures to support our foreign currency liquidity, we hold foreign debt securities, maintain credit lines and swap facilities denominated in foreign currencies, and pledge collateral to the U.S. Federal Reserve Bank.

We maintain management and control systems to support our ability to access liquidity on a stable and cost-effective basis.

We believe we are able to access such sources of liquidity on a stable and flexible basis by keeping credit ratings at a high level. The following table shows credit ratings assigned to the Company by Moody’s Japan K.K., (“Moody’s”), S&P Global Ratings Japan Inc. (“S&P”) and Fitch Ratings Japan Limited (“Fitch”) at December 11, 2023.

At December 11, 2023
Moody’s			S&P			Fitch
Long-term	Outlook	Short-term	Long-term	Outlook	Short-term	Long-term	Outlook	Short-term
A1	S	P-1	A-	S	—	A-	S	F1

32

The following table shows credit ratings assigned to SMBC by Moody’s, S&P and Fitch at December 11, 2023.

At December 11, 2023
Moody’s			S&P			Fitch
Long-term	Outlook	Short-term	Long-term	Outlook	Short-term	Long-term	Outlook	Short-term
A1	S	P-1	A	S	A-1	A-	S	F1

We are assigned credit ratings by major domestic and international credit rating agencies. Credit ratings do not constitute recommendations to purchase, sell or hold a security, and rating agencies may review or indicate an intention to review ratings at any time. While the methodology and rating system vary among rating agencies, credit ratings are generally based on information provided by us or independent sources, and can be influenced by the credit ratings of Japanese government bonds and broader views of the Japanese financial system. Any downgrade in or withdrawal of these credit ratings, or any adverse change in these ratings relative to other financial institutions, could increase our borrowing costs, reduce our access to the capital markets and otherwise negatively affect our ability to raise funds, which in turn could have a negative impact on our liquidity position.

The guidelines published by the Financial Services Agency of Japan (“FSA”) for liquidity coverage ratio (“LCR”) and net stable funding ratio (“NSFR”) applicable to banks and bank holding companies with international operations are based on the full text of the LCR and NSFR standard issued by the Basel Committee on Banking Supervision (“BCBS”) in January 2013 and October 2014, respectively. Under these guidelines, banks and bank holding companies with international operations must maintain LCRs and NSFRs of at least 100% on both a consolidated basis and a nonconsolidated basis. The following tables show the Company’s and SMBC’s LCRs for the three months ended September 30, 2023 and NSFRs at September 30, 2023. Each figure is calculated based on our financial statements prepared in accordance with Japanese GAAP, as required by the FSA’s LCR and NSFR guidelines.

Liquidity coverage ratio:

	For the three months ended September 30, 2023 (1)
SMFG (consolidated)		134.0	%
SMBC (consolidated)		138.7	%
SMBC (nonconsolidated)		143.1	%

(1) Under the FSA’s LCR guidelines, the LCR for the three months ended September 30, 2023 is set as the three-month average of daily LCRs for the same three months, which is calculated by dividing the balance of high-quality liquid assets by the total net cash outflows on a daily basis for the same three months.

Net stable funding ratio:

	At September 30, 2023 (1)
SMFG (consolidated)		122.3	%
SMBC (consolidated)		132.3	%
SMBC (nonconsolidated)		131.7	%

(1) Under the FSA’s NSFR guidelines, the NSFR is calculated by dividing the available amount of stable funding by the required amount of stable funding.

For further information, see “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity—Liquidity Requirement” of our annual report on Form

20-F

for the fiscal year ended March 31, 2023.

33

Capital Management

With regard to capital management, we strictly abide by the capital adequacy guidelines set by the FSA. Japan’s capital adequacy guidelines are based on the Basel Capital Accord, which was proposed by the BCBS for uniform application to all banks which have international operations in industrialized countries. Japan’s capital adequacy guidelines may be different from those of central banks or supervisory bodies of other countries because they have been designed by the FSA to suit the Japanese banking environment. Our banking subsidiaries outside of Japan are also subject to the local capital ratio requirements.

Each figure for the FSA capital adequacy guidelines is calculated based on our financial statements prepared under Japanese GAAP.

The FSA capital adequacy guidelines permit Japanese banks to choose from the standardized approach, the foundation internal rating-based (“IRB”) approach and the advanced IRB approach for credit risk, and the basic indicator approach, the standardized approach (“TSA”) and the advanced measurement approach (“AMA”) for operational risk. To be eligible to adopt the foundation IRB approach or the advanced IRB approach for credit risk, and the TSA or the AMA for operational risk, a Japanese bank must establish advanced risk management systems and receive prior approval from the FSA.

We and SMBC have adopted the advanced IRB approach since March 2009 and the AMA since March 2008.

In December 2010, the BCBS published the new Basel III rules text to implement the Basel III framework, which sets out higher and better-quality capital, better risk coverage, the introduction of a leverage ratio as a backstop to the risk-based requirement, measures to promote the

build-up

of capital that can be drawn down in periods of stress, and the introduction of two global liquidity standards. The main measures of the minimum capital requirements in the Basel III framework began in January 2013 and have been fully applied from January 2019. The minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 4.5%, 6% and 8%, respectively, since January 2015. Moreover, banks have been required to hold a capital conservation buffer of 2.5% to withstand future periods of stress since January 2019. As a result, taking the capital conservation buffer into account, the minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 7%, 8.5% and 10.5%, respectively, since January 2019. Furthermore, a countercyclical buffer within a range of 0% to 2.5% of common equity or other fully loss-absorbing capital has been implemented according to national circumstances and we are required to hold a countercyclical buffer of 0.16% at September 30, 2023.

In addition to the above-mentioned minimum capital requirements and capital buffer requirements under Basel III, organizations identified by the FSB as

G-SIBs,

which includes us, are required to maintain an additional 1% to 2.5% of Common Equity Tier 1 capital as a percentage of risk-weighted assets based on the organization’s size, interconnectedness, substitutability, complexity and cross-jurisdictional activity as determined by the FSB. The amount of

G-SIB

capital surcharge that applies to us based on the FSB’s determination is 1%. The FSB updates its list of

G-SIBs

on an annual basis.

To reflect the Basel III framework, the FSA changed its capital adequacy guidelines. The minimum Common Equity Tier 1 capital requirement, Tier 1 capital requirement and total capital requirement have been 4.5%, 6% and 8%, respectively, since March 2015. The capital conservation buffer, countercyclical buffer and the

G-SIB

capital surcharge started to be phased in from March 2016 and have been fully applied from March 2019 under the FSA capital adequacy guidelines.

In December 2017, the Group of Central Bank Governors and Heads of Supervision endorsed the outstanding Basel III regulatory reforms. For further details regarding the finalized Basel III reforms, see “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity—Capital Adequacy Requirement” of our annual report on Form

20-F

for the fiscal year ended March 31, 2023.

34

In March 2015, the FSA published its leverage ratio guidelines, which have been applied from March 2015, to help ensure broad and adequate capture of both

on-and

off-balance

sheet sources of leverage for internationally active banks. The FSA’s leverage ratio guidelines are based on the text of the leverage ratio framework and disclosure requirements issued by the BCBS in January 2014.

In December 2017, the definition and requirements of the leverage ratio were revised as part of the finalized Basel III reforms, under which the leverage ratio is based on a Tier 1 definition of capital and with the minimum leverage ratio of 3%. Under the finalized Basel III reforms,

G-SIBs

are required to meet a leverage ratio buffer, which will take the form of a Tier 1 capital buffer set at 50% of the applicable

G-SIB

capital surcharge. Various refinements were also made to the definition of the leverage ratio exposure measure. The leverage ratio requirements under the definition based on the framework issued by the BCBS in January 2014 were implemented as a Pillar 1 measurement from January 2018, and those under the revised definition and the leverage ratio buffer requirement for

G-SIBs

were implemented as a Pillar 1 measurement from January 2023.

In March 2019, the FSA published its guidelines for the leverage ratio applicable to banks and bank holding companies with international operations, which have been applied from March 2019. Under the FSA’s guidelines for the leverage ratio, banks and bank holding companies with international operations must maintain a leverage ratio of at least 3% on both a consolidated basis and a nonconsolidated basis for banks and on consolidated basis for bank holding companies.

In June 2020, in light of the increasing impact of the

COVID-19

pandemic, the FSA published amendments to its guidelines for the leverage ratio, which mainly exclude deposits with the BOJ from the denominator for the calculation of the leverage ratio in order to maintain harmonization with the monetary policy implemented by the BOJ and the prudential regulations for banks and other financial institutions. These amendments came into effect in June 2020 and were scheduled to expire in March 2021, but the expiry date of these amendments was extended to March 2022, and extended again until March 31, 2024. In July 2022, the FSA published amendments to its guidelines for the leverage ratio. Under the amended guidelines, the leverage ratio buffer requirement for

G-SIBs

in Japan took effect from March 2023, while the finalized definition of the leverage ratio exposure measure will take effect from March 31, 2024, except for banks that have notified the FSA that they wish to apply amended requirements earlier. Furthermore, in November 2022, the FSA published amendments to its guidelines for the leverage ratio, which provide that from April 1, 2024 onward the minimum leverage ratio will be increased from 3% to 3.15%, the minimum leverage-based Total Loss-Absorbing Capacity ratio will be increased from 6.75% to 7.10% and the leverage buffer applicable to

G-SIBs

will be increased by 0.05%, while excluding amounts of deposits to the BOJ from the total exposure, taking into account exceptional macroeconomic conditions and other circumstances.

35

The table below presents our risk-weighted capital ratios, total capital, risk-weighted assets and leverage ratio under Japanese GAAP at September 30, 2023 and March 31, 2023, based on the Basel III rules.

	At September 30, 2023			At March 31, 2023
	(In billions, except percentages)
SMFG Consolidated:
Total risk-weighted capital ratio		16.22	%		15.98	%
Tier 1 risk-weighted capital ratio		15.20	%		14.94	%
Common Equity Tier 1 risk-weighted capital ratio		13.94	%		14.02	%
Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)	¥	13,312.8		¥	12,350.8
Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital)		12,470.6			11,548.9
Common Equity Tier 1 capital		11,438.7			10,839.0
Risk-weighted assets		82,041.0			77,285.0
The amount of minimum total capital requirements (1)		6,563.3			6,182.8
Leverage ratio		4.93	%		5.03	%

(1) The amount of minimum total capital requirements is calculated by multiplying risk-weighted assets by 8%.

Common Equity Tier 1 capital consists primarily of capital stock, capital surplus and retained earnings relating to common shares, unrealized gains and losses included in accumulated other comprehensive income, and

non-controlling

interests that meet the criteria set forth in the FSA capital adequacy guidelines for inclusion in Common Equity Tier 1 capital.

Our capital position and SMBC’s capital position depend in part on the fair market value of our investment securities portfolio, since unrealized gains and losses are included in the amount of regulatory capital and have been fully counted as Common Equity Tier 1 capital since March 2018. Since our other securities (including money held in trust) with a readily ascertainable market value included unrealized gains and losses, substantial fluctuations in the Japanese stock markets may affect our capital position and the capital position of SMBC.

Non-controlling

interests arising from the issue of common shares by a fully consolidated subsidiary of a bank may receive recognition in Common Equity Tier 1 capital only if: (1) the instrument giving rise to the

non-controlling

interest would, if issued by the bank, meet all of the criteria set forth in the FSA capital adequacy guidelines for classification as common shares for regulatory capital purposes; and (2) the subsidiary that issued the instrument is itself a bank or other financial institution subject to similar capital adequacy guidelines.

Regulatory adjustments such as goodwill and other intangibles, deferred tax assets, investment in the common equity capital of banking, financial and insurance entities and defined benefit pension fund assets and liabilities are applied mainly to the calculation of Common Equity Tier 1 capital in the form of a deduction.

Additional Tier 1 capital consists primarily of perpetual subordinated bonds.

Tier 2 capital consists primarily of subordinated debt securities.

Capital instruments such as subordinated debt issued on or after March 31, 2013 must meet the new requirements to be included in regulatory capital. Capital instruments issued prior to March 31, 2013 that do not meet the requirements set forth in the FSA capital adequacy guidelines no longer qualify as Additional Tier 1 or Tier 2 capital.

36

Set forth below is a table of risk-weighted capital ratios, total capital, risk-weighted assets and leverage ratio of SMBC at September 30, 2023 and March 31, 2023 on a consolidated and nonconsolidated basis.

	At September 30, 2023			At March 31, 2023
	(In billions, except percentages)
SMBC Consolidated:
Total risk-weighted capital ratio		15.48	%		15.34	%
Tier 1 risk-weighted capital ratio		14.27	%		14.15	%
Common Equity Tier 1 risk-weighted capital ratio		12.20	%		12.43	%
Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)	¥	11,771.9		¥	10,802.3
Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital)		10,850.9			9,963.2
Common Equity Tier 1 capital		9,277.3			8,755.6
Risk-weighted assets		76,039.2			70,402.0
The amount of minimum total capital requirements (1)		6,083.1			5,632.2
Leverage ratio		4.66	%		4.69	%
SMBC Nonconsolidated:
Total risk-weighted capital ratio		13.54	%		13.97	%
Tier 1 risk-weighted capital ratio		12.15	%		12.63	%
Common Equity Tier 1 risk-weighted capital ratio		9.96	%		10.81	%
Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)	¥	9,496.4		¥	9,098.4
Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital)		8,526.8			8,223.6
Common Equity Tier 1 capital		6,985.6			7,039.6
Risk-weighted assets		70,127.2			65,103.0
The amount of minimum total capital requirements (1)		5,610.2			5,208.2

(1) The amount of minimum total capital requirements is calculated by multiplying risk-weighted assets by 8%.

Our securities subsidiary in Japan, SMBC Nikko Securities is also subject to capital adequacy requirements under the Financial Instruments and Exchange Act of Japan. At September 30, 2023, the capital adequacy ratio was 347.1% for SMBC Nikko Securities, and sufficiently above 140%, below which level it would be required to file daily reports with the Commissioner of the FSA.

37

FINANCIAL RISK MANAGEMENT

Risk Management System

Our risk management system is described in the “Quantitative and Qualitative Information about Risk Management” section within Item 11, “Quantitative and Qualitative Disclosures about Credit, Market and Other Risk,” of our annual report on Form

20-F

for the fiscal year ended March 31, 2023. There were no material changes in our risk management system for the six months ended September 30, 2023.

Credit Risk

Our credit risk management system is described in the “Credit Risk” section within Item 11 of our annual report on Form

20-F

for the fiscal year ended March 31, 2023. There were no material changes in our credit risk management system for the six months ended September 30, 2023.

Market Risk

Our market risk management system is described in the “Market Risk and Liquidity Risk” section within Item 11 of our annual report on Form

20-F

for the fiscal year ended March 31, 2023.

Our market risk can be divided into various factors: interest rates, foreign exchange rates, equity prices and option risks. We manage each of these risks by employing the value at risk (“VaR”) method as well as supplemental indicators suitable for managing each risk, such as the basis point value (“BPV”).

VaR is the largest predicted loss that is possible given a fixed confidence interval. For example, our VaR indicates the largest loss that is possible for a holding period of one day and a confidence interval of 99.0%. BPV is the amount of change in assessed value as a result of a

one-basis-point

(0.01%) movement in interest rates.

The principal SMBC Group companies’ internal VaR model makes use of historical data to prepare scenarios for market fluctuations and, by conducting simulations of gains and losses on a net position basis, the model estimates the maximum losses that may occur. The VaR calculation method we employ for both trading and

non-trading

activities is based mainly on the following:

• the historical simulation method;

• a one-sided confidence interval of 99.0%;

• a one-day holding period (a one-year holding period for the equity holding investment portfolio); and

• an observation period of four years (ten years for the equity holding investment portfolio).

This method is reviewed periodically and refined, if necessary.

VaR Summary

The following tables set forth our VaR for trading activities and

non-trading

activities by risk categories for the six months ended September 30, 2023.

38

VaR for Trading Activities

	Interest rate   risk		Foreign exchange risk		Equities and commodities risk		Others		Total (1)
	(In billions)
For the six months ended September 30, 2023:
SMBC Consolidated
Maximum	¥	39.6	¥	33.5	¥	2.3	¥	10.8	¥	16.8
Minimum		5.2		2.6		0.3		5.0		10.9
Daily average		14.9		11.2		1.1		7.9		13.7
At September 30, 2023		5.5		3.3		1.4		9.2		14.5
At March 31, 2023		27.9		22.6		0.2		5.7		11.6
SMFG Consolidated
Maximum	¥	49.6	¥	34.9	¥	12.8	¥	10.8	¥	38.9
Minimum		15.8		3.8		5.2		5.0		27.2
Daily average		25.7		12.5		6.4		7.9		30.6
At September 30, 2023		18.2		4.4		7.2		9.2		33.8
At March 31, 2023		37.6		23.9		5.5		5.7		27.7

(1) Total for “Maximum,” “Minimum” and “Daily average” represent the maximum, minimum and daily average of the total of the trading book. For certain subsidiaries, we employ the standardized method and/or the historical simulation method for the VaR calculation method.

VaR for

Non-Trading

Activities

• Banking

	Interest rate   risk		Foreign exchange risk		Equities and commodities risk		Others		Total (1)
	(In billions)
For the six months ended September 30, 2023:
SMBC Consolidated
Maximum	¥	87.2	¥	0.5	¥	26.6	¥	0.0	¥	97.4
Minimum		60.7		0.0		4.0		0.0		64.1
Daily average		72.5		0.0		14.5		0.0		80.1
At September 30, 2023		82.9		0.0		26.4		0.0		93.3
At March 31, 2023		63.3		0.0		11.3		0.0		68.0
SMFG Consolidated
Maximum	¥	88.5	¥	0.5	¥	26.6	¥	0.0	¥	98.6
Minimum		62.1		0.0		4.0		0.0		65.5
Daily average		73.7		0.0		14.5		0.0		81.3
At September 30, 2023		84.3		0.0		26.4		0.0		94.7
At March 31, 2023		64.7		0.0		11.3		0.0		69.4

(1) Total for “Maximum,” “Minimum” and “Daily average” represent the maximum, minimum and daily average of the total of the banking book.

39

• Equity holding Investment

	Equities risk
	(In billions)
For the six months ended September 30, 2023:
SMBC Consolidated
Maximum	¥	1,190.8
Minimum		970.9
Daily average		1,100.9
At September 30, 2023		1,138.7
At March 31, 2023		1,003.2
SMFG Consolidated
Maximum	¥	1,458.6
Minimum		1,189.3
Daily average		1,345.7
At September 30, 2023		1,394.9
At March 31, 2023		1,224.8

Back-testing

The relationship between the VaR calculated with the model and the profit and loss data is back-tested periodically. There were no significant excess losses in the back-testing results including the trading accounts.

Stress Tests

To prepare for unexpected market swings, we perform stress tests on a monthly basis based on various scenarios.

Interest Rate Risk

To supplement the above limitations of VaR methodologies, the SMBC Group adopts various indices to measure and monitor the sensitivity of interest rates, including delta, gamma and vega risks. The SMBC Group considers BPV as one of the most significant indices to manage interest rate risk. BPV is the amount of change in the value to the banking and trading book as a result of a

one-basis-point

(0.01%) movement in interest rates. The principal SMBC Group companies use BPV to monitor interest rate risk, not only on a net basis, but also by term to prevent the concentration of interest rate risk in a specific period. In addition, as previously addressed, the SMBC Group enhances the risk management methods of VaR and BPV by using them in combination with back-testing and stress tests.

Interest rate risk substantially changes depending on the method used for recognizing the expected maturity dates of demand deposits that can be withdrawn at any time or the method used for estimating the timing of cancellation prior to maturity of time deposits and consumer housing loans. At SMBC, the maturity of demand deposits that are expected to be left with SMBC for a prolonged period is regarded to be at the longest five years (2.5 years on average), and the cancellation prior to maturity of time deposits and consumer housing loans is estimated based on historical data.

Based on the standards for interest rate risk in the banking book issued by the BCBS in April 2016, the FSA revised the related regulatory guidelines pertaining to monitoring of interest rate risks in the banking book in December 2017. The revised disclosure requirements with respect to the changes in economic value of equity (“ΔEVE”) and changes in net interest income (“ΔNII”) in the banking book as a result of interest rate shocks have been applied from March 31, 2018. The tables below present ΔEVE and ΔNII of SMBC and SMFG on a consolidated basis at September 30, 2023 and March 31, 2023, respectively.

40

ΔEVE is defined as a decline in economic value as a result of an interest rate shock. It is calculated by multiplying the interest rate sensitivity (excluding credit spread) and interest rate change. The FSA implements a “materiality test” to identify banks taking excessive interest rate risks. Under the materiality test, the FSA monitors the ratio of ΔEVE to Tier 1 capital based on a set of prescribed interest rate shock scenarios. The threshold applied by the FSA is 15%, and the ratios for SMBC on a consolidated basis at September 30, 2023 and March 31, 2023 were 5.4% and 2.9%, respectively and those for SMFG on a consolidated basis at September 30, 2023 and March 31, 2023 were 4.7% and 2.5%, respectively.

ΔNII is defined as a decline in interest income over a

12-month

period as a result of an interest rate shock. It is calculated assuming a constant balance sheet over a forward-looking

12-month

period.

	At September 30, 2023					At March 31, 2023
	Δ EVE		Δ NII			Δ EVE		Δ NII
	(In billions)
SMBC Consolidated
Parallel shock up	¥	585.3	¥	(440.6	)	¥	287.1	¥	(462.5	)
Parallel shock down		27.5		596.1			85.5		664.4
Steepener shock		69.3		—			165.1		—
Flattener shock		131.1		—			36.2		—
Short rate shock up		307.0		—			64.6		—
Short rate shock down		23.1		—			67.4		—
Maximum		585.3		596.1			287.1		664.4
	At September 30, 2023					At March 31, 2023
	(In billions)
Tier 1 Capital	¥			10,850.9		¥			9,963.2
	At September 30, 2023					At March 31, 2023
	Δ EVE		Δ NII			Δ EVE		Δ NII
	(In billions)
SMFG Consolidated
Parallel shock up	¥	585.3	¥	(440.6	)	¥	287.1	¥	(462.5	)
Parallel shock down		27.5		596.1			85.5		664.4
Steepener shock		69.3		—			165.1		—
Flattener shock		131.1		—			36.2		—
Short rate shock up		307.0		—			64.6		—
Short rate shock down		23.1		—			67.4		—
Maximum		585.3		596.1			287.1		664.4
	At September 30, 2023					At March 31, 2023
	(In billions)
Tier 1 Capital	¥			12,470.6		¥			11,548.9

Note: ΔEVE and ΔNII are calculated by currency at the SMBC consolidated level and the results are aggregated across the various currencies. For ΔNII, only Japanese yen and U.S. dollars are included in the calculation. These are the material currencies where interest rate sensitive assets and liabilities are more than 5% of total assets and liabilities.

41

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

		Page
Consolidated Statements of Financial Position (Unaudited)			F-2
Consolidated Income Statements (Unaudited)			F-3
Consolidated Statements of Comprehensive Income (Unaudited)			F-4
Consolidated Statements of Changes in Equity (Unaudited)			F-5
Consolidated Statements of Cash Flows (Unaudited)			F-6
Notes to Consolidated Financial Statements (Unaudited)			F-7
1	General Information		F-7
2	Summary of Material Accounting Policies		F-7
3	Critical Accounting Estimates and Judgments		F-9
4	Segment Analysis		F-9
5	Derivative Financial Instruments and Hedge Accounting		F-12
6	Investment Securities		F-16
7	Loans and Advances		F-17
8	Borrowings		F-19
9	Debt Securities in Issue		F-20
10	Provisions		F-20
11	Shareholders’ Equity		F-21
12	Equity Attributable to Other Equity Instruments Holders		F-22
13	Fee and Commission Income		F-22
14	Impairment Charges on Financial Assets		F-23
15	Earnings Per Share		F-23
16	Dividends Per Share		F-24
17	Contingency and Capital Commitments		F-24
18	Fair Value of Financial Assets and Liabilities		F-25
19	Interest Rate Benchmark Reform		F-35

F-1

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Consolidated Statements of Financial Position (Unaudited)

	Note		At September 30, 2023			At March 31, 2023
			(In millions)
Assets:
Cash and deposits with banks			¥	78,237,000		¥	76,465,511
Call loans and bills bought				6,088,010			5,684,812
Reverse repurchase agreements and cash collateral on securities borrowed				13,402,684			11,024,084
Trading assets				5,310,998			4,585,915
Derivative financial instruments		5		13,015,294			8,649,947
Financial assets at fair value through profit or loss				1,900,462			1,488,239
Investment securities		6		34,082,730			27,595,598
Loans and advances		7		116,285,384			111,891,134
Investments in associates and joint ventures				1,384,292			1,141,250
Property, plant and equipment				1,877,012			1,832,241
Intangible assets				973,871			905,028
Other assets				8,929,755			6,167,202
Current tax assets				71,559			190,267
Deferred tax assets				81,596			65,810
Total assets			¥	281,640,647		¥	257,687,038
Liabilities:
Deposits			¥	178,121,198		¥	172,927,810
Call money and bills sold				2,161,558			2,569,056
Repurchase agreements and cash collateral on securities lent				23,604,811			17,786,026
Trading liabilities				4,187,152			3,291,089
Derivative financial instruments		5		15,298,715			10,496,855
Financial liabilities designated at fair value through profit or loss				421,392			414,106
Borrowings		8		16,060,190			15,371,801
Debt securities in issue		9		13,725,816			11,984,994
Provisions		10		225,396			247,344
Other liabilities				12,273,302			8,703,413
Current tax liabilities				46,800			41,649
Deferred tax liabilities				449,682			315,930
Total liabilities				266,576,012			244,150,073
Equity:
Capital stock		11		2,344,038			2,342,537
Capital surplus				635,915			645,774
Retained earnings				7,563,151			7,199,479
Treasury stock		11		(17,722	)		(151,799	)
Equity excluding other reserves				10,525,382			10,035,991
Other reserves				3,288,687			2,629,000
Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc.				13,814,069			12,664,991
Non-controlling interests				123,871			106,172
Equity attributable to other equity instruments holders		12		1,126,695			765,802
Total equity				15,064,635			13,536,965
Total equity and liabilities			¥	281,640,647		¥	257,687,038

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-2

Consolidated Income Statements (Unaudited)

			For the six months ended September 30,
	Note		2023		2022
			(In millions, except per share data)
Interest income			¥	2,776,392	¥	1,424,087
Interest expense				1,887,450		573,910
Net interest income				888,942		850,177
Fee and commission income		13		690,715		607,546
Fee and commission expense				119,089		112,737
Net fee and commission income				571,626		494,809
Net trading income				487,524		565,037
Net income from financial assets and liabilities at fair value through profit or loss				79,984		171,708
Net investment income (loss)				61,733		(4,915	)
Other income				57,734		85,818
Total operating income				2,147,543		2,162,634
Impairment charges on financial assets		14		130,253		88,025
Net operating income				2,017,290		2,074,609
General and administrative expenses				1,072,003		948,612
Other expenses				129,601		162,686
Operating expenses				1,201,604		1,111,298
Share of post-tax profit of associates and joint ventures				55,286		61,241
Profit before tax				870,972		1,024,552
Income tax expense				208,185		247,158
Net profit			¥	662,787	¥	777,394
Profit attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.			¥	651,127	¥	762,185
Non-controlling interests				5,891		9,603
Other equity instruments holders				5,769		5,606
Earnings per share:
Basic		15	¥	487.79	¥	555.91
Diluted		15		487.65		555.72

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-3

Consolidated Statements of Comprehensive Income (Unaudited)

	For the six months ended September 30,
	2023			2022
	(In millions)
Net profit	¥	662,787		¥	777,394
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans:
Gains (losses) arising during the period, before tax		(6,886	)		15,329
Equity instruments at fair value through other comprehensive income:
Gains (losses) arising during the period, before tax		760,840			(219,566	)
Own credit on financial liabilities designated at fair value through profit or loss:
Gains (losses) arising during the period, before tax		(7,589	)		1,035
Share of other comprehensive income (loss) of associates and joint ventures		1,790			12,073
Income tax relating to items that will not be reclassified		(223,425	)		62,244
Total items that will not be reclassified to profit or loss, net of tax		524,730			(128,885	)
Items that may be reclassified subsequently to profit or loss:
Debt instruments at fair value through other comprehensive income:
Gains (losses) arising during the period, before tax		(484,785	)		(652,810	)
Reclassification adjustments for (gains) losses included in net profit, before tax		45,420			157,216
Exchange differences on translating foreign operations:
Gains (losses) arising during the period, before tax		487,098			655,317
Reclassification adjustments for (gains) losses included in net profit, before tax		—			193
Share of other comprehensive income (loss) of associates and joint ventures		33,910			38,125
Income tax relating to items that may be reclassified		132,461			147,427
Total items that may be reclassified subsequently to profit or loss, net of tax		214,104			345,468
Other comprehensive income, net of tax		738,834			216,583
Total comprehensive income	¥	1,401,621		¥	993,977
Total comprehensive income attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.	¥	1,386,696		¥	976,191
Non-controlling interests		9,156			12,180
Other equity instruments holders		5,769			5,606

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-4

Consolidated Statements of Changes in Equity (Unaudited)

	Equity excluding other reserves											Other reserves
	Capital stock		Capital surplus			Retained earnings			Treasury stock			Remeasure- ments of defined benefit plans reserve			Financial instruments at fair value through other comprehensive income reserve			Own credit on financial liabilities designated at fair value through profit or loss reserve			Exchange differences on translating foreign operations reserve		Equity attributable to SMFG’s shareholders			Non- controlling interests			Equity attributable to other equity instruments holders			Total equity
	(In millions)
Balance at April 1, 2022	¥	2,341,878	¥	645,382		¥	6,434,605		¥	(13,403	)	¥	197,310		¥	1,808,222		¥	520		¥	540,242	¥	11,954,756		¥	93,325		¥	733,611		¥	12,781,692
Comprehensive income:
Net profit		—		—			762,185			—			—			—			—			—		762,185			9,603			5,606			777,394
Other comprehensive income		—		—			—			—			10,641			(499,964	)		718			702,611		214,006			2,577			—			216,583
Total comprehensive income		—		—			762,185			—			10,641			(499,964	)		718			702,611		976,191			12,180			5,606			993,977
Issuance of shares under share-based payment transactions		659		659			—			—			—			—			—			—		1,318			—			—			1,318
Transaction with non-controlling interest shareholders		—		(395	)		—			—			—			—			—			—		(395	)		1,294			—			899
Dividends to shareholders		—		—			(143,936	)		—			—			—			—			—		(143,936	)		(2,713	)		—			(146,649	)
Coupons on other equity instruments		—		—			—			—			—			—			—			—		—			—			(5,606	)		(5,606	)
Purchases of other equity instruments and sales of other equity instruments-net		—		—			—			—			—			—			—			—		—			—			1,002			1,002
Purchases of treasury stock		—		—			—			(34	)		—			—			—			—		(34	)		—			—			(34	)
Sales of treasury stock		—		—			—			320			—			—			—			—		320			—			—			320
Loss on sales of treasury stock		—		—			(46	)		—			—			—			—			—		(46	)		—			—			(46	)
Share-based payment transactions		—		(62	)		—			—			—			—			—			—		(62	)		—			—			(62	)
Transfer from other reserves to retained earnings		—		—			90,970			—			(21,303	)		(69,667	)		—			—		—			—			—			—
Others		—		—			—			—			—			—			—			—		—			2,723			—			2,723
Balance at September 30, 2022	¥	2,342,537	¥	645,584		¥	7,143,778		¥	(13,117	)	¥	186,648		¥	1,238,591		¥	1,238		¥	1,242,853	¥	12,788,112		¥	106,809		¥	734,613		¥	13,629,534
Balance at April 1, 2023	¥	2,342,537	¥	645,774		¥	7,199,479		¥	(151,799	)	¥	159,584		¥	1,575,193		¥	9,433		¥	884,790	¥	12,664,991		¥	106,172		¥	765,802		¥	13,536,965
Comprehensive income:
Net profit		—		—			651,127			—			—			—			—			—		651,127			5,891			5,769			662,787
Other comprehensive income		—		—			—			—			(4,696	)		232,612			(5,265	)		512,918		735,569			3,265			—			738,834
Total comprehensive income		—		—			651,127			—			(4,696	)		232,612			(5,265	)		512,918		1,386,696			9,156			5,769			1,401,621
Issuance of shares under share-based payment transactions		1,501		1,501			—			—			—			—			—			—		3,002			—			—			3,002
Issuance of other equity instruments		—		—			—			—			—			—			—			—		—			—			360,806			360,806
Acquisition and disposal of subsidiaries and businesses-net		—		—			—			—			—			—			—			—		—			48			—			48
Transaction with non-controlling interest shareholders		—		(9,893	)		—			—			—			—			—			—		(9,893	)		9,793			—			(100	)
Dividends to shareholders		—		—			(168,078	)		—			—			—			—			—		(168,078	)		(3,307	)		—			(171,385	)
Coupons on other equity instruments		—		—			—			—			—			—			—			—		—			—			(5,769	)		(5,769	)
Purchases of other equity instruments and sales of other equity instruments-net		—		—			—			—			—			—			—			—		—			—			87			87
Purchases of treasury stock		—		—			—			(61,326	)		—			—			—			—		(61,326	)		—			—			(61,326	)
Sales of treasury stock		—		—			—			243			—			—			—			—		243			—			—			243
Loss on sales of treasury stock		—		—			(99	)		—			—			—			—			—		(99	)		—			—			(99	)
Cancellation of treasury stock		—		—			(195,160	)		195,160			—			—			—			—		—			—			—			���
Share-based payment transactions		—		(1,378	)		—			—			—			—			—			—		(1,378	)		—			—			(1,378	)
Transfer from other reserves to retained earnings		—		—			75,882			—			(17,693	)		(58,189	)		—			—		—			—			—			—
Others		—		(89	)		—			—			—			—			—			—		(89	)		2,009			—			1,920
Balance at September 30, 2023	¥	2,344,038	¥	635,915		¥	7,563,151		¥	(17,722	)	¥	137,195		¥	1,749,616		¥	4,168		¥	1,397,708	¥	13,814,069		¥	123,871		¥	1,126,695		¥	15,064,635

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-5

Consolidated Statements of Cash Flows (Unaudited)

	For the six months ended September 30,
	2023			2022
	(In millions)
Operating Activities:
Profit before tax	¥	870,972		¥	1,024,552
Adjustments for:
Gains on financial assets at fair value through profit or loss and investment securities		(58,174	)		(18,600	)
Foreign exchange gains		(1,170,432	)		(939,255	)
Provision for loan losses		129,983			86,989
Depreciation and amortization		166,526			157,999
Share of post-tax profit of associates and joint ventures		(55,286	)		(61,241	)
Net changes in assets and liabilities:
Netdecrease of term deposits with original maturities over three months		1,137,962			1,767,421
Net increase of call loans and bills bought		(278,393	)		(4,914,016	)
Net (increase) decrease of reverse repurchase agreements and cash collateral on securities borrowed		(1,922,238	)		1,388,766
Net increase of loans and advances		(3,661,329	)		(9,941,327	)
Net change of trading assets and liabilities, derivative financial instruments, and financial liabilities designated at fair value through profit or loss		463,896			1,232,767
Net increaseof deposits		4,097,851			8,666,708
Net increase (decrease) of call money and bills sold		(426,526	)		4,375
Net increase (decrease) of repurchase agreements and cash collateral on securities lent		5,492,415			(2,458,303	)
Net increase (decrease) of other unsubordinated borrowings and debt securities in issue		1,352,249			(7,388,484	)
Income taxes paid—net		(78,584	)		(106,797	)
Other operating activities—net		(1,488,690	)		(1,312,248	)
Net cash and cash equivalents provided by (used in) operating activities		4,572,202			(12,810,694	)
Investing Activities:
Purchases of financial assets at fair value through profit or loss and investment securities		(17,447,417	)		(15,404,357	)
Proceeds from sales of financial assets at fair value through profit or loss and investment securities		4,351,295			11,051,492
Proceeds from maturities of financial assets at fair value through profit or loss and investment securities		8,997,999			11,892,293
Acquisitions of the subsidiaries and businesses, net of cash and cash equivalents acquired		(7	)		—
Investments in associates and joint ventures		(126,574	)		—
Proceeds from sales of investments in associates and joint ventures		138			4,512
Purchases of property, plant and equipment		(41,181	)		(30,387	)
Purchases of intangible assets		(111,371	)		(93,017	)
Proceeds from sales of property, plant and equipment		3,503			1,864
Net cash and cash equivalents provided by (used in) investing activities		(4,373,615	)		7,422,400
Financing Activities:
Redemption of subordinated borrowings.		(10,000	)		(15,000	)
Proceeds from issuance of subordinated bonds		141,033			—
Payments for the principal portion of lease liabilities		(46,198	)		(44,825	)
Proceeds from issuance of other equity instruments		360,806			—
Dividends paid to shareholders of Sumitomo Mitsui Financial Group, Inc.		(167,956	)		(143,871	)
Dividends paid to non-controlling interest shareholders		(3,307	)		(2,713	)
Coupons paid to other equity instruments holders		(5,769	)		(5,606	)
Purchases of treasury stock and proceeds from sales of treasury stock—net		(61,182	)		240
Purchases of other equity instruments and proceeds from sales of other equity instruments—net		87			1,002
Transactions with non-controlling interest shareholders—net		(100	)		956
Net cash and cash equivalents provided by (used in) financing activities		207,414			(209,817	)
Effect of exchange rate changes on cash and cash equivalents		1,406,060			1,674,253
Net increase (decrease) of cash and cash equivalents		1,812,061			(3,923,858	)
Cash and cash equivalents at beginning of period		75,344,235			74,343,953
Cash and cash equivalents at end of period	¥	77,156,296		¥	70,420,095
Net cash and cash equivalents provided by operating activities includes:
Interest and dividends received	¥	2,795,638		¥	1,367,994
Interest paid		1,778,547			510,259

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-6

Notes to Consolidated Financial Statements (Unaudited)

1 GENERAL INFORMATION

Sumitomo Mitsui Financial Group, Inc. (the “Company” or “SMFG”) was established on December 2, 2002, as a holding company for Sumitomo Mitsui Banking Corporation (“SMBC”) and its subsidiaries through a statutory share transfer (

kabushiki-iten

) of all of the outstanding equity securities of SMBC in exchange for the Company’s newly issued securities. The Company is a joint stock corporation with limited liability (

Kabushiki Kaisha

) incorporated under the Companies Act of Japan (“Companies Act”). Upon the formation of the Company and the completion of the statutory share transfer, SMBC became a direct, wholly owned subsidiary of the Company. The Company has a primary listing on the Tokyo Stock Exchange (Prime Market), with further listing on the Nagoya Stock Exchange (Premier Market). The Company’s American Depositary Shares are listed on the New York Stock Exchange.

The Company and its subsidiaries (the “Group”) offer a diverse range of financial services, including commercial banking, leasing, securities, consumer finance and other services together with its associates and joint ventures.

The accompanying consolidated financial statements have been authorized for issue by the Management Committee on December 22, 2023.

2 SUMMARY OF MATERIAL ACCOUNTING POLICIES

Basis of Preparation

The interim consolidated financial statements, including selected explanatory notes, of the Group have been prepared in accordance with IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”). The interim consolidated financial statements should be read in conjunction with the Group’s consolidated financial statements for the fiscal year ended March 31, 2023, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB.

Material Accounting Policies

The material accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group’s consolidated financial statements for the fiscal year ended March 31, 2023.

For the six months ended September 30, 2023, a number of amendments to standards have become effective; however, they have not resulted in any material impact on the Group’s interim consolidated financial statements.

Recent Accounting Pronouncements

The Group is currently assessing the impact of the following standards, amendments to standards, and interpretations that are not yet effective and have not been early adopted:

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)

In September 2014, the IASB issued the narrow-scope amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” to address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The effective date of applying the amendments

F-7

was January 1, 2016 when they were originally issued, however, in December 2015, the IASB issued

Effective Date of Amendments to IFRS 10 and IAS 28

to remove the effective date and indicated that a new effective date will be determined at a future date when it has finalized revisions, if any, that result from its research project on equity accounting. The Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

Classification of Liabilities as Current or

Non-current

(Amendments to IAS 1)

In January 2020, the IASB issued narrow-scope amendments to IAS 1 “Presentation of Financial Statements” to clarify how to classify debt and other liabilities as current or

non-current.

The amendments make it easier for entities to determine whether, in the statements of financial position, debt and other liabilities with an uncertain settlement date should be classified as current or

non-current.

The effective date of applying the amendments was January 1, 2022 when they were originally issued, however, in July 2020, the IASB issued an amendment which defers the effective date to annual periods beginning on or after January 1, 2023. Subsequently, in October 2022, the IASB issued a further amendment which defers the effective date to annual periods beginning on or after January 1, 2024. The amendments are not expected to have a material impact on the Group’s consolidated financial statements.

Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)

In September 2022, the IASB issued narrow-scope amendments to IFRS 16 “Leases,” which add to subsequent measurement requirements for the lease liability arising from a sale and leaseback transaction. The amendments specify how to measure the lease liability when reporting after the date of the transaction. The amendments are effective for annual reporting periods beginning on or after January 1, 2024 and are not expected to have a material impact on the Group’s consolidated financial statements.

Non-current

Liabilities with Covenants (Amendments to IAS 1)

In October 2022, the IASB issued amendments to IAS 1 to improve the information entities provide about long-term debt with covenants. The amendments to IAS 1 specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or

non-current

at the reporting date. Instead, the amendments require an entity to disclose information about these covenants in the notes to the financial statements and enable investors to understand the risk that such debt could become repayable early. The amendments are effective for annual reporting periods beginning on or after January 1, 2024 and are not expected to have a material impact on the Group’s consolidated financial statements.

Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)

In May 2023, the IASB issued amendments to IAS 7 “Statement of Cash Flows” and IFRS 7 “Financial Instruments: Disclosures,” which require an entity to provide disclosures to enhance the transparency of supplier finance arrangements and their effects on an entity’s liabilities, cash flows and exposure to liquidity risk. The amendments are effective for annual periods beginning on or after January 1, 2024 and are not expected to have a material impact on the Group’s consolidated financial statements.

Lack of Exchangeability (Amendments to IAS 21)

In August 2023, the IASB issued the amendments to IAS 21 “The Effects of Changes in Foreign Exchange Rates” to address a matter not previously covered in the accounting requirements for the effects of changes in foreign exchange rates. The amendments require entities to apply a consistent approach in assessing whether a currency can be exchanged into another currency. The amendments also require entities to determine the exchange rate and provide more useful information in their financial statements when a currency cannot be exchanged into another currency. The amendments are effective for annual periods beginning on or after

F-8

January 1, 2025. The Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The consolidated financial statements are influenced by estimates and management judgments, which necessarily have to be made in the course of preparation of the consolidated financial statements. Estimates and judgments are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, and which are continually evaluated. For information on the estimation of the allowance for loan losses which reflects the current and forward-looking impact of the situation in Russia and Ukraine, the rising interest rates in foreign countries due to global monetary tightening and the subsequent effects following the mitigation of the

COVID-19

pandemic, refer to Note 7 “Loans and Advances.” The critical accounting estimates and judgments are described in Note 3 “Critical Accounting Estimates and Judgments” of the Group’s consolidated financial statements for the fiscal

year

ended March 31, 2023.

4 SEGMENT ANALYSIS

Business Segments

The Group’s business segment information is prepared based on the internal reporting system utilized by its management to assess the performance of its business segments under accounting principles generally accepted in Japan (“Japanese GAAP”).

The Group has four main business segments: the Wholesale Business Unit, the Retail Business Unit, the Global Business Unit and the Global Markets Business Unit, with the remaining operations recorded in Head office account and others.

Wholesale Business Unit

The Wholesale Business Unit provides comprehensive solutions primarily for corporate clients in Japan that respond to wide-ranging client needs in relation to financing, investment management, risk hedging, settlement, M&A and other advisory services, digital services and leasing services. This business unit mainly consists of the wholesale businesses of SMBC, SMBC Trust Bank Ltd. (“SMBC Trust Bank”), Sumitomo Mitsui Finance and Leasing Company, Limited (“SMFL”), SMBC Nikko Securities Inc. (“SMBC Nikko Securities”), Sumitomo Mitsui Card Company, Limited (“Sumitomo Mitsui Card”) and SMBC Finance Service Co., Ltd. (“SMBC Finance Service”).

Retail Business Unit

The Retail Business Unit provides financial services to consumers residing in Japan and mainly consists of the retail businesses of SMBC, SMBC Trust Bank, SMBC Nikko Securities, Sumitomo Mitsui Card, SMBC Finance Service and SMBC Consumer Finance Co., Ltd. (“SMBC Consumer Finance”). This business unit offers a wide range of products and services for consumers, including wealth management services, settlement services, consumer finance and housing loans, in order to address the financial needs of all individual customers.

Global Business Unit

The Global Business Unit supports the global businesses of a diverse range of clients, such as Japanese companies operating overseas,

non-Japanese

companies, financial institutions and government agencies and public corporations of various countries. This business unit provides a variety of tailored products and services to meet customer and market requirements, including loans, deposits, clearing services, trade finance, project finance, loan syndication, derivatives, global cash management services, leasing services, equity and fixed

F-9

income sales and trading, underwriting activities, Japanese stock brokerage and M&A advisory services. This business unit mainly consists of the global businesses of SMBC, SMBC Trust Bank, SMFL, SMBC Nikko Securities and their foreign subsidiaries.

Global Markets Business Unit

The Global Markets Business Unit offers solutions through foreign exchange products, derivatives, bonds, stocks and other marketable financial products, and also undertakes asset liability management operations, which help comprehensively control balance sheet liquidity risks and market risks. This business unit consists of the Global Markets and Treasury Unit of SMBC, which was renamed from the Treasury Unit in April 2023, and the Global Markets Division of SMBC Nikko Securities.

Head office account and others

The Head office account and others represent the difference between the aggregate of the Wholesale Business Unit, the Retail Business Unit, the Global Business Unit and the Global Markets Business Unit, and the Group as a whole. It mainly consists of administrative expenses related to headquarters operations and profit or loss from other subsidiaries including The Japan Research Institute, Limited and Sumitomo Mitsui DS Asset Management Company, Limited. It also includes the elimination items related to internal transactions between the Group companies.

Measurement of Segment Profit or Loss

The business segment information is prepared under the management approach. Consolidated net business profit is used as a profit indicator of banks in Japan. Consolidated net business profit of each segment is calculated by deducting general and administrative expenses (i.e., the total of personnel expense,

non-personnel

expense and tax), and by adding or deducting others (i.e., share of profit or loss of equity-method associates and joint ventures and cooperated profit and loss based on internal managerial accounting) to or from consolidated gross profits (i.e., the total of net interest income, trust fees, net fee and commission income, net trading income and net other operating income). The consolidated gross profits and general and administrative expenses of each segment are prepared for management accounting purposes and not generated solely by aggregating figures prepared under financial accounting. While the Group’s disclosure complies with the requirements on segment information in accordance with IFRS, the figures reported to management and disclosed herein are prepared under Japanese GAAP. Consequently, the business segment information does not agree with the figures in the consolidated financial statements under IFRS. These differences are addressed in the “Reconciliation of Segmental Results of Operations to Consolidated Income Statements.”

Information regarding the total assets of each segment is not used by management in deciding how to allocate resources and assess performance. Accordingly, total assets are not included in the business segment information.

F-10

Segmental Results of Operations

The following tables show the Group’s results of operations by business segment for the six months ended September 30, 2023 and 2022. The comparative information for the fiscal year ended September 30, 2022 has been restated to reflect the changes to the allocation logic from the Head office account and others to other business segments in the Group’s managerial accounting, which became effective from April 1, 2023, and to eliminate the impact of factors such as changes in interest rates and exchange rates that may distort the comparison.

For the six months ended September 30, 2023:

	Wholesale Business Unit			Retail Business Unit			Global Business Unit			Global Markets Business Unit			Head office account and others			Total
	(In billions)
Consolidated gross profit (1)	¥	396.9		¥	621.8		¥	670.5		¥	286.6		¥	(158.5	)	¥	1,817.3
General and administrative expenses		(151.9	)		(526.8	)		(391.0	)		(79.9	)		67.4			(1,082.2	)
Others (2)		53.6			3.4			31.8			15.8			(68.8	)		35.8
Consolidated net business profit	¥	298.6		¥	98.4		¥	311.3		¥	222.5		¥	(159.9	)	¥	770.9
For the six months ended September 30, 2022:
	Wholesale Business Unit			Retail Business Unit			Global Business Unit			Global Markets Business Unit			Head office account and others			Total
	(In billions)
Consolidated gross profit (1)	¥	353.4		¥	567.9		¥	589.5		¥	266.7		¥	(145.1	)	¥	1,632.4
General and administrative expenses		(143.3	)		(487.7	)		(330.2	)		(73.6	)		72.2			(962.6	)
Others (2)		48.8			2.1			47.1			15.4			(61.3	)		52.1
Consolidated net business profit	¥	258.9		¥	82.3		¥	306.4		¥	208.5		¥	(134.2	)	¥	721.9

(1) Consolidated gross profit = (Interest income – Interest expenses) + Trust fees + (Fee and commission income – Fee and commission expenses) + (Trading income – Trading losses) + (Other operating income – Other operating expenses).

(2) “Others” includes share of profit or loss of equity-method associates and joint ventures and cooperated profit and loss, that is, profit and loss double counted within the Group’s business segments in the managerial accounting.

F-11

Reconciliation of Segmental Results of Operations to Consolidated Income Statements

The figures provided in the tables above are calculated by aggregating the figures used for management reporting under Japanese GAAP for each segment. The total amount of consolidated net business profit that is calculated by each segment based on the internal managerial data is reconciled to profit before tax reported in the consolidated financial statements under IFRS as shown in the following table:

	For the six months ended September 30,
	2023			2022
	(In billions)
Consolidated net business profit	¥	770.9		¥	721.9
Differences between management reporting and Japanese GAAP:
Total credit costs		(100.3	)		(83.1	)
Gains on equity instruments		46.8			92.1
Extraordinary gains or losses and others		(11.0	)		(6.2	)
Profit before tax under Japanese GAAP		706.4			724.7
Differences between Japanese GAAP and IFRS:
Scope of consolidation		2.7			3.2
Derivative financial instruments		255.8			464.5
Investment securities		(49.1	)		(105.6	)
Loans and advances		(61.0	)		(33.2	)
Investments in associates and joint ventures		10.1			(28.7	)
Property, plant and equipment		0.4			(0.6	)
Lease accounting		(0.9	)		—
Defined benefit plans		(26.8	)		(28.1	)
Foreign currency translation		(16.3	)		(22.5	)
Classification of equity and liability		7.3			5.7
Others		42.4			45.2
Profit before tax under IFRS	¥	871.0		¥	1,024.6

5 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

Derivative financial instruments include futures, forwards, swaps, options and other types of derivative contracts, which are transactions listed on exchanges or

over-the-counter

(“OTC”) transactions. In the normal course of business, the Group enters into a variety of derivatives for trading and risk management purposes. The Group uses derivatives for trading activities, which include facilitating customer transactions, market-making and arbitrage activities. The Group also uses derivatives to reduce its exposures to market and credit risks as part of its asset and liability management.

Derivatives are financial instruments that derive their value from the price of underlying items such as interest rates, foreign exchange rates, equities, bonds, commodities, credit spreads and other indices. The Group’s derivative financial instruments mainly consist of interest rate derivatives and currency derivatives. Interest rate derivatives include interest rate swaps, interest rate options and interest rate futures. Currency derivatives include foreign exchange forward transactions, currency swaps and currency options.

F-12

The tables b

e

low represent the derivative financial instruments by type and purpose of derivatives at September 30, 2023 and March 31, 2023.

	At September 30, 2023
	Trading						Risk Management (1)
	Notional amounts		Assets		Liabilities		Notional amounts		Assets		Liabilities
	(In millions)
Interest rate derivatives	¥	1,705,064,948	¥	7,105,501	¥	8,935,065	¥	63,920,478	¥	1,200,112	¥	1,355,496
Futures		158,410,820		42,383		44,662		1,562,264		2,253		947
Listed Options		187,933,727		52,836		36,721		—		—		—
Forwards		31,225,313		78,469		72,821		—		—		—
Swaps		1,047,934,282		5,731,168		6,064,799		62,150,298		1,197,859		1,310,443
OTC Options		279,560,806		1,200,645		2,716,062		207,916		—		44,106
Currency derivatives		247,544,947		4,353,447		2,417,493		25,068,889		251,956		2,471,902
Futures		980		—		181		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		130,894,081		2,092,679		1,605,454		9,703,233		142,696		469,557
Swaps		106,052,283		2,027,596		538,251		15,365,656		109,260		2,002,345
OTC Options		10,597,603		233,172		273,607		—		—		—
Equity derivatives		3,087,398		52,245		61,296		—		—		—
Futures		1,726,002		23,713		19,235		—		—		—
Listed Options		679,406		11,528		17,067		—		—		—
Forwards		393,964		908		16,791		—		—		—
Swaps		31,119		91		1,382		—		—		—
OTC Options		256,907		16,005		6,821		—		—		—
Commodity derivatives		130,997		13,379		12,178		—		—		—
Futures		52,700		1,932		1,572		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		—		—		—		—		—		—
Swaps		65,539		11,251		10,168		—		—		—
OTC Options		12,758		196		438		—		—		—
Credit derivatives		3,164,779		38,654		45,285		—		—		—
Total derivative financial instruments	¥	1,958,993,069	¥	11,563,226	¥	11,471,317	¥	88,989,367	¥	1,452,068	¥	3,827,398

F-13

	At March 31, 2023
	Trading						Risk Management (1)
	Notional amounts		Assets		Liabilities		Notional amounts		Assets		Liabilities
	(In millions)
Interest rate derivatives	¥	1,691,197,124	¥	5,025,797	¥	6,380,627	¥	65,003,591	¥	763,819	¥	1,032,506
Futures		129,630,431		37,084		36,633		8,746,711		5,990		2,836
Listed Options		262,156,548		87,651		52,918		—		—		—
Forwards		24,354,115		30,619		24,358		—		—		—
Swaps		1,036,174,625		4,059,518		4,100,097		56,071,259		757,829		1,008,337
OTC Options		238,881,405		810,925		2,166,621		185,621		—		21,333
Currency derivatives		220,393,641		2,571,317		1,629,519		21,600,130		203,864		1,376,767
Futures		1,114		145		—		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		115,616,503		1,113,495		1,107,415		7,430,656		71,072		184,808
Swaps		93,961,952		1,282,512		352,236		14,169,474		132,792		1,191,959
OTC Options		10,814,072		175,165		169,868		—		—		—
Equity derivatives		2,372,833		54,508		42,208		—		—		—
Futures		1,369,369		11,259		16,491		—		—		—
Listed Options		565,733		9,312		17,713		—		—		—
Forwards		146,369		12,567		2		—		—		—
Swaps		39,235		433		2,554		—		—		—
OTC Options		252,127		20,937		5,448		—		—		—
Commodity derivatives		129,488		9,142		7,946		—		—		—
Futures		25,427		407		1,247		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		—		—		—		—		—		—
Swaps		73,010		8,567		6,331		—		—		—
OTC Options		31,051		168		368		—		—		—
Credit derivatives		2,893,477		21,500		27,282		—		—		—
Total derivative financial instruments	¥	1,916,986,563	¥	7,682,264	¥	8,087,582	¥	86,603,721	¥	967,683	¥	2,409,273

(1) Derivative financial instruments categorized as “Risk Management” are used for economic hedging, such as managing the exposure to changes in fair value of the loan portfolio, and are identified as hedging instruments under Japanese GAAP. Under IFRS, the Group applies hedge accounting for certain fixed rate debt securities in issue, borrowings, and debt instruments at fair value through other comprehensive income (“FVOCI”) and net investments in foreign operations. Derivative financial instruments designated as hedging instruments are also categorized as “Risk Management.”

Hedge accounting

The Group applies fair value hedge accounting and hedge accounting of net investments in foreign operations in order to reflect the effect of risk management activities on its consolidated financial statements.

F-14

Fair value hedges

The Group app

l

i

e

s fair value hedge accounting to mitigate the risk of changes in the fair value of certain fixed rate financial assets and liabilities. The table below represents the amounts related to items designated as hedging instruments at September 30, 2023 and March 31, 2023.

	At September 30, 2023						At March 31, 2023
	Notional amounts		Carrying amounts				Notional amounts		Carrying amounts
			Assets		Liabilities				Assets		Liabilities
	(In millions)
Interest rate risk
Interest rate swaps	¥	9,854,304	¥	139,607	¥	875,688	¥	8,264,813	¥	101,835	¥	587,049
Interest rate options		207,916		—		44,106		185,621		—		21,333

Hedges of net investments in foreign operations

The Group applies hedge accounting of net investments in foreign operations to mitigate the foreign currency risk of exchange differences arising from the translation of net investments in foreign operations. The table below represents the amounts related to items designated as hedging instruments at September 30, 2023 and March 31, 2023.

At September 30, 2023			At March 31, 2023
Nominal amounts	Carrying amounts		Nominal amounts	Carrying amounts
	Assets	Liabilities		Assets	Liabilities
(In millions)

Foreign exchange forward contracts	¥	3,430,339	¥	32,887	¥	465,816	¥	3,088,524	¥	48,483	¥	147,366
Foreign currency denominated financial liabilities		322,840		—		322,840		287,072		—		287,072

F-15

6 INVESTMENT SECURITIES

The following table shows the amount of investment securities, which consist of debt instruments at amortized cost, debt instruments at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income at September 30, 2023 and March 31, 2023.

	At September 30, 2023		At March 31, 2023
	(In millions)
Debt instruments at amortized cost:
Domestic:
Japanese government bonds	¥	78,556	¥	72,549
Japanese municipal bonds		128,649		93,044
Japanese corporate bonds		4,990		—
Total domestic		212,195		165,593
Foreign:
Bonds issued by other governments and official institutions (1)		72,689		68,121
Mortgage-backed securities		1,926		—
Other debt instruments		3,241		1,853
Total foreign		77,856		69,974
Total debt instruments at amortized cost	¥	290,051	¥	235,567
Debt instruments at fair value through other comprehensive income:
Domestic:
Japanese government bonds	¥	9,512,127	¥	9,576,298
Japanese municipal bonds		1,077,443		1,087,625
Japanese corporate bonds		910,839		946,726
Other debt instruments		313		312
Total domestic		11,500,722		11,610,961
Foreign:
U.S. Treasury and other U.S. government agency bonds		9,825,401		5,232,456
Bonds issued by other governments and official institutions (1)		3,416,633		2,991,272
Mortgage-backed securities		3,151,857		2,379,250
Other debt instruments		651,193		597,484
Total foreign		17,045,084		11,200,462
Total debt instruments at fair value through other comprehensive income	¥	28,545,806	¥	22,811,423
Equity instruments at fair value through other comprehensive income:
Domestic equity instruments	¥	4,071,827	¥	3,587,964
Foreign equity instruments		1,175,046		960,644
Total equity instruments at fair value through other comprehensive income	¥	5,246,873	¥	4,548,608
Total investment securities	¥	34,082,730	¥	27,595,598

(1) Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agencies.

F-16

7 LOANS AND ADVANCES

The following tables present loans and advances at September 30, 2023 and March 31, 2023.

	At September 30, 2023
	12-month ECL			Lifetime ECL not credit- impaired			Lifetime ECL credit-impaired			Total
	(In millions)
Loans and advances at amortized cost:
Gross loans and advances	¥	112,702,852		¥	3,770,596		¥	1,207,957		¥	117,681,405
Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net											(446,390	)
Less: Allowance for loan losses		(206,054	)		(257,488	)		(486,089	)		(949,631	)
Carrying amount										¥	116,285,384
	At March 31, 2023
	12-month ECL			Lifetime ECL not credit- impaired			Lifetime ECL credit-impaired			Total
	(In millions)
Loans and advances at amortized cost:
Gross loans and advances	¥	108,254,496		¥	3,718,669		¥	1,170,662		¥	113,143,827
Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net											(388,579	)
Less: Allowance for loan losses		(187,455	)		(240,494	)		(436,165	)		(864,114	)
Carrying amount										¥	111,891,134

F-17

Reconciliation of allowance for loan losses is as follows:

	At September 30, 2023
	12-month ECL			Lifetime ECL not credit- impaired			Lifetime ECL credit-impaired		Total
	(In millions)
Allowance for loan losses:
Balance at April 1, 2023	¥	187,455		¥	240,494		¥	436,165	¥	864,114
Net transfers between stages		(1,301	)		(9,373	)		10,674		—
Provision for loan losses		12,665			18,250			99,068		129,983
Charge-offs (1)		—			—			91,512		91,512
Recoveries		—			—			8,049		8,049
Net charge-offs		—			—			83,463		83,463
Others (2)		7,235			8,117			23,645		38,997
Balance at September 30, 2023	¥	206,054		¥	257,488		¥	486,089	¥	949,631
	At September 30, 2022
	12-month ECL			Lifetime ECL not credit- impaired			Lifetime ECL credit-impaired		Total
	(In millions)
Allowance for loan losses:
Balance at April 1, 2022	¥	162,919		¥	247,020		¥	583,115	¥	993,054
Net transfers between stages		(7,616	)		(8,529	)		16,145		—
Provision for loan losses		12,104			5,737			69,148		86,989
Charge-offs (1)		—			—			142,198		142,198
Recoveries		—			—			10,467		10,467
Net charge-offs		—			—			131,731		131,731
Others (2)		7,882			14,052			19,922		41,856
Balance at September 30, 2022	¥	175,289		¥	258,280		¥	556,599	¥	990,168

(1) Charge-offs consist of the reduction of the allowance through the sales of loans and write-offs.

(2) Others mainly include foreign exchange translations for the six months ended September 30, 2023 and 2022.

The allowance for loan losses is measured under the expected credit losses (“ECL”) model which requires the use of complex models and significant assumptions about future economic conditions and credit behavior. For the six months ended September 30, 2023, the obligor grading, macroeconomic factors and additional ECL adjustments used to determine the final ECL reflected the current and forward-looking impact of the situation in Russia and Ukraine, the rising interest rates in foreign countries due to global monetary tightening and the subsequent effects following the mitigation of the

COVID-19

pandemic. The obligor grades were reviewed based on the most recent information available as appropriate.

The macroeconomic scenarios for incorporating forward-looking information in the ECL measurement were updated, reflecting the recent economic forecasts. The Group assumed that the Japanese economy would continue to recover during the fiscal years ending March 31, 2024 and 2025, driven by an increase in the consumption of services such as dining out and travel, which had been suppressed by the

COVID-19

pandemic. The Group also assumed that the global GDP growth would slow to around 3% for the fiscal year ending March 31, 2024, but would gradually recover during the fiscal year ending March 31, 2025, due to the Group’s expectation that global monetary tightening would peak in response to declining inflationary pressure. This assumption was considered in determining the base scenario. The upside and downside scenarios were developed

F-18

based on the premises of the base scenario and past macroeconomic experience. The following table shows the growth rates of the Japanese and global GDP, which are the key factors of the macroeconomic scenarios, under the base scenario.

	For the fiscal year ending March 31,
	2024		2025
	(%)
Japanese GDP		6.2		2.6
Global GDP		3.0		3.1

In determining the need for making additional ECL adjustments, the Group considered whether there is an increase in the credit risk for some portfolios which had a material adverse impact resulting from the sanctions imposed in connection with Russia’s aggression against Ukraine, the rising interest rates in foreign countries due to the global monetary tightening, or the subsequent effects following the mitigation of the

COVID-19

pandemic and whether the increased risk, if any, was not fully incorporated in the ECL model. For the Russian exposure, the Group evaluated the forward-looking impact on credit risks and losses based on factors such as the possibility that payment of principal or interest would be delayed or the request for loan restructuring would be made due to the prolonged impact of sanctions targeting Russia imposed by the Japanese government and authorities in several other jurisdictions, Russia’s measures to defend its economy and mitigate the effect of sanctions, and a deterioration of credit condition of Russia. In addition, the Group also considered the prolonged difficulty in collecting payments from Russian customers through remittances out of Russia due to orders by the Russian authorities. For the rising interest rates in foreign countries from the global monetary tightening, the Group evaluated the forward-looking impact on credit risks and losses in light of the increased interest payment burden on borrowers. For the subsequent effects following the mitigation of the

COVID-19

pandemic, additional ECL adjustments included the consideration of the termination of the government support measures and the establishment of new lifestyles. The Group evaluated the forward-looking impact on credit risks and losses of certain industry-related portfolios selected based on changes in factors such as the market conditions and bankruptcy trends. As a consequence, the Group decided to maintain ECL adjustments for the above portfolios affected by the situation in Russia and Ukraine, the rising interest rates in foreign countries due to the global monetary tightening and the subsequent effects following the mitigation of the

COVID-19

pandemic.

As a result, for the six months ended September 30, 2023, the allowance for loan losses increased by

¥85,517 million from ¥864,114 

million at beginning of period to

¥949,631 

million at end of period primarily due to an increase in allowance of lifetime ECL credit-impaired. Th

is

 was primarily due to an increase in the provision for loan losses related to some large corporate borrowers.

8 BORROWINGS

Borrowings at September 30, 2023 and March 31, 2023 consisted of the following:

	At September 30, 2023		At March 31, 2023
	(In millions)
Unsubordinated borrowings	¥	14,247,306	¥	13,532,217
Subordinated borrowings		177,412		186,218
Liabilities associated with securitization transactions		1,210,393		1,236,369
Lease liabilities		425,079		416,997
Total borrowings	¥	16,060,190	¥	15,371,801

F-19

9 DEBT SECURITIES IN ISSUE

Debt securities in issue at September 30, 2023 and March 31, 2023 consisted of the following:

	At September 30, 2023		At March 31, 2023
	(In millions)
Commercial paper	¥	2,874,209	¥	2,585,889
Unsubordinated bonds		9,572,275		8,285,355
Subordinated bonds		1,279,332		1,113,750
Total debt securities in issue	¥	13,725,816	¥	11,984,994

10 PROVISIONS

The following table presents movements by class of provisions for the six months ended September 30, 2023.

	Provision for interest repayment			Other provisions			Total
	(In millions)
Balance at April 1, 2023	¥	128,234		¥	119,110		¥	247,344
Additional provisions		—			4,386			4,386
Amounts used		(16,110	)		(4,231	)		(20,341	)
Unused amounts reversed		—			(5,903	)		(5,903	)
Amortization of discount and effect of change in discount rate		(516	)		78			(438	)
Others		—			348			348
Balance at September 30, 2023	¥	111,608		¥	113,788		¥	225,396

Provision for Interest Repayment

Japan has two laws restricting interest rates on loans. The Interest Rate Restriction Act sets the maximum interest rates on loans ranging from 15% to 20%. The Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates capped the interest rate on loans at 29.2% up to June 2010. Interest rates on loans greater than the range of

15-20%

but below the maximum allowable of 29.2% were called “gray zone interest,” and many consumer lending and credit card companies were charging interest in this zone.

In January 2006, judicial decisions strictly interpreted the conditions under which consumer finance companies may retain gray zone interest. As a result, claims for refunds of gray zone interest have increased, and consumer lending and credit card companies have recorded a provision for claims for refunds of gray zone interest.

In December 2006, the Government of Japan made amendments to laws regulating money lenders to implement regulatory reforms affecting the consumer finance industry. As a result, in June 2010, the maximum legal interest rates on loans were reduced to the range of

15-20%,

and gray zone interest was abolished.

The provision for interest repayment is calculated by estimating the future claims for the refund of gray zone interest, taking into account historical experience such as the number of customer claims for a refund, the amount of repayments and the characteristics of customers, and the length of the period during which claims are expected to be received in the future. The timing of the settlement of these claims is uncertain.

For the six months ended September 30, 2023, the provision for interest repayment decreased primarily due to the use of the provision.

F-20

Other Provisions

Other provisions include asset retirement obligations and provisions for loan commitments, reimbursement of deposits, point programs and litigation claims. Most of these provisions occurred in the normal course of business and none of them were individually significant at September 30, 2023 and April 1, 2023.

11 SHAREHOLDERS’ EQUITY

Common Stock

The number of issued shares of common stock and common stock held by the Company at September 30, 2023 and March 31, 2023 was as follows:

	At September 30, 2023		At March 31, 2023
Shares outstanding		1,337,529,084		1,374,691,194
Shares in treasury		3,455,590		30,070,650

The total number of authorized shares of common stock was 3,000 million at September 30, 2023 and March 31, 2023 with no stated value.

On November

14, 2022

, the Company’s board of directors resolved to repurchase shares of its common stock and cancel all the repurchased shares.

The resolution authorized the repurchase of up to the lesser of (i) an aggregate of 61,000,000 shares of its common stock and (ii) an aggregate of ¥200 billion between November 15, 2022 and May 31, 2023. On May 31, 2023, the Company completed the repurchase pursuant to the resolution, acquiring 37,640,000 shares of its common stock for ¥200 billion in aggregate. The Company cancelled all the repurchased shares on June 20, 2023.

On November 14, 2023, the Company’s board of directors resolved to repurchase shares of its common stock and cancel all the repurchased shares. The resolution authorized the repurchase of up to the lesser of (i) an aggregate of 26,000,000 shares of its common stock and (ii) an aggregate of ¥150

billion between November 15, 2023 and March 31, 2024. During November 2023, the Company entered into contracts to repurchase 3,568,800 shares of common stock for ¥26 billion in aggregate. 

Preferred Stock

The following table shows the number of shares of preferred stock at September 30, 2023 and March 31, 2023.

	At September 30, 2023				At March 31, 2023
	Authorized		Issued		Authorized		Issued
Type 5 preferred stock		167,000		—		167,000		—
Type 7 preferred stock		167,000		—		167,000		—
Type 8 preferred stock		115,000		—		115,000		—
Type 9 preferred stock		115,000		—		115,000		—

F-21

12 EQUITY ATTRIBUTABLE TO OTHER EQUITY INSTRUMENTS HOLDERS

Equity attributable to other equity instruments holders at September 30, 2023 and March 31, 2023 consisted of the following:

	At September 30, 2023		At March 31, 2023
	(In millions)
Perpetual subordinated bonds	¥	1,106,695	¥	755,802
Perpetual subordinated borrowings	¥	20,000	¥	10,000
Total equity attributable to other equity instruments holders	¥	1,126,695	¥	765,802

Equity attributable to other equity instruments holders consists of perpetual subordinated bonds and perpetual subordinated borrowings which are Basel

III-compliant

Additional Tier 1 capital instruments and are classified as equity under IFRS.

The bonds and borrowings bear a fixed rate of interest until the first call date. After the first call date, they will bear a floating rate of interest unless they are redeemed. SMFG may at any time and in its sole discretion, elect to cancel any interest payment. If cancelled, interest payments are

non-cumulative

and will not increase to compensate for any short-fall in interest payments in any previous year.

These bonds and borrowings are undated, have no final maturity date and may be redeemed at SMFG’s option, in whole, but not in part, on the first call date or any interest payment dates thereafter subject to prior confirmation of the Financial Services Agency of Japan (“FSA”).

The principal amount of the bonds and borrowings may be written down upon the occurrence of certain trigger events. For example, if the Common Equity Tier 1 capital ratio falls below 5.125% (“Capital Ratio Event”), the principal amount required to fully restore the Common Equity Tier 1 capital ratio above 5.125% will be written down.

The principal amount of the bonds and borrowings which has been written down due to a Capital Ratio Event may be reinstated at SMFG’s option, subject to prior confirmation of the FSA that the Common Equity Tier 1 capital ratio remains at a sufficiently high level after giving effect to such reinstatement.

13 FEE AND COMMISSION INCOME

Fee and commission income for the six months ended September 30, 2023 and 2022 consisted of the following:

	For the six months ended September 30,
	2023		2022
	(In millions)
Loans	¥	71,500	¥	68,340
Credit card business		207,529		181,965
Guarantees		41,245		35,386
Securities-related business		88,549		55,537
Deposits		9,016		8,560
Remittances and transfers		74,658		73,526
Safe deposits		2,195		2,051
Trust fees		3,785		3,044
Investment trusts		82,543		74,220
Agency		4,746		4,630
Others		104,949		100,287
Total fee and commission income	¥	690,715	¥	607,546

F-22

Fee and commission income can be mainly disaggregated into loans, credit card business, securities-related business, remittances and transfers and investment trusts by types of services. Loan transaction fees principally arise in the Wholesale Business Unit and the Global Business Unit. Fees obtained through credit card business principally arise in the Retail Business Unit. Fees obtained through securities-related business principally arise in the Wholesale Business Unit, the Retail Business Unit and the Global Business Unit. Remittance and transfer fees principally arise in the Wholesale Business Unit, the Retail Business Unit and the Global Business Unit. Fees and commissions obtained through investment trusts principally arise in the Retail Business Unit and Head office account and others, which include the investment advisory and investment trust management businesses.

14 IMPAIRMENT CHARGES ON FINANCIAL ASSETS

Impairment charges (reversals) on financial assets for the six months ended September 30, 2023 and 2022 consisted of the following:

	For the six months ended September 30,
	2023			2022
	(In millions)
Loans and advances	¥	129,983		¥	86,989
Loan commitments		(5,132	)		(7,429	)
Financial guarantees		5,402			8,465
Total impairment charges on financial assets	¥	130,253		¥	88,025

15 EARNINGS PER SHARE

The following table shows the income and share data used in the basic and diluted earnings per share calculations for the six months ended September 30, 2023 and 2022.

	For the six months ended September 30,
	2023			2022
	(In millions, except number of shares and per share data)
Basic:
Profit attributable to shareholders of the Company	¥	651,127		¥	762,185
Weighted average number of common stock in issue (in thousands of shares)		1,334,846			1,371,054
Basic earnings per share	¥	487.79		¥	555.91
Diluted:
Profit attributable to the common shareholders of the Company	¥	651,127		¥	762,185
Impact of dilutive potential ordinary shares issued by subsidiaries and associates		(2	)		—
Net profit used to determine diluted earnings per share	¥	651,125		¥	762,185
Weighted average number of common stock in issue (in thousands of shares)		1,334,846			1,371,054
Adjustments for stock options (in thousands of shares)		397			478
Weighted average number of common stock for diluted earnings per share (in thousands of shares)		1,335,243			1,371,532
Diluted earnings per share	¥	487.65		¥	555.72

F-23

16 DIVIDENDS PER SHARE

The dividends recognized by the Company for the six months ended September 30, 2023 and 2022 were as follows:

	Per share		Aggregate amount
	(In yen)		(In millions)
Dividends on common stock for the six months ended September 30,
2023	¥	125	¥	168,078
2022	¥	105	¥	143,936

On November 

14

, 2023, the board of directors approved a dividend of ¥135 per share of common stock totaling ¥180,100 million in respect of the six months ended September 30, 2023. The consolidated financial statements for the six months ended September 30, 2023 do not include this dividend payable.

17 CONTINGENCY AND CAPITAL COMMITMENTS

Legal Proceedings

The Group is engaged in various legal proceedings in Japan and a number of overseas jurisdictions, involving claims by and against it, which arise in the normal course of business. The Group does not expect that the outcome of these proceedings will have a significant adverse effect on the consolidated financial statements of the Group. The Group has recorded adequate provisions with respect to litigation arising out of normal business operations. The Group has not disclosed any contingent liability associated with these legal actions because it cannot reliably be estimated.

Capital Commitments

At September 30, 2023 and March 31, 2023, the Group had ¥1,365 million and ¥1,134 million, respectively, of contractual commitments to acquire property, plant and equipment. In addition, the Group had ¥1,219 million and ¥631 million of contractual commitments to acquire intangible assets, at September 30, 2023 and March 31, 2023, respectively. The Group’s management is confident that future net revenues and funding will be sufficient to cover these commitments.

Loan Commitments and Financial Guarantees and Other Credit-related Contingent Liabilities

Loan commitment contracts on overdrafts and loans are agreements to lend up to a prescribed amount to customers, as long as there is no violation of any condition established in the contracts. However, since many of these loan commitments are expected to expire without being drawn down, the total amount of unused commitments does not necessarily represent an actual future cash flow requirement. Many of these loan commitments include clauses under which the Group can reject an application from customers or reduce the contract amounts in cases where economic conditions change, the Group needs to secure claims, or some other significant event occurs.

Financial guarantees are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of the debt instrument. Other credit-related contingent liabilities include performance bonds, which are contracts that provide compensation if another party fails to perform the contractual obligation.

F-24

The table below shows the nominal amounts of undrawn loan commitments, and financial guarantees and other credit-related contingent liabilities at September 30, 2023 and March 31, 2023.

	At September 30, 2023		At March 31, 2023
	(In millions)
Loan commitments	¥	85,878,811	¥	79,068,816
Financial guarantees and other credit-related contingent liabilities		14,605,432		13,693,772
Total	¥	100,484,243	¥	92,762,588

18 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Accounting policies and the valuation process of fair value measurement for the six months ended September 30, 2023 are consistent with those described in Note 44 “Fair Value of Financial Assets and Liabilities” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2023.

Financial Assets and Liabilities Carried at Fair Value

Fair Value Hierarchy

The following tables present the carrying amounts of financial assets and liabilities carried at fair value based on the three levels of the fair value hierarchy at September 30, 2023 and March 31, 2023. The three levels of the fair value hierarchy are as follows:

• quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date (Level 1);

• inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (Level 2); and

• significant unobservable inputs for the asset or liability (Level 3).

F-25

	At September 30, 2023
	Level 1 (1)		Level 2 (1)			Level 3			Total
	(In millions)
Financial assets:
Trading assets:
Debt instruments	¥	4,004,541	¥	944,694		¥	—		¥	4,949,235
Equity instruments		361,105		658			—			361,763
Total trading assets		4,365,646		945,352			—			5,310,998
Derivative financial instruments:
Interest rate derivatives		97,472		8,208,059			82			8,305,613
Currency derivatives		—		4,604,469			934			4,605,403
Equity derivatives		35,241		408			16,596			52,245
Commodity derivatives		1,932		11,447			—			13,379
Credit derivatives		—		38,244			410			38,654
Total derivative financial instruments		134,645		12,862,627			18,022			13,015,294
Financial assets at fair value through profit or loss:
Debt instruments		506,426		641,478			666,125			1,814,029
Equity instruments		1,934		284			84,215			86,433
Total financial assets at fair value through profit or loss		508,360		641,762			750,340			1,900,462
Investment securities at fair value through other comprehensive income:
Japanese government bonds		9,512,127		—			—			9,512,127
U.S. Treasury and other U.S. government agency bonds		9,825,401		—			—			9,825,401
Other debt instruments		1,387,551		7,820,727			—			9,208,278
Total debt instruments		20,725,079		7,820,727			—			28,545,806
Equity instruments		4,744,887		1,501			500,485			5,246,873
Total investment securities at fair value through other comprehensive income		25,469,966		7,822,228			500,485			33,792,679
Total	¥	30,478,617	¥	22,271,969		¥	1,268,847		¥	54,019,433
Financial liabilities:
Trading liabilities:
Debt instruments	¥	3,574,685	¥	217,374		¥	—		¥	3,792,059
Equity instruments		389,454		5,639			—			395,093
Total trading liabilities		3,964,139		223,013			—			4,187,152
Derivative financial instruments:
Interest rate derivatives		82,330		10,204,113			4,118			10,290,561
Currency derivatives		181		4,884,340			4,874			4,889,395
Equity derivatives		36,302		17,768			7,226			61,296
Commodity derivatives		1,572		10,606			—			12,178
Credit derivatives		—		45,174			111			45,285
Total derivative financial instruments		120,385		15,162,001			16,329			15,298,715
Financial liabilities designated at fair value through profit or loss		—		285,442			135,950			421,392
Others (2)		—		(6,728	)		(12,559	)		(19,287	)
Total	¥	4,084,524	¥	15,663,728		¥	139,720		¥	19,887,972

F-26

	At March  31, 2023
	Level 1 (1)		Level 2 (1)			Level 3			Total
	(In millions)
Financial assets:
Trading assets:
Debt instruments	¥	3,732,551	¥	497,294		¥	—		¥	4,229,845
Equity instruments		340,365		15,705			—			356,070
Total trading assets		4,072,916		512,999			—			4,585,915
Derivative financial instruments:
Interest rate derivatives		130,725		5,658,891			—			5,789,616
Currency derivatives		145		2,774,537			499			2,775,181
Equity derivatives		20,571		13,002			20,935			54,508
Commodity derivatives		407		8,735			—			9,142
Credit derivatives		—		21,142			358			21,500
Total derivative financial instruments		151,848		8,476,307			21,792			8,649,947
Financial assets at fair value through profit or loss:
Debt instruments		343,539		398,883			650,467			1,392,889
Equity instruments		2,829		7,320			85,201			95,350
Total financial assets at fair value through profit or loss		346,368		406,203			735,668			1,488,239
Investment securities at fair value through other comprehensive income:
Japanese government bonds		9,576,298		—			—			9,576,298
U.S. Treasury and other U.S. government agency bonds		5,232,456		—			—			5,232,456
Other debt instruments		1,503,857		6,498,812			—			8,002,669
Total debt instruments		16,312,611		6,498,812			—			22,811,423
Equity instruments		4,076,610		7,177			464,821			4,548,608
Total investment securities at fair value through other comprehensive income		20,389,221		6,505,989			464,821			27,360,031
Total	¥	24,960,353	¥	15,901,498		¥	1,222,281		¥	42,084,132
Financial liabilities:
Trading liabilities:
Debt instruments	¥	3,017,272	¥	84,161		¥	—		¥	3,101,433
Equity instruments		183,935		5,721			—			189,656
Total trading liabilities		3,201,207		89,882			—			3,291,089
Derivative financial instruments:
Interest rate derivatives		92,387		7,317,498			3,248			7,413,133
Currency derivatives		—		3,001,220			5,066			3,006,286
Equity derivatives		34,204		894			7,110			42,208
Commodity derivatives		1,247		6,699			—			7,946
Credit derivatives		—		27,074			208			27,282
Total derivative financial instruments		127,838		10,353,385			15,632			10,496,855
Financial liabilities designated at fair value through profit or loss		—		229,086			185,020			414,106
Others (2)		—		(4,086	)		(7,852	)		(11,938	)
Total	¥	3,329,045	¥	10,668,267		¥	192,800		¥	14,190,112

F-27

(1) Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the period. There were no significant transfers between Level 1 and Level 2 for the six months ended September 30, 2023 and for the fiscal year ended March 31, 2023.

(2) Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract. The separated embedded derivatives are measured at fair value using the valuation techniques described in “Derivative financial instruments (including embedded derivatives)” in Note 44 “Fair Value of Financial Assets and Liabilities” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2023.

The following tables present reconciliations from the beginning to the ending balances for financial assets and liabilities carried at fair value and categorized within Level 3 of the fair value hierarchy for the six months ended September 30, 2023 and 2022.

				Total gains (losses)																									Changes in unrealized gains (losses) included in profit or loss related to assets and liabilities held at September 30, 2023
	At April 1, 2023			Included in profit or loss			Included in other comprehensive income			Purchases		Sales			Issuances			Settlements (1)			Transfers into Level 3 (2)		Transfers out of Level 3 (2)			At September 30, 2023
	(In millions)
Derivative financial instruments—net:
Interest rate derivatives—net	¥	(3,248	)	¥	(2,329	)	¥	—		¥	1,541	¥	—		¥	—		¥	—		¥	—	¥	—		¥	(4,036	)	¥	(1,031	)
Currency derivatives—net		(4,567	)		663			—			74		(110	)		—			—			—		—			(3,940	)		580
Equity derivatives—net		13,825			(1,867	)		—			2,123		(4,711	)		—			—			—		—			9,370			2,067
Credit derivatives—net		150			149			—			—		—			—			—			—		—			299			148
Total derivative financial instruments—net		6,160			(3,384	)		—			3,738		(4,821	)		—			—			—		—			1,693			1,764
Financial assets at fair value through profit or loss:
Debt instruments		650,467			32,792			305			54,432		(38,883	)		—			(29,456	)		—		(3,532	)		666,125			32,586
Equity instruments		85,201			(892	)		—			5,770		(792	)		—			(4,315	)		—		(757	)		84,215			(1,473	)
Total financial assets at fair value through profit or loss		735,668			31,900			305			60,202		(39,675	)		—			(33,771	)		—		(4,289	)		750,340			31,113
Investment securities at fair value through other comprehensive income:
Equity instruments		464,821			—			37,478			806		(2,120	)		—			(117	)		—		(383	)		500,485			—
Total investment securities at fair value through other comprehensive income		464,821			—			37,478			806		(2,120	)		—			(117	)		—		(383	)		500,485			—
Financial liabilities designated at fair value through profit or loss		(185,020	)		(10,861	)		(957	)		—		—			(14,957	)		75,845			—		—			(135,950	)		516
Others (3) —liabilities		7,852			5,049			—			—		—			—			—			—		(342	)		12,559			5,017
Total	¥	1,029,481		¥	22,704		¥	36,826		¥	64,746	¥	(46,616)		¥	(14,957)		¥	41,957		¥	—	¥	(5,014	)	¥	1,129,127		¥	38,410

F-28

				Total gains (losses)																									Changes in unrealized gains (losses) included in profit or loss related to assets and liabilities held at September 30, 2022
	At April 1, 2022			Included in profit or loss			Included in other comprehensive income			Purchases		Sales			Issuances			Settlements (1)			Transfers into Level 3 (2)		Transfers out of Level 3 (2)			At September 30, 2022
	(In millions)
Derivative financial instruments—net:
Interest rate derivatives—net	¥	(7,162	)	¥	(3,439	)	¥	—		¥	8	¥	—		¥	—		¥	—		¥	—	¥	—		¥	(10,593	)	¥	(3,409	)
Currency derivatives—net		1,652			(1,445	)		—			—		—			—			—			—		(5,522	)		(5,315	)		(2,099	)
Equity derivatives—net		15,384			3,709			—			2,609		(5,104	)		—			—			—		—			16,598			6,924
Credit derivatives—net		521			(500	)		—			—		—			—			—			—		—			21			(494	)
Total derivative financial instruments—net		10,395			(1,675	)		—			2,617		(5,104	)		—			—			—		(5,522	)		711			922
Financial assets at fair value through profit or loss:
Debt instruments		693,013			25,736			398			68,177		(40,242	)		—			(33,344	)		—		(80,259	)		633,479			26,808
Equity instruments		35,884			76			—			4,403		(161	)		—			(633	)		—		(459	)		39,110			(48	)
Total financial assets at fair value through profit or loss		728,897			25,812			398			72,580		(40,403	)		—			(33,977	)		—		(80,718	)		672,589			26,760
Investment securities at fair value through other comprehensive income:
Equity instruments		468,713			—			(6,391	)		2,175		(3,972	)		—			(64	)		—		—			460,461			—
Total investment securities at fair value through other comprehensive income		468,713			—			(6,391	)		2,175		(3,972	)		—			(64	)		—		—			460,461			—
Financial liabilities designated at fair value through profit or loss		(291,086	)		41,262			220			—		—			(44,886	)		65,889			—		—			(228,601	)		57,436
Others (3) —liabilities		3,052			7,567			—			940		—			—			—			—		(1,363	)		10,196			8,185
Total	¥	919,971		¥	72,966		¥	(5,773	)	¥	78,312	¥	(49,479)		¥	(44,886	)	¥	31,848		¥	—	¥	(87,603	)	¥	915,356		¥	93,303

(1) Settlements for equity instruments include redemption of preferred stocks and receipt of cash distributions which represent a return of investment.

(2) Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the period. For the six months ended September 30, 2023 and 2022, transfers out of Level 3 amounted to ¥ 5,014  million and ¥ 87,603  million, respectively. Those transfers out of Level 3 were primarily due to a decrease of significance of unobservable inputs of certain financial assets at fair value through profit or loss, including certain investment funds. 

(3) Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract.

F-29

The following table presents total gains or losses included in profit or loss for the Level 3 financial assets and liabilities, and changes in unrealized gains or losses included in profit or loss related to those financial assets and liabilities held at September 30, 2023 and 2022 by line item of the consolidated income statements.

	Total gains (losses) included in profit or loss for the six months ended September 30,				Changes in unrealized gains (losses) included in profit or loss related to assets and liabilities held at September 30,
	2023		2022		2023		2022
	(In millions)
Net interest income	¥	559	¥	861	¥	525	¥	576
Net trading income		1,106		5,120		6,256		8,531
Net income from financial assets and liabilities at fair value through profit or loss		21,039		67,074		31,629		84,196
Other expenses		—		89		—		—
Total	¥	22,704	¥	72,966	¥	38,410	¥	93,303

The aggregate deferred day one profit yet to be recognized in profit or loss at the beginning and end of the six months ended September 30, 2023 and 2022, and reconciliation of changes in the balances were as follows:

	For the six months ended September 30,
	2023			2022
	(In millions)
Balance at beginning of period	¥	22,276		¥	27,100
Increase due to new trades		1,861			7,061
Reduction due to redemption, sales or passage of time		(10,649	)		(16,017	)
Balance at end of period	¥	13,488		¥	18,144

The Group has entered into transactions where the fair value is determined using valuation techniques for which not all inputs are observable in the market. The difference between the transaction price and the fair value that would be determined at initial recognition using a valuation technique is referred to as “day one profit and loss,” which is not recognized immediately in the consolidated income statements. The table above shows the day one profit and loss balances, all of which are derived from derivative financial instruments, financial assets at fair value through profit or loss and financial liabilities designated at fair value through profit or loss. The release to profit or loss results from the realization due to redemption or sales, and the amortization of the deferred day one profit and loss with the passage of time over the life of the instruments.

Valuation Techniques

Valuation techniques are consistent with those described in Note 44 “Fair Value of Financial Assets and Liabilities” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2023.

F-30

Significant Unobservable Inputs

The following tables present quantitative information about significant unobservable inputs used in the fair value measurement for Level 3 financial assets and liabilities at September 30, 2023 and March 31, 2023. Qualitative information about significant unobservable inputs is consistent with those described in Note 44 “Fair Value of Financial Assets and Liabilities” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2023.

	At September 30, 2023
	Assets		Liabilities			Valuation technique(s) (1)	Significant unobservable inputs (1)	Range of inputs (1)
	(In millions)
Derivative financial instruments:
Interest rate derivatives	¥	82	¥	4,118		Option model	Interest rate to interest rate correlation		31%-99%
							Quanto correlation		(5% ) -46%
							Interest rate volatility		3%-8%
Currency derivatives		934		4,874		Option model	Interest rate to interest rate correlation		26%-99%
							Quanto correlation		5%-49%
							Foreign exchange volatility		8%-15%
Equity derivatives		16,596		7,226		Option model	Equity to equity correlation		45%-91%
							Quanto correlation		(29% ) -29%
							Equity volatility		16%-57%
Credit derivatives		410		111		Credit Default model	Quanto correlation		18%-28%
Financial assets at fair value through profit or loss:
Debt instruments		666,125		—		Option model	Foreign exchange volatility		12%-42%
						DCF model	Probability of default rate		0%-32%
							Loss given default rate		0%-100%
							Discount margin		5%-9%
						Net asset value (2)	—		—
Equity instruments		84,215		—		Market multiples	Price/Book value multiple		0.7x
							Liquidity discount		20%
						DCF model	Probability of default rate		0%-1%
							Loss given default rate		90%
						See note (3) below	—		—
Investment securities at fair value through other comprehensive income:
Equity instruments		500,485		—		Market multiples	Price/Book value multiple		0.3x-3.5x
							Liquidity discount		20%
						See note (3) below	—		—
Financial liabilities designated at fair value through profit or loss		—		135,950		Option model	Equity to equity correlation		43%-89%
							Interest rate to interest rate correlation		26%-27%
							Quanto correlation		(29% ) -49%
							Equity volatility		18%-45%
						Credit Default model	Quanto correlation		18%-28%
Others (4)		—		(12,559	)	Option model	Interest rate to interest rate correlation		26%-99%
							Quanto correlation		(5% ) -49%
							Equity volatility		27%-28%
							Foreign exchange volatility		10%-42%
						Credit Default model	Quanto correlation		18%-28%

F-31

	At March 31, 2023
	Assets		Liabilities			Valuation technique(s) (1)	Significant unobservable inputs (1)	Range of inputs (1)
	(In millions)
Derivative financial instruments:
Interest rate derivatives	¥	—	¥	3,248		Option model	Interest rate to interest rate correlation		26%-99%
							Quanto correlation		(11%)-42%
Currency derivatives		499		5,066		Option model	Interest rate to interest rate correlation		29%-99%
							Quanto correlation		8%-50%
							Foreign exchange volatility		12%-36%
Equity derivatives		20,935		7,110		Option model	Equity to equity correlation		48%-92%
							Quanto correlation		(13%)-38%
							Equity volatility		12%-70%
Credit derivatives		358		208		Credit Default model	Quanto correlation		15%-25%
Financial assets at fair value through profit or loss:
Debt instruments		650,467		—		Option model	Foreign exchange volatility		13%-43%
						DCF model	Probability of default rate		0%-33%
							Loss given default rate		0%-100%
							Discount margin		5%-9%
						Net asset value (2)	—		—
Equity instruments		85,201		—		Market multiples	Price/Book value multiple		1.1x
						DCF model	Probability of default rate		0%-1%
							Loss given default rate		90%
						See note (3) below	—		—
Investment securities at fair value through other comprehensive income:
Equity instruments		464,821		—		Market multiples	Price/Book value multiple		0.2x-3.7x
							Liquidity discount		20%
						See note (3) below	—		—
Financial liabilities designated at fair value through profit or loss		—		185,020		Option model	Equity to equity correlation		47%-93%
							Interest rate to interest rate correlation		29%-30%
							Quanto correlation		(13%)-50%
							Equity volatility		17%-52%
						Credit Default model	Quanto correlation		15%-25%
Others (4)		—		(7,852	)	Option model	Equity to equity correlation		80%-83%
							Interest rate to interest rate correlation		26%-99%
							Quanto correlation		(11%)-50%
							Equity volatility		24%-28%
							Foreign exchange volatility		12%-43%
						Credit Default model	Quanto correlation		15%-25%

(1) Valuation techniques and unobservable inputs for insignificant Level 3 financial assets and liabilities are excluded.

(2) The Group has determined that the net asset value represents fair values of certain investment funds.

(3) Fair values of certain equity instruments such as unlisted stocks are estimated on the basis of an analysis of the investee’s financial position and results, risk profile, prospects and other factors. A range of key inputs is not provided in these tables as it is not practical to do so given the nature of such valuation techniques.

(4) Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract.

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Sensitivity Analysis

The fair value of certain financial assets and liabilities

is

measured using valuation techniques based on inputs such as prices and rates that are not observable in the market. The following tables present the impact of the valuation sensitivity, if these inputs fluctuate to the extent deemed reasonable and the volatility of such inputs has a significant impact on the fair value. Qualitative information about sensitivity to changes in significant unobservable inputs is consistent with those described in Note 44 “Fair Value of Financial Assets and Liabilities” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2023.

	At September 30, 2023
	Total fair value measured using valuation techniques			Effect recorded in profit or loss				Effect recorded directly in equity
				Favorable changes		Unfavorable changes		Favorable changes		Unfavorable changes
	(In millions)
Financial instruments—net:
Derivative financial instruments—net:
Interest rate derivatives—net	¥	(4,036	)	¥	7	¥	6	¥	—	¥	—
Currency derivatives—net		(3,940	)		5		5		—		—
Equity derivatives—net		9,370			3,094		3,065		—		—
Credit derivatives—net		299			18		18		—		—
Financial assets at fair value through profit or loss:
Debt instruments		666,125			257		2,718		—		—
Equity instruments		84,215			263		688		—		—
Investment securities at fair value through other comprehensive income:
Equity instruments		500,485			—		—		17,038		17,038
Financial liabilities designated at fair value through profit or loss (1)		(135,950	)		424		437		—		—
Others (1)(2) —liabilities:		12,559			51		50		—		—
	At March 31, 2023
	Total fair value measured using valuation techniques			Effect recorded in profit or loss				Effect recorded directly in equity
				Favorable changes		Unfavorable changes		Favorable changes		Unfavorable changes
	(In millions)
Financial instruments—net:
Derivative financial instruments—net:
Interest rate derivatives—net	¥	(3,248	)	¥	—	¥	—	¥	—	¥	—
Currency derivatives—net		(4,567	)		6		6		—		—
Equity derivatives—net		13,825			2,462		2,467		—		—
Credit derivatives—net		150			17		17		—		—
Financial assets at fair value through profit or loss:
Debt instruments		650,467			917		4,533		—		—
Equity instruments		85,201			362		875		—		—
Investment securities at fair value through other comprehensive income:
Equity instruments		464,821			—		—		15,368		15,368
Financial liabilities designated at fair value through profit or loss (1)		(185,020	)		1,007		1,109		—		—
Others (1)(2) —liabilities:		7,852			62		61		—		—

(1) As part of risk management, the Group enters into transactions to offset the profit or loss of certain financial instruments, including embedded derivatives. Sensitivity of embedded derivatives related to these transactions is presented as derivative financial instruments or financial assets at fair value through profit or loss, according to the presentation of the financial instruments arising from these transactions.

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(2) Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract.

Financial Assets and Liabilities Not Carried at Fair Value

The table below presents the carrying amounts and fair values of financial assets and liabilities not carried at fair value on the Group’s consolidated statements of financial position at September 30, 2023 and March 31, 2023. It does not include the carrying amounts and fair values of financial assets and liabilities whose carrying amounts are reasonable approximations of fair values.

		At September 30, 2023				At March 31, 2023
	Notes	Carrying amount		Fair value		Carrying amount		Fair value
		(In millions)
Financial assets:
Investment securities:
Debt instruments at amortized cost	a	¥	290,051	¥	288,504	¥	235,567	¥	235,541
Loans and advances	b		116,285,384		118,381,677		111,891,134		114,154,110
Other financial assets	b		8,063,908		8,061,023		5,360,634		5,357,987
Financial liabilities:
Deposits:
Non-interest-bearing deposits, demand deposits and deposits at notice	c	¥	125,399,091	¥	125,412,459	¥	123,181,105	¥	123,009,507
Other deposits	c		52,722,107		52,740,173		49,746,705		49,607,234
Borrowings	c		15,635,111		15,546,303		14,954,804		14,876,449
Debt securities in issue	c		13,725,816		13,631,362		11,984,994		11,828,910
Other financial liabilities	c		12,105,474		12,105,317		8,522,212		8,522,110

Notes:

a.	The fair values of debt instruments at amortized cost are determined using quoted prices in active markets or observable inputs other than quoted prices in active markets.
b.	(i)	The carrying amounts of loans with no specified repayment dates represent a reasonable estimate of fair value, considering the nature of these financial instruments.
	(ii)	Short-term financial assets: The carrying amounts represent a reasonable estimate of fair value.
	(iii)	Long-term financial assets: Except for impaired loans and advances, the fair values are mostly determined using discounted cash flow models taking into account certain factors including counterparties’ credit ratings, pledged collateral, and market interest rates. The fair values of impaired loans and advances are generally determined by discounting the estimated future cash flows over the time period they are expected to be recovered, and may be based on the appraisal value of underlying collateral as appropriate.
c.	Note that some of the financial liabilities in this category include embedded derivatives, which are separately accounted for, but presented together with the host contract.
	(i)	The carrying amounts of demand deposits and deposits without maturity represent a reasonable estimate of fair value, considering the nature of these financial instruments.
	(ii)	Short-term financial liabilities: The carrying amounts represent a reasonable estimate of fair value.
	(iii)	Long-term financial liabilities: The fair values are, in principle, based on the present values of future cash flows calculated using the funding costs for the remaining maturities. The fair values of debt securities in issue are based on a price quoted by a third party, such as a pricing service or broker, or the present values of future cash flows calculated using the rate derived from yields of bonds issued by SMFG, SMBC and other subsidiaries and publicly offered subordinated bonds published by securities firms.
	(iv)	The carrying amounts and fair values of lease liabilities are not included in this table.

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19 INTEREST RATE BENCHMARK REFORM

As of March 31, 2023, the Group had completed all of the transition from the London Interbank Offered Rate (“LIBOR”) settings which ceased at the end of 2021 to alternative reference rates. The Group continues the transition of financial instruments referencing the USD LIBOR settings which ceased as of June 30, 2023.

The following table shows quantitative information about financial instruments that have yet to be referencing the USD LIBOR at September 30, 2023 and March 31, 2023. The amounts in the table below are the aggregation of the amounts used for regulatory reporting of SMFG, SMBC, SMBC’s subsidiaries and SMBC Nikko Securities. They include contracts that will switch to using alternative reference rates at the next reset after September 30, 2023 and March 31, 2023. They also include, to a limited extent, synthetic USD LIBOR contracts that the Group utilized as a temporary solution.

	At September 30, 2023		At March 31, 2023
	(In billions)
Carrying amount of non-derivative financial assets	¥	2,908	¥	9,568
Carrying amount of non-derivative financial liabilities		77		1,351
Derivative notional amounts		1,965		247,066

F-35