MISSION &
VISION &
FIVE VALUES
“Our Group Mission,” which serves as the foundation
for all of our corporate activities, portrays our mission toward stakeholders.
“Vision” is our medium- to long-term aim for the Group.
“Five Values” represent the core values
we share with all SMBC Group employees.
MISSION
VISION
FIVE VALUES
MISSION
We grow and prosper together with our customers,
by providing services of greater value to them.
We aim to maximize our shareholders’ value through the continuous
growth of our business.
We create a work environment that encourages and
rewards diligent and highly-motivated employees.
We contribute to a sustainable society by addressing environmental and social issues.
VISION
A trusted global solution provider committed to the growth of our customers
and advancement of society
FIVE VALUES
Integrity
As a professional, always act with sincerity and a high ethical standard.
Customer First
Always look at it from the customer’s point of view, and provide value based on their individual needs.
Proactive & Innovative
Embrace new ideas and perspectives, don’t be deterred by failure.
Speed & Quality
Differentiate ourselves through the speed and quality of our decision-making and service delivery.
Team “SMBC Group”
Respect and leverage the knowledge and diverse talent of our global organization, as a team.
001
SMBC GROUP ANNUAL REPORT 2022 Executives of SMBC Nikko Securities
Inc (SMBC Nikko Securities) were recently
arrested and indicted on charges of violating
the Financial Instruments and Exchange Act.
SMBC Nikko Securities was also indicted
on the same charges. On behalf of SMBC
Group, I extend my deepest apologies to our
customers and all other impacted parties for
causing great concern and inconvenience.
We take these developments very
seriously and will fully devote our resources
to restoring the trust of customers and other
stakeholders by supporting SMBC Nikko
Securities in developing and implementing
preventive measures that reflect the
findings of investigations undertaken by the
investigation committee established by SMBC
Nikko Securities.
Jun Ohta
Director President and Group CEO
Contents
Value creation at SMBC Group
004
006
008
018
020
021
022
028
036
042
History of SMBC Group
SMBC Group’s Value Creation Process
Message from Group CEO
Core Policy of the Medium-Term Management Plan
(FY2020–FY2022)
Financial Highlights
ESG Highlights
Message from the Group CFO
Special Contents:
Our Inorganic Strategy to Realize Sustainable Growth
Round-Table Discussion with Outside Directors
Communication with Stakeholders
Business Strategies for Creating Value
046
048
052
056
060
064
072
084
Group Structure
Retail Business Unit
Wholesale Business Unit
Global Business Unit
Global Markets Business Unit
Opening up the Future of Finance through Digital
Creating Value through Sustainability Initiatives
Human Resource Strategies
Supporting Value Creation
Corporate Infrastructure Supporting Value Creation
090 Corporate Governance
106 Risk Management
110 Compliance
112 Customer-Oriented Initiatives
115
Internal Audit
116
IT Governance
118
Financial Review
123
ESG Information
002
003
SMBC GROUP ANNUAL REPORT 2022SMBC GROUP ANNUAL REPORT 2022
History of SMBC Group
The roots of SMBC Group trace back more than four hundred years.
Drawing from the business spirit inherited from the pioneers at Mitsui and Sumitomo,
SMBC Group has adapted to the changing needs of the times and shifted its businesses
while enhancing the quality of its corporate infrastructure through sustainability initiatives.
(cid:31)(cid:30)(cid:29)(cid:31)(cid:28)
Expansion of the Scope of Operations and Target Markets
2012
SMBC Aviation Capital became a subsidiary
2012
SMBC Consumer Finance became a subsidiary
2013
SMBC Trust Bank became a subsidiary
2013
Bank BTPN became an equity-method affiliate
2015
The Bank of East Asia became an equity-method affiliate
2016
Sumitomo Mitsui Asset Management became a subsidiary
(cid:31)(cid:30)(cid:29)
2015
First issuance of green bond
(cid:26)
(cid:25)
2015
Establishment of SMFG Corporate Governance Guideline
2016
Endorsement of Women’s Empowerment Principles
(cid:24)
(cid:31)(cid:30)(cid:30)(cid:29)(cid:28)
Birth and Growth of Comprehensive Financial Group
2001
Sumitomo Mitsui Banking Corporation formed
2002
Sumitomo Mitsui Financial Group established
2004
SMBC Consumer Finance became an equity-method affiliate
2009
SMBC Nikko Securities became a subsidiary
(cid:31)(cid:30)(cid:29)
(cid:26)
2002
Endorsement of United Nations Environment Programme
Finance Initiative
(cid:25)
2005
Establishment of voluntary Audit Committee
(cid:26) (cid:24) (cid:25)
2007
Signing of United Nations Global Compact
(cid:25)
2010
Listed on New York Stock Exchange
004
(cid:31)(cid:30)(cid:29)(cid:27)(cid:28)
Pursuit of Sustainable Growth through Utilization of
Group Strength and Structural Reforms
2018
Group business reorganization
• THE MINATO BANK and Kansai Urban Banking Corporation deconsolidated
• Sumitomo Mitsui Finance and Leasing deconsolidated and
converted into an equity-method affiliate
2019
Sumitomo Mitsui DS Asset Management established through merger of
Sumitomo Mitsui Asset Management and Daiwa SB Investments
2019
Bank BTPN became a subsidiary
(cid:31)(cid:30)(cid:29)
(cid:24)
2017
Release of Statement on Human Rights
(cid:24)
2017
Release of Diversity and Inclusion Statement
(cid:26)
2017
Endorsement of recommendations of Task Force on Climate-related
Financial Disclosures
(cid:25)
2017
Transition to Company with Three Committees
Introduction of group-wide business units and CxO system
(cid:26)
(cid:24)
2018
Announcement of sector-specific financing policies
(cid:26) (cid:24) (cid:25)
2019
Signing of Principles for Responsible Banking
(cid:31)(cid:30)(cid:31)(cid:30)(cid:28)
Creating economic and social value by achieving
growth with quality and sustainability
2021
Investment for growth in Asia in 2021
• Fullerton India became a consolidated subsidiary
• FE Credit became an equity method affiliate
• Investment in RCBC
Strengthening the foundations of business
• Investment in Jefferies
• Investment in ARA Asset Management
2022
Investment in SBI Holdings
(cid:31)(cid:30)(cid:29)
(cid:25)
(cid:26) (cid:24)
2020
Revision of Our Mission
Establishment of SMBC Group Statement on Sustainability
(cid:26)
(cid:24) (cid:25)
2021
Appointment of Group CSuO and
establishment of Sustainability Committee
(cid:26)
2021
Commitment to achieving net zero emissions across investment
and loan portfolio by 2050
(cid:26)
2021
Participation in NZBA, TSVCM and PCAF
(cid:26)
2022
Participation in the TNFD Forum
(cid:26) (cid:24)
2022
Establishment of SMBC Group Environmental and
Social Framework
005
Value Creation at SMBC GroupValue Creation at SMBC GroupBusiness Strategies for Creating ValueCorporate Infrastructure Supporting Value CreationSMBC GROUP ANNUAL REPORT 2022SMBC GROUP ANNUAL REPORT 2022 SMBC Group’s
Value Creation
Process
SMBC Group defines sustainability as “creating a society in which today’s generation can enjoy
economic prosperity and well-being, and pass it on to future generations.”
SMBC Group has identified “Environment,” “Community” and “Next Generation” as priority issues (Materiality).
In carrying out our Medium-Term Management Plan and achieving our KPIs in line with these priority issues,
SMBC Group will generate social and economic value, and give back to all our stakeholders.
⑥ Value Cycle
It also further enhances intangible assets that are a source of this value, creating a virtuous cycle.
Value is returned to stakeholders by growing SMBC Group’s corporate value.
Dialog with stakeholders
Investment for growth
Capital policy
P042
P025
P028
Our businesses not only produce economic value, but also work to bring about the society SMBC Group
seeks to create, and influence the way our customers and other stakeholders think and act.
⑤ Impact
Creating economic value
Creating social value
Definition of Sustainability
Creating a society in which today’s generation can enjoy
economic prosperity and well-being, and pass it on to future generations
Creation of a society in which
everyone can live with peace of mind
Preservation of
a healthy
environment
Fostering of people
and industries that
will shape the future
④
Outcome
FY2022 Financial Targets
Preservation of a healthy environment
ROCET1
(cid:15458)8.5%
CET1 ratio
c.
10%
● Meeting the target of 1.5℃ scenario and achieving
a carbon-neutral society
● Reducing the risk of natural disasters
Base expenses
Bottom-line profit
<2019results
¥730 billion
Creation of a society in which everyone can live with peace of mind
● Providing financial infrastructure that can be accessed with peace of mind
● Bringing about a prosperous society through credit creation
Fostering of people and industries that will shape the future
● Driving technology and innovation
P022
P072
Four Business Units draw up and put in place business strategies for
each customer segment consistent with these three priority issues: “Environment,” “Community” and “Next Generation.”
Sustainability & Digital is integrated into our business
activities as an issue to be addressed cross-functionally by all Business Units.
IMPACT
Society / Customers
Society / Customers
Shareholders
OUTCOME
OUTPUT
Employees
Employees
SMBC Group’s Business Activities
Creation and intermediation of value
Sustainability and Digital
Business Unit
Retail
Wholesale
Global
Global Market
Three Priority Issues
Environment
Community
Next Generation
Financial Capital
006
Human Capital
Intellectual Capital
Social and Relationship Capital
INPUT
Compliance
Corporate
governance
Risk
management
③
Output
Implementation of the Medium-Term Management Plan
Retail
Wholesale
Global
Global Market
Balance of
fee-based AUM
Amount of
Sustainable Finance
Revenue from multi-franchise
strategy target countries
Green bonds
¥18trillion
(+¥3 trillion)
Credit card sales handled
¥31trillion
(+¥10 trillion)
Total
¥1.4 trillion
Number of companies
providing digital solutions
for corporate clients
10,000
companies
+15 %
Retail deposits in Asia
3x
Issue at least
Once
per year
Sustainability
Digital
P018
Business Activities /
Models②
We conduct our business activities by drawing on SMBC Group’s intangible assets, including its brand and customer
base cultivated over the course of the company’s more than 400-year history, together with its robust financial capital.
①
Input
Robust financials
Group history
Human Resources
IT
P118
P004
P084
P116
007
Value Creation at SMBC GroupValue Creation at SMBC GroupBusiness Strategies for Creating ValueCorporate Infrastructure Supporting Value CreationSMBC GROUP ANNUAL REPORT 2022SMBC GROUP ANNUAL REPORT 2022 The World in 2050
W hen I was born in 1958,
Japan had entered a
period of high economic growth.
was present in what seemed like
all corners of the country. Japan’s
economy continued to grow at
MESSAGE FROM GROUP CEO
BUILDING AN ERA OF
FULFILLED GROWTH
Jun Ohta
Director President and Group CEO
The construction of Tokyo Tower
a brisk pace after I entered the
had just been completed and
workforce and in the late 1980s
consumer electronics were
the economy entered a phase
quickly becoming a regular part
that would later be referred to as
of Japanese family life. In 1964,
“Japan’s bubble economy.” The
Tokyo hosted the Summer Olympic
economy continued to expand until
Games and the Tokaido Shinkansen
1991, and so the first 30 years of
opened. I still vividly remember
my life coincided with a period of
the excitement and energy that
economic growth and prosperity.
008
SMBC GROUP ANNUAL REPORT 2022
009
Value Creation at SMBC GroupValue Creation at SMBC GroupBusiness Strategies for Creating ValueCorporate Infrastructure Supporting Value CreationSMBC GROUP ANNUAL REPORT 2022 MESSAGE FROM GROUP CEO
However, the bubble economy
The question now is: “What
optimistic perspective, we can say
eventually collapsed, leading to
a plunge in the values of stocks,
real estate, and a wide array of
sort of era will the next 30 years
that we are entering an era that
be?” I expect peoples’ values and
is not an extension of the past.
lifestyles to undergo discontinuous
Japan’s economy, even though it
other assets. Financial institutions
change based on digitalization,
has languished over the past 30
were faced with not only a sudden
climate change, and a range of
years, could break free of traditional
slowdown in the macroeconomy
other keywords. If we look at our
restraints and unlock a new future.
but also with plummeting collateral
current environment, we can
I want to make the next 30
valuations. For many years we
see that long-term trends are
years an era of “fulfilled growth.”
struggled with the disposal of the
undergoing a paradigm shift:
Going forward, the metrics used
I strongly believe that we will be able to reach
even higher goals by pursuing quantitative
growth that is accompanied by heightened quality
in the next Medium-Term Management Plan.
Quantitative Growth Accompanied by Heightened Quality
T he current Medium-Term
Management Plan was
launched in the spring of 2020, just
In order to realize our Vision,
In FY2021, the second year
we will pursue quantitative
of the current Medium-Term
growth that is accompanied by
Management Plan, we managed
resulting non-performing loans.
from deflation to inflation, from
to measure corporate value will
as the COVID-19 pandemic was
heightened quality. When an
to exceed our annual target and
Japan’s economy could not shake
consistently low-interest rates
change. Pursuing economic
causing havoc and disruption all
organization ceases to pursue
the prior year’s results for both
off sluggish growth and deflation;
to rising interest rates, and from
value will no longer be sufficient
over the world. In my FY2020 Group
growth, it stagnates and morale
net business profit and bottom-
this led to the “Lost Decade”
globalization to deglobalization.
to enhance corporate value. A
CEO Message, I stressed that SMBC
falls. I want to make SMBC Group
line profit. We produced these
becoming the “Lost Two Decades”
Trends that had continued over the
corporation’s contributions to
Group would overcome the impact
a lively, high-energy organization
solid results regardless of the fact
which eventually became the “Lost
past few decades are reversing,
generating social value will become
of the unexpected pandemic and
that enables junior level employees
that we faced unforeseen negative
Three Decades.” The 30 years of the
causing disruption in the process.
ever more important in increasing
worked to drive our Group to greater
to pursue challenges in a variety
factors arising from the Russia-
midway stage of my life coincided
We are entering a complex,
corporate value. Corporations that
heights through the evolution of our
of sectors with a sense of purpose
Ukraine conflict: impairment losses
with a period of stagnation in Japan.
unpredictable era. If we adopt an
generate social value are those
business model. However, we are
and excitement. This positive
in our aircraft leasing business and
which contribute to the fulfilled
growth of the global community.
On the other hand, corporations
that are unable to create social
value will eventually be viewed as
no longer having the right to pursue
economic value.
now experiencing another major
energy will help drive SMBC
increased credit costs. I believe
unforeseen event: Russia’s invasion
Group’s future growth over the
this demonstrates that the path
of Ukraine.
next 30 years. Keeping firmly
we are following is the right one.
However, even in this
in mind that the nature of the
In addition, we have succeeded
discontinuous paradigm shift,
risks we face will change, we
in laying the foundations of our
there is no change to the path we
will review our portfolio with the
sustained future growth through
must follow. Our Vision, “A trusted
goal of enhancing both asset and
inorganic deals in the Asia retail
2050, approximately 30 years
global solution provider committed
capital efficiencies, and establish
and overseas securities businesses.
from now, is also the target year
set by the global community to
achieve carbon neutrality and a
decarbonized society. As you can
see, 2050 is a major milestone
for humankind, and I will share
with you what SMBC Group will
do to contribute to the global
community’s fulfilled growth.
to the growth of our customers
robust financial foundations by
In FY2022, the final year of the
and advancement of society,”
carrying out thorough, consistent
current Medium-Term Management
was designed to illustrate SMBC
cost control measures. At the
Plan, we will bring the Plan to a strong
Group’s path to sustained growth.
same time, we will allocate the
finish while laying the foundations for
Not only must we further develop
necessary management resources
the next Medium-Term Management
our capabilities in the financial
in a disciplined manner to business
Plan. In terms of the bottom-line
sector, we must also enhance
areas that contain sufficient
profit, we have set a target of ¥730
our ability to provide high-quality
growth potential. In addition, we
billion, a figure above our original
solutions in non-financial areas on
will enhance our management
target. However, I strongly believe
a global basis. Going forward, it is
foundations by strengthening
that we will be able to reach even
essential that we further enhance
our governance frameworks so
higher goals by pursuing quantitative
our focus on realizing our Vision.
that SMBC Group can realize
growth that is accompanied by
sustained growth in an uncertain
heightened quality in the next
environment.
Medium-Term Management Plan.
010
011
Value Creation at SMBC GroupValue Creation at SMBC GroupBusiness Strategies for Creating ValueCorporate Infrastructure Supporting Value CreationSMBC GROUP ANNUAL REPORT 2022SMBC GROUP ANNUAL REPORT 2022 MESSAGE FROM GROUP CEO
Three Themes
I n order to realize sustained
growth, we must expand
the range and enhance the
in our revenue by establishing a
expected vigorous expansion in
economies by expanding the scope
markets with SMBC Group’s client
solutions, which are financial
second and third SMBC Group in
personal consumption. We will
of our business and becoming a
base and financing functions.
solutions that can be embedded
Asia’s developing economies so
offer a diverse product and service
comprehensive financial group in
These collaborations are already
in the platforms of non-financial
sophistication and quality of our
that we can share in the benefits of
lineup that reflects the needs of
those local markets.
producing results. For example, we
partner corporations.
solutions. We are engaging in
their rapid growth.
each economy’s growth stage,
various initiatives based on the
In FY2021, as part of our
starting with motorcycle loans, then
three themes that were established
Multi-Franchise Strategy, in
branching out into automobile and
under the current Medium-
addition to our existing investments
mortgage loans, and finally offering
Enhance our Overseas
Securities Business
have been able to close deals with
For example, we provide
clients with which SMBC Group
payment, financing, and other
had not been able to develop a
financial services to social media
business relationship. We will
chat, e-commerce, and flea market
Term Management Plan: “Data
in Indonesia, we acquired stakes
multi-purpose loans and credit
Our overseas securities
further accelerate the growth of our
applications that individual customers
Orientated,” “Building Platforms,”
in local financial institutions in
cards.
business is an area in which we are
overseas securities business and
view on a daily basis via their
and “Solutions Provider.” I would
India, Vietnam, and the Philippines
In April 2022, with the goal
lagging behind our competitors. Our
expanding our collaborations with
smartphones. Our services are also
now like to take this opportunity to
with the aim of establishing the
of maximizing the impact of our
competitors managed to generate
Jefferies will be an important part of
embedded in the platforms of MaaS
share a few distinct examples with
foundations of our sustained
investments we established the
significant revenue from vibrant
this effort.
you.
growth. Going forward, we will focus
Asia Business Development
bond markets during COVID-19
on post-merger integration (PMI)
Division to strengthen PMI,
while we were unable to capture
Embedded Solutions
businesses and the cashless payment
tools used by retail stores.
As we operate behind the
scenes when providing financial
Expand our Asia Franchise
and developing these investments
governance, and other facets of
into strong, robust pillars that can
our management framework in
sufficient opportunities.
Our partnership with
With the digitalization of
services through such platforms,
When I visit the developing
support our future growth.
regard to our investee companies.
Jefferies is of great importance
society gaining even more speed,
users usually do not realize the
economies of Asia, I am met with
While we are already servicing
The division is also expected to
as it will allow us to grow in the
it is no longer sufficient for us to
role we are playing. However, by
energy and vibrancy. Scenes that
large corporations in those
support our organic growth and
U.S. market by strengthening our
leverage the extraordinary volume
allowing the financial platforms
remind me of Japan when I was a
countries, establishing a presence
help optimize our collaborations
business portfolio. We commenced
of financial data we possess and
of non-financial firms to provide
child. I believe a country’s financial
in the retail sector and becoming a
and synergies with investee
collaborations in Sub Investment-
our robust client base to develop
customers with safe and secure
sector is closely correlated with its
full-line financial services provider
companies. We will continue efforts
Grade, global M&A, and the
and provide financial platforms.
services, we are contributing to the
GDP, and for some time now I have
will allow us to best capture
to replicate our growth trajectory
healthcare sector, combining
We must also focus on developing
spread of cashless payments.
wanted to realize ‘J-curve’ growth
the countries’ growth given the
in Japan in Asia’s developing
Jefferies’ deep knowledge of capital
and providing embedded financial
See page 028 for details.
Our Inorganic Strategy to Realize
Sustainable Growth
See page 064 for details.
Opening up the Future of Finance through
Digital
I have wanted to realize ‘J-curve’ growth in our
revenue by establishing a second and third SMBC
Group in Asia’s developing economies so that we
can share in the benefits of their rapid growth.
012
013
Value Creation at SMBC GroupValue Creation at SMBC GroupBusiness Strategies for Creating ValueCorporate Infrastructure Supporting Value CreationSMBC GROUP ANNUAL REPORT 2022SMBC GROUP ANNUAL REPORT 2022
MESSAGE FROM GROUP CEO
Realize Sustainability in a Sustainable Manner
Employees Pursuing Challenges Becomes the Strength of SMBC Group
A lthough Japan was full of
energy and vibrancy during
its period of high economic postwar
investment portfolio by 2050.
forward, we will continue to support
In May 2022, we established a
customers’ decarbonization efforts
medium-term financed emissions
while increasing SMBC Group’s
O ur people are the basis
of SMBC Group’s
competitiveness, and they are
constrained by the boundaries of
leads to the creation of new ideas,
SMBC Group. I believe that the
which in turn leads to results that
future success of the financial
exceed expectations. Under the
growth, I clearly remember that the
reduction target for the power
corporate value by providing a
the most valuable management
sector depends on each and every
strong commitment of the senior
nights were very dark and quiet.
sector.
wide range of sustainability-related
resource that a financial group can
one of our employees having big
management team, the promotion
The other day, an article written by
However, there is no simple,
solutions that include financing,
possess. Since becoming Group
ambitions and thinking outside the
of diversity and inclusion at SMBC
the famous Japanese screenwriter
straightforward method of realizing
bond underwriting, leasing, and
Mr. Soh Kuramoto was published
carbon neutrality. A sudden
advisory services.
for which the title can be roughly
withdrawal of credit facilities will
Our corporate color is green.
translated as “Old Man, Turn Off
not only disrupt the stable supply
As part of efforts to cement our
CEO, under the slogan “Break
the mold,” I have endeavored
to develop a corporate culture
that encourages employees to
box when pursuing those ambitions.
Group will be accelerated. The
The pursuit of those ambitions will
empowerment of women is an
also serve as a new source of power
area of particular focus. We have
to drive SMBC Group forward into
set targets for female managers
the Lights and Return to Blissful
of power, but it could very well
position as a green financial
pursue their aspirations and
the future.
(20% of all managers) and female
Poverty” (BUNGEISHUNJU June).
negatively impact the development
institution that is firmly committed
ambitions without being bound
I am also working to realize
executive officers (25 people) to be
It was a public critique by Mr.
of new decarbonization
to contributing to the realization
by preconceptions. I also believe
a truly diverse and inclusive
reached by FY2025. Furthermore,
Kuramoto of what he viewed as a
technologies. Merely reducing our
of a sustainable society, in April
that a willingness and desire to
workplace by breaking through
tendency of old people in Japan
loan portfolio in certain sectors
2022 we consolidated the various
change at an organizational level
the differences of nationality,
SMBC Group overseas and
domestic offices celebrate
to excessively focus on how the
does not address the heart of the
sustainability-related functions
has developed over the past three
gender, culture, and mindset. I was
International Women’s Day as
economy is performing. This he
issue. Together with our customers,
located throughout SMBC Group
years.
seconded to Singapore in 2002,
part of efforts to develop a more
felt was in strict contrast to the
we must carefully determine a
to form the Sustainability Division.
More than 10 corporations
and my department was made up
inclusive, diverse culture.
concern shown by young people
realistic decarbonization route
The Sustainability Division is staffed
have been established by giving
of about 50 staff, of whom only
In addition, we will strengthen
around the world regarding climate
and pace up to 2050 while paying
by more than 100 employees and
shape to the ideas of junior
four were Japanese. The rest were
our investments in human capital.
change. The mindset in which
close attention to each country’s
is responsible for the full line of
and mid-tier staff through my
locally hired employees of more
For example, the total payment
we pass the world on to the next
circumstances. As a proud member
sustainability operations at SMBC
CEO production project. In fact,
than 10 different nationalities. The
increase rate for SMBC employees,
generation in the same or better
of the financial community, SMBC
Group, from strategic planning
some corporations are already
team was truly diverse in terms
which reflects salary increases,
condition as when we inherited it is
Group will do our best to contribute
to providing customers with
generating profit. I have informed
of culture and mindset. At first, I
promotions and bonuses, will
the fundamental concept behind
to the decarbonization of society
sustainability-related solutions.
these strong-spirited CEOs that I
struggled to build consensus in
be approximately 4%. In order
sustainability, and it is an essential
by supporting customers’ efforts
We will continue with efforts to
support them in pursuing an IPO,
such a diverse team. However, I
to create a more comfortable
factor in the pursuit of happiness.
to transition to a carbon neutral
contribute to the realization of a
and that I want them to engage in
soon experienced firsthand that
working environment, we will
In order to pass our green
business model and develop new
sustainable society by addressing
further challenges without being
combining various ways of thinking
allocate more resources to
earth on to future generations, we
technologies.
issues such as climate change,
at SMBC Group are strengthening
Having said this, climate
human rights, biodiversity
our efforts to tackle climate change.
change is one of the various
conservation, and economic
In May 2021, we established the
paradigm shifts the world is facing,
growth. Through such initiatives
Roadmap Addressing Climate
and also represents a major
we will realize sustainability in a
Change, a long-term action plan
opportunity. We have set a KPI
sustainable manner.
to realize a carbon neutral society.
to execute sustainable financing
In the roadmap, SMBC Group
equivalent to ¥30 trillion between
committed to reducing the GHG
FY2020 to FY2029. We have
emissions of our group companies
successfully captured increasing
to net zero by 2030, and in August
demand for such products, and in
of the same year we committed
FY2021 we executed ¥5.4 trillion
to realizing a carbon neutral loan/
of sustainable financing. Going
See page 072 for details.
Creating Value through Sustainability
Initiatives
online training programs, the
professional development of senior
management and specialist staff,
career path development, reskilling,
and our healthcare framework.
Through such efforts, we will create
a virtuous cycle, in which personnel
will be empowered to create new
social value.
See page 084 for details.
Human Resource Strategies Supporting
Value Creation
014
015
Value Creation at SMBC GroupValue Creation at SMBC GroupBusiness Strategies for Creating ValueCorporate Infrastructure Supporting Value CreationSMBC GROUP ANNUAL REPORT 2022SMBC GROUP ANNUAL REPORT 2022 MESSAGE FROM GROUP CEO
The Sustained Growth of Shareholder Value
R ealizing the sustained
growth of a corporation’s
value and passing on that value
program. SMBC Group’s capital
ROE from both the numerator
remains at sufficient levels, even
and denominator by ensuring
after taking into consideration our
that our growth strategy produces
to its shareholders is a CEO’s
inorganic investments, and will be
the desired financial results and
responsibility. While SMBC Group’s
applied in a balanced manner to
applying firm discipline to improve
progressive dividend policy will
fund investments for growth and
capital efficiency.
remain our principal approach to
shareholder returns.
In addition to increasing
enhancing shareholder returns, we
While we have enhanced
shareholder value from a financial
will also execute share buybacks
shareholder returns, our PBR (Price
perspective, we will leverage our
in a flexible manner. In FY2022,
to Book Ratio) remains mired at
non-financial assets to increase
we set a bottom line target of ¥730
approximately 0.4. We consistently
SMBC Group’s corporate value over
billion, a target which exceeds the
underperformed our competitors
the medium to long term. First, in
initial target set under the Medium-
in this metric during FY2021, and
order to consistently increase the
Term Management Plan, and we
this is an issue that I take very
value of personnel, data, and other
increased our dividend forecast by
seriously. The key reason for our
assets that are not shown on our
¥10 to ¥220, achieving our goal of
lagging share price is that we have
balance sheet, we will accelerate
a 40% dividend payout ratio. This
not been able to convince investors
investments in digitalization and
means that during the three years
of our vision of sustained growth.
human capital. Then, we will
covered by the current Medium-
An increasing number of people
engage with all our stakeholders
Term Management Plan, SMBC
are adopting a pessimistic view
after maximizing disclosure of
Group has increased its dividend
of the financial sector in Japan
ESG and other non-financial
payment by ¥30 per share and
given the country’s accelerating
information, in order to minimize
total dividend amount by ¥90
decline in birth rate and population,
information asymmetry. We will
billion. We will place a buying
stagnating economy, and ongoing
strive to realize the sustained
order in the ¥100 billion share
negative interest rate policy.
growth of SMBC Group’s corporate
buyback program established
However, I have no doubt that the
value by providing greater
Take Care of the Matters at Hand and Wait for an Opportunity to Present Itself
I would like to conclude this
year’s message by sharing
with you the thoughts of Liu Bei, a
macroenvironment remains
building an even stronger business
highly volatile due to Russia’s
portfolio by improving capital, asset,
invasion of Ukraine and a number
and expense efficiencies.
in November 2021 once that is
expansion of our Asia franchise and
information transparency, so that
famous historic figure during the
of other factors. Furthermore, we
SMBC Group will contribute
deemed to be appropriate. At
the enhancement of our overseas
investors are able to forecast SMBC
Three Kingdoms Period of China.
are also facing climate change,
to the world’s fulfilled growth as
the same time, we will carefully
securities business, both themes
Group’s performance with greater
He stressed the importance of
digitalization, and other irreversible
we realize quantitative growth that
consider the macroenvironment
which I discussed earlier, will form
confidence, and by decreasing the
carefully taking care of matters
paradigm shifts. In terms of
is accompanied by heightened
to determine the plausibility of
the foundations of SMBC Group’s
cost of shareholder’s equity.
that you can actually control and
internal matters, it is imperative for
quality by patiently gathering our
establishing a new share buyback
sustained growth. We will increase
SMBC Group will contribute to the world’s
fulfilled growth as we realize quantitative growth
that is accompanied by heightened quality.
patiently waiting for an opportunity
SMBC Group to regain any loss of
strength and consistently capturing
to present itself. When I was
customer trust or confidence that
new business opportunities. I
rereading my favorite book the
may have resulted from the recent
would like to ask for the continued
other day, I felt this applied to
incident in our Group as quickly as
support and understanding of all
SMBC Group’s situation right now.
possible. In such an environment,
our stakeholders as I stand at the
Although we are seeing
we will enhance our governance
forefront of SMBC Group’s more
a gradual recovery from the
and other internal control
than 110,000 employees in our
COVID-19 pandemic, the global
frameworks while at the same time
efforts to realize this vision.
016
017
Value Creation at SMBC GroupValue Creation at SMBC GroupBusiness Strategies for Creating ValueCorporate Infrastructure Supporting Value CreationSMBC GROUP ANNUAL REPORT 2022SMBC GROUP ANNUAL REPORT 2022 Core Policy of the Medium-Term Management Plan
(FY2020-FY2022)
Vision
A trusted global solution provider committed to
the growth of our customers and advancement of society
Core Policy
Transform existing businesses
Seek new growth opportunities
Elevate quality in all aspects
Business
strategy
Management
base
Financial Targets
Profitability
Efficiency
Financial soundness
Maximize profitability
by increasing bottom-line profit
and disciplined capital management
Reduce cost
while investing for growth
Secure ample level of capital
on a post-Basel III reforms basis
ROCET1 ≥8.5%
Target for FY2022
Base expenses
< FY2019 results
CET1 ratio c.10%
Changed the denominator to
CET1 in line with CET1 ratio target
Pursue both cost reduction and
growth investment
Post-Basel III reforms basis (excl.OCI)
FY2019 results
Business Strategies – Transformation & Growth –
Previous Plan
Current Medium-Term Management Plan
Discipline
Focus
Improve efficiency
Accumulate capital
Increase profit by drastic optimization
and remodeling businesses
Use capital for organic growth
Invest for future growth
Use capital for inorganic growth
Seven Key Strategies
Transformation
Transform existing
businesses
Growth
Seek new growth
opportunities
1
2
3
4
5
6
7
Pursue sustainable growth of wealth management business
Improve productivity and strengthen solutions in the domestic wholesale business
Enhance overseas CIB business to improve asset / capital efficiency
Hold the number one position in payment business
Enhance asset-light business on a global basis
Expand franchise and strengthen digital banking in Asia
Develop digital solutions for corporate clients
Management Base – Quality –
Elevate quality in all aspects
ESG
Resource
management
• Contribute to realize a
sustainable society
• Enhance corporate
governance suitable
for a global bank
• Sophisticate HR
management to motivate
employees
• Build flexible and robust
IT/cyber infrastructure
Business
management
• Enforce sound risk-taking
• Pursue efficient and
scientific management
018
019
9.5%9.8%JPY 1,530 bn(vs. FY2016 +JPY 70 bn)Value Creation at SMBC GroupValue Creation at SMBC GroupBusiness Strategies for Creating ValueCorporate Infrastructure Supporting Value CreationSMBC GROUP ANNUAL REPORT 2022SMBC GROUP ANNUAL REPORT 2022 Financial Highlights
ESG Highlights
Corporate Infrastructure Supporting Value Creation
Sustainability Key Performance Indicators
Environment
Amount of
Green Finance
Green Bond
Issuance
Target
FY2021 Result
Target
FY2021 Result
¥20
trillion
(From FY2020 to FY2029)
7.5
¥
trillion
one
issuance or more/
year
one
issuance
Community
Next Generation
Retail Deposits
in Asia
Financial Literacy
Education
Target
x 3
of Dec. 2019
(By Dec. 2022)
FY2021 Result
Target
FY2021 Result
x2.5
1.5
million
(from FY2020 to FY2029)
298
thousand
Human Resources
Female Managers
Childcare Leave (Male)*
Target
FY2021 Result
Target
FY2021 Result
20
%
(By FY2025)
17.0
%
100
%
100
* Figure is for SMBC.
%
Credit ratings (As of June 30, 2022)
Holding company
SMBC
Long-term Short-term Long-term Short-term
Moody’s
S&P
Fitch
R&I
JCR
A1
A-
A
A+
AA-
P-1
A1
—
F1
—
—
A
A
AA-
AA
P-1
A-1
F1
a-1+
J-1+
020
021
2105001,000706.67.3(FY)0105608061.814.5’17’18’19’20’21(FY)0(FY)015200’18/3’19/3’20/3’21/3’22/3125250’17’18’19’20’21’17’18’19’20’21(FY)0’17’18’19’20’21Despite a certain degree of negative impact from the conflict in Russia and Ukraine, consolidated gross profit increased due to strong growth in the Retail, Wholesale, and Global Business Units and increased gains from sales of strategic shareholdings.(Billions of yen)%%%An increase in consolidated net business profit, decrease in total credit cost and increased gains on stocks led to a significant year-on-year improvement in profit attributable to owners of parent. (%)Business expenses decreased year-on-year mainly because of successful group-wide cost control initiatives, despite recovery of spending after the COVID-19 pandemic and depreciation of the yen.Overhead Ratio (OHR)(%)(%)To enhance shareholder returns as we presented in the Medium-Term ManagementPlan, we increased the FY2022 dividend forecast by ¥10 to ¥200 per share.Dividend per Share of Common Stock(Yen)While CET1 ratio decreased from the previous fiscal year due to the promotion of inorganic strategies and a decrease in unrealized gains on other securities, we continue to maintain a level higher than required.Common Equity Tier 1 Capital Ratio (CET1 Ratio) (Basel III fully-loaded basis)Profit Attributable to Owners of ParentReturn on Equity (ROE)(Calculated using stockholders’ equity as the denominator)Value Creation at SMBC GroupValue Creation at SMBC GroupBusiness Strategies for Creating ValueSMBC GROUP ANNUAL REPORT 2022SMBC GROUP ANNUAL REPORT 2022 MESSAGE FROM GROUP CFO
We will deliver steady growth by bringing the Medium-Term Management
Plan to a strong conclusion while increasing corporate value by further
improving capital efficiency and proactively disclosing information
On February 24, 2022, Russia invaded Ukraine.
At that time, very few people had imagined that Russia
would launch a full-scale invasion of Ukraine. There was
approximately one month left in our fiscal year, and my
attention had already started to turn towards FY2022.
Suddenly, I was faced with a slew of unforeseen issues
that had to be addressed by the end of March. I instructed
my team to take the necessary financial measures after
carefully considering the scope of the arising issues while
disclosing the status of our Russia business in a proactive,
timely manner as part of our efforts to reduce the market’s
concern. SMBC Group was the first Japanese financial
group to disclose details of its Russia exposure, an act for
which we received positive feedback from investors and
Toru Nakashima
Group CFO & CSO
Director Senior Managing Executive Officer
analysts. I also carefully considered if our initiatives in
their existing state were appropriate given the increased
uncertainty in our business environment, for example,
rising global inflation and interest rates.
Although March was a very hectic month, when I look
back over the entire FY2021 it was a year in which I was
able to confirm that our business was steadily recovering
from the enormous impact of COVID-19 and that we had
returned to our originally planned trajectory of growth. As
Group CFO, I have also paid close attention to whether the
management resources allocated under the Medium-Term
Management Plan were producing the anticipated results.
As Group CSO, I have carefully reviewed the initiatives
established under the seven key strategies based on
our core policies of “Transformation and Growth” while
reviewing and revising our digital and green initiatives, and
those related to other accelerating trends, to ensure they
are being carried out at an appropriate pace. In addition,
we have laid foundations for our future growth by making
several investments for inorganic growth.
As a result, in our financial results for FY2021 we were
able to generate strong growth in bottom-line profit while
putting aside sufficient capital buffers as a precautionary
measure. Unfortunately, the performance of our stock
price throughout the year was by no means satisfactory.
While the uncertain business environment will continue in
FY2022, not only will we achieve the final financial targets
established under the Medium-Term Management Plan,
we will also plant the seeds of further growth with the next
Medium-Term Management Plan in mind and enhance
our capital efficiency, which includes accelerating the
reduction of our strategic shareholdings so that we can
improve our PBR.
Progress of the Medium-Term Management Plan
(1) Overview of FY2021 Results and
Targets for FY2022
Although increased credit costs and impairment losses
stemming from our aircraft leasing business due to
the Russia-Ukraine conflict had a negative impact of
approximately ¥100 billion on profit attributable to owners
of parent for FY2021, we were still able to generate a final
figure of ¥706.6 billion. This number not only exceeds our
FY2020 result by ¥193.8 billion, it also exceeds the revised
target we announced when releasing our financial results
for the first half of FY2021. The key factors behind this were
strong growth in consolidated net business profit thanks
to the recovery of business activities from the disruptions
of COVID-19, and the steady execution of initiatives
established under the Medium-Term Management Plan by
our Business Units, in addition to a major increase in gains
on stocks due to the sale of strategic shareholdings.
For FY2022 we have set targets of ¥1,235 billion for
consolidated net business profit and ¥730 billion for profit
attributable to owners of parent. These numbers are in line
with our promise made at the time of the Medium-Term
Management Plan’s release to increase consolidated net
business profit by ¥100 billion and increase bottom-line
profit by a minimum of 10% during the next three years,
excluding one-time factors. Increasing net consolidated
business profit by more than ¥80 billion on a year-on-
year basis in this uncertain business environment is a
very challenging target, but by no means an impossible
one given the steady recovery of economic activities from
COVID-19 and the steady progress of the Medium-Term
Management Plan’s initiatives. In terms of credit cost, loan
loss provisions, including forward-looking ones, in relation
to our Russia exposure are at this time deemed sufficient.
As Group CFO I will strive to achieve our goal of ¥730 billion
for profit attributable to owners of parent for FY2022 to
bring our Medium-Term Management Plan to a strong
conclusion.
(JPY bn)
Results
FY2021
YoY
Target
FY2022
Consolidated net business profit
1,152.9
+68.9
1,235
Total credit cost
Ordinary profit
274.4
(86.1)
210
1,040.6
+329.6
1,060
Profit attributable to owners of parent
706.6
+193.8
730
022
023
Value Creation at SMBC GroupValue Creation at SMBC GroupBusiness Strategies for Creating ValueCorporate Infrastructure Supporting Value CreationSMBC GROUP ANNUAL REPORT 2022SMBC GROUP ANNUAL REPORT 2022 MESSAGE FROM GROUP CFO
Financial Impact of the Russia-Ukraine Conflict
In FY2021, increased credit costs and impairment
losses stemming from our aircraft leasing business due
to the Russia-Ukraine conflict had a negative impact of
approximately ¥100 billion on our bottom-line profit.
For our aircraft leasing business, we booked
impairment losses equivalent to approximately half the
book value of the leased aircraft, resulting in a negative
impact on consolidated net business profit of ¥47
billion. We are processing insurance claims in order to
minimize the impact of the said impairment losses on
our financials.
In terms of credit cost, we booked costs of ¥75
billion (equivalent to more than 30% of our exposure
to Russian borrowers). This figure includes a buffer in
case of further deteriorations in the creditworthiness
of impacted customers.
In FY2022, we will pay careful attention to
developments in the conflict and take necessary
actions in a timely manner considering the volatility
of the situation; upside scenarios resulting from a
de-escalation in the conflict, and further downside
scenarios are both possible.
We are producing solid results for our three financial
metrics established in the Medium-Term Management
Plan to measure profitability, efficiency, and financial
soundness. We will continue to focus on business efficiency
when conducting business operations.
Financial Targets
(2) Seven Key Strategies
In addition to the prolonged impact of COVID-19, we are
experiencing a number of other scenarios, such as the
Russia-Ukraine conflict and rising global inflation, that we
did not foresee when planning the current Medium-Term
Management Plan. However, these events, rather than
requiring fundamental changes to our Plan, have in fact
accelerated anticipated trends. We must bring our various
initiatives to an early conclusion so that we do not fall
behind.
In FY2021, we focused on addressing new customer
needs that were arising in a post-COVID-19 world while
implementing initiatives to address issues that had become
visible in the changing business environment.
For example, in our wealth management business
SMBC Group companies worked closely together to
strengthen our product design capabilities, approach to
customers, and online sales. In our payment business, we
captured the growth of the cashless payment market by
focusing on expanding the customer base of “stera,” our
cashless payment platform, and issuing next-generation
credit cards. In addition, in our domestic wholesale
business there was increased demand for solutions to
address issues in business restructuring, real estate
business, and other needs which became apparent due to
COVID-19, while in our overseas business we introduced
products offering high margins in order to enhance capital
and asset efficiencies.
We are also carrying out initiatives aimed at realizing
medium- to long-term growth by concluding investments
and partnerships in our Asia retail business, overseas
ROCET1
Base expenses*¹
CET1 ratio*²
8.6%
≥8.5%
JPY
1,530 bn
JPY
1,510 bn
JPY
1,520 bn
9.8%
10.0%
c.10%
6.9%