UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2015

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 001-34919

Kabushiki Kaisha Mitsui Sumitomo Financial Group

(Exact name of Registrant as specified in its charter)

SUMITOMO MITSUI FINANCIAL GROUP, INC.

(Translation of registrant’s name into English)

Japan	1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005, Japan
(Jurisdiction of incorporation or organization)	(Address of principal executive offices)

Haruyuki Nagata

1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005, Japan

Telephone: +81-3-3282-8111        Facsimile: +81-3-4333-9954

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act

Title of Each Class	Name of Each Exchange on which registered
Common stock, without par value	The New York Stock Exchange*

* Not for trading, but only in connection with the listing of the American Depositary Shares, each American Depositary Share representing 1/5 of one share of the registrant’s common stock.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

At March 31, 2015, the following shares of capital stock were outstanding: 1,414,055,625 shares of common stock (including 46,814,201 shares of common stock held by the registrant and its consolidated subsidiaries and equity-method associates as treasury stock).

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  x Accelerated Filer  ¨ Non-accelerated Filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board  x Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

TABLE OF CONTENTS

			Page
Certain Defined Terms, Conventions and Presentation of Financial Information				1
Cautionary Statement Regarding Forward-Looking Statements				2
PART I				3
	Item 1.	Identity of Directors, Senior Management and Advisers		3
	Item 2.	Offer Statistics and Expected Timetable		3
	Item 3.	Key Information		3
	3.A.	Selected Financial Data		3
	3.B.	Capitalization and Indebtedness		5
	3.C.	Reasons for the Offer and Use of Proceeds		5
	3.D.	Risk Factors		5
	Item 4.	Information on the Company		18
	4.A.	History and Development of the Company		18
	4.B.	Business Overview		19
	4.C.	Organizational Structure		54
	4.D.	Property, Plant and Equipment		56
	Item 4A.	Unresolved Staff Comments		57
	Item 5.	Operating and Financial Review and Prospects		57
	5.A.	Operating Results		66
	5.B	Liquidity and Capital Resources		109
	5.C.	Research, Development, Patents and Licenses		113
	5.D.	Trend Information		113
	5.E.	Off-Balance Sheet Arrangements		113
	5.F.	Tabular Disclosure of Contractual Obligations		114
	5.G.	Safe Harbor		114
	Item 6.	Directors, Senior Management and Employees		115
	6.A.	Directors and Senior Management		115
	6.B.	Compensation		122
	6.C.	Board Practices		122
	6.D.	Employees		126
	6.E.	Share Ownership		127
	Item 7.	Major Shareholders and Related Party Transactions		129
	7.A.	Major Shareholders		129
	7.B.	Related Party Transactions		129
	7.C.	Interests of Experts and Counsel		130
	Item 8.	Financial Information		130
	8.A.	Consolidated Statements and Other Financial Information		130
	8.B.	Significant Changes		131
	Item 9.	The Offer and Listing		131
	9.A.	Offer and Listing Details		131
	9.B.	Plan of Distribution		133
	9.C.	Markets		133
	9.D.	Selling Shareholders		133
	9.E.	Dilution		134
	9.F.	Expenses of the Issue		134
	Item 10.	Additional Information		134
	10.A.	Share Capital		134
	10.B.	Memorandum and Articles of Incorporation		134
	10.C.	Material Contracts		144
	10.D.	Exchange Controls		144

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			Page
	10.E.	Taxation		145
	10.F.	Dividends and Paying Agents		149
	10.G.	Statement by Experts		149
	10.H.	Documents on Display		150
	10.I.	Subsidiary Information		150
	Item 11.	Quantitative and Qualitative Disclosures about Credit, Market and Other Risk		150
	Item 12.	Description of Securities other than Equity Securities		163
	12.A.	Debt Securities		163
	12.B.	Warrants and Rights		163
	12.C.	Other Securities		163
	12.D.	American Depositary Shares		163
PART II				165
	Item 13.	Defaults, Dividend Arrearages and Delinquencies		165
	Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		165
	Item 15.	Controls and Procedures		165
	Item 16A.	Audit Committee Financial Expert		166
	Item 16B.	Code of Ethics		166
	Item 16C.	Principal Accountant Fees and Services		167
	Item 16D.	Exemptions from the Listing Standards for the Audit Committee		167
	Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		168
	Item 16F.	Change in Registrant’s Certifying Accountant		168
	Item 16G.	Corporate Governance		168
	Item 16H.	Mine Safety Disclosure		170
PART III				171
	Item 17.	Financial Statements		171
	Item 18.	Financial Statements		171
	Item 19.	Exhibits		171
Signatures				172
Selected Statistical Data				A-1
Index to Consolidated Financial Statements				F-1

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CERTAIN DEFINED TERMS, CONVENTIONS AND

PRESENTATION OF FINANCIAL INFORMATION

As used in this annual report, unless the context otherwise requires, “SMFG,” the “Company,” “we,” “us,” “our” and similar terms refer to Sumitomo Mitsui Financial Group, Inc. as well as to its subsidiaries, as the context requires. References to the “Group” are to us and our subsidiaries and affiliates taken as a whole. “SMBC” and “the Bank” refer to Sumitomo Mitsui Banking Corporation or to Sumitomo Mitsui Banking Corporation and its subsidiaries taken as a whole, depending on the context. The Bank is our main subsidiary.

In this annual report, all of our financial information is presented on a consolidated basis, unless we state otherwise. As used in this annual report, “IFRS” means International Financial Reporting Standards as issued by the International Accounting Standards Boards (“IASB”) and “Japanese GAAP” means accounting principles generally accepted in Japan. Our consolidated financial information in this annual report has been prepared in accordance with IFRS, 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 Japanese GAAP. Unless otherwise stated or the context otherwise requires, all financial information contained in this annual report is expressed in Japanese yen.

Our fiscal year ends on March 31.

Unless otherwise specified or required by the context: references to “days” are to calendar days; references to “years” are to calendar years and to “fiscal years” are to our fiscal years ending on March 31; references to “$,” “dollars” and “U.S. dollars” are to United States dollars; references to “euros” and “€” are to the currency of those member states of the European Union which are participating in the European Economic and Monetary Union pursuant to the Treaty on European Union; references to “£” and “British pounds sterling” are to the currency of the United Kingdom; and references to “yen” and “¥” are to Japanese yen. Unless otherwise specified, when converting currencies into yen we use our median exchange rates for buying and selling spot dollars, or other currencies, by telegraphic transfer against yen as determined at the end of the relevant fiscal period.

Unless otherwise indicated, in this annual report, where information is presented in millions, billions or trillions of yen or thousands, millions or billions of dollars, amounts of less than one thousand, one million, one billion or one trillion, as the case may be, have been rounded. Accordingly, the total of figures presented in columns or otherwise may not equal the total of the individual items. Except for capital ratios, which have been truncated, percentage data, unless we state otherwise have been subjected to rounding adjustments for the convenience of the reader.

1

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended (“Securities Exchange Act of 1934”). When included in this annual report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “probability,” “risk,” “project,” “should,” “seek,” “target,” “will” and similar expressions, among others, identify forward-looking statements. You can also identify forward-looking statements in the discussions of strategy, plans or intentions. Such statements, which include, but are not limited to, statements contained in “Item 3. Key Information—Risk Factors,” “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk,” reflect our current views with respect to future events and are inherently subject to risks, uncertainties and assumptions, including the risk factors described in this annual report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described here as anticipated, believed, estimated, expected or intended.

The U.S. Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves. We rely on this safe harbor in making these forward-looking statements.

Forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors, and the differences may be material. Potential risks and uncertainties include, without limitation, the following:

• deterioration of Japanese and global economic conditions and financial markets;

• constraints on our operations due to capital adequacy requirements;

• declines in the value of our securities portfolio;

• changes in the level or volatility of market rates or prices;

• incurrence of significant credit-related costs;

• a significant downgrade of our credit ratings;

• our ability to successfully implement our business strategy through our subsidiaries, affiliates and alliance partners;

• exposure to new risks as we expand the scope of our business;

• the industry specific risks of the consumer finance industry;

• the recoverability of deferred tax assets;

• litigation and regulatory proceedings;

• insufficient liquidity;

• problems of other financial institutions; and

• adverse regulatory developments or changes in government policies.

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 the filing of this annual report. We expressly disclaim any obligation to update or to announce publicly any revision to any of the forward-looking statements contained in this annual report to reflect any changes in events, conditions, circumstances or other developments upon which any such statement is based. The information contained in this annual report identifies important factors in addition to those referred to above that could cause differences in our actual results.

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

3.A.    SELECTED FINANCIAL DATA

Selected Financial Data

The following selected financial data at and for each of the five fiscal years ended March 31, 2015, 2014, 2013, 2012 and 2011 have been derived from our consolidated financial statements. You should read this data together with “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements included elsewhere in this annual report.

	For the fiscal year ended and at March 31,
	2015		2014(2)			2013(2)		2012(2)			2011(2)
	(In millions, except per share data)
Consolidated income statement data:
Interest income	¥	1,782,621	¥	1,714,044		¥	1,725,723	¥	1,710,331		¥	1,720,181
Interest expense		371,107		320,511			321,570		313,631			311,056
Net interest income		1,411,514		1,393,533			1,404,153		1,396,700			1,409,125
Fee and commission income		1,002,766		1,003,169			948,685		869,407			806,704
Fee and commission expense		129,253		127,959			127,054		132,562			132,560
Net fee and commission income		873,513		875,210			821,631		736,845			674,144
Net trading income		127,759		135,218			105,302		182,296			324,479
Net income from financial assets at fair value through profit or loss		22,678		58,586			15,794		33,734			30,116
Net investment income		371,064		332,265			223,404		239,365			235,911
Other income		525,905		429,541			324,403		245,563			204,470
Total operating income		3,332,433		3,224,353			2,894,687		2,834,503			2,878,245
Impairment charges (reversals) on financial assets		90,138		(14,275	)		270,145		284,310			433,928
Net operating income		3,242,295		3,238,628			2,624,542		2,550,193			2,444,317
General and administrative expenses		1,621,897		1,522,990			1,447,116		1,374,540			1,311,427
Other expenses		505,614		428,780			287,896		238,937			212,059
Operating expenses		2,127,511		1,951,770			1,735,012		1,613,477			1,523,486
Share of post-tax profit (loss) of associates and joint ventures		18,124		19,454			19,593		(25,004	)		(5,796	)
Profit before tax		1,132,908		1,306,312			909,123		911,712			915,035
Income tax expense		409,947		414,076			255,300		460,779			353,996
Net profit	¥	722,961	¥	892,236		¥	653,823	¥	450,933		¥	561,039

3

	For the fiscal year ended and at March 31,
	2015		2014(2)		2013(2)		2012(2)		2011(2)
	(In millions, except per share data)
Profit attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.	¥	614,070	¥	766,388	¥	535,976	¥	338,260	¥	453,519
Non-controlling interests		108,891		125,848		117,847		112,673		107,520
Earnings per share:
Basic	¥	449	¥	561	¥	396	¥	244	¥	321
Diluted		449		561		395		243		321
Weighted average number of common shares in issue (in thousands of shares)		1,367,258		1,366,186		1,353,926		1,387,405		1,394,391
Dividends per share in respect of each fiscal year:
Common stock	¥	125	¥	125	¥	100	¥	100	¥	105
	$	1.04	$	1.22	$	1.06	$	1.22	$	1.26
Preferred stock (Type 6)(1)	¥	—	¥	—	¥	—	¥	44,250	¥	88,500
	$	—	$	—	$	—	$	539	$	1,064
Consolidated statement of financial position data:
Total assets	¥	179,181,466	¥	158,631,041	¥	147,770,475	¥	141,824,796	¥	136,438,043
Loans and advances		86,971,716		81,244,982		75,987,057		72,536,813		71,020,329
Total liabilities		168,160,616		149,215,851		139,210,786		134,407,940		129,014,402
Deposits		115,833,980		108,370,494		101,021,413		92,853,566		90,469,098
Borrowings		11,217,052		8,463,363		6,475,543		10,412,858		12,548,358
Total equity		11,020,850		9,415,190		8,559,689		7,416,856		7,423,641
Capital stock		2,337,896		2,337,896		2,337,896		2,337,896		2,337,896

(1) On April 1, 2011, we acquired and cancelled all of the outstanding Type 6 preferred stock.

(2) Comparative information has been restated to reflect the adoption of IFRIC Interpretation 21 “Levies.” For more information, see Note 2 “Summary of Significant Accounting Policies—New and Amended Accounting Standards Adopted by the SMFG Group” to our consolidated financial statements included elsewhere in this annual report.

4

Exchange Rates

We maintain our accounts in yen. The following table sets forth for the indicated periods the median exchange rates for buying and selling spot dollars by telegraphic transfer against yen as determined by the Bank, expressed in Japanese yen per $1.00.

	High		Low		Period end		Average(1)
	(Yen per dollar)
Fiscal year ended March 31,
2011	¥	94.43	¥	79.31	¥	83.15	¥	85.22
2012		85.47		75.99		82.13		78.98
2013		96.45		77.57		94.01		83.31
2014		105.37		92.91		102.88		100.47
2015		121.59		101.25		120.15		110.61
Most recent six months:
January		120.32		116.44		118.22		118.33
February		120.18		117.30		119.26		118.59
March		121.54		119.17		120.15		120.37
April		120.51		118.94		119.00		119.58
May		123.73		119.30		123.73		120.76
June		125.51		122.44		122.44		123.77
July (through July 10, 2015)		123.40		120.79		121.66		122.40

(1) Average exchange rates have been calculated by using the average of the exchange rates on the last day of each month during a fiscal year, except for the monthly average rates, which represent the averages of the exchange rates for each day of the relevant months.

The median exchange rate quotation by the Bank for buying and selling spot dollars by telegraphic transfer against yen on July 10, 2015 was ¥121.66 = $1.00.

These exchange rates are reference rates and are neither necessarily the rates used to calculate ratios nor the rates used to convert dollars to yen in the consolidated financial statements included elsewhere in this annual report.

3.B.    CAPITALIZATION AND INDEBTEDNESS

Not applicable.

3.C.    REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

3.D.    RISK FACTORS

Investing in our securities involves risks. You should carefully consider the risks described below as well as all the other information in this annual report, including, but not limited to, our consolidated financial statements and related notes included elsewhere in this annual report and “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk.” Our business, operating results and financial condition could be adversely affected by any factors, including, but not limited to, those discussed below. The trading prices of our securities could also decline due to any of these factors including, but not limited to, those discussed below. Moreover, this annual report contains forward-looking statements that involve risks and uncertainties. Our actual results could also differ from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the risks faced by us described below and elsewhere in this annual report. See “Cautionary Statement Regarding Forward-Looking Statements.” Forward-looking statements in this section are made only as of the filing date of this annual report.

5

Risks Related to the Economic and Financial Environment

We may be adversely affected if Japanese and global economic conditions and financial markets deteriorate.

Our financial condition and results of operations are materially affected by general economic conditions and financial markets in Japan and foreign countries, which would be influenced by the changes of various factors such as fiscal and monetary policies, and laws and regulations. Those factors include, for example, the Japanese consumption tax rate. The Japanese consumption tax rate increased from 5% to 8% in April 2014 and was scheduled to further increase to 10% in October 2015. However, the increase in the consumption tax rate to 10% has been postponed until April 1, 2017. Furthermore, geopolitical instability in various parts of the world, including North Africa, the Middle East, Asia and Eastern Europe could also contribute to economic instability in those and other regions and that could affect Japanese and global economic conditions.

The deterioration of Japanese and global economic conditions, or financial market turmoil, could result in a worsening of our liquidity and capital conditions, an increase in our credit costs, and an increase in impairment of our investment securities and, as a result, adversely affect our business, financial condition and results of operations.

Risks Related to Our Business

Failure to satisfy capital adequacy requirements could constrain our and the Bank’s operations.

We and the Bank are subject to capital adequacy requirements established by the Financial Services Agency of Japan (“FSA”). The current requirements reflect the principal risk-weighted capital measures of the Basel III rules text published by the Basel Committee on Banking Supervision (“BCBS”) in December 2010 and are being phased in from March 2013 to March 2019. Compared to the previous requirements, the current requirements increase both the quality and quantity of the risk-weighted capital base.

With respect to the quality of the capital base, certain capital instruments, including existing preferred securities and subordinated debt, are eligible for inclusion as Tier 1 capital or Tier 2 capital only for the phase-out period. Furthermore, deferred tax assets that arise from timing differences will be recognized as part of the common equity component of Tier 1, with recognition capped at 10% of the bank’s common equity component under certain conditions, while deferred tax assets that arise from net loss carry forwards will be deducted from the common equity component of Tier 1. Such recognition and deduction are implemented in a phased manner and will be fully implemented in March 2018.

With respect to the quantity of the capital base, the minimum Common Equity Tier 1 risk-weighted capital ratio applicable to us and the Bank began increasing incrementally from March 2013 reaching 4.5% by March 2015. Moreover, we and the Bank will be required to hold a capital conservation buffer of 2.5% to withstand future periods of stress, and failure to maintain capital at the full buffer levels will result in restrictions on bonuses and capital distributions. The capital conservation buffer will be phased in from March 2016 to March 2019. As a result, the total minimum Common Equity Tier 1 risk-weighted capital ratio will be increased to 7%, and the total minimum risk-weighted capital ratio will be increased to 10.5%. At March 31, 2015, on a consolidated basis, our total risk-weighted capital ratio was 16.58% compared to the minimum required total risk-weighted capital ratio of 8.0%. Out of our total risk-weighted capital ratio, our Tier 1 risk-weighted capital ratio was 12.89%, including 11.30% of Common Equity Tier 1 risk-weighted capital ratio, compared to the minimum required ratios of 6% and 4.5%, respectively.

In addition, in November 2014, we and other organizations were identified by the Financial Stability Board (“FSB”) as Global Systemically Important Financial Institutions (“G-SIFIs”). The list of G-SIFIs is updated each year in November, and the requirements for additional loss absorption capacity above the Basel III minimum requirement will apply from 2016, initially to those financial institutions identified in November 2014 as G-SIFIs.

6

Our and the Bank’s capital ratios could decline as a result of decreases in Tier 1 and Tier 2 capital or increases in risk-weighted assets. The following circumstances, among others, could reduce our risk-weighted capital ratio and that of the Bank:

• declines in the value of securities;

• inability to refinance subordinated debt obligations or preferred securities with those qualified as regulatory capital under the new capital adequacy requirements which phased in from March 2013; and

• increases in risk-weighted assets resulting from business growth, strategic investments, borrower downgrades or changes in parameters such as probability of default (“PD”).

We and the Bank have adopted the advanced internal rating-based (“IRB”) approach for measuring exposure to credit risk and the advanced measurement approach (“AMA”) to measure exposure to operational risk. If the FSA revokes its approval of such implementation or otherwise changes its approach to measure capital adequacy ratios, our and the Bank’s ability to maintain capital at the required levels may be adversely affected.

If our capital ratios fall below required levels, the FSA may require us to take a variety of corrective actions, including withdrawal from all international operations or suspension of all or part of our and the Bank’s operations, which may indirectly affect our or the Bank’s ability to fulfill our and the Bank’s contractual obligations or may result in restrictions on our and the Bank’s businesses. In addition, some of the Bank’s domestic and overseas subsidiaries are also subject to local capital ratio requirements. Failure of those subsidiaries to meet local requirements may result in administrative actions or sanctions imposed by local regulatory authorities.

Future declines of securities prices on Japanese stock markets or other global markets could cause us to experience impairment losses and unrealized losses on our equity securities portfolio, which could negatively affect our financial condition, results of operations and regulatory capital position.

The reported value of our available-for-sale equity instruments accounted for 3.6% of our total assets at March 31, 2015, approximately 88.3% of which were Japanese equity securities. This value depends mainly on prices of the instruments in the stock market. In addition, the reported value, gross unrealized gains and losses, and cost of those available-for-sale equity instruments at March 31, 2015 are described in “Item 5.A. Operating Results—Investment Securities.”

A listed equity security is impaired primarily based on its market price. If we conclude that a particular security is impaired, we calculate the impairment loss based on the market price of that security at the end of the relevant period. Declines in the Japanese stock markets or other global markets could result in further losses from impairment of the securities in our equity securities portfolio or sales of these securities, adversely affecting our results of operations and financial condition.

Our regulatory capital position and that of the Bank depend in part on the fair value of our equity securities portfolio. Substantial declines in the Japanese stock markets or other global markets would negatively affect our and the Bank’s capital positions, and limit the Bank’s ability to make distributions to us.

We may further reduce our holdings of equity securities in order to reduce financial risks. Any disposal by us of equity holdings of our customers’ shares could adversely affect our relationships with those customers.

Changes in the levels or volatility of market rates or prices could adversely affect our financial condition and results of operations.

We engage in trading and investing activities dealing with various kinds of financial instruments such as bonds, equities, currencies, derivatives and funds. Our financial condition and results of operations could be

7

adversely affected by actual changes or volatility in interest rates, foreign exchange rates and market prices of other investment securities. For example, we have substantial investments in debt securities. In particular, Japanese government bonds represent a significant part of our fixed income portfolio. At March 31, 2015, we had ¥9 trillion of Japanese government bonds classified as available-for-sale financial assets, which accounted for approximately 5.2% of our total assets. Increases in interest rates could substantially decrease the value of our fixed income portfolio, and any unexpected changes in yield curves could adversely affect the value of our bond and interest rate derivative positions, resulting in lower-than-expected revenues from trading and investment activities. Market volatility may also result in significant unrealized losses or impairment losses on such instruments. Furthermore, the downgrading of investment securities by credit rating agencies may also cause declines in the value of our securities portfolio.

Adverse economic conditions and deterioration of the financial conditions of our customers could increase our credit costs.

Our non-performing loans (“NPLs”) and credit costs for corporate and individual customers may increase significantly if:

• domestic or global economic conditions worsen or do not improve;

• our customers do not repay their loans, due to reasons including deterioration of their financial conditions; and

• the value of collateral declines.

We have substantial exposure to corporate customers in the following sectors: real estate and goods rental and leasing, manufacturing, wholesale and retail, transportation, communications and public enterprises, and services, including electric utilities, and to individual customers mainly through housing loans. The financial conditions of those customers may be subject to changes in the industry-specific economic conditions as well as general economic conditions. In addition, adverse region-specific economic conditions could worsen our customers’ financial conditions or could decrease the value of our collateral provided to us in such regions. As a result, we may be required to record increases in our allowance for loan losses.

Moreover, for certain borrowers, we may choose to engage in debt-for-equity swaps or provide partial debt write-offs, additional financing or other forms of assistance as an alternative to exercising our full legal rights as a creditor if we believe that doing so may increase our ultimate recoverable amount of the loan. We may be required to, or choose to, provide new or additional financing to customers who may incur unexpected liabilities, have difficulty in the future in continuing operations, encounter difficulties or need to devote significant resources to repair their infrastructures, as a result of natural disasters or other calamities.

In addition, changes in laws or government policies may have an adverse impact on the rights of creditors. For example, the Government of Japan has provided or may provide in the future government guarantees and other government support measures in response to the financial crisis or other unexpected incidents such as the Great East Japan Earthquake of March 2011 and collateral events. Even if our current or future loans to borrowers have received or will receive any government support measures, it is unclear to what extent those loans will benefit, directly or indirectly, from the current or any future government guarantees or support measures.

In addition, our NPLs may increase and there may be additional credit costs if we fail to accurately estimate the incurred losses in our loan portfolio. These estimates require difficult, subjective and complex judgments such as credit evaluation of our borrowers, valuation of collateral and forecasts of economic conditions.

The ratio of impaired loans and advances to the total loans and advances, both net of allowance for loan losses, were 1.0%, 1.3% and 1.8% at March 31, 2015, 2014 and 2013, respectively. For further information, see “Item 5.A. Operating Results—Loans and Advances.”

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A significant downgrade of our credit ratings could have a negative effect on us.

At the date of this annual report, SMFG has the issuer credit ratings of A/A-1 from Standard & Poor’s Ratings Japan K.K., (“S&P”), and the foreign and local currency issuer default ratings of A-/F1 from Fitch Ratings Japan Limited (“Fitch”). There can be no assurance that these ratings will be maintained.

A material downgrade of our credit ratings may have various effects including, but not limited to, the following:

• we may have to accept less favorable terms in our transactions with counterparties, including capital raising activities, or may be unable to enter into certain transactions;

• foreign regulatory bodies may impose restrictions on our overseas operations;

• existing agreements or transactions may be cancelled; and

• we may be required to provide additional collateral in connection with derivatives transactions.

Any of these or other effects of a downgrade of our credit ratings could have a negative impact on the profitability of our treasury and other operations, and could adversely affect our regulatory capital position, liquidity position, financial condition and results of operations. For more information about our credit ratings, see “Item 5.B. Liquidity and Capital Resources.”

We face significant challenges in achieving the goals of our business strategy, and our business may not be successful.

In May 2014, we and the Bank announced a new medium-term management plan through March 2017. We believe that we have targeted appropriate business areas. However, our initiatives to offer new products and services and to increase sales of our existing products and services may not succeed, if current market conditions do not stabilize, market opportunities develop more slowly than expected, our initiatives have less potential than we envisioned originally or the profitability of these products and services is undermined by competitive pressures. Consequently, we may be unable to achieve or maintain profitability in our targeted business areas.

In order to implement our business strategy successfully, we need to hire and train qualified personnel continuously and in a proactive manner, as well as to attract and retain employees with professional experience and specialized product knowledge. However, we face competition from other commercial banks, investment banks, consumer finance companies and other financial services providers in hiring highly competent employees. There can be no assurance that we will succeed in attracting, integrating and retaining appropriately qualified personnel.

We are exposed to new risks as we expand our businesses, the range of our products and services, and geographic scope of our businesses overseas.

As part of our business strategies we have expanded and may continue to expand our businesses or our range of products and services beyond our core business, commercial banking. This could expose us to new risks, such as adverse regulatory changes, more competition or deterioration in the operating environments that affect those businesses, products and services. Some of those risks could be types with which we have no or only limited experience. As a result, our risk management systems may prove to be insufficient and may not be effective in all cases or to the degree required.

In accordance with our strategy to further increase our presence in the international financial markets, we may continue to expand the scale of our overseas businesses, especially in emerging economies, notably Asian countries and regions. The expansion of our overseas businesses may further increase our exposure to risks of adverse developments in foreign economies and markets, including interest rate and foreign exchange rate risk,

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regulatory risk and political risk. Our overseas expansion also exposes us to the compliance risks and the credit and market risks specific to the countries and regions in which we operate, including the risk of deteriorating conditions in the credit profile of overseas borrowers.

Failure of our business strategies through our subsidiaries, affiliates and other business alliance partners could negatively affect our financial condition and results of operations, including impairment losses on goodwill or investments.

Aligned with our business strategies, we have made and may undertake acquisition of a subsidiary, investments in affiliates and other business alliance partners, and reorganization within our Group companies. It is uncertain whether we will receive the expected benefits from those business strategies, due to any adverse regulatory changes, worsening of economic conditions, increased competition or other factors that may negatively affect the related business activities. Furthermore, unanticipated costs and liabilities may be incurred in connection with those business strategies, including liabilities from the claims related to the businesses prior to our business alliances, and cost from actions by regulatory authorities.

When we acquire a subsidiary, we may recognize goodwill and intangible assets. Impairment losses on goodwill or intangible assets in connection with acquisitions must be recognized when the recoverable amount of goodwill or intangible assets of the business is lower than the carrying amount at the time of impairment testing, which is performed annually or whenever there is an indication that the goodwill or intangible assets may be impaired.

We account for some of our investments in affiliates under the equity method. Therefore, net losses incurred by equity method investees may cause us to record our share of the net losses. Furthermore, we may lose the capital which we have invested in business alliances or may incur impairment losses on securities acquired in such alliances. We may also be required under contractual or other arrangements to provide financial support, including credit support and equity investments, to business alliance partners in the future. Additionally, we may also incur credit costs from our credit exposure to such partners.

We are exposed to the industry specific risks of the consumer finance industry.

Changes in the legal environment have severely adversely affected the business performance of consumer lending and credit card companies. We have exposures to the risks specific to the consumer finance industry through our subsidiaries, including Cedyna Financial Corporation (“Cedyna”) and SMBC Consumer Finance Co., Ltd. (“SMBC Consumer Finance”).

Consumer lending and credit card companies had offered unsecured personal loans, which included loans with so-called “gray zone” interest in excess of the maximum rate prescribed by the Interest Rate Restriction Act (ranging from 15% to 20%) up to the 29.2% maximum rate permitted under the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates (“Contributions Act”). However, as a result of court decisions unfavorable to those companies, claims for refunds of amounts paid in excess of the applicable maximum allowed rate by the Interest Rate Restriction Act have increased substantially. Although Cedyna, SMBC Consumer Finance and other subsidiaries have each recorded a provision for claims for refunds of gray zone interest on loans, we may be required to recognize additional losses if such provisions are determined to be insufficient.

Amendments to laws regulating moneylenders, which were promulgated in 2006 and which became fully effective in June 2010, increased the authority of government regulators, prohibited gray zone interest and introduced an upper limit on aggregate credit extensions to an individual by moneylenders at one-third of the borrower’s annual income. After the promulgation of such amendments, Cedyna, SMBC Consumer Finance and other companies engaged in related business reduced their interest rates on loans in preparation for the prohibition of gray zone interest. As a consequence, margins earned by those companies, as well as the amounts of loans extended, have decreased.

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Inability to generate sufficient future taxable profits or adverse changes to tax laws, regulatory requirements or accounting standards could have a negative impact on the recoverability of certain deferred tax assets.

We recognize deferred tax assets relating to tax losses carried forward and deductible temporary differences only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the temporary differences can be utilized. The deferred tax assets are quantified on the basis of current tax rates and accounting standards and are subject to change as a result of changes to future tax rates or the rules for computing taxable profits and allowable losses. Failure to generate sufficient future taxable profits or changes in tax laws or accounting standards may reduce our estimated recoverable amount of net deferred tax assets. Such a reduction could have an adverse effect on our financial condition and results of operations.

Declines in returns on our plan assets or revised actuarial assumptions for retirement benefits may adversely affect our financial condition and results of operations.

The Bank and some of our other subsidiaries have various defined benefit plans. We have experienced in the past, and may experience in the future, declines in returns on plan assets and changes in the discount rates and other actuarial assumptions. If returns on plan assets decrease, or if we revise the discount rates and other assumptions, the deficit of the impacted defined benefit plan may increase and adversely affect our financial condition and results of operations. Because more than half of our plan assets are composed of equity instruments, the plan assets are greatly affected by volatility in the prices of equity securities. Substantial declines in the prices for publicly traded Japanese stocks would negatively affect our plan assets. For further information, see Note 23 “Retirement Benefits” to our consolidated financial statements included elsewhere in this annual report.

Our business relies on our information technology systems, and their failure could harm our relationships with customers or adversely affect our provision of services to customers.

In all aspects of our business, we use information technology systems to deliver services to and execute transactions on behalf of our customers as well as for back-office operations. We therefore depend on the capacity and reliability of the electronic and information technology systems supporting our operations. We may encounter service disruptions in the future, owing to failures of these information technology systems. Our information technology systems are subject to damage or incapacitation as a result of quality problems, human errors, natural disasters, power losses, sabotage, computer viruses, acts of terrorism, cyber attacks and similar events. While we have taken steps to protect information technology systems from those risks, including by establishing data recovery capability and functionality, these measures may not be sufficient. In addition, we may not be prepared to address all contingencies that could arise in the event of a major disruption of services. The failure to address such contingencies could harm our relationships with customers or adversely affect our provision of services to customers.

We handle personal information obtained from our individual and corporate customers in relation to our banking, securities, consumer lending, credit card and other businesses. The systems we have implemented to protect the confidentiality of personal information, including those designed to meet the strict requirements of the Act on the Protection of Personal Information, may not be effective in preventing disclosure of personal information by unauthorized access from a third party. Leakage of personal information could expose us to demands for compensation or lawsuits for ensuing economic losses or emotional distress, administrative actions or sanctions, additional expenses associated with making necessary changes to our systems and reputational harm. As a result, our business, financial condition and results of operations could be materially and adversely affected.

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Our risk management policies and procedures may not adequately address unidentified or unanticipated risks.

We are exposed to a variety of operational, legal and regulatory risks throughout our organization. Management of these risks requires, among other things, policies and procedures to properly record and verify large numbers of transactions and events. However, these policies and procedures may not be fully effective or sufficient. We have devoted significant resources to strengthening our risk management policies and procedures and expect to continue doing so in the future. Nevertheless, particularly in light of the continuing evolution of our operations and expansion into new areas, our policies and procedures designed to identify, monitor and manage risks may not be fully effective. Some of our methods of managing risks are based upon our use of observed historical market behavior and thus may not accurately predict future risks. Violations of laws including the Japanese antitrust and fair trade laws by us or by the Bank may result in administrative sanctions. Furthermore, investigations, administrative actions or litigation could commence in relation to violations, which may involve costs and may result in deterioration of our reputation.

Fraud, misconduct or other unlawful behavior by directors, officers and employees or third parties could subject us to losses and regulatory sanctions.

We are exposed to potential losses resulting from fraud, misconduct and other unlawful behavior by directors, officers and employees. Directors, officers and employees may bind us to transactions that exceed authorized limits or present unacceptable risks, hide from us and from our customers unauthorized activities, improperly use confidential information or otherwise abuse customer confidences. Third parties may engage in fraudulent activities, including fraudulent use of bank accounts or the use of false identities to open accounts for money laundering, tax evasion or other illegal purposes. Third parties could also use stolen or forged ATM cards or engage in credit card fraud, and we may be required to indemnify victims of such fraud for related losses. In the broad range of businesses in which we engage, fraud, misconduct and other unlawful behavior are difficult to prevent or detect. In addition, with or without actual fraud, misconduct and other unlawful behavior by directors, officers and employees, investigations, administrative actions or litigation could commence in relation to them. Furthermore, we may not be able to recover the losses caused by these activities, including possible deterioration of our reputation.

Transactions involving Iran and other countries designated by the U.S. Department of State as state sponsors of terrorism or targets that are subject to other U.S. economic sanctions may lead some potential customers and investors to avoid doing business with us or investing in our securities or may limit our business operations.

U.S. law generally prohibits or substantially restricts U.S. persons from doing business with countries designated by the U.S. Department of State as state sponsors of terrorism (“Designated Countries”), which currently are Iran, Sudan and Syria. Under U.S. law, there are similar prohibitions or restrictions on countries, a region and persons that are the subject of other U.S. economic sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) or other agencies (collectively with the Designated Countries, the “Restricted Targets”). We maintain a Group-wide policy designed to ensure compliance with applicable U.S. laws and regulations. This policy, which covers the Bank and our banking subsidiaries that provide financial services globally, prohibits the new extension of credit to Iranian entities. Our non-U.S. offices engage in transactions relating to the Restricted Targets on a limited basis and in compliance with applicable laws and regulations. These activities include remittance of Japanese yen with respect to our customers’ export or import transactions, maintenance of correspondent banking accounts with Iranian banks, including the Central Bank of Iran, and the payment of fees in Japanese yen to certain Iranian banks in connection with performance bonds issued in the past by the Bank through these Iranian banks related to our customers’ projects in Iran. The performance bonds expired and have not been renewed, but the Bank continues to be obligated to pay certain fees to the Iranian banks. In addition, we maintain a representative office in Iran that mainly performs an information-collecting function.

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We do not believe that our operations relating to the Restricted Targets materially affect our business, financial condition or results of operations. A limited number of the Bank’s potential violations of U.S. economic sanctions were identified and voluntarily disclosed to OFAC. These transactions resulted from inadvertent operational errors or the lack of familiarity of some personnel of the Bank with the requirements of the relevant regulations in the past, or from the inherent limitation on information about underlying transactions that can be obtained in the course of normal banking operations. Since the discovery of these potential violations we have further strengthened our Group-wide OFAC compliance program in an effort to prevent the recurrence of such potential violations. We settled some of the voluntarily disclosed potential violations with OFAC while others remain unsettled. However, in light of the inadvertent nature of such potential violations and the degree to which our strengthened OFAC compliance program aims to mitigate the risk of potential violations, we do not believe that our settlement with OFAC, or any possible penalties that OFAC may impose with respect to the other potential violations that remain unsettled, will have a material impact on our reputation, financial condition or results of operations, or on the prices of our securities.

We are aware of initiatives by U.S. states and U.S. institutional investors, such as pension funds, to adopt laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities engaged in certain business with Iran and other Designated Countries. It is possible that such laws and initiatives may result in our inability to enter into transactions with those entities that are subject to such prohibitions or to retain or acquire such entities as customers or investors in our securities.

In recent years, the U.S. government has implemented a number of sanctions targeting non-U.S. companies that engage in certain Iran-related transactions. The Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (“CISADA”) may lead to the imposition of sanctions against non-U.S. financial institutions, such as us, if they are determined by the Secretary of the Treasury to have facilitated “significant transactions” or provided “significant financial services” for certain Iran-linked individuals or entities, or the Iranian Revolutionary Guard Corps. In addition, the National Defense Authorization Act for Fiscal Year 2012 (“2012 NDAA”), Executive Order 13622, the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”), the Iran Freedom and Counter-Proliferation Act of 2012 (“IFCA”) and Executive Order 13645 broadened the range of sanctionable Iran-related transactions. For a description of the laws and Executive Orders mentioned above, as well as the status of Japan’s exception under the 2012 NDAA (“NDAA Exception”) and certain U.S. secondary sanctions relief pursuant to the November 24, 2013 Joint Plan of Action (“JPOA”) between the permanent members of the United Nations Security Council, plus Germany (“P5+1”) and Iran, see “Item 4.B. Business Overview—Regulations in the United States—Laws Prohibiting Money Laundering and Terrorist Financing.”

In addition, the U.S. government has enacted a series of Ukraine-related sanctions, including those under the Ukraine-Related Sanctions Regulations, the Ukraine Freedom Support Act of 2014 and “sectoral” sanctions on the financial, energy and defense sectors of the Russian economy.

The laws and Executive Orders referenced above or similar legislative or regulatory developments may further limit our business operations. If we were determined to have engaged in activities targeted by certain U.S. statutes or Executive Orders or regulations, we could lose our ability to open or maintain correspondent or payable-through accounts with U.S. financial institutions, among other potential sanctions. In addition, depending on sociopolitical developments, even though we ensure compliance with applicable laws and regulations, our reputation may suffer due to our association with the Restricted Targets. The above circumstances could have a significant adverse effect on our business or the prices of our securities.

Our business could be adversely affected by litigation and regulatory proceedings globally.

We conduct business in many locations in and outside of Japan. We face the risk of litigation and regulatory proceedings in connection with our operations. For example, if we engage in activities targeted by CISADA, the 2012 NDAA, or other related U.S. statutes or Executive Orders, this could result in the imposition of sanctions

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by the U.S. government against us. Lawsuits and regulatory actions may result in sanctions of very large indeterminate amounts or limit our operations, and costs to defend either could be substantial. Moreover, the Bank and one of its subsidiaries contribute to financial benchmarks such as the Tokyo Interbank Offered Rate (“TIBOR”) and the London Interbank Offered Rate (“LIBOR”) for certain specific currencies. These benchmarks are widely referenced in jurisdictions in which we operate and do not operate. We face or may face some investigations, litigation and regulatory proceedings, and an adverse regulatory decision, judgment or ruling, including in jurisdictions we do not operate in, could have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Our Industry

Our liquidity could be adversely affected by actual or perceived weaknesses in our businesses and by factors we cannot control, such as a general decline in the level of business activity in the financial services sector.

We need liquidity to maintain our lending activities, meet deposit withdrawals, pay our operating expenses and pay interest on and principal of debt and dividends on capital stock. Adverse market and economic conditions in the domestic and global economies may limit or adversely affect our access to liquidity required to operate our business. If our counterparties or the markets are reluctant to finance our operations due to factors including actual or perceived weaknesses in our businesses as a result of large losses, changes in our credit ratings, or a general decline in the level of business activity in the financial services sector, we may be unable to meet our payment obligations when they become due or only be able to meet them with funding obtained on unfavorable terms. Circumstances unrelated to our businesses and outside of our control, such as, but not limited to, adverse economic conditions, disruptions in the financial markets or negative developments concerning other financial institutions perceived to be comparable to us, may also limit or adversely affect our ability to replace maturing liabilities in a timely manner. Without sufficient liquidity, we will be forced to curtail our operations, which could adversely affect our business, results of operations and financial condition.

We may incur losses as a result of financial difficulties of counterparties and other financial institutions.

We regularly execute transactions with counterparties in the financial services industry. Many of these transactions expose us to credit risk in the event of deterioration of creditworthiness of a counterparty or client. With respect to secured transactions, our credit risk may be exacerbated when the collateral cannot be foreclosed on or is liquidated at prices not sufficient to recover the full amount of the loan or other exposures due to us. Losses from our investments in and loans to other financial institutions could materially and adversely affect our business, financial condition and results of operations. We may also be requested to participate in providing assistance to distressed financial institutions that are not our subsidiaries. In addition, if the funds collected by the Deposit Insurance Corporation of Japan (“DIC”) are insufficient to insure the deposits of failed Japanese banks, the insurance premiums that we pay to the DIC will likely be increased, which could adversely affect our business and results of operations.

Adverse regulatory developments or changes in government policies could have a negative impact on our results of operations.

Our businesses are subject to extensive regulation and associated regulatory risks, including the effects of changes in the laws, regulations, policies, voluntary codes of practice and interpretations in Japan and the other jurisdictions in which we operate. Those changes and their effects on us are unpredictable and beyond our control.

Changes in the regulatory environment may adversely affect our financial condition and results of operations. In particular, the financial crisis has led to calls for significant financial reform measures, and various governments are at different stages of enacting legislation that will affect financial institutions.

In response to the financial and economic turmoil, regulatory authorities have been reviewing and revising capital adequacy guidelines, particularly in relation to quality of capital and accounting standards; such revisions

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could adversely affect our capital ratios. In December 2010, the BCBS published the Basel III rules text, setting out certain changes to capital requirements which include raising the quality of banks’ capital bases, enhancing risk coverage, inhibiting leverage, reducing pro-cyclicality and introducing liquidity regulation. The changes that the FSA made to its capital adequacy guidelines in response to Basel III, have been generally applied from March 31, 2013.

The FSA’s Financial Inspection Manual for financial institutions and related guidelines are revised or amended from time to time. Our implementation of any such changes could result in an increase in our administrative expenses, which could have an adverse effect on our results of operations and financial condition.

The FSA and regulatory authorities in the United States and other jurisdictions, along with the United Nations, have in recent years made sanctions as a means to promote the prevention of money laundering and terrorism financing a focus of governmental policy relating to financial institutions. Any regulatory action or change in regulatory focus, whether as a result of inspections or regulatory developments, may negatively affect our banking operations and may require expensive remediation.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which was enacted in July 2010, provides a broad framework for significant regulatory changes across most areas of U.S. financial regulations. The Dodd-Frank Act addresses, among other issues, systemic risk oversight, bank capital standards, the resolution of failing systemically significant financial institutions, over-the-counter (“OTC”) derivatives, the ability of banking entities to engage in proprietary trading activities and invest in hedge funds and private equity funds, consumer and investor protection, and securitization. Implementation of the Dodd-Frank Act is taking place through detailed rulemaking over multiple years by various regulators. The final details, impact and timing of some of the rules, particularly of rules relating to derivatives, remain uncertain, and they could result in additional costs, or restrict or otherwise affect the way we conduct our business.

These and similar, or any other kind of significant regulatory developments could adversely affect our capital ratios and results of operations. For further details, see “Item 4.B. Business Overview—Regulations in Japan, Regulations in the United States, and Regulations in Other Jurisdictions.” Since those changes in regulation or fiscal or other policies and their effects are unpredictable and beyond our control, we may not be able to comply with those changes at all times, despite our efforts. Any such failures could result in administrative or judicial proceedings against us, including suspension of our business and financial penalties, which could materially adversely affect our business, reputation, results of operations and financial condition.

We operate in the highly competitive financial services industry.

Deregulation of the financial system, consolidation among financial institutions, diversification within the financial services industry, and the expanded presence of foreign financial institutions and investors have made the Japanese financial services market highly competitive. Moreover, competition in overseas markets has intensified due to global consolidation, convergence and alliances among financial institutions. We compete with various types of financial services companies, including:

• banking groups, including Japan’s other major banking groups;

• government-controlled and government-affiliated entities;

• regional banking institutions;

• major investment banks; and

• non-bank financial institutions.

Government actions, such as those taken to stabilize the market and to alter the regulatory framework, may affect our competitive position. In response to the recent financial crisis, the Government of Japan has taken and may adopt policies, including providing fiscal stimulus or extending credit support to other Japanese financial

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institutions, which adversely affect our competitive position. Under the Postal Privatization Act, the Japan Post Bank Co., Ltd. (“Japan Post Bank”), one of the world’s largest deposit-taking financial institutions, is allowed to expand its business with prior approval of the government. Increased competition in Japan may put downward pressure on prices for our financial services, cause us to lose market share or require us to incur additional expenses in order to remain competitive. Internationally, various forms of financial support provided by foreign governments to foreign banks and other financial institutions during the current financial crisis may reduce the cost of capital to those institutions and otherwise give them competitive advantages. There can be no assurance that we will be able to respond effectively to current or future competition.

Damage to our reputation may have an adverse effect on our business and results of operations.

Maintaining our reputation is vital to our ability to attract and maintain customers, investors and employees. Our reputation could be damaged through a variety of circumstances, including, among others, fraud or other misconduct or unlawful behavior by directors, officers or employees, systems failures, compliance failures, investigations, adverse litigation judgments or regulatory decisions, or unfavorable outcomes of governmental inspections. Negative media coverage of Japan’s financial services industry or us, even if inaccurate or not applicable to us, may have a materially adverse effect on our brand image and may undermine depositor confidence, thereby affecting our businesses and results of operations. For example, actual or rumored investigations of us or our directors, officers or employees, or actual or rumored litigation or regulatory proceedings, or media coverage of the same, may have a material adverse effect on our reputation and could negatively affect the prices of our securities. Actions by the financial services industry generally or by certain members in the industry can also adversely affect customers’ confidence on the financial services industry. Such reputational harm could also lead to a decreased customer base, reduced revenues and higher operating costs.

Other Risks

Our failure to establish, maintain and apply adequate internal controls over financial reporting could negatively impact investor confidence in the reliability of our financial statements.

In order to operate as a global financial institution, it is essential for us to have effective internal controls, corporate compliance functions, and accounting systems to manage our assets and operations.

As a New York Stock Exchange (“NYSE”)-listed company and a registrant with the U.S. Securities and Exchange Commission (“SEC”) under section 404 of the U.S. Sarbanes-Oxley Act of 2002, our management is required to assess the effectiveness of our internal control over financial reporting and disclose whether such internal controls are effective. Our independent registered public accounting firm has to conduct an audit to evaluate and then render an opinion on the effectiveness of our internal control over financial reporting. The Financial Instruments and Exchange Act of Japan (“FIEA”) also requires companies listed on a Japanese stock exchange, such as us, to file, together with their annual securities reports required by the FIEA, audited internal control reports assessing the effectiveness of their internal controls over financial reporting.

We have established internal controls over financial reporting, as well as rules for evaluating those controls, in order to provide reasonable assurance of the reliability of our financial reporting and the preparation of financial statements. However, these controls may not prevent or detect errors. Any evaluation of effectiveness to future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. To the extent any issues are identified through the foregoing processes, there can be no assurance that we will be able to resolve them in a timely manner or at all. If this occurs, our reputation may be damaged, which could lead to a decline in investor confidence in us.

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Our business operations are exposed to risks of natural disasters, terrorism, pandemics and other calamities.

Our business operations are subject to the risks of natural disasters, terrorism, pandemics, blackouts, geopolitical incidents and other calamities, any of which could impair our business operations. Despite our preparation of operation manuals and other backup measures and procedures, such calamities could cause us to suspend operations and could adversely affect our businesses, financial condition and results of operations. Massive natural disasters such as the Great East Japan Earthquake and any subsequent collateral events, may adversely affect economic conditions in general, the financial conditions of our corporate and individual customers and stock market prices, or cause other negative effects, any or all of which could materially and adversely affect our financial condition and results of operations owing to, for example, an associated increase in the amount of credit-related costs or an increase in losses related to our holdings of securities.

Sales of our shares by us or the Bank may have an adverse effect on the market price of our shares and may dilute existing shareholders.

We may issue shares from the unissued portion of our authorized share capital and sell shares held as treasury stock, generally without a shareholder vote. In addition, the Bank may sell any of our shares that it holds. Sales of shares in the future may be at prices below prevailing market prices and may be dilutive.

It may not be possible for investors to effect service of process within the United States upon us or our directors, corporate auditors or senior management, or to enforce against us or those persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the U.S. federal or state securities laws.

We are a joint stock corporation incorporated under the laws of Japan. Almost all of our directors, corporate auditors and senior management reside outside the United States. Many of our assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to affect service of process within the United States upon us or these persons or to enforce, against us or these persons, judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal or state securities laws. We believe that there is doubt as to the enforceability in Japan, in original actions or in actions to enforce judgments of U.S. courts, of claims predicated solely upon the U.S. federal or state securities laws mainly because the Civil Execution Act of Japan requires Japanese courts to deny requests for the enforcement of judgments of foreign courts if foreign judgments fail to satisfy the requirements prescribed by the Civil Execution Act, including requirements that:

• the jurisdiction of the foreign court be recognized under laws, regulations, treaties or conventions;

• proper service of process be made on relevant defendants, or relevant defendants be given appropriate protection if such service is not received;

• the judgment and proceedings of the foreign court not be repugnant to public policy as applied in Japan; and

• there exist reciprocity as to the recognition by a court of the relevant foreign jurisdiction of a final judgment of a Japanese court.

Judgments obtained in U.S. courts, predicated upon the civil liability provisions of the U.S. federal or state securities laws, may not satisfy these requirements.

As a holder of our American Depositary Shares (“ADSs”), you have fewer rights than a shareholder of record in our shareholder register because you must act through the depositary to exercise these rights.

The rights of our shareholders under Japanese law to take actions such as voting their shares, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records and

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exercising appraisal rights are available only to our shareholders of record. Because the depositary, through its custodian, is the record holder of the shares underlying the ADSs, only the depositary can exercise shareholder rights relating to the deposited shares. ADS holders will not be able to directly bring a derivative action, examine our accounting books and records or exercise appraisal rights.

Pursuant to the deposit agreement among us, the depositary and the holders and beneficial owners of ADSs, the depositary will endeavor to exercise voting and other rights associated with shares underlying ADSs in accordance with instructions given by ADS holders, and the depositary will also pay to ADS holders dividends and distributions collected from us. However, the depositary is permitted under the deposit agreement to exercise reasonable discretion in carrying out those instructions or in making distributions, and is not liable for failure to carry out instructions or make distributions as long as it acts in good faith. Therefore, ADS holders may not be able to exercise voting or other rights associated with the shares underlying ADSs in the manner that they intend, or may lose some or all of the value of dividends or distributions collected from us. Moreover, the deposit agreement may be amended or terminated by us and the depositary without any reason, or consent from or notice to ADS holders. As a result, ADS holders may not be able to exercise rights in connection with the deposited shares exercised in the way they wish or at all.

ADS holders are dependent on the depositary for certain communications from us. We send to the depositary most of our communications to ADS holders in Japanese. ADS holders may not receive all of our communications in the same manner as or on an equal basis with shareholders of record in our shareholder register.

Item 4. Information on the Company

4.A.    HISTORY AND DEVELOPMENT OF THE COMPANY

Legal and Commercial Name

Our legal name is Sumitomo Mitsui Financial Group, Inc. Our commercial name is Sumitomo Mitsui Financial Group.

Date of Incorporation

We were established in December 2002.

Domicile and Legal Form

We are a joint stock corporation incorporated with limited liability under the laws of Japan. Our address is: Sumitomo Mitsui Financial Group, Inc., 1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005, Japan. Our telephone number is: +81-3-3282-8111.

History and Development

We were established in December 2002 as a holding company for the Group through a statutory share transfer (kabushiki-iten) of all of the outstanding equity securities of the former SMBC in exchange for our newly issued securities. Upon our formation and completion of the statutory share transfer, the former SMBC became our direct, wholly owned subsidiary. The Bank was established in March 2003 through the merger of the former SMBC with Wakashio Bank, which was established in 1996 as a subsidiary of Sakura Bank. The former SMBC was established in April 2001 through the merger of Sumitomo Bank and Sakura Bank, which was established through the merger of Taiyo Kobe Bank and Mitsui Bank in 1990. Mitsui and Sumitomo started their banking businesses in 1876 and 1895, respectively. The origins of both banking businesses can be traced back to the seventeenth century.

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Information Concerning the Principal Capital Expenditures and Divestitures

In June 2012, the Bank, Sumitomo Mitsui Finance and Leasing Company, Limited (“SMFL”) and Sumitomo Corporation, a non-affiliate, acquired the aircraft leasing business of The Royal Bank of Scotland Group plc, and commenced its operation as SMBC Aviation Capital. The business which we acquired for a total price of ¥93 billion, comprises companies including SMBC Aviation Capital Limited (former RBS Aerospace Limited), SMBC Aviation Capital (UK) Limited (former RBS Aerospace (UK) Limited), and SMBC Aviation Capital Australia Leasing Pty Limited (former RBS Australia Leasing Pty Limited).

In June 2012, the Bank transferred all of its shares of ORIX Credit Corporation (“ORIX Credit”), a consumer finance provider which became a subsidiary of the Bank in July 2009, to ORIX Corporation (“ORIX”). As a result, ORIX Credit is no longer our subsidiary.

Public Takeover Offers

Not applicable.

4.B.    BUSINESS OVERVIEW

Overview

We are a holding company that directly owns 100% of the issued and outstanding shares of the Bank, one of the largest commercial banks in Japan. We are one of the three largest banking groups in Japan with an established presence across all of the consumer and corporate banking sectors. Our subsidiaries in our Commercial Banking segment include, in addition to the Bank, Kansai Urban Banking Corporation (“KUBC”), THE MINATO BANK, LTD. (“The Minato Bank”), Sumitomo Mitsui Banking Corporation Europe Limited (“SMBC Europe”), and Sumitomo Mitsui Banking Corporation (China) Limited (“SMBC (China)”). Our subsidiaries also include SMFL in our Leasing segment; SMBC Nikko Securities Inc. (“SMBC Nikko Securities”) and SMBC Friend Securities Co., Ltd. (“SMBC Friend Securities”) in our Securities segment; and Sumitomo Mitsui Card Company, Limited (“Sumitomo Mitsui Card”), Cedyna and SMBC Consumer Finance in our Consumer Finance segment. See “Item 4.C. Organizational Structure.”

Management Philosophy

Our Group-wide management philosophy is as follows:

• 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; and

• we create a work environment that encourages and rewards diligent and highly-motivated employees.

In addition to our Group-wide management philosophy, we have also established a code of conduct. Our code of conduct is designed to be a guideline for the conduct of our directors, officers and employees in the realization of our Group-wide management philosophy in all areas. Our code of conduct is as follows:

• to strive to increase shareholder value whilst also maintaining healthy relationships with customers, employees and other stakeholders. To give utmost consideration to the trust which people have in the Bank, to abide by all laws and regulations, to maintain a high ethical standard, and to act fairly and sincerely;

• to continue improving our knowledge and capability and, at the same time, to raise our productivity in order to provide superior financial services at competitive prices;

• to establish a top brand global bank by understanding the needs of each customer and by providing valuable services which meet those needs;

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• to be selective and focused in the implementation of our business strategy, to define and develop the competitive advantages which we have over our competitors and, by allocating managerial resources strategically to those businesses, to become a top player in our selected markets;

• to be creative, proactive and courageous in order to be in a leading position in all business areas and always a step ahead of our competitors;

• to build a strong organization based on market practice and sound principles whilst reflecting our diverse values. To delegate internal authority under an efficient and effective management system which facilitates speedy decision-making and execution; and

• to support the growth of our business by setting challenging targets for our staff and employing results-based evaluation and compensation systems.

Environment

We recognize preservation of the environment as one of our most important management objectives and strive to achieve harmony with the natural environment in our corporate activities.

Basic Philosophy Regarding the Group’s Environmental Activities

Recognizing the importance of realizing a sustainable society as one of our most important tasks, we make continuous efforts to harmonize environmental preservation and pollution control with corporate activities, in order to support the economy and contribute to the betterment of society as a whole.

We and our principal Group companies have obtained ISO 14001 certification, the international standard for environmental management systems. Every year we set environmental objectives which we systematically pursue through environmental activities based on a PDCA (Plan, Do, Check and Act) cycle. The Bank and some of our other Group companies adopted “Principles for Financial Action towards a Sustainable Society” in October 2011, which have been set forth for the purposes of making environmental financing widely-known and improving the quality of environmental financing.

The Bank made its head office “carbon neutral” and requires land pledged as collateral to undergo soil contamination and asbestos risk assessment. In addition, we also apply the “Equator Principles,” a set of guidelines for financial institutions to assess and manage social and environmental impacts related to the financing of large-scale development projects, when we finance such projects.

Description of Operations and Principal Activities

Commercial Banking

We offer commercial banking services to a wide range of customers including large corporations, mid-sized companies, small-sized companies, individuals, governments and governmental entities mainly through the Bank. The Bank has solid franchises in both corporate and consumer banking in Japan. The Bank has long-standing and close business relationships with many companies listed on the First Section of the Tokyo Stock Exchange and long historical relationships with the so-called Sumitomo Group and Mitsui Group companies.

The Bank provides an extensive range of corporate and consumer banking services in Japan and wholesale banking services overseas. In Japan, the Bank accepts deposits from, makes loans to, extends guarantees to and provides other products and services to corporations, individuals, governments and governmental entities. The Bank offers financing solutions through loan syndication, structured finance and project finance to large corporate customers in the domestic and overseas markets, as well as a variety of financing options to domestic mid-sized companies, small-sized companies and individuals. The Bank also underwrites and deals in bonds issued by or guaranteed by the Government of Japan and local government authorities, and acts in various

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administrative and advisory capacities for select types of corporate and government bonds. Internationally, the Bank operates through a network of branches, representative offices, subsidiaries and affiliates to provide loan syndication, project finance and cash management services and participate in international securities markets.

Until March 31, 2014, the Bank conducted its primary banking business through five business units: the Consumer Banking Unit, the Middle Market Banking Unit, the Corporate Banking Unit, the International Banking Unit and the Treasury Unit. On April 1, 2014, the Bank restructured its domestic business operations and reorganized its domestic business units, in order to further enhance its capability to meet the needs of our clients and deliver higher value-added products and services. Under the new structure, the Consumer Banking Unit, the Middle Market Banking Unit and the Corporate Banking Unit were reorganized into two business units: the Wholesale Banking Unit and the Retail Banking Unit. Accordingly, the Bank operates its primary banking business through four business units. In addition to the four business units, the Bank also has several cross-sectional units and divisions including the Investment Banking Unit, the Corporate Advisory Division, the Private Advisory Division and the Transaction Business Division. Further, the Bank has a Corporate Staff Unit, a Corporate Services Unit, a Compliance Unit, a Risk Management Unit and an Internal Audit Unit.

The Bank’s Wholesale Banking Unit

The Bank’s Wholesale Banking Unit aims to offer business solutions for the increasingly complex and diverse management issues that are faced by large Japanese corporations, including listed companies and mid-sized companies, and, together with certain of our Group companies, provides a wide range of financial products and services targeting those corporations and companies, through 179 sales channels of the Bank at March 31, 2015. The financial products and services that this business unit provides include deposits, loans including syndicated loans, commitment lines, structured finance and nonrecourse loans, settlement services, cash management, leasing, factoring, management information systems consulting, collection and investment banking services. This business unit also provides the following products and services:

• Services for Globalizing Corporations. In light of the recent overseas expansion trend, the Bank focuses on offering products and services whereby the Bank assists those customers entering new markets, especially in China and other Asian countries, and accommodates an increase in their international trade operations.

• Loan Products and Services to Promote Socially Responsible Activities. The Bank provides a variety of loan products and services designed for corporate clients engaging in socially responsible activities. These activities include environmentally friendly activities, improvement of eating habits, development of agricultural and fishery industries, and development of risk management systems for emergency situations. The Bank evaluates their socially responsible activities and offers loans with certain conditions incorporating the results of its evaluation. Furthermore, in connection with these loans, the Bank provides advice in relation to the client’s socially responsible initiatives.

• Services to Promote B-to-B Transactions. The Bank, with its subsidiaries and affiliates, provides various internet settlement services to meet its customers’ needs. The Bank has promoted these services to stimulate greater demand for its solutions business. Using these services, corporate customers are able to transfer money more easily and effectively, and also utilize foreign exchange services to transfer funds to and from their overseas counterparts in foreign currencies.

The Bank’s Retail Banking Unit

The Bank’s Retail Banking Unit provides financial services to both consumers residing in Japan and domestic small-sized companies.

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For consumers, this business unit offers a wide range of financial services including personal bank accounts, deposit products such as ordinary deposits, time deposits and foreign currency deposits, and the following products and services through various channels:

• Housing Loans. Housing loans, which are principally secured by collateral or supported by guarantees, are one of the primary products offered by this business unit. The Bank provides housing loans with a variety of terms and interest rates, including 2- to 35-year term, fixed-rate loans, to meet diversified customer needs. For instance, the Bank offers a housing loan combined with an insurance policy that covers the repayment of the outstanding loan balance in the event the borrower is diagnosed with certain diseases.

• Investment Trust. The Bank, as a broker, provides a variety of investment trust products with varying risk-return profiles that are developed and managed by experienced asset management companies within Japan and overseas. Also, the Bank, together with its subsidiary SMBC Nikko Securities, offers discretionary investment management services.

• Insurance Products. The Bank, as an agent, offers pension-type insurance, whereby customers who make all premium payments are able to receive annuity payments when they reach a certain age. The Bank, as an agent, also sells a wide range of insurance products, including medical insurance, juvenile insurance, home fire insurance, single-premium whole life insurance and level-premium life insurance.

• Consumer Finance Services. The Bank offers a variety of consumer loan products such as unsecured card loan products to its individual customers.

In addition, the Bank is promoting the collaboration with its subsidiary SMBC Nikko Securities to meet customers’ diverse needs for asset management by leveraging their respective strengths of a broad client base and a high advisory capability.

The operations are mainly conducted through a large and well developed branch network. The Bank had a domestic network consisting of 441 branch offices at March 31, 2015, most of which were located in the Tokyo and Osaka regions. Some branches provide financial consulting services for asset management and housing loans during extended hours, including weekday evenings, weekends and national holidays, for the convenience of individual customers.

The Bank also operates an extensive network of ATMs in Japan. At March 31, 2015, the Bank offers its customers’ access to 51,055 ATMs, some of which are the Bank’s ATMs and the majority of which are ATMs made available through arrangements with other ATM providers such as convenience store chains.

This business unit also offers internet banking services for consumers. At March 31, 2015, the Bank’s internet banking services had approximately 14 million registered users. The users are able to transfer funds, perform balance inquiries, make time deposits and foreign currency deposits, and buy and sell investment trusts over the internet, as well as over the mobile phone or the traditional telephone.

For small-sized companies, this business unit provides a wide array of financial products and services to comprehensively address in the same place business owners’ needs as both corporate managers and individuals such as business and asset succession.

The Bank also offers the wealth management services to its customers in collaboration with SMBC Nikko Securities and Barclays PLC (“Barclays”). See “—Other Major Group Companies and Alliances—Alliance with Barclays PLC.”

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The Bank’s International Banking Unit

The Bank’s International Banking Unit mainly supports companies, financial institutions, sovereign/quasi-sovereign entities outside Japan, and multinational companies operating in Japan. 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 and global cash management services.

At March 31, 2015, the Bank’s international network consisted of 15 branches, 17 sub-branches and 7 representative offices and the Bank seeks to meet customers’ needs globally, together with the network of the Bank’s foreign banking subsidiaries such as SMBC Europe with 7 offices and SMBC (China) with 15 offices, and foreign banking associates including PT Bank Tabungan Pensiunan Nasional Tbk, the Bank of East Asia, Limited and Vietnam Export Import Commercial Joint Stock Bank.

Based on our strategy of expanding our businesses globally, the Bank has been promoting strategic alliances to enhance products and services with leading financial institutions such as Barclays, Kotak Mahindra Bank Limited, and ACLEDA Bank Plc. Additionally, in order to further expand our business in the U.S., we and the Bank obtained financial holding company status under the U.S. Bank Holding Company Act of 1956, as amended (“Bank Holding Company Act”), on May 7, 2013, which allows the expansion of the scope of services to provide in the U.S., including underwriting and trading of securities and providing other investment banking services.

The Bank’s Treasury Unit

The Bank’s Treasury Unit operates in the domestic and international money, foreign exchange, securities and derivatives markets to serve customer needs and the Bank’s own asset and liability management requirements.

To further expand the Bank’s customer base, this business unit also seeks to provide specialized solutions and enhance customer service capabilities in market transactions through the following activities:

• providing a variety of products from traditional money and foreign exchange transactions to derivative transactions; and

• developing channels such as an internet banking site providing foreign exchange transactions to satisfy a variety of requirements and orders from customers.

Others

The Bank also engages in the following business activities through its business units:

• Payment Services. The Bank handles money remittances for municipalities, public and private corporations and individuals in Japan and overseas. Domestic remittance services are significant in Japan, where checks are rarely used and money remittance is a major means of payment. The Bank also handles the collection for its customers of promissory notes, bills of exchange and checks.

• Foreign Exchange. The Bank engages in a variety of foreign exchange transactions, including foreign currency exchange, overseas transfers and trade finance for export and import activities.

The following unit or divisions operate across the business units discussed above and in cooperation with our Group companies, including SMBC Nikko Securities.

• Investment Banking Unit. The Investment Banking Unit provides a broad range of sophisticated financial products and services, as follows:

• Customized Financial Services and Financing Solutions. The Bank provides a wide range of innovative financial services and financing solutions to its corporate clients, including loan

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syndication, structured finance, project finance, acquisition financing such as LBO and MBO financing, non-recourse real estate finance, securitization, derivatives and M&A advisory.

• Securities Intermediary Services for Corporate Clients. The Bank provides corporate clients with securities intermediary services, and offers structured bonds, subordinated bonds and other products to corporate clients in cooperation with SMBC Nikko Securities.

• Corporate Bond Trust Services. The Bank serves as a trustee or co-trustee of corporate mortgage bonds. The Bank also serves as a commissioned company for bondholders and as a fiscal and paying agent for unsecured bonds that are issued and publicly offered by domestic and foreign customers. In this role, the Bank also advises issuers about market conditions and provides administrative services on behalf of issuers.

• Other Trust Services. The Bank offers other trust services to its customers, including monetary claims trusts for asset securitizations and trusts for structured finance.

• Principal Investments. The Bank, directly or through private equity funds, invests in corporate customers seeking to restructure or reorganize themselves or expand their businesses.

• Solutions Related to Growing Industrial Sectors. The Bank provides a wide range of solutions to corporate customers addressing businesses related to growing industrial sectors, such as environmental, infrastructure, water, new energy, agriculture, health care, and robot industries.

• Corporate Advisory Division. The Corporate Advisory Division complements our service lineup for both listed and non-listed companies, providing financial solutions for the increasingly sophisticated and diverse management issues faced by corporate clients. This division provides a centralized information platform that maintains the Bank’s accumulated information and knowledge concerning a wide range of industries. Leveraging this centralized information platform, this division provides the Bank’s customers with proposals for strategic initiatives to help enhance their corporate value. This division establishes a separate team for each project and works in cooperation with the Bank’s other departments and our Group companies, including SMFL and SMBC Nikko Securities. This division aims to offer comprehensive solutions for M&A, strategic investment, business alliances and other management issues.

• Private Advisory Division. The Private Advisory Division addresses areas where the needs of individuals and corporate clients overlap, including private banking, corporate employees business, business succession and asset succession consulting for business owners and high-net-worth individuals.

• Transaction Business Division. The Transaction Business Division complements our transaction and financing services, including cash management, settlement, foreign exchange and supply chain finance for our corporate clients. This division aims to offer a variety of products and services to capture customers’ cash flows and business flows.

In addition to the Bank, our domestic banking subsidiaries include KUBC, The Minato Bank and SMBC Trust Bank Ltd. (“SMBC Trust Bank”). KUBC and The Minato Bank are regional financial institutions based in Kansai area and provide commercial banking services to corporations and individuals. SMBC Trust Bank, which became our wholly owned subsidiary in October 2013, offers extensive trust services tailored to the needs of customers, such as wealth management solutions.

Our domestic banking associate is The Japan Net Bank, Limited (“The Japan Net Bank”), which, as an internet bank, provides internet-based services such as deposits, loans and investment products. The Japan Net Bank, which had been our subsidiary, became our associate in April 2014 due to a decrease in our proportion of voting rights.

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Our foreign banking subsidiaries include SMBC Europe, SMBC (China), Manufacturers Bank, Sumitomo Mitsui Banking Corporation of Canada, Banco Sumitomo Mitsui Brasileiro S.A., JSC Sumitomo Mitsui Rus Bank, PT Bank Sumitomo Mitsui Indonesia and Sumitomo Mitsui Banking Corporation Malaysia Berhad.

Our foreign banking associates include PT Bank Tabungan Pensiunan Nasional Tbk, the Bank of East Asia, Limited, one of the largest commercial banks in Hong Kong, which became our associate in March 2015, and Vietnam Export Import Commercial Joint Stock Bank.

Leasing

Sumitomo Mitsui Finance and Leasing Company, Limited

Sumitomo Mitsui Finance and Leasing Company, Limited (“SMFL”), one of the major leasing companies in Japan, provides a variety of leasing services including equipment lease, operating lease, leveraged lease and aircraft operating lease. In 2007, SMFL was formed as a result of the merger of SMBC Leasing and Sumisho Lease. We have a 60% equity interest in SMFL, while the remaining 40% is held by Sumitomo Corporation, a non-affiliate.

In June 2012, the Bank, SMFL and Sumitomo Corporation acquired the aircraft leasing business of The Royal Bank of Scotland Group plc, and commenced its operation as SMBC Aviation Capital. In March 2013, the integration of the existing aircraft leasing businesses of SMFL and Sumitomo Corporation into SMBC Aviation Capital was completed. We and Sumitomo Corporation intend to further expand and develop the aircraft leasing business in Asia and other emerging markets.

Others

In addition to the above companies, our U.S. subsidiary SMBC Leasing and Finance, Inc. engages in the leasing business. Our associate Sumitomo Mitsui Auto Service Company, Limited engages in the auto leasing business.

Securities

SMBC Nikko Securities Inc.

As one of the major Japanese securities companies, SMBC Nikko Securities Inc. (“SMBC Nikko Securities”), our wholly owned subsidiary, offers a wide range of financial products and investment consultation and administrative services to its individual and corporate customers in Japan. For individual customers, SMBC Nikko Securities provides consulting services to meet diversified asset management needs at 123 branches nationwide at March 31, 2015, and a widely used online trading tool. For corporate customers, it also offers trading capabilities and financial products, debt and equity underwriting, and M&A advisory services, mainly in Japan.

SMBC Nikko Securities, together with its overseas network, SMBC Nikko Securities (Hong Kong) Limited, SMBC Nikko Securities (Singapore) Pte. Ltd., SMBC Nikko Capital Markets Limited and SMBC Nikko Securities America, Inc. (“SMBC Nikko Securities America”), seeks to provide financial services such as brokerage services of Japanese stocks and M&A advisory services to clients on a global basis. To strengthen our cross border M&A and other advisory services to Japanese companies, SMBC Nikko Securities, the Bank and Moelis & Company, a global investment bank headquartered in New York, established a business alliance in March 2011. In February 2012, we invested approximately $93 million in Moelis & Company to enhance the existing business alliance.

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SMBC Friend Securities Co., Ltd.

SMBC Friend Securities Co., Ltd. (“SMBC Friend Securities”), our wholly owned subsidiary, is a full-line securities company focusing on retail business. SMBC Friend Securities has a nationwide network that offers services tailored to the needs of its clients and offers online financial consulting services.

Business Alliance with Citigroup Inc.

In May 2009, we entered into a strategic business alliance with Citigroup Inc. (“Citigroup”) centering on a variety of collaborative activities between SMBC Nikko Securities and Citigroup. As part of this alliance, Citigroup provides us with access to its global corporate and investment banking networks, including sales and trading and M&A services. The long-standing relationship between Citigroup and the former Nikko Cordial Securities Inc. in the origination and distribution of financial products in Japan and globally is being upheld with SMBC Nikko Securities.

Consumer Finance

Sumitomo Mitsui Card Company, Limited

Sumitomo Mitsui Card Company, Limited (“Sumitomo Mitsui Card”) is a leading company in Japan’s credit card industry, having introduced the Visa brand into the Japanese market. Sumitomo Mitsui Card conducts a comprehensive credit card business with a strong brand, and offers a variety of settlement and finance services to meet diverse customer needs.

We, Sumitomo Mitsui Card, the Bank and NTT DoCoMo, Inc. (“NTT DoCoMo”) formed a strategic business and capital alliance in credit payment service. We have a 66% equity interest in Sumitomo Mitsui Card, while the remaining 34% is held by NTT DoCoMo. Pursuant to the alliance, Sumitomo Mitsui Card offers a credit payment service using NTT DoCoMo’s mobile phones equipped with contactless IC chips.

In addition, Sumitomo Mitsui Card issues a variety of affiliated credit cards in cooperation with partners including, but not limited to, railway companies, airline companies, department stores and retailers to satisfy both these partners’ and cardholders’ needs. Sumitomo Mitsui Card also provides services for customers such as travelers and retailers both in Japan and China, in alliance from 2005, with China UnionPay Co., Ltd., a bankcard association in China.

Cedyna Financial Corporation

Cedyna Financial Corporation (“Cedyna”), our wholly owned subsidiary, conducts credit card, installment (such as shopping credit and automobile loan) and solution (such as collection outsourcing and factoring) businesses.

In March 2012, Cedyna made SMBC Finance Service Co., Ltd. (“SMBC Finance Service”) a wholly owned subsidiary. SMBC Finance Service, which had been a subsidiary of the Bank before the reorganization, provides collection outsourcing services and has a strong customer base and internet settlement know-how. In April 2014, Cedyna transferred its own collection outsourcing business to SMBC Finance Service in order to strengthen its competitive edge by taking advantage of scale and promoting streamlining.

SMBC Consumer Finance Co., Ltd.

SMBC Consumer Finance Co., Ltd. (“SMBC Consumer Finance”), which became our wholly owned subsidiary in April 2012 and changed its company name from Promise in July 2012, is a core entity in our consumer lending business. It provides consumer loans, together with its wholly owned subsidiary Mobit Co., LTD., that consist mainly of unsecured loans to individuals, and conducts other business including loan guarantee business. SMBC Consumer Finance guarantees certain consumer loans made by the Bank.

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ORIX Credit Corporation

In July 2009, the Bank acquired a 51% equity interest in ORIX Credit Corporation (“ORIX Credit”) as part of a collaborative initiative with ORIX, and ORIX Credit became a subsidiary of the Bank. ORIX Credit offered a wide range of card loan products, focusing on a card loan with a low interest rate and large credit line. However, in June 2012, the Bank transferred all of its shares of ORIX Credit to ORIX and, as a result, ORIX Credit is no longer our subsidiary.

Others

In addition to the above companies, our subsidiary Sakura Card Co., Ltd., which is scheduled to be merged with Cedyna by April 2016, and our associate Pocket Card Co., Ltd. engage in the credit card business, and our subsidiary SMM Auto Finance, Inc. engages in automobile sale financing.

Other Major Group Companies and Alliances

The Japan Research Institute, Limited

The Japan Research Institute, Limited (“The Japan Research Institute”) is our wholly owned subsidiary that provides financial consultation services on management reform, IT, the planning and development of strategic information systems and outsourcing. It also conducts diverse activities including domestic and international economic research and analysis, policy recommendations and business incubation.

Alliance with Barclays PLC

Barclays PLC (“Barclays”) and the Bank have allied to explore joint business development opportunities, and in April 2010, Barclays, the Bank and SMBC Nikko Securities established a division in SMBC Nikko Securities to provide wealth management services to high-net-worth individuals in Japan. In May 2010, the Bank entered into a business alliance agreement with Absa Bank Limited, a group company of Barclays, regarding collaboration on services to Japanese companies in South Africa and other African countries. We have intensified our management-level communications with Barclays regarding, for example, the effects of strengthened regulation of the global banking industry. The Bank believes these initiatives will yield mutual benefits and will facilitate business expansion for us in targeted growth business areas, both foreign and domestic.

Credit Loss Protection Agreement with Goldman Sachs

To expand its overseas portfolio and revenue, the Bank entered into agreements with Goldman Sachs in 2003 to provide credit protection to Goldman Sachs’ extension of credit to their investment grade clients in exchange for receiving a proportion of the fees and interest income from the borrowers. In connection with the agreements, Goldman Sachs established certain wholly owned subsidiaries (“William Street Entities”) that might make credit commitments and extensions. Goldman Sachs entered into credit loss protection arrangements with the Bank in order to hedge in part the credit risk to its investment in the William Street Entities. The Bank, through its Cayman Islands branch, would issue letters of credit in exchange for fees equal to a portion of the fees and interest to be paid by the borrowers to the William Street Entities. The first letter of credit (“FLC”), was issued in 2003 in a maximum available amount of $1 billion, and is available over a 20-year period, subject to early termination or extension. Also, from time to time over a 20-year period, subject to early termination or extension and other conditions, upon the request of Goldman Sachs, the Bank has issued letters of credit and may issue one or more additional letters of credit (each a second letter of credit (“SLC Series”) exposing the Bank to risk rated BBB/Baa2 or higher in an aggregate maximum available amount of $1.125 billion). Goldman Sachs may draw on the letters of credit in the event that Goldman Sachs realizes certain losses (“Specified Losses”), with respect to loan commitments or loans extended thereunder that Goldman Sachs has entered into with specified borrowers approved by the Bank and Goldman Sachs.

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Under the FLC, Goldman Sachs is entitled to draw from time to time amounts equal to approximately 95% of Specified Losses, up to an aggregate stated amount of $1 billion. Under the SLC Series, Goldman Sachs is entitled, subject to certain conditions, to draw from time to time amounts equal to approximately 70% of Specified Losses above specified loss thresholds, up to an aggregate stated amount of $1.125 billion. Goldman Sachs has made a small number of drawdowns under the FLC in accordance with its terms.

In connection with these credit arrangements, the Bank pays Goldman Sachs an administration fee based on the aggregate amount of commitments covered by the FLC.

The credit loss protection arrangements contain a number of provisions that give the Bank some control over the determination of borrowers to which it has potential exposure under the FLC and any SLC Series:

• Goldman Sachs may make credit commitments covered by the arrangements only to borrowers approved by the Bank.

• Unless the Bank and Goldman Sachs agree otherwise, the borrowers covered by the FLC and any SLC Series that are rated by both of the two major rating agencies must be rated investment grade by at least one, and borrowers that are rated only by one of the two major rating agencies must be rated investment grade by that rating agency. If neither of the two major rating agencies rates a borrower, then further credit to the borrower shall no longer be covered by the FLC or any SLC Series, if the Bank and Goldman Sachs determine the borrower’s credit conditions are lower than investment grade.

• If the ratings of an approved borrower fall below investment grade in the judgment of both major rating agencies (or, if a borrower is rated investment grade by only one agency, and that agency downgrades the borrower below investment grade), further credit to that borrower will no longer be covered by these arrangements, unless the Bank and Goldman Sachs otherwise agree.

• On the fifth, tenth and fifteenth anniversaries of the transaction, the Bank has the right to cause Goldman Sachs to stop extending new credit to borrowers the Bank deems to have become “unbankable.” Unbankable borrowers are those who have investment grade ratings from the two major rating agencies but are deemed by the Bank to be below BB- and below Ba3 based on the Bank’s application of rating agency methodologies and criteria. If Goldman Sachs disagrees with the Bank, the matter is to be referred to arbitration, and a suspension is effective unless and until an arbitrator rules in favor of Goldman Sachs.

The Bank, through a separate bankruptcy-remote Cayman Islands subsidiary, has collateralized the obligations on the FLC and a portion of the SLC Series by buying $1.723 billion of Goldman Sachs demand notes and pledging those demand notes to Goldman Sachs. If Goldman Sachs activates an SLC Series that is not collateralized, the Bank through its Cayman Islands subsidiary will be required to purchase and pledge additional Goldman Sachs demand notes with a principal amount equal to the stated amount of that SLC Series. Subject to certain conditions, the Bank has the right to substitute as collateral high quality liquid securities for the Goldman Sachs demand notes.

These arrangements are designed to collateralize the Bank’s obligations in the event the Bank’s Cayman Islands branch fails to perform on the FLC or any SLC Series, including as a result of our insolvency or the insolvency of the Bank or the Bank’s Cayman Islands branch.

If Goldman Sachs’ credit rating, as determined by either of the two major credit rating agencies, falls below investment grade, Goldman Sachs is obligated to provide collateral to the Bank to support Goldman Sachs’ obligations under the Goldman Sachs demand notes. After an initial 15-year period under the letters of credit, the Bank and Goldman Sachs will negotiate in good faith to extend the terms of the letter of credit arrangements for one additional five-year term. Before the expiration of the initial 20-year term, in certain circumstances, the letter of credit arrangements with the Bank may be terminated by the Bank or Goldman Sachs, in which event Goldman Sachs would be obligated to prepay any outstanding demand notes. In circumstances related primarily

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to the creditworthiness of the Bank or a breach of its representations or covenants, Goldman Sachs may draw on the letters of credit for early termination amounts of up to the remaining undrawn or available amount on the letters of credit. In connection with draws on the letters of credit of early termination amounts, Goldman Sachs would have to prepay any outstanding demand notes. Goldman Sachs also would be obligated to pay the Bank on the originally scheduled expiration date of the letter of credit arrangements an amount equal to the early termination amounts minus the losses that would have been reimbursed under the letters of credit had they not terminated early.

Management Policies

In May 2011, we launched a medium-term management plan for the three years from the fiscal year ended March 31, 2012 to the fiscal year ended March 31, 2014, with the two management objectives as follows: “aim for top quality in strategic business areas” and “establish a solid financial base and corporate infrastructure to meet the challenges of financial regulations and the highly competitive environment.” The financial objectives and targets were also set with the aim of improving and seeking a balance between financial soundness, profitability and growth.

Our basic policies for the fiscal year ended March 31, 2014, the last year of the medium-term management plan were as follows: “proactively contribute to the revitalization of Japanese economy, and as a result achieve our growth” and “create new business models and challenge for ‘innovation’ in order to make the next leap forward.” We continued to proactively support the revitalization of Japanese economy through financing, and proceeded with the establishment of new business models to accommodate changes in the financial needs of our clients and business environment in order to achieve medium- to long-term growth. We also achieved objectives and financial targets that we set in the medium-term management plan.

In May 2014, we and the Bank announced our vision for the next decade and the new management goals for the three-year medium-term management plan through March 2017.

Vision for the Next Decade

Our vision for the next decade, in view of the changing business environment, including the growth of Asia’s emerging countries, the aging and shrinking Japanese population and global financial regulatory reform, is to become a global financial group that, by earning the highest trust of our customers, lead the growth of Japan and the Asian region. Specifically, we aim to achieve the following three points.

We aim to become a truly Asia-centric institution. Strengthening our business in Asia is the key strategy for realizing our vision in view of the high medium- to long-term growth potential of Asia’s emerging countries. We will proactively invest our resources in the region in order to become a leading financial group in Asia.

We aim to develop the best-in-class earnings base in Japan. Japan is a mature market but there are opportunities within the market segments and we aim to proactively contribute to the revitalization of the Japanese economy by investing our resources in such growth areas and taking appropriate risks. At the same time, we intend to capture a high market share and build a solid earnings base by implementing specific strategies for enhancing our capability to meet our clients’ needs.

We aim to realize true globalization and continue to evolve our business model. We intend to expand our global franchise and implement measures to realize the true globalization of our corporate infrastructure that supports our growth. At the same time, we intend to continue to evolve our business model by anticipating changes in our business environment, both domestic and international.

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Three-Year Management Goals

In the next three years, we aim to further evolve our client-centric business models, revise our portfolio structure, and enhance our client base with speed in order to achieve the sustainable growth of our top-line profit and further increase our enterprise value. We also set the following four goals for our three-year medium-term management plan as the first step toward realizing our vision.

Develop and evolve client-centric business models for main domestic and international businesses. The needs of our clients are becoming more diverse and sophisticated, and we are implementing a number of initiatives to meet their needs. We have revised our client segmentation and are implementing strategies and evolving business models accordingly, and allocating resources from the perspective of group optimization.

• Large corporate business strategy. The activities of our large corporate clients are becoming more global, and cross-border, and accordingly, their financial needs are becoming bigger and more complex. We are creating a unique business model, Global-Corporate and Investment Banking (“G-CIB”) model, to meet their needs, thereby enhancing our client base and top-line profit.

• Middle market and small and medium-sized enterprise business strategy. In the middle and small and medium-sized enterprise markets, where we have a number of strengths, we have revised the client segmentation and grouped clients based on attributes in order to fully meet the financial needs of each individual company. Further, under the newly launched Area system, we aim to comprehensively address needs of business owners both as corporate managers and as individuals, through one-stop-services.

• Consumer banking business strategy. The financial needs of individuals are changing, under the circumstances of the accelerated shift from savings to investment, the arrival of the great era of inheritance, and changing lifestyles. We intend to meet their needs by implementing strategies based on a new client segmentation on a Group-wide basis and achieve the top business base in Japan.

• Consumer finance and credit card business strategy. In the consumer finance business, we aim to expand the variety of our client base and achieve an overwhelming share in the domestic market through the integrated operation of the planning and promotion functions of SMBC and SMBC Consumer Finance. In the credit card business, we intend to reinforce our top-line profit by leveraging the strengths of Sumitomo Mitsui Card and Cedyna as bank-based and retail-based credit card companies, respectively. At the same time, we intend to pursue cost synergies by managing the business on a group basis through measures such as integrating the management platforms of the Group’s credit card companies.

• International business strategy. In our international business, we intend to shift our business model in order to achieve sustainable growth by improving the efficiency of assets while depending less on lending volume. At the same time, we intend to enhance our global franchise. Specifically, we aim to strengthen multi-faceted transactions with globally operating non-Japanese corporate clients. To this end, we are enhancing our product line-up and promoting cross-selling by strengthening the transaction banking business, and revising our client coverage to a more global-based framework. Further, we will create a highly profitable asset portfolio by diversifying and flexibly rebalancing our portfolio.

• Institutional investor business strategy. We intend to create a new business model to meet the needs of institutional investors by establishing a Group-wide framework, centered on the Bank and SMBC Nikko Securities, enhancing our ability to provide products to institutional investors and strengthening our capability to source, underwrite and distribute deals domestically and internationally.

• IT and transaction banking business strategy. Information and communication technology (“ICT”) and transaction banking business are necessary underpinnings for creating new businesses, and we intend to offer new leading-edge services through various measures, including alliances with leading players in ICT.

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Build a platform for realizing Asia-centric operations and capture growth opportunities. We aim to become a global financial group that, by earning the highest trust of our customers, leads the growth of Japan and the Asian region. This is our vision for the next decade and, to this end, we aim to steadily create a business platform in Asia, with the enhancement of our Asia business as the principal strategy for the whole group, and prioritize the allocation of resources, including human resources and infrastructure, to Asia.

Realize sustainable growth of top-line profit while maintaining soundness and profitability. Underpinned by the stable financial base built during the previous years, we intend to focus more on growth in the new medium-term management plan. We intend to achieve sustainable growth of our top-line profit by developing and evolving our business models and allocating resources to growth fields while continuing to focus on maintaining soundness and profitability.

Upgrade corporate infrastructure to support our next stage of growth. Our business is expanding globally and on a Group-wide basis, and we intend to strengthen our management platform to support our business growth. Specifically, we intend to globalize our organization and human resources and intensify group management. To this end, we recently established “Global Human Resources Department.” We also recently established “Diversity and Inclusion Committee” to promote diversity as we believe diversity is a source of competitiveness. We are also upgrading our risk management system.

Revenues by Region

The following table sets forth the percentage of our total operating income under IFRS for the fiscal years ended March 31, 2015, 2014, and 2013, based on the total operating income of our offices in the indicated regions. For each of the periods presented, we earned most of our total operating income in Japan, where we compete with other major Japanese banking groups and financial service providers. 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 fiscal year ended March 31,
	2015			2014			2013
Region:
Japan		76	%		78	%		82	%
Foreign:
Americas		5	%		6	%		4	%
Europe and Middle East		11	%		9	%		7	%
Asia and Oceania (excluding Japan)		8	%		7	%		7	%
Total		100	%		100	%		100	%

Seasonality

Our business is not materially affected by seasonality.

Sources and Availability of Raw Materials

We are not reliant on any particular source of raw materials.

Marketing Channels

See “—Description of Operations and Principal Activities” for a discussion of our marketing channels.

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Regulations in Japan

Our businesses are subject to extensive regulation, including the effects of changes in the laws, regulations, policies, voluntary codes of practice and interpretations in Japan. On the other hand, deregulation of banking activities in Japan, and more generally of the Japanese financial system, has proceeded, which has made the Japanese banking industry highly competitive.

Supervisory and regulatory authorities

Pursuant to the Banking Act, the FSA has the authority in Japan to supervise banks, bank holding companies and banks’ principal shareholders, meaning bank shareholders having 20% (or 15% in some cases) or more of the voting rights of a bank. The Bank of Japan (“BOJ”) also has supervisory authority over banks in Japan based primarily on its contractual agreements and transactions with Japanese banks. Only companies licensed by the Prime Minister are defined as banks under the Banking Act, and licenses may be granted only to a kabushiki kaisha, a joint stock corporation, with paid-up capital of ¥2 billion or more.

The Financial Services Agency of Japan

The Prime Minister has supervisory authority over banks in Japan, which is generally delegated to the Financial Services Agency of Japan (“FSA”) except for matters prescribed by cabinet order. The Minister for Financial Services has the power to direct the FSA. Under the Banking Act, the FSA has supervisory control over banks, bank holding companies and banks’ principal shareholders in Japan, except for matters to which the Prime Minister retains authority.

The FSA’s authority includes granting and revoking of operating licenses, and approving business activities such as becoming a principal shareholder, establishment of subsidiaries or overseas offices, mergers, corporate splits or business transfers, and dissolutions or discontinuations of business by existing banks, etc.

The FSA may also instruct a Japanese bank to suspend its business or to remove directors if the bank violates laws, other regulations or their articles of incorporation or commits acts contrary to public policy. The FSA may also direct a Japanese bank in financial difficulty to take certain actions, such as holding certain property in Japan for the protection of depositors. Under the prompt corrective action (“PCA”) system, the FSA may take corrective actions in the case of capital deterioration of financial institutions.

The Ministry of Finance and the FSA have introduced a number of regulatory measures into the banking sector in Japan to secure sound management of banks, as well as measures to increase the transparency of the regulatory process, such as bank holding company regulations, single customer credit limits, disclosure regulations, regulations regarding reserves for loan losses and inspections.

The Banking Act authorizes the FSA to inspect banks and bank holding companies in Japan at any time and with any frequency. Such inspections are conducted by officials from the FSA’s Inspection Department. The FSA monitors the financial soundness of banks and the status and performance of their control systems and reviews their compliance with laws and regulations. The FSA has issued guidelines on its inspection of financial institutions called the Financial Inspection Manual. The Financial Inspection Manual itself does not have the force of law, but the FSA’s inspections of banks are based on the Financial Inspection Manual, which emphasizes the need for bank self-assessment rather than assessment based on the advice of the government authority and risk management by each bank instead of a mere assessment of its assets. Following an inspection, the FSA may exercise its authority over a bank under the Banking Act to suspend or terminate its banking business.

The Ministry of Finance

The Ministry of Finance conducts examinations of banks in relation to foreign exchange transactions under the Foreign Exchange and Foreign Trade Act.

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The Bank of Japan

The Bank of Japan (“BOJ”) is the central bank of Japan and serves as the principal instrument for the execution of Japan’s monetary policy. The BOJ implements monetary policy mainly by adjusting its basic loan rate, open market operations and imposing deposit reserve requirements. All banks in Japan maintain deposits with the BOJ and rely substantially upon obtaining borrowings from and rediscounting bills with the BOJ. Moreover, most banks in Japan maintain current accounts under agreements with the BOJ pursuant to which the BOJ can conclude a contract with the Bank concerning on-site examinations. BOJ supervision is intended to support the effective execution of monetary policy, while FSA supervision aims to maintain the sound operations of banks in Japan and promote the security of depositors. Through its examinations, the BOJ seeks to identify problems at an early stage and give corrective guidance where necessary.

Regulations Regarding Capital Adequacy and Liquidity

Capital Adequacy Requirement

In 1988, the BCBS issued the Basel Capital Accord. The Basel Capital Accord sets minimum risk-weighted capital ratios for the purpose of maintaining sound management of banks which have international operations. The minimum risk-weighted capital ratio required was 8% on both a consolidated and nonconsolidated basis. In 2004, the BCBS issued the amended Basel Capital Accord (“Basel II”), which includes detailed measurement of credit risk, the addition of operational risk, a supervisory review process and market discipline through disclosure. These amendments did not change the minimum risk-weighted capital ratio of 8% applicable to banks with international operations (including the Bank). These rules took effect in Japan in 2007, and since 2008, banks are able to apply the advanced IRB approach for credit risk and the AMA for operational risk.

In July 2009, the BCBS approved a final package of measures to enhance certain elements of the Basel II framework, which includes an increase of the risk weights of resecuritization instruments and revisions of certain trading book rules (referred to as “Basel 2.5”), and the FSA’s capital adequacy guidelines which reflect such framework have been applied in Japan from December 2011.

In September 2009, the Group of Central Bank Governors and Heads of Supervision reached an agreement on several key measures to strengthen regulation of the banking sector, and in December 2009 the BCBS published a consultative document entitled “Strengthening the resilience of the banking sector” containing proposals on these measures centering on several core areas. The BCBS’ proposals focused on raising the quality, consistency and transparency of the regulatory capital base through measures including a requirement that the predominant form of Tier 1 capital must be common shares and retained earnings; limitations on the use of hybrid instruments with an incentive to redeem; a requirement that regulatory adjustments, including deductions of the amount of net deferred tax assets which rely on the future profitability of a bank, be applied to common equity generally; and a requirement for additional disclosure regarding regulatory capital levels.

The BCBS’ proposals also cover the following key areas:

• strengthening the risk coverage of the capital framework;

• introducing a leverage ratio as a supplementary measure to the Basel II risk-based framework with a view to migrating to a Pillar 1 (minimum capital requirement) treatment based on appropriate review and calibration (for further information, see “Leverage Ratio” below);

• introducing measures to promote the build-up of capital buffers in good times that can be drawn upon in periods of stress; and

• introducing minimum liquidity standards for internationally active banks that include a 30-day liquidity coverage ratio requirement underpinned by a longer-term structural liquidity ratio (for further information, see “Liquidity Requirement” below).

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In July 2010, the Group of Central Bank Governors and Heads of Supervision reached a broad agreement on the overall design of the BCBS’ capital and liquidity reform package. In addition, in August 2010, the BCBS issued for consultation a proposal to enhance the loss absorbency function of regulatory capital. In September 2010, the Group of Central Bank Governors and Heads of Supervision announced a substantial strengthening of existing capital requirements. The framework of the proposed reform was endorsed by the G-20 leaders at their Seoul summit in November 2010. These capital reforms increased the minimum common equity requirement from 2% to 4.5% and will require banks to hold a capital conservation buffer of 2.5% to withstand future periods of stress, bringing the total common equity requirement to 7%. The Tier 1 capital requirement also increased from 4% to 6% (increasing to 8.5% when included together with the above capital conservation buffer). The total capital requirement remains at 8% but will increase to 10.5% with the capital conservation buffer. In addition, a countercyclical buffer within a range of 0% to 2.5% of common equity or other fully loss-absorbing capital will be implemented according to national circumstances. The Group of Central Bank Governors and Heads of Supervision also agreed on transitional arrangements for implementing the new standards. Under the transitional arrangements, these new capital requirements are being phased in between January 1, 2013 and January 1, 2019. In December 2010, the BCBS published the new Basel III rules text. To reflect changes made by the BCBS, the FSA changed its capital adequacy guidelines. The FSA’s changes have mostly been applied from March 31, 2013, which generally reflects the main measures of the minimum capital requirements of the BCBS that started to be phased in on January 1, 2013 and will be fully applied from March 2019.

In September 2013, the BCBS and the International Organization of Securities Commissions (“IOSCO”) released the final framework for margin requirements for non-centrally cleared derivatives (“2013 framework”). This framework will require high quality liquid assets to be posted as margin on non-centrally cleared derivative transactions, which could adversely affect our liquidity position. The requirements were originally planned to be phased in over a four-year period beginning in December 2015 with the largest, most active and most systemically important participants in the derivatives market, including us. In March 2015, the BCBS and IOSCO released revisions to the 2013 framework, which delay the beginning of the phase-in period for collecting and posting initial margin on non-centrally cleared trades from December 2015 to September 2016. The full phase-in schedule has been adjusted to reflect this nine-month delay. The revisions also institute a six-month phase-in period of the requirement to exchange variation margin, beginning in September 2016.

In addition to the above-mentioned minimum capital requirements and capital buffer requirements under Basel III, organizations identified by the FSB as G-SIFIs, which as of November 2014 included us, will be required to maintain an additional 1% to 2.5% of common equity 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. This requirement is commonly referred to as the G-SIFI capital surcharge, and the amount of G-SIFI capital surcharge that would have applied to us based on the FSB’s determination as of November 2014 was 1% of risk-weighted assets. The G-SIFI capital surcharge requirement will be phased in from January 2016 to January 2019. The FSB updates its list of G-SIFIs on an annual basis.

In November 2014, the FSB issued policy proposals consisting of a set of principles and a detailed term sheet on the adequacy of loss-absorbing and recapitalization capacity for G-SIFIs for public consultation. The proposals have been developed by the FSB in consultation with the BCBS and will, once finalized, form a new minimum standard of total loss-absorbing capacity (“TLAC”). The FSB proposes to ensure the availability of adequate loss-absorbing capacity for G-SIFIs in resolution by setting a new minimum requirement for TLAC. G-SIFIs will be required to meet this new standard by as early as January 2019. The proposals are scheduled to be finalized by the time of the next G-20 leaders’ summit in 2015.

Furthermore, as a disincentive for G-SIFIs facing the maximum G-SIFI capital surcharge to “increase materially their global systemic importance in the future,” an additional 1% capital surcharge could be applied. So long as we are identified as a G-SIFI, we are also subject to stronger supervisory mandates and higher supervisory expectations for risk management functions, data aggregation capabilities, risk governance and

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internal controls. The substance of this heightened supervision has not yet been fixed, but we anticipate that at a minimum any rules will contain more stringent reporting requirements and impose common frameworks for data aggregation and internal risk management processes on G-SIFIs.

Because we have been identified as a G-SIFI, we are also subject to, among other things, resolution-related requirements described in the FSB’s “Key Attributes of Effective Resolution Regimes for Financial Institutions.” In particular, the FSB has required the initial group of G-SIFIs to have in place a recovery and resolution plan, including a group-level plan, containing various specified elements, to be subject to regular resolvability assessments. Under the Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc., issued by the FSA, as part of crisis management, financial institutions identified as G-SIFIs must prepare and submit a recovery plan, which includes a description of events that would trigger implementation of the recovery plan and the analysis of the recovery options to the FSA, and the FSA must prepare the resolution plan for each G-SIFI.

In December 2014, the BCBS published a consultative document on the design of a capital floor framework which will replace the current transitional floor based on the Basel I standard with a capital floor based on the Basel II/III standard. The proposed framework will be based on the finalized version of the standardized approach, which is also being revised. The BCBS intends to publish the final standards of the capital floor framework around the end of 2015.

In June 2015, the BCBS also issued a consultative document on the risk management, capital treatment and supervision of interest rate risk in the banking book (“IRRBB”). Such document presents two options for the capital treatment of IRRBB: (i) a Pillar 1 (minimum capital requirement) approach and (ii) an enhanced Pillar 2 approach.

Our securities subsidiaries in Japan are also subject to capital adequacy requirements under the FIEA. Under the requirements, securities firms must maintain a minimum capital adequacy ratio of 120% on a nonconsolidated basis and must file periodic reports with the Commissioner of the FSA or the Director-General of the appropriate Local Finance Bureau, and also publicly disclose their capital adequacy ratio on a quarterly basis. Failure to meet the capital adequacy requirements will trigger mandatory regulatory action. For example, a securities firm with a capital adequacy ratio of greater than 120%, but less than 140% will be required to file daily reports with the Commissioner of the FSA or the Director-General of the appropriate Local Finance Bureau. A securities firm with a capital adequacy ratio of less than 120% may be ordered to change its business conduct, place its property in trust or be subject to other supervisory orders, as the relevant authorities deem appropriate. A securities firm with a capital adequacy ratio of less than 100% may be subject to temporary suspension of all or part of its business operations or cancellation of its license to act as a securities broker and dealer.

The capital adequacy ratio for securities firms is defined as the ratio of adjusted capital to a quantified total of business risks, which include market risks, counterparty risks and operational risks (e.g., risks in carrying out daily business activities, such as administrative problems with securities transactions and clerical mistakes) quantified in the manner specified by a rule promulgated under the FIEA. Adjusted capital is defined as net worth less illiquid assets, as determined in accordance with Japanese GAAP. Net worth consists mainly of stated capital, additional paid-in capital, retained earnings, reserves for securities transactions, certain allowances for doubtful current accounts, net unrealized gains (losses) in the market value of investment securities, and subordinated debt. Illiquid assets generally include non-current market assets, certain deposits and advances, and prepaid expenses.

In May 2010, the FIEA was amended, introducing a minimum capital adequacy requirement on a consolidated basis applicable to securities firms whose total assets exceed ¥1,000 billion. These amendments became effective from April 2011.

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Leverage Ratio

In March 2015, the FSA published its leverage ratio guidelines which have been applied from March 31, 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. Any final adjustments to the definition and calibration of the leverage ratio will be made by the BCBS by 2017, with a view to migrate to a Pillar 1 treatment on January 1, 2018, based on appropriate review and calibration.

Liquidity Requirement

In October 2014, the FSA published its guidelines for liquidity coverage ratio (“LCR”) applicable to banks with international operations that have been applied from March 31, 2015. These guidelines are based on the full text of the LCR standard issued by the BCBS in January 2013. LCR is intended to promote resilience to potential liquidity disruptions over a thirty-day horizon and help ensure that global banks have sufficient, unencumbered, high-quality liquid assets to offset the net cash outflows they could encounter under an acute short-term stress scenario. Under the FSA’s LCR guidelines, banks with international operations must maintain LCR of 100% on both a consolidated basis and a nonconsolidated basis, while the minimum LCR requirements are being phased in between March 31, 2015 and March 31, 2019 with an increase of 10% in each year starting from 60%.

In October 2014, the BCBS issued the final standard for the net stable funding ratio (“NSFR”), which requires a minimum amount of stable sources of funding at a bank relative to the liquidity profiles of the bank’s assets, as well as the potential for contingent liquidity needs arising from off-balance sheet commitments, over a one-year horizon. NSFR is scheduled to be introduced as a minimum standard by January 1, 2018.

Self-Assessment, Reserves and Related Disclosure

Financial institutions, including the Bank, are required to establish self-assessment programs to, among other things, analyze their assets giving due consideration to accounting principles and other applicable rules and to classify their assets into categories taking into account the likelihood of repayment and the risk of impairment to the value of the assets. These classifications determine whether an addition to or reduction in reserves or write-offs is necessary.

Pursuant to the Japanese Institute of Certified Public Accountants (“JICPA”) guidelines, the outcome of each financial institution’s self-assessment leads to substantially all of a bank’s loans and other claims on customers being analyzed by classifying obligors into five categories: (1) normal borrowers; (2) borrowers requiring caution; (3) potentially bankrupt borrowers; (4) effectively bankrupt borrowers; and (5) bankrupt borrowers. The reserve for possible loan losses is then calculated based on the obligor categories.

FSA guidelines require banks to classify their assets not only by the five categories of obligor but also by four categories of quality. The Bank has adopted its own internal guidelines for self-assessment which conform to guidelines currently in effect and comply with the PCA system requirements.

Based on the results of the self-assessment discussed above, the Bank is required to establish a reserve for its loan portfolio in an amount the Bank considers adequate at a balance sheet date. Three categories of reserves the Bank establishes, for statutory purposes, along with the Accounting Standards for Banks issued by the Japanese Bankers Association, are a general reserve, a specific reserve and a reserve for specific overseas loan losses.

Under the Banking Act, banks and bank holding companies must disclose their non- and under-performing loans (consolidated and nonconsolidated) as risk-monitored loans. Risk-monitored loans are classified into four categories: (1) bankrupt loans, (2) non-accrual loans, (3) past due loans (three months or more) and (4) restructured loans. Banks and bank holding companies are required to submit to the FSA annual reports on

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their business including the amount of risk-monitored loans. Banks and bank holding companies must disclose their financial statements on an annual basis. The financial statements consist of the balance sheet and income statement, and explanatory documents regarding business and asset conditions, each prepared under the Banking Act both on a nonconsolidated and consolidated basis.

Independent of the Banking Act disclosure regulations, the Act Concerning Emergency Measures for the Revitalization of Financial Functions requires banks to disclose their loans and their other problem assets. Under this law, assets are classified into four categories: (1) bankrupt and quasi-bankrupt assets, (2) doubtful assets, (3) substandard assets and (4) normal assets. Generally, bankrupt and quasi-bankrupt assets correspond to the total of bankrupt loans and the lower tier of the non-accrual loans (the borrowers of which are effectively bankrupt) under the Banking Act disclosure. Doubtful assets generally correspond to the higher tier portion of the non-accrual loans (the borrowers of which are not, but have the potential to become, bankrupt). The substandard assets generally correspond to the total of the restructured loans and past due loans (three months or more). Bankrupt and quasi-bankrupt assets and doubtful assets also include non-loan assets, for example, securities lending, foreign exchange, accrued interest, advanced payments and customers’ liabilities for acceptances and guarantees.

Prompt Corrective Action System

Under the Prompt Corrective Action (“PCA”) system, the FSA may take corrective actions depending upon the extent of capital deterioration of a financial institution. The FSA may require a bank to submit and implement a capital reform plan, if;

• the total risk-weighted capital ratio of a bank with international operations becomes less than 8% but not less than 4%;

• the Common Equity Tier 1 risk-weighted capital ratio becomes less than 4.5% but not less than 2.25%; or

• the Tier 1 risk-weighted capital ratio becomes less than 6% but not less than 3%.

The FSA may order a bank to (1) submit and implement a plan for improving its capital; (2) prohibit or restrict the payment of dividends to shareholders or bonuses to officers; (3) reduce assets or restrict any increase in assets; (4) prohibit or restrict the acceptance of deposits under terms less advantageous than ordinary terms; (5) reduce the business of some offices; (6) eliminate some offices other than the head office; (7) reduce or prevent the launching of non-banking businesses; or (8) take certain other actions, if;

• the total risk-weighted capital ratio of a bank with international operations declines to less than 4% but not less than 2%;

• the Common Equity Tier 1 risk-weighted capital ratio becomes less than 2.25% but not less than 1.13%; or

• the Tier 1 risk-weighted capital ratio becomes less than 3% but not less than 1.5%.

The FSA may order a bank to conduct any one of the following: (1) a capital increase; (2) a substantial reduction in its business; (3) a merger; or (4) abolishment of its banking business, if;

• the total risk-weighted capital ratio of a bank with international operations declines to less than 2% but not less than 0%;

• the Common Equity Tier 1 risk-weighted capital ratio becomes less than 1.13% but not less than 0%; or

• the Tier 1 risk-weighted capital ratio becomes less than 1.5% but not less than 0%.

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The FSA may order the bank to suspend all or part of its business, if the total risk-weighted capital ratio, the Common Equity Tier 1 risk-weighted capital ratio or Tier 1 risk-weighted capital ratio of a bank with international operations declines below 0%.

The FSA may take actions similar to the actions the FSA may take with respect to a bank, if;

• the total risk-weighted capital ratio of a bank holding company that holds a bank with international operations declines to levels below 8%;

• the Common Equity Tier 1 risk-weighted capital ratio declines to levels below 4.5%; or

• the Tier 1 risk-weighted capital ratio declines to levels below 6%.

Prompt Warning System

The prompt warning system currently in effect allows the FSA to take precautionary measures to maintain and promote the sound operation of financial institutions before those financial institutions become subject to the PCA system. These measures include requiring a financial institution to reform: (1) profitability, if deemed necessary to improve profitability based upon a fundamental profit index; (2) credit risk management, if deemed necessary to reform management of credit risk based upon the degree of large credit concentration and other circumstances; (3) stability, if deemed necessary to reform management of market and other risks based upon, in particular, the effect of securities price fluctuations; and (4) cash flow management, if deemed necessary to reform management of liquidity risks based upon deposit trends and level of reserve for liquidity.

Regulations for Stabilizing the Financial System

Deposit Insurance System

The Deposit Insurance Act was enacted to protect depositors when deposit-taking institutions fail to meet their obligations. The Deposit Insurance Corporation of Japan (“DIC”) implements the law and is supervised by the Prime Minister and the Minister of Finance. Subject to limited exceptions, the Prime Minister’s authority is delegated to the FSA Commissioner.

From April 2011 to March 2014, the DIC received annual insurance premiums from member deposit-taking financial institutions, amounting to 0.107% of deposits that bear no interest, are redeemable upon demand and are used by depositors primarily for payment and settlement purposes, and 0.082% of other deposits. From April 2014, they amounted to 0.108% and 0.081%, respectively. For the fiscal years ended March 31, 2013 through 2015, a certain amount was reimbursed to the member institutions each fiscal year because there were no failures of insured deposit-taking financial institutions. From April 2015, annual insurance premiums amounted to 0.054% of deposits primarily for payment and settlement purposes and 0.041% of deposits for other deposits.

Premiums held by the DIC may be either deposited at deposit-taking institutions or used to purchase marketable securities. The insurance money may be paid out to depositors in case of a suspension of repayments of deposits, banking license revocation, dissolution or bankruptcy of a bank. Payouts are generally limited to a maximum of ¥10 million of principal amount together with any interest accrued with respect to each depositor. Only non-interest-bearing deposits that are redeemable upon demand and used by depositors primarily for payment and settlement functions are protected in full.

City banks (including the Bank), regional banks (including member banks of the second association of regional banks), trust banks, credit associations, credit cooperatives, labor banks and Japan Post Bank participate in the deposit insurance system on a compulsory basis.

The Deposit Insurance Act also provides a permanent system for resolving failed deposit-taking institutions.

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The basic method for resolving a failed deposit-taking institution under the Deposit Insurance Act is cessation of the business by paying insurance money to depositors up to the principal amount of ¥10 million plus accrued interest per depositor, or pay-off or transfer of the business to another deposit-taking institution, with financial assistance provided within the cost of pay-off. Under the Deposit Insurance Act, transfer of business is regarded as the primary method. In order to affect a prompt transfer of business, the following framework has been established:

• a Financial Reorganization Administrator is appointed by the FSA Commissioner and takes control of the management and assets of the failed deposit-taking institution. The administrator is expected to diligently search for a deposit-taking institution which will succeed to the business of the failed institution;

• if no successor deposit-taking institution can be immediately found, a “bridge bank” will be established by the DIC for the purpose of temporarily maintaining the operations of the failed deposit-taking institution, and the bridge bank will seek to transfer the failed deposit-taking institution’s assets to another deposit-taking institution or dissolve the failed deposit-taking institution; and

• in order to facilitate or encourage a deposit-taking institution to succeed to a failed business, financial aid may be provided by the DIC to any successor deposit-taking institution to enhance its capital after succession or to indemnify it for losses incurred as a result of the succession.

Where it is anticipated that the failure of a deposit-taking institution may cause an extremely grave problem in maintaining the financial order in Japan or the region where the deposit-taking institution is operating, the following exceptional measures may be taken following deliberation by Japan’s Financial Crisis Response Council:

• the DIC may subscribe for shares or other instruments issued by the relevant deposit-taking institution or the holding company thereof and require the institution to submit to the DIC a plan to reestablish sound management (Item 1 measures) (dai ichigo sochi);

• once the deposit-taking institution fails, financial aid exceeding the cost of pay-off may be available to the institution (Item 2 measures) (dai nigo sochi); and

• if the failed institution is a bank and the problem cannot be avoided by other measures, then the DIC may acquire all of the shares of the bank (Item 3 measures) (dai sango sochi).

In order to fund the above-mentioned activities, the DIC may borrow from financial institutions or issue bonds which may be guaranteed by the Government of Japan.

In addition, on June 12, 2013, a bill to amend the Deposit Insurance Act which includes establishment of a new orderly resolution regime of financial institutions was enacted and became effective on March 6, 2014. Financial institutions including banks, securities companies and insurance companies and their holding companies will be subject to the new resolution regime that includes, among others, the following features.

Under the new resolution regime, where the Prime Minister recognizes that the failure of a financial institution which falls into either of (a) or (b) below may cause significant disruption in the financial markets or other financial systems in Japan if measures described in (a) (specified Item 1 measures) (tokutei dai ichigo sochi) or measures described in (b) (specified Item 2 measures) (tokutei dai nigo sochi) are not taken, the Prime Minister may confirm that any of the following measures need to be applied to the financial institution following deliberation by Japan’s Financial Crisis Response Council:

(a) if the financial institution is not a financial institution whose liabilities exceed its assets, which means it is unable to fully perform its obligations with its assets, the DIC shall supervise the operation of business and management and disposal of assets of that financial institution, and may provide it with loans or guarantees

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necessary to avoid the risk of significant disruption in the financial systems in Japan, or subscribe for shares or subordinated bonds of, or lend subordinated loans to, the financial institution, taking into consideration the financial condition of the financial institution;

(b) if the financial institution is a financial institution whose liabilities exceed or are likely to exceed its assets or which has suspended or is likely to suspend payment of its obligations, the DIC shall supervise the operation of business and management and disposal of assets of that financial institution and may provide financial aid necessary to assist a merger, business transfer, corporate split or other reorganization in respect to such failed financial institution; and

if a measure set out in (b) above is determined to be taken with respect to a financial institution, the Prime Minister may order that the financial institution’s operations of business and management and disposal of assets be placed under the control of the DIC. The business or liabilities of the financial institution subject to the supervision by the DIC as set forth above may also be transferred to a “bridge bank” established by the DIC for the purpose of the temporary maintenance and continuation of operations of, or repayment of the liabilities of, such financial institution, and the bridge bank will seek to transfer the financial institution’s business or liabilities to another financial institution or dissolve the financial institution. The financial aid provided by the DIC to assist a merger, business transfer, corporate split or other reorganization in respect to the financial institution set out in (b) above may take the form of a monetary grant, loan or deposit of funds, purchase of assets, guarantee or assumption of debts, subscription of preferred stock or subordinated bonds, subordinated loan, or loss sharing.

The expenses for implementation of the measures for these crisis management operations will be borne by the financial industry; provided, however, the Government of Japan may provide subsidies to the DIC within the limit to be specified in the government budget in cases where it is likely to cause extremely serious hindrance to the maintenance of the credit system in Japan or significant turmoil in the financial market or other financial system of Japan if such expenses are to be borne only by the financial industry.

On March 6, 2014, the FSA made an announcement clarifying the requirement of loss absorbency at the point of non-viability for additional Tier 1 instruments and Tier 2 instruments under Basel III issued by banks and bank holding companies. According to the announcement, (i) additional Tier 1 instruments and Tier 2 instruments under Basel III issued by a bank must be written-down or converted into common shares when the Prime Minister of Japan confirms (nintei) that the above-described “Item 2 measures (dai nigo sochi),” “Item 3 measures (dai sango sochi),” or “specified Item 2 measures (tokutei dai nigo sochi)” need to be applied to the bank and (ii) additional Tier 1 instruments and Tier 2 instruments under Basel III issued by a bank holding company must be written-down or converted into common shares when the Prime Minister of Japan confirms (nintei) that the above-described “specified Item 2 measures (tokutei dai nigo sochi)” need to be applied to the bank holding company. The FSA also stated in the announcement that the trigger event for loss absorbency at the point of non-viability with respect to such instruments should be construed in accordance with the then effective financial crisis response framework for banks and bank holding companies that have failed or are likely to fail, since the purpose of such write-down or conversion required under Basel III is to ensure that all classes of these capital instruments fully absorb losses at the point of non-viability before taxpayers are exposed to loss.

Special Measures Act Concerning Facilitation of Reorganization by Financial Institutions, Etc.

Under the Special Measures Act Concerning Facilitation of Reorganization by Financial Institutions, Etc.: (1) for one year after the merger or transfer of the entire business of a deposit-taking institution, the maximum amount to be covered by the deposit insurance will be ¥10 million multiplied by the number of parties to the merger or business transfer; and (2) the procedures are simplified to a certain extent in connection with the transfer of an entire business or a merger with another deposit-taking institution by a deposit-taking institution that is made in accordance with a management base-strengthening plan that has been approved by the Government of Japan.

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Single Customer Credit Limit

The Banking Act restricts the aggregate amount of credit and loans that may be extended to any single customer in order to avoid the excessive concentration of credit risks and promote the fair and extensive use of bank credit. To tighten the restrictions under Japanese law to meet international standards, the Banking Act and the related cabinet order were amended in June 2013 and October 2014, respectively and those amendments became effective in December 2014. As a result of the amendments, the credit limit of bank holding companies, banks or bank groups for any single customer, including certain of the customer’s affiliates, was lowered from 40% to 25% of the total qualifying capital of the bank holding company, bank or bank group, with certain adjustments.

Restrictions on Activities of a Bank Holding Company

Under the Banking Act, a bank holding company is prohibited from carrying on any business other than management of its subsidiaries and other incidental businesses. A bank holding company may have any of the following as a subsidiary: a bank, a securities company, an insurance company or a foreign subsidiary that engages in the banking, securities or insurance business. In addition, a bank holding company may have as a subsidiary any company that engages in finance-related business, such as a credit card company, a leasing company or an investment advisory company. Certain companies that are designated by ministerial ordinance as those that cultivate new business fields may also become the subsidiary of a bank holding company.

Restriction on Aggregate Shareholdings by a Bank

The Act Concerning Restriction on Shareholdings by Banks requires Japanese banks and their qualified subsidiaries to limit the aggregate market value (excluding unrealized gains, if any) of their equity securities holdings to an amount equal to 100% of their consolidated Tier 1 capital, with adjustments, in order to reduce exposure to stock price fluctuations. Treasury shares, shares issued by subsidiaries, shares not listed on any stock exchange or not registered with any OTC market, shares held as trust assets, and shares acquired through debt-for-equity swaps in restructuring transactions are excluded from this limitation. In order to facilitate the disposition of shares of listed stocks held by banks while preventing adverse effects caused by sales of large amounts of shares in a short period of time, share purchases by the Banks’ Shareholdings Purchase Corporation of listed shares have been restarted from March 2009.

Shareholding Restrictions Applicable to a Bank Holding Company and a Bank

The provision of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade which prohibits banks from holding more than 5% of the voting rights of non-financial companies in Japan does not apply to bank holding companies. However, the Banking Act generally prohibits a bank holding company and its subsidiaries, on an aggregated basis, from holding more than 15% of the voting rights of certain types of companies which are not permitted to become subsidiaries of bank holding companies. Also, the Banking Act generally prohibits a bank and its subsidiaries, on an aggregated basis, from holding more than 5% of the voting rights of certain types of companies which are not permitted to become subsidiaries of banks.

Examination and Reporting Applicable to Shareholders of a Bank

The FSA may request the submission of reports or other materials from a bank and/or its bank holding company, or inspect the bank and/or the bank holding company, if necessary, in order to secure the sound and appropriate operation of the business of a bank.

Under the Banking Act, a person who desires to hold 20% (in some exceptional cases, 15%) or more of the voting rights of a bank is required to obtain advance approval of the FSA Commissioner. In addition, the FSA may request the submission of reports or materials from, or may conduct an inspection of, any principal shareholder who holds 20% (in some exceptional cases, 15%) or more of the voting rights of a bank if the FSA

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deems the action necessary in order to secure the sound and appropriate operation of the business of the bank. Under limited circumstances, the FSA may order the principal shareholder to take such measures as the FSA deems necessary.

Furthermore, any person who becomes a holder of more than 5% of the voting rights of a bank holding company or a bank must report the ownership of the voting rights to the Director General of the relevant local finance bureau within five business days. This requirement is separate from the significant shareholdings report required under the FIEA. In addition, a similar report must be made in respect of any subsequent change of 1% or more in any previously reported holding or in respect of any change in material matters set out in reports previously filed, with some exceptions.

Regulations for Protection of Customers

Protection of Personal Information

The Act on the Protection of Personal Information and related rules, regulations and guidelines impose requirements on businesses that use databases containing personal information, including appropriate custody of personal information and restrictions on information sharing with third parties.

Act on Sales, Etc. of Financial Products

Due to deregulatory measures in the banking and other financial services industries, more financial products, including highly structured and other complicated products, may now be marketed to a broad base of customers. The Act on Sales, Etc. of Financial Products was enacted to better protect customers from incurring unexpected losses as a result of purchasing these financial products. Under this law, sellers of financial products have a duty to their potential customers to explain important matters (i.e., the nature and magnitude of risk involved) regarding the financial products that they sell. If a seller fails to comply with the duty, the loss in value of the purchased investment product due to the failure to explain is refutably presumed to be the amount of the customer’s loss. An amendment to this law, together with other related laws including the FIEA, became effective in September 2007. The amended law enlarges the scope of the duty of financial services providers to inform customers of important matters related to the financial products that they offer.

Act Concerning Protection of Depositors and Relief for Victims of Certain Types of Fraud

The Act Concerning Protection of Depositors from Illegal Withdrawals Made by Forged or Stolen Cards requires financial institutions to establish internal systems to prevent illegal withdrawals of deposits made using forged or stolen bank cards. The law also requires financial institutions to compensate depositors for any amount illegally withdrawn using forged or stolen bankcards, subject to certain conditions.

The Act Concerning Payment of Dividends for Relief of Damages from Funds in Account used in connection with Crimes requires that financial institutions take appropriate measures against various crimes including the closing of accounts used in connection with fraud and other crimes. The law also requires financial institutions to make, in accordance with specified procedures, payments from funds collected from the closed accounts to victims of certain crimes.

Act on Prevention of Transfer of Criminal Proceeds

Under the Act on Prevention of Transfer of Criminal Proceeds, which addresses money laundering and terrorism concerns, financial institutions and certain other entities, such as credit card companies, are required to perform customer identification, submit suspicious transaction reports and keep records of their transactions.

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Other Regulations Related to Our Business

Financial Instruments and Exchange Act of Japan

The Financial Instruments and Exchange Act of Japan (“FIEA”) regulates the securities industry and most aspects of securities transactions in Japan, including public offerings, private placements and secondary trading of securities, ongoing disclosure by securities issuers, tender offers for securities, organization and operation of securities exchanges and self-regulatory organizations and registration of securities companies. The Prime Minister has the authority to regulate the securities industry and securities companies, which authority is delegated to the FSA Commissioner under the FIEA. The Securities and Exchange Surveillance Commission, an external agency of the FSA, is independent from the Agency’s other bureaus and is vested with authority to conduct day-to-day monitoring of the securities markets and to investigate irregular activities that hinder fair trading of securities, including inspection of securities companies as well as banks in connection with their securities business. Furthermore, the FSA Commissioner delegates certain authority to the Director General of the Local Finance Bureau to inspect local securities companies and their branches. A violation of applicable laws and regulations may result in various administrative sanctions, including revocation of registration or authorization, suspension of business or an order to discharge any Director or Executive Officer who has failed to comply with applicable laws and regulations. Securities companies are also subject to the rules and regulations of the Japanese stock exchanges and the Japan Securities Dealers Association, a self-regulatory organization of securities companies.

An amendment to the FIEA was promulgated in September 2012 in order to, among other things, facilitate the establishment of a “Comprehensive Exchange,” in which securities, financial derivatives and commodity derivatives are traded comprehensively. It enables Financial Instruments Exchanges to trade commodity derivatives to enhance user convenience. The FSA conducts supervision of the “Comprehensive Exchange.” The amendment with regard to the “Comprehensive Exchange” became effective on March 11, 2014.

Regulation of the Consumer Finance Business

In order to resolve the problems of heavily indebted borrowers and to effect proper regulation of the consumer finance business, in June 2010, maximum legal interest rates were reduced to levels prescribed by the Interest Rate Restriction Act, ranging from 15% to 20%, and gray zone interest, which is interest on loans in excess of rates prescribed by the Interest Rate Restriction Act up to the 29.2% maximum rate permitted under the Contributions Act, was abolished. Judicial decisions have strictly interpreted the conditions under which consumer finance companies may retain gray zone interest. As a result, claims for refunds of gray zone interest increased substantially. Amendments to the Money Lending Business Act provide an additional upper limit on aggregate borrowings by an individual from all moneylenders over which moneylenders may not extend further loans, as well as stricter regulation and supervision of moneylender activities.

Installment Sales Act

In order to ensure the fairness of transactions with respect to installment and other sales, prevent damage to consumers and manage credit card numbers, the Installment Sales Act imposes requirements on those who conduct installment sales businesses. In June 2008, revisions to the Installment Sales Act were enacted, most of which became effective in December 2009. The revisions impose more stringent and expanded requirements for credit card companies, including, among other things: (1) wider coverage of installment sales under the regulations; (2) measures to prevent inappropriate extensions of credit for certain credit transactions; (3) measures to prevent excessive lending for certain credit transactions that include requirements to investigate the payment ability of consumers by use of designated credit information organizations and prohibition of execution of credit agreements that exceed the payment ability of consumers; and (4) measures to protect certain information, such as credit numbers.

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Base Erosion and Profit Shifting (BEPS)

In July 2013, the Organization for Economic Co-operation and Development (“OECD”) published the Action Plan on Base Erosion and Profit Shifting (“BEPS”) in order to prevent exploiting of gaps and mismatches in tax rules and artificial shifting of profits to low or no-tax locations. The Action Plan on BEPS identified 15 key areas to be addressed by 2015. In September 2014, reports on recommendations for a coordinated international approach for seven key areas were delivered and those for the other key areas are scheduled to be delivered in 2015. An integrated package of such deliverables is scheduled to be delivered to the G-20 Finance Ministers in October 2015. These measures will apply once they are implemented either in domestic laws or in the network of bilateral tax treaties. Some of the deliverables published by OECD have been partially reflected to Japanese tax regulations by the tax reform adopted in 2015.

Deregulation

The developments toward deregulation of the financial system including those described below have made the Japanese banking industry highly competitive.

Deregulation of Bank Engagement in the Securities Business

The gradual relaxation of the restrictions under the Securities and Exchange Act allowed banks to engage in the following business lines, after taking appropriate registration measures with the FSA:

• underwriting and dealing in Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, commercial paper and certain bonds issued by special purpose companies;

• selling beneficiary certificates of investment trusts and securities issued by an investment company; and

• dealing in listed or OTC securities or derivatives transactions as well as in the securities intermediary business.

In addition, amendments to the FIEA and the Banking Act relating to firewalls and conflicts of interest between banks, securities companies and insurance companies became effective on June 1, 2009. The amendment relating to firewalls abolished the ban on certain officers and employees from holding concurrent posts in banks, securities companies and insurance companies, and relaxed restrictions on the transfer of non-public customer information. On the other hand, the amendment relating to conflicts of interest requires those financial institutions, including banks, to implement proper information management procedures and to develop appropriate internal systems to prevent customer interests from being unfairly harmed through trading by the companies or by other companies within their group. For example, the companies may be required to create information barriers between departments and monitor how it executes transactions with customers.

Deregulation of Insurance Products

The gradual deregulation of the financial services industry permitted banks in Japan to offer an increased variety of insurance products, including pension-type insurance to the full range, as an agent.

Privatization of Japan Post Holdings Co., Ltd.’s subsidiaries

The Government of Japan began privatizing or eliminating several government institutions in connection with making Japan Post Holdings Co., Ltd. (“Japan Post Holdings”), a joint stock corporation that holds shares of four operating companies. Privatization of Japan Post Holdings’ banking and insurance subsidiaries, which was originally planned to be completed by 2017, was suspended in December 2009. In April 2012, a law was enacted to abolish the deadline of the privatization of Japan Post Holdings’ banking and insurance subsidiaries. Under the Postal Privatization Act, Japan Post Holdings’ banking subsidiary, one of the world’s largest deposit-taking institutions, is allowed to expand its business with prior approval of the government.

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Regulations in the United States

As a result of its operations in the United States, the Bank and SMFG are subject to extensive federal and state banking and securities supervision and regulation. The Bank engages in U.S. banking activities directly through its branches in Los Angeles, San Francisco and New York and through its representative office in Houston. The Bank also controls a U.S. banking subsidiary, Manufacturers Bank, and a U.S. broker-dealer subsidiary, SMBC Nikko Securities America.

The Bank’s New York branch is supervised by the Federal Reserve Bank of New York and the New York State Department of Financial Services, but its deposits are not insured (or eligible to be insured) by the Federal Deposit Insurance Corporation (“FDIC”). The Bank’s Los Angeles and San Francisco branches are supervised by the Federal Reserve Bank of San Francisco and the California Department of Business Oversight, but their deposits are not insured (or eligible to be insured) by the FDIC. The Bank’s representative office in Houston is subject to regulation and examination by the Texas Department of Banking and the Federal Reserve Bank of Dallas.

The Bank and SMFG are qualifying foreign banking organizations under the U.S. International Banking Act of 1978, as amended (“International Banking Act”), and as such are subject to regulation as bank holding companies under the Bank Holding Company Act. Additionally, the Bank and SMFG are bank holding companies by virtue of their ownership of Manufacturers Bank. As a result, the Bank, SMFG and their U.S. operations are subject to regulation, supervision and examination by the Federal Reserve Board as their U.S. “umbrella supervisor.”

Manufacturers Bank is a California state-chartered bank that is not a member of the Federal Reserve System. As a state non-member bank the deposits of which are insured by the FDIC, Manufacturers Bank is subject to regulation, supervision and examination by the FDIC and the California Department of Business Oversight.

In order to further expand our business in the U.S., we and the Bank obtained financial holding company status under the Bank Holding Company Act on May 7, 2013, which authorizes the expansion of the scope of services we provide in the U.S., including the underwriting and trading of securities and other investment banking services.

Restrictions on Business Activities

As described below, federal and state banking laws and regulations restrict the Bank’s and SMFG’s ability to engage, directly or indirectly through subsidiaries, in certain activities in the United States.

The Bank and SMFG are required to obtain the prior approval of the Federal Reserve Board before directly or indirectly acquiring the ownership or control of more than 5% of any class of voting shares of U.S. banks, certain other depository institutions and bank or depository institution holding companies. Under the Bank Holding Company Act and the Federal Reserve Board regulations, the Bank is required to serve as a source of financial strength to Manufacturers Bank. In addition, the Bank’s U.S. banking operations (including Manufacturers Bank and the Bank’s U.S. branches) are also restricted from engaging in certain “tying” arrangements involving products and services.

As financial holding companies, we, the Bank and the companies under our control are permitted to engage in a broader range of activities in the U.S. and abroad than permitted for bank holding companies and their subsidiaries. Unless otherwise limited by the Federal Reserve Board, financial holding companies generally can engage, directly or indirectly in the U.S. and abroad, in financial activities, either de novo or by acquisition, by providing after-the-fact notice to the Federal Reserve Board. These financial activities include underwriting and dealing in securities, insurance underwriting and brokerage and making investments in non-financial companies

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for a limited period of time, as long as the financial holding company does not directly or indirectly manage the non-financial companies’ day-to-day activities, and the financial holding company’s banking subsidiaries engage only in permitted cross-marketing with the non-financial companies. If we or the Bank cease to qualify as financial holding companies, we could be barred from new financial activities or acquisitions, and have to discontinue the broader range of activities permitted to financial holding companies.

Other Prudential Restrictions

The Bank’s U.S. branches and Manufacturers Bank are subject to requirements and restrictions under U.S. federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be made and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of Manufacturers Bank, and to a limited extent, the Bank’s New York and California branches.

In addition, under U.S. federal banking laws, state-chartered banks (such as Manufacturers Bank) and state-licensed branches and agencies of foreign banks (such as the Bank’s New York branch) may not, as a general matter, engage as a principal in any type of activity not permissible for their federally chartered or licensed counterparts, unless (i) in the case of state-chartered banks, the FDIC determines that the additional activity would pose no significant risk to the FDIC’s Deposit Insurance Fund and is consistent with sound banking practices and (ii) in the case of state-licensed branches and agencies of foreign banks, the Federal Reserve Board determines that the additional activity is consistent with sound banking practices. The U.S. federal banking laws also subject state branches and agencies of foreign banks to the same single-borrower lending limits that apply to federal branches or agencies, which are substantially similar to the lending limits applicable to national banks. For the Bank’s U.S. branches, these single-borrower lending limits are based on the worldwide capital of the Bank.

Under the International Banking Act, the Federal Reserve Board may terminate the activities of any U.S. office of a foreign bank if it determines (i) that the foreign bank is not subject to comprehensive supervision on a consolidated basis in its home country (unless the home country is making demonstrable progress toward establishing such supervision), (ii) that there is reasonable cause to believe that such foreign bank or its affiliate has violated the law or engaged in an unsafe or unsound banking practice in the United States and, as a result of such violation or practice, the continued operation of the U.S. office would be inconsistent with the public interest or with the purposes of federal banking laws, or (iii) for a foreign bank that presents a risk to the stability of the United States financial system, the home country of the foreign bank has not adopted, or made demonstrable progress toward adopting, an appropriate system of financial regulation to mitigate such risk.

There are various qualitative and quantitative restrictions on the extent to which SMFG and its subsidiaries can borrow or otherwise obtain credit from its U.S. bank subsidiary, Manufacturers Bank, or engage in certain other transactions involving that subsidiary. In general, these transactions must be on terms that would ordinarily be offered by Manufacturers Bank to unaffiliated entities, and credit transactions must be secured by designated amounts of specified collateral. In addition, certain transactions, such as certain purchases by Manufacturers Bank from the Bank or its non-bank subsidiaries, are subject to volume limitations. Effective in July 2012, the Dodd-Frank Act (discussed below) subjects credit exposure arising from derivative transactions, securities borrowing and lending transactions, and repurchase/reverse repurchase agreements to these collateral and volume transactions limitations.

Regulatory Requirements applicable to Financial Holding Companies

As financial holding companies, we and the Bank are subject to additional regulatory requirements. For example, we, the Bank and Manufacturers Bank, which is our U.S. insured depository institution subsidiary, must be “well capitalized,” meaning maintenance of a Tier 1 risk-based capital ratio of at least 6% and a total risk-based capital ratio of at least 10% under the revised capital standards of Basel III, which became effective on

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January 1, 2015 in the U.S. In addition, we, the Bank and Manufacturers Bank must be “well managed,” including maintenance of examination ratings that are at least satisfactory. Further, the Bank is also required to be well capitalized and well managed under its home country standards, which must be comparable to those required for a U.S. bank. Failure to comply with such requirements would require us and the Bank to prepare a remediation plan, and we would not be able to undertake new business activities or acquisitions based on our status as a financial holding company during any period of noncompliance without the prior approval of the Federal Reserve Board. Divestiture or termination of certain business activities in the U.S. may also be required as a consequence of failure to correct such conditions within 180 days.

Regulations for Stabilizing the Financial System

Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) provides a broad framework for significant regulatory changes across most areas of U.S. financial regulation. The Dodd-Frank Act addresses, among other issues, systemic risk oversight, bank capital standards, the resolution of failing systemically significant financial institutions, OTC derivatives, the ability of banking entities to engage in proprietary trading activities and invest in hedge funds and private equity funds, consumer and investor protection, hedge fund registration, and securitization.

Implementation of the Dodd-Frank Act is taking place through detailed rulemaking over multiple years by various regulators, including the Office of the Comptroller of the Currency (“OCC”), the Federal Reserve Board, the SEC, the FDIC, the Commodity Futures Trading Commission (“CFTC”), the Financial Stability Oversight Council and the Consumer Financial Protection Bureau. The final details, impact and timing of some of the implementing rules, particularly of rules relating to derivatives remain uncertain, and they could result in additional costs, or restrict or otherwise affect the way we conduct our business.

In December 2013, the Federal Reserve Board, the SEC, the OCC, the FDIC, and the CFTC adopted final rules implementing what is known as the “Volcker Rule.” The final rules require banking entities to conform to certain restrictions on proprietary trading activities, hedge fund and private equity fund activities and certain other enumerated investment restrictions, but contain a number of exclusions and exemptions that substantially limit their extraterritorial reach. Concurrently, with the release of the final rules in December 2013, the Federal Reserve Board issued an order extending the conformance period until July 21, 2015. During the conformance period, banking entities must engage in good-faith efforts to conform their activities and investments to the requirements of the final rules by the conformance deadline. In December 2014, the Federal Reserve Board announced its intention to extend the conformance period until July 21, 2017 for certain investments in and relationships with hedge funds and private equity funds that were in place as of December 31, 2013. Although complying with the final rules could result in additional costs, or restrict or otherwise affect the way we conduct our business, the impact remains uncertain.

The Dodd-Frank Act provides regulators with tools to impose greater capital, leverage and liquidity requirements and other prudential standards, particularly for financial institutions that pose significant systemic risk and bank holding companies with assets of $50 billion or more. In imposing heightened prudential standards on non-U.S. financial institutions such as us and the Bank, the Federal Reserve Board is directed to take into account the principle of national treatment and equality of competitive opportunity, and the extent to which the non-U.S. bank holding company is subject to comparable home country standards.

On February 18, 2014, the Federal Reserve Board adopted final rules that will apply enhanced prudential standards to the U.S. operations of large non-U.S. banking organizations, including us. The final rules, effective July 1, 2016, will require large non-U.S. banking organizations, such as us, to certify that they are subject to home country capital standards that are broadly consistent with the Basel capital framework, including Basel III; conduct home country capital stress tests that are comparable to U.S. standards; comply with a qualitative

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liquidity framework, including, among other things, a U.S. liquidity buffer requirement for its U.S. branches and agencies based on the results of internal liquidity stress testing; and establish a U.S. risk committee that understands the risk management policies and framework of its U.S. operations and has a general understanding of the risk management practices of the U.S. operations.

Under the final rules, non-U.S. banking organizations with combined U.S. assets (excluding assets held by its U.S. branches and agencies) of $50 billion or more, will be required to establish a separately capitalized top-tier U.S. intermediate holding company. However, this requirement will not apply to us. The final rules for single counterparty credit limits and for early remediation have yet to be promulgated.

Effective in July 2011, the Dodd-Frank Act removed a longstanding prohibition on the payment of interest on demand deposits by Manufacturers Bank and the Bank’s three branches in the United States. In addition, the Dodd-Frank Act requires that the lending limits take into account credit exposure arising from derivative transactions and securities lending, securities borrowing, and repurchase agreements and reverse repurchase agreements with counterparties. In June 2013, the OCC adopted the final rules that implement these new lending limits, and compliance with these new lending limits is required for our New York, Los Angeles and San Francisco branches from October 1, 2013, in addition to existing state lending limits that apply to the branches. Additionally, as a California state-chartered bank, Manufacturers Bank is subject to state lending limits, which also apply to credit exposure arising from derivative transactions.

Furthermore, the Dodd-Frank Act provides for an extensive framework for the regulation of OTC derivatives, including mandatory clearing, exchange trading and transaction reporting of certain OTC derivatives. In October 2012, the final joint rules of the CFTC and the SEC that further define “swap” and “security based swap” became effective. As a result, certain entities are required to register with the CFTC as “swap dealers” or “major swap participants” and our subsidiary, SMBC Capital Markets, Inc., became provisionally registered as a swap dealer on or around December 31, 2012. While some of the U.S. swaps requirements are already final and effective, others are subject to further rulemaking or deferred compliance dates. Mandatory clearing, trade execution and reporting requirements for swaps took effect in the first half of 2013.

Furthermore, the Dodd-Frank Act requires the SEC to establish rules requiring issuers with listed securities, which may include non-U.S. private issuers such as us, to establish a “clawback” policy to recoup previously awarded compensation in the event of an accounting restatement. The Dodd-Frank Act also grants the SEC discretionary rule-making authority to impose a new fiduciary standard on brokers, dealers and investment advisers, and expands the extraterritorial jurisdiction of U.S. courts over actions brought by the SEC or the United States with respect to violations of the antifraud provisions in the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.

Laws Prohibiting Money Laundering and Terrorist Financing

The Bank Secrecy Act / USA PATRIOT Act of 2001

The Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001 (“PATRIOT Act”) contains measures to prevent and detect the financing of terrorism and international money laundering by imposing significant compliance and due diligence obligations, creating crimes, providing for penalties and expanding the extraterritorial jurisdiction of the United States. The Bank Secrecy Act, as amended, imposes anti-money laundering compliance obligations on U.S. financial institutions, including the U.S. offices of foreign banks. The passage of the PATRIOT Act and other events have resulted in heightened scrutiny of compliance with the Bank Secrecy Act and anti-money laundering rules by federal and state regulatory and law enforcement authorities. Certain provisions of the USA Patriot Act expired in June 2015 and were extended in part by the USA Freedom Act of 2015, enacted on June 2015.

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U.S. Sanctions Targeting Iran Related Activities

In July 2010, the U.S. government enacted legislation designed to restrict economic and financial transactions with Iran, i.e., CISADA, which, as amended, may lead to the imposition of sanctions against non-U.S. financial institutions, such as us, if they are determined by the U.S. Secretary of the Treasury to have facilitated “significant transactions” or provided “significant financial services” for certain Iran-linked individuals or entities or the Iranian Revolutionary Guard Corps. Non-U.S. financial institutions that engage in sanctionable activity could lose their ability to open or maintain correspondent or payable-through accounts with U.S. financial institutions, among other possible sanctions.

In December 2011, the U.S. government adopted Section 1245 of the 2012 NDAA, which broadened the range of sanctionable transactions to include conducting or facilitating “significant financial transactions” with the Central Bank of Iran or other Iranian financial institutions designated for sanctions under the International Emergency Economic Powers Act in connection with Iran’s weapons of mass destruction proliferation or support for international terrorism.

In addition, in July 2012, Executive Order 13622, as amended, authorizes the U.S. Secretary of the Treasury, in consultation with the U.S. Secretary of State, to impose correspondent account sanctions on any foreign financial institution that knowingly conducts or facilitates a significant financial transaction with the National Iranian Oil Company or Naftiran Intertrade Company, or that knowingly conducts or facilitates a significant transaction for the purchase, acquisition, sale, transport or marketing of petroleum, petroleum products or petrochemical products from Iran, with certain exceptions.

Further, in August 2012, the President signed the ITRA into law, which strengthens existing sanctions on Iran, especially those aimed at third-country nationals engaging in business with Iran, and includes measures relating to human rights abuses in Iran and Syria. It exposes non-U.S. persons to possible sanctions if they engage in specified activities relating to Iran.

In addition, the IFCA, which is included in the U.S. National Defense Authorization Act for Fiscal Year 2013, imposes, among other things, new sanctions against the energy, shipping and shipbuilding sectors of Iran, as well as Iranian port operators, and the sale, supply or transfer to or from Iran of certain precious and other metals and materials. Executive Order 13645 targets, among other things, the automotive sector of Iran and transactions in Iran’s currency, the rial. The IFCA and Executive Order 13645 provide for the imposition of sanctions on persons, including foreign financial institutions, that knowingly engage in activities related to the sectors and conduct targeted by the IFCA and Executive Order 13645, and activities involving certain Iranian persons included on the Specially Designated Nationals and Blocked Persons List (the “SDN List”) maintained by OFAC.

The U.S. Secretary of State announced on March 20, 2012 that Japan was among a number of countries that had significantly reduced the volume of crude oil purchases from Iran, and that therefore the 2012 NDAA sanctions would not apply to Japanese financial institutions for a period of 180 days, which period could be renewed based on ongoing reductions in crude oil purchases from Iran. The NDAA Exception was renewed on September 14, 2012, March 13, 2013, and September 6, 2013. The NDAA Exception, which was subject to certain restrictions, also exempted Japanese financial institutions from sanctions under certain provisions of Executive Order 13622, the IFCA, and Executive Order 13645.

On January 20, 2014, the U.S. government issued certain temporary sanctions waivers as part of the JPOA among the P5 + 1 and Iran (“JPOA Waivers”). While in effect, the JPOA Waivers supersede the NDAA Exception, which expired on March 5, 2014. The effective period of the JPOA Waivers (“JPOA Relief Period”) was originally from January 20, 2014 through July 20, 2014, but was successively extended through July 13, 2015. Pursuant to the JPOA Waivers, the U.S. government agreed not to seek reductions in the volume of Iranian crude oil purchased by current authorized purchasers, including Japan, during the JPOA Relief Period. Additionally, non-U.S. financial institutions, such as us, that engaged in certain transactions initiated and completed during the JPOA Relief Period relating to exports of Iranian petrochemical products, petroleum and

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petroleum products, Iran’s automotive sector, Iran’s trade in gold and precious metals, and the supply and installation of certain spare parts and services for civil aircraft in Iran would not be targeted for secondary sanctions under U.S. law, pursuant to the JPOA Waivers. As discussed below, on July 14, 2015, the sanctions relief provided for in the JPOA was further extended.

As part of the JPOA, the P5 + 1 and Iran agreed on a process to authorize or facilitate the release in installments over the initial JPOA Relief Period (January 20, 2014 through July 20, 2014) of $4.2 billion of Iran’s restricted funds held in banks outside Iran and outside the United States, contingent on Iran fulfilling its commitments under the JPOA. The United States Government worked with non-U.S. financial institutions to implement the release of such funds to Iran. As part of the extension of the JPOA Relief Period to November 24, 2014, the P5 + 1 agreed to allow Iran access to an additional $2.8 billion of its restricted assets in installments. According to the U.S. Treasury Department, the P5+1 fulfilled their commitments to facilitate the release of $4.2 billion during the initial JPOA Relief Period and to facilitate the release of a further $2.8 billion through November 24, 2014. Further, as part of a further extension of the JPOA Relief Period, the P5 + 1 agreed to facilitate the release in installments of an additional $4.9 billion of Iran’s restricted funds during the period beginning on November 25, 2014, and ending on June 30, 2015. In addition, the JPOA, among other things, established a financial channel to facilitate humanitarian trade for Iran’s domestic needs using Iranian oil revenues held abroad. For a description of the remittances the Bank conducted in connection with the export of humanitarian goods to Iran under applicable laws and regulations, see “—Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934.”

In April 2015, the parties to the JPOA reached an understanding on the framework for a Joint Comprehensive Plan of Action for containing Iran’s nuclear program (“JCPOA”). In May 2015, President Obama signed into law the Iran Nuclear Agreement Review Act of 2015, which establishes a mechanism for Congressional review of any new agreement reached between the United States and Iran related to Iran’s nuclear program.

On July 14, 2015, the P5 + 1 and Iran, with the European Union, agreed on the final text of the JCPOA . Building on the framework for a JCPOA announced in April, the JCPOA will provide Iran with phased sanctions relief upon verification that Iran has implemented key nuclear commitments. Under the JCPOA, U.S. sanctions relief will be provided through the suspension and eventual termination of nuclear-related secondary sanctions, beginning once the International Atomic Energy Agency (“IAEA”) verifies that Iran has implemented key nuclear-related measures described in the JCPOA (“Implementation Day”). The U.S. government has stated that it will publish detailed guidance related to the JCPOA prior to Implementation Day, but as of July 15, 2015, this guidance has not yet been issued. Pursuant to the JCPOA, the sanctions relief provided for in the JPOA has been extended through Implementation Day. This JPOA sanctions relief is the only Iran-related sanctions relief in effect until further notice. Effective July 14, 2015, all specific licenses issued pursuant to OFAC’s “Second Amended Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry” with an expiration date on or before July 14, 2015, are hereby authorized to remain in effect according to their terms until Implementation Day.

Ukraine Freedom Support Act of 2014

In order to deter the Russian government from further destabilizing and invading Ukraine, the U.S. government enacted H.R. 5859, the Ukraine Freedom Support Act of 2014 (signed into law on December 18, 2014). Among other things, the Act authorizes prohibitions or strict limitations on the opening or maintaining of correspondent or payable-through accounts in the United States by non-U.S. financial institutions determined by the U.S. government (i) to have knowingly engaged in on or after December 18, 2014 in significant transactions involving certain activities described in the Act, including those involving individuals or entities on whom sanctions are imposed pursuant to the Act for making a significant investment in a project for the extraction of deepwater, Arctic offshore or shale formation crude oil in Russia, or (ii) to have knowingly facilitated, on or after June 16, 2015, a significant financial transaction on behalf of any Russian individual or entity included on the SDN List pursuant to Ukraine-related sanction programs.

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Foreign Account Tax Compliance Act

Provisions of the U.S. tax law commonly referred to as the Foreign Account Tax Compliance Act (“FATCA”), which became effective on July 1, 2014, aim to prevent U.S. persons from hiding their financial assets or evading their U.S. federal income tax obligations by the use of offshore accounts. A foreign financial institution that has entered into an agreement with the U.S. Internal Revenue Service (“IRS”) pursuant to which it agrees to comply with FATCA, referred to as a “participating foreign financial institution” (“PFFI”), is required to perform specified due diligence, reporting and withholding functions (a “PFFI agreement”). Specifically, under FATCA, a PFFI is required to ascertain the U.S. status of customers through specified due diligence and report certain information annually to the IRS. In cases where customers are not compliant with FATCA, PFFIs are obligated to carry out specified reporting and withholding procedures as prescribed. The consequences for foreign financial institutions that are not compliant with FATCA include being subjected to a 30% withholding tax on certain withholdable payments from U.S. sources and reporting to the IRS.

As of July 1, 2015, the United States entered into intergovernmental agreements or reached agreements in substance with more than 100 countries in furtherance of the objectives of FATCA, which modify the operation of FATCA with respect to financial institutions located in those countries. On June 11, 2013 the United States and Japan entered into an intergovernmental agreement to facilitate the implementation of FATCA pursuant to which Japanese financial institutions (such as us and certain of our Group companies) are directed by the Japanese authorities to register with the IRS and fulfill obligations consistent with those required under a PFFI agreement. We have registered with the IRS to become a PFFI. We are committed to complying with FATCA as a PFFI and abiding by the terms of our PFFI agreement with the IRS within the jurisdictions in which we operate and in accordance with the time frame set out by the IRS. We intend to closely monitor FATCA developments and evolving industry practices to ensure continued compliance with FATCA moving forward.

Other Regulations in the United States

In the United States, the Bank’s U.S.-registered broker-dealer subsidiary, SMBC Nikko Securities America, is regulated by the SEC. Broker-dealers are subject to regulations that cover all aspects of the securities business, including:

• sales methods;

• trade practices among broker-dealers;

• use and safekeeping of customers’ funds and securities;

• capital structure;

• record-keeping;

• the financing of customers’ purchases; and

• the conduct of directors, officers and employees.

In addition, SMBC Nikko Securities America is a member of and regulated by the Financial Industry Regulatory Authority and is regulated by the individual state securities authorities in the states in which it operates. The U.S. government agencies and self-regulatory organizations, as well as state securities authorities in the United States having jurisdiction over the Bank’s U.S. broker-dealer affiliates, are empowered to conduct administrative proceedings that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer or its directors, officers or employees.

Regulations in Other Jurisdictions

Elsewhere in the world, our operations are subject to regulation and control by local central banks and monetary authorities.

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Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934

Section 13(r) of the Securities Exchange Act of 1934, as amended, requires an issuer to disclose whether it or any of its affiliates knowingly engaged in certain activities or transactions relating to Iran or with individuals or entities designated by the U.S. government under specified Executive Orders, even if those activities are not prohibited by U.S. law and are conducted outside the United States by non-U.S. affiliates. During the twelve months ended March 31, 2015, one affiliate of SMFG, SMBC, engaged in activities subject to disclosure under Section 13(r). SMBC conducted these activities consistent with its internal policies and procedures, the policies and procedures of SMFG, and applicable laws and regulations.

SMBC issued letters of credit and provided remittance and other settlement services in connection with customers’ trade transactions between Japan and Iran. These transactions principally involved the importation of oil into Japan or exportation of civilian commercial products from Japan and were conducted with Iranian banks. Under the exception for Japanese financial institutions under the 2012 NDAA, SMBC supported a Japanese importing company by paying bills of exchange in connection with imports of crude oil from an Iranian oil company designated under Executive Order 13382. These transactions did not involve the settlement of U.S. dollar-denominated payments cleared through U.S. banks. SMBC has informed SMFG that it intends to continue to engage in these types of transactions on a limited basis to the extent permitted under applicable regulations. For the twelve months ended March 31, 2015, the gross revenue related to these transactions was ¥11.8 million, representing about 0.0004% of SMFG’s total interest and fee income. SMFG does not allocate direct costs to interest and fee income and therefore does not calculate net profits with respect to these transactions.

In addition, in accordance with the JPOA, SMBC has conducted certain settlement services related to humanitarian trades with Iran. We are voluntarily disclosing such transactions, although we do not believe those transactions are subject to disclosure under Section 13(r) of the Securities Exchange Act of 1934. The JPOA provides for the establishment of a financial channel to facilitate humanitarian trade for Iran’s domestic needs using Iranian oil revenues held abroad. The overall framework to provide these services is based on an agreement between the U.S. and Japanese authorities and was reviewed by U.S. and Japanese authorities for compliance with applicable laws and regulations. The services provided under the framework are permitted under certain conditions; the remittance must be in Japanese Yen through a “Special Purpose Account” for humanitarian trade; and the sellers of the humanitarian goods, namely food, agricultural products, medicines and medical devices, are limited to Japanese entities and entities permitted by U.S. regulators. To facilitate the export of humanitarian goods to Iran, at the request of U.S. and Japanese regulators and with the written authorization of the U.S. government, SMBC has provided remittances in connection with the export of humanitarian goods to Iran starting in March 2014. These transactions were conducted through the use of yen accounts maintained with SMBC in Japan by some Iranian financial institutions that are not designated under Executive Order 13382 or 13224, nor controlled by the Iranian government. These transactions did not involve U.S. dollars or clearing services of U.S. banks for the settlement of payments. SMBC intends to continue to provide these remittance and other settlement services in connection with the exports of humanitarian goods to Iran to the extent that U.S. and Japanese regulators continue to make such requests, and that the services are permitted under applicable laws and regulations.

In the past, SMBC has issued performance bonds that supported various projects, including the construction of petroleum plants in Iran. Some of these performance bonds may have had counterparties that were entities or instrumentalities of the Government of Iran, or were issued through Iranian banks that have since been designated under Executive Order 13382 or 13224. All of these performance bonds have matured, and SMBC has not renewed and will not renew them, but SMBC continues to have obligations under the matured performance bonds until they are returned or cancelled by the beneficiaries. In connection with a beneficiary’s cancellation of a performance bond, SMBC paid a cancellation fee of ¥42 million in Japanese yen, with the authorization of the Ministry of Finance of Japan, to an Iranian bank that is designated under Executive Order 13382. SMBC has also received fees from its customers on whose behalf it issued the performance bonds. For the twelve months ended March 31, 2015, the gross revenue relating to these transactions was ¥50 million, representing less than 0.0018%

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of SMFG’s total interest and fee income. As noted above, SMFG does not allocate direct costs to interest and fee income and therefore does not calculate net profits with respect to these transactions. SMBC has informed SMFG that it intends to continue to accept fee income from its customers for whose account the performance bonds were issued and to pay the relevant fees to the Iranian banks, to the extent authorized by the Ministry of Finance of Japan or otherwise permitted under applicable regulations, until the bonds are returned or cancelled. However, SMBC strongly urges the relevant customers to ask the beneficiaries to agree to return or cancel these performance bonds.

SMBC has frozen all accounts of Iranian banks designated under Executive Order 13382 or 13224 pursuant to Japanese foreign exchange laws, and has frozen U.S. dollar accounts of other Iranian banks. SMBC still maintains two Japanese yen accounts of government-owned Iranian banks, including an account for the Central Bank of Iran, and certain transactions described in this disclosure were conducted through the use of such accounts. These transactions were conducted in accordance with Japanese law, and we do not believe that the transactions were sanctionable under U.S. sanctions, due to the exception for Japanese financial institutions under the 2012 NDAA and JPOA Waivers that were in effect at the time the transactions occurred. For a description of the exception under the 2012 NDAA and JPOA Waivers described in this paragraph, see “—Regulations in the United States—Laws Prohibiting Money Laundering and Terrorist Financing.” The gross revenue attributable to the accounts of government-owned Iranian banks for the twelve months ended March 31, 2015, was less than ¥0.1 million, representing less than 0.0001% of SMFG’s total interest and fee income. SMFG does not allocate direct costs to interest and fee income and therefore does not calculate net profits with respect to these transactions. SMBC has informed SMFG that it intends to continue to maintain the Iranian accounts described above to the extent permitted under applicable laws and regulations.

Between 2001 and 2006, prior to changes in applicable laws and regulations, SMBC made loans to Japanese-owned entities involved in financing the development of petroleum-related projects in Iran that may have been commissioned by the Government of Iran. One such borrower owed SMBC an overdue balance until November 2014, at which time it repaid the entire amount pursuant to a specific license from OFAC. No additional loans have been extended since then, and SMBC has no plans to do so in the future.

As of the date of this annual report, to our knowledge, there are no other activities for the twelve months ended March 31, 2015 that require disclosure under Section 13(r) of the Securities Exchange Act of 1934.

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4.C.    ORGANIZATIONAL STRUCTURE

The following chart presents our corporate structure summary at March 31, 2015.

(1) These companies are our associates.

As the ultimate holding company of the Group, we are responsible for:

• group strategy and management;

• group resource allocation;

• group financial accounting;

• investor relations;

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• capital strategy;

• group IT strategy;

• HR management for group executives;

• group risk management, internal control and compliance;

• compensation schemes; and

• efficiently harmonizing our operations on a Group-wide basis.

Principal Subsidiaries

Our principal subsidiaries at March 31, 2015 are shown in the list below. We consolidate all entities that we control. We control an entity when we are exposed, or have rights, to variable returns from our involvement with the entity and have the ability to affect those returns through our power over the entity.

Principal domestic subsidiaries

Company Name	Proportion of  Ownership Interest(1)		Proportion of Voting Rights(1)			Main Business
	(%)		(%)
Sumitomo Mitsui Banking Corporation		100.0		100.0		Commercial banking
THE MINATO BANK, LTD.		6.0		46.4	(2)(3)	Commercial banking
Kansai Urban Banking Corporation		59.8		60.1		Commercial banking
SMBC Trust Bank Ltd.		100.0		100.0		Trust Banking
SMBC Guarantee Co., Ltd.		100.0		100.0		Credit guarantee
Sumitomo Mitsui Finance and Leasing Company, Limited		60.0		60.0		Leasing
SMBC Nikko Securities Inc.		100.0		100.0		Securities
SMBC Friend Securities Co., Ltd.		100.0		100.0		Securities
Sumitomo Mitsui Card Company, Limited		65.9		65.9		Credit card
Cedyna Financial Corporation		100.0		100.0		Credit card and consumer credit
SMBC Consumer Finance Co., Ltd.		100.0		100.0		Consumer lending
SAKURA CARD CO., LTD.		100.0		100.0		Credit card
Mobit Co., LTD.		100.0		100.0		Consumer lending
SMM Auto Finance, Inc.		51.0		51.0		Automobile sales financing
SMBC Finance Service Co., Ltd.		100.0		100.0		Collecting agent and factoring
The Japan Research Institute, Limited		100.0		100.0		System development, data processing, management consulting and economic research
SAKURA KCS Corporation		50.2		50.2		System engineering and data processing
Financial Link Co., Ltd.		100.0		100.0		Data processing service and consulting
SMBC Venture Capital Co., Ltd.		40.0		40.0	(3)	Venture capital
SMBC Consulting Co., Ltd.		100.0		100.0		Management consulting and information services
Japan Pension Navigator Co., Ltd.		69.7		69.7		Operational management of defined contribution pension plans

(1) Percentages of proportion of ownership interest and proportion of voting rights have been truncated.

(2) We have a 6.0% direct holding in THE MINATO BANK, LTD., and can control a further 40.4% of the voting rights held by the Bank’s retirement benefit trust under contractual agreements between the Bank and the retirement benefit trust.

(3) These companies are accounted for as subsidiaries, despite our holdings of less than 50% of the voting rights, because we are able to govern the financial and operating policies of these companies under a statute or an agreement, or by delegating the majority of the members of the board of directors.

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Principal foreign subsidiaries

Company Name	Country of Incorporation	Proportion of Ownership Interest(1)		Proportion of Voting Rights(1)		Main Business
		(%)		(%)
Sumitomo Mitsui Banking Corporation Europe Limited	U.K.		100.0		100.0	Commercial banking
Sumitomo Mitsui Banking Corporation (China) Limited	China		100.0		100.0	Commercial banking
Manufacturers Bank	U.S.A.		100.0		100.0	Commercial banking
Sumitomo Mitsui Banking Corporation of Canada	Canada		100.0		100.0	Commercial banking
Banco Sumitomo Mitsui Brasileiro S.A.	Brazil		100.0		100.0	Commercial banking
JSC Sumitomo Mitsui Rus Bank	Russia		100.0		100.0	Commercial banking
PT Bank Sumitomo Mitsui Indonesia	Indonesia		98.4		98.4	Commercial banking
Sumitomo Mitsui Banking Corporation Malaysia Berhad	Malaysia		100.0		100.0	Commercial banking
SMBC Leasing and Finance, Inc.	U.S.A.		100.0		100.0	Leasing
SMBC Aviation Capital Limited	Ireland		90.0		90.0	Leasing
SMBC Nikko Securities America, Inc.	U.S.A.		100.0		100.0	Securities
SMBC Nikko Capital Markets Limited	U.K.		100.0		100.0	Securities
SMBC Capital Markets, Inc.	U.S.A.		100.0		100.0	Derivatives

(1) Percentages of proportion of ownership interest and proportion of voting rights have been truncated.

4.D.    PROPERTY, PLANT AND EQUIPMENT

The assets for rent we own for the purpose of operating leases mainly consist of aircraft for the leasing business. We own or lease the land and buildings in which we conduct our business. Most of the property that we operate in Japan is owned by us to be used by our branches. In contrast, our international operations are conducted out of leased premises. Our head office building in Marunouchi is leased from a third party. Our largest property is the site of the Bank’s former Otemachi head office, with a net carrying value of ¥123 billion at March 31, 2015. The redevelopment of the building on the site started in April 2011 and was completed in June 2015.

The following table shows the net carrying amount of our tangible fixed assets at March 31, 2015.

	At March 31, 2015
	(In millions)
Assets for rent	¥	1,506,709
Land		492,732
Buildings		302,641
Leased assets		8,368
Others		186,047
Total	¥	2,496,497

For more information, see Note 12 “Property, Plant and Equipment” and Note 38 “Assets Pledged and Received as Collateral” to our consolidated financial statements included elsewhere in this annual report.

The total area of land related to our material office and other properties at March 31, 2015 was approximately 721,000 square meters for owned land and approximately 17,000 square meters for leased land.

We are not aware of any material environmental issues that may affect the utilization of our assets.

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Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

The discussion below should be read together with “Item 3.A. Selected Financial Data” and our consolidated financial statements and related notes included elsewhere in this annual report. Unless otherwise indicated, we present our information on a consolidated basis.

OVERVIEW

Operating Environment

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

For the fiscal year ended March 31, 2015, Japanese gross domestic product (“GDP”) decreased by 0.9%, compared with an increase of 2.1% in the previous fiscal year, based on data published in June 2015 by the Cabinet Office of the Government of Japan.

In the first half of the fiscal year ended March 31, 2015, the Japanese economy was temporarily sluggish, reflecting a decline in demand following the rush demand ahead of the consumption tax increase that took place in April 2014. Quarter-on-quarter growth rates of Japanese GDP were minus 1.7% for the period from April to June 2014 and minus 0.5% for the period from July to September 2014. In the second half of the fiscal year, the economy gradually improved, supported by improvements in corporate earnings and employment situation. As a result, Japanese GDP increased, on a quarter-on-quarter basis, by 0.3% for the period from October to December 2014 and by 1.0% for the period from January to March 2015.

Private consumption, which accounts for about 58% of Japanese GDP, decreased by 3.1% for the fiscal year ended March 31, 2015. The decrease reflected a decline in demand following the rush demand ahead of the consumption tax increase that took place in April 2014. In particular, for the period from April to June 2014, immediately after the consumption tax increase, private consumption decreased by 5.1% on a quarter-on-quarter basis, although it increased by 0.4% on a quarter-on-quarter basis for the period from July to September 2014. In the second half of the fiscal year, private consumption showed some resilience, reflecting the gradual improvement in the employment and income situation. For both periods from October to December 2014 and from January to March 2015, private consumption increased by 0.4% on a quarter-on-quarter basis.

Private investment, which accounts for about 16% of Japanese GDP, consists of capital investments by business and private residential investments. Capital investments by business increased by 0.4% for the fiscal year ended March 31, 2015. Capital investments by business decreased by 4.8% on a quarter-on-quarter basis for the period from April to June 2014. Thereafter, capital investments increased, on a quarter-on-quarter basis, by 0.1% for the period from July to September 2014, by 0.3% for the period from October to December 2014, and by 2.7% for the period from January to March 2015, reflecting the improvement in corporate earnings. Private residential investments decreased by 11.7% for the fiscal year ended March 31, 2015, due to a decline in demand following the rush demand ahead of the consumption tax increase in April 2014. For the periods from April to June 2014 and July to September 2014, private residential investments decreased, on a quarter-on-quarter basis, by 10.8% and 6.4%, respectively. Thereafter, the decrease slowed and the quarter-on-quarter growth rate of private residential investments was minus 0.6% for the period from October to December 2014. Then, for the period from January to March 2015, private residential investments increased by 1.7% on a quarter-on-quarter basis.

Changes in private inventories contributed 0.5 percentage points to Japanese GDP growth for the fiscal year ended March 31, 2015. For the period from April to June 2014, changes in private inventories contributed

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1.3 percentage points to Japanese GDP growth on a quarter-on-quarter basis. However, changes in private inventories pulled down Japanese GDP growth, on a quarter-on-quarter basis, by 0.7 percentage points for the period from July to September 2014 and by 0.2 percentage points for the period from October to December 2014. Thereafter, for the period from January to March 2015, changes in private inventories contributed 0.6 percentage points to Japanese GDP growth on a quarter-on-quarter basis.

The ratio of exports of goods and services to Japanese GDP was about 17%, and exports of goods and services increased by 8.0% for the fiscal year ended March 31, 2015. For the period from April to June 2014, exports of goods and services were almost flat on a quarter-on-quarter basis, due to a slow recovery of exports to the U.S. and some Asian countries. However, exports of goods and services subsequently increased, on a quarter-on-quarter basis, by 1.6% for the period from July to September 2014, by 3.2% for the period from October to December 2014 and by 2.4% for the period from January to March 2015, reflecting the depreciation of the yen and increasing demand in the U.S. where the economy was resilient.

The ratio of imports of goods and services to Japanese GDP was about 15%, and imports of goods and services increased by 3.7% for the fiscal year ended March 31, 2015. For the period from April to June 2014, imports of goods and services decreased by 5.2% on a quarter-on-quarter basis, due to a decline in demand following the rush demand ahead of the consumption tax increase that took place in April 2014. Thereafter, imports of goods and services continued to increase, reflecting robust domestic demand. Imports of goods and services increased, on a quarter-on-quarter basis, by 1.1% for the period from July to September 2014, by 1.4% for the period from October to December 2014 and by 2.9% for the period from January to March 2015.

Industrial production was relatively weak in the first half of the fiscal year ended March 31, 2015, but showed some signs of improvement in the second half of the fiscal year. The momentum of recovery in industrial production was maintained as a whole.

The employment situation improved as a whole during the fiscal year ended March 31, 2015. The active job openings-to-applicants ratio continued to improve as a whole. In addition, the unemployment rate remained relatively low, and the unemployment rate in March 2015 was 3.4%, a decrease of 0.2% from the same month of the previous year, based on the Labor Force Survey by the Statistics Bureau in the Ministry of Internal Affairs and Communications. On the other hand, compensation of employees decreased by 1.6% on a quarter-on-quarter basis for the period from April to June 2014. However, it increased by 0.6% on a quarter-on-quarter basis for the period from July to September 2014. It was flat on a quarter-on-quarter basis for the period from October to December 2014 and increased on a quarter-on-quarter basis by 0.6% for the period from January to March 2015.

Further, according to Teikoku Databank, a research institution in Japan, there were approximately 9,000 corporate bankruptcies in Japan during the fiscal year ended March 31, 2015, a decrease of 10.5% from the previous fiscal year, involving approximately ¥1.9 trillion in total liabilities, a decrease of 31.3% from the previous fiscal year.

In Japanese financial and capital markets, the uncollateralized overnight call rate, which is the benchmark short-term interest rate, remained at relatively low levels during the fiscal year ended March 31, 2015, due to the ongoing provision of ample funds by the BOJ. The yield on newly issued Japanese government bonds with a maturity of 10 years, which is the benchmark long-term interest rate, temporarily declined to the 0.1%-or-more level, but was around 0.4% at March 31, 2015.

The Nikkei Stock Average, which is a price-weighted average of 225 stocks listed on the Tokyo Stock Exchange First Section, rose from ¥14,827.83 at March 31, 2014 to ¥19,206.99 at March 31, 2015. It stood at ¥19,754.36 at March 23, 2015, its highest closing level since April 2000.

The yen depreciated against the U.S. dollar from ¥102.98 at March 31, 2014 to ¥120.21 at March 31, 2015, according to the statistical data published by the BOJ. Thereafter, the yen exchange rate against the U.S. dollar at June 30, 2015 was ¥122.25.

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The global economy gradually headed toward recovery for the fiscal year ended March 31, 2015. The economies of developed countries, including the U.S. and certain European countries, continued to recover gradually, in spite of slower growth in some emerging economies. For further information on exposures to certain European countries, see “Item 5.A. Operating Results—Financial Condition—Exposures to Selected European Countries.”

The U.S. economy continued to recover for the fiscal year ended March 31, 2015, led by domestic demand. However, the pace of the recovery slowed down toward the end of the fiscal year due to the strong dollar and lower oil prices, which led to a slowdown in U.S. oil production and related investments. The European economy continued to recover due to a pick-up in private consumption, although it showed some signs of leveling off in the middle of the fiscal year. China’s economic growth slowed down, and the growth momentum in other Asian economies as a whole continued to be slow for the fiscal year ended March 31, 2015.

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

To address perceived weaknesses in financial regulation revealed by the global financial crisis, regulatory authorities in Japan and foreign countries have been and may continue taking significant steps to enhance regulation of the financial sector. The BCBS and other international bodies are leading efforts to formulate enhanced regulations, including in the areas of capital adequacy and liquidity. The BCBS published the Basel III rules text in December 2010, reflecting agreement on global regulatory standards on capital adequacy and liquidity of internationally active banks. The new rules started to be phased in on January 1, 2013 and will be fully applied from January 2019. To reflect the principal risk-weighted capital measures of the Basel III rules text, the FSA has promulgated new capital adequacy requirements which started to be phased in on March 31, 2013 and will be fully applied from March 31, 2019. For a more detailed description of the capital adequacy rules based on Basel III, see “Item 4.B. Business Overview—Regulations in Japan.”

In the United States, the Dodd-Frank Act which was enacted in July 2010, provides a broad framework for significant regulatory changes across most areas of U.S. financial regulation. The Dodd-Frank Act addresses, among other issues, systemic risk oversight, bank capital standards, the resolution of failing systemically significant U.S. financial institutions, OTC derivatives, the ability of banking entities to engage in proprietary trading activities and invest in hedge funds and private equity funds, consumer and investor protection, hedge fund registration, and securitization. For a more detailed description of the Dodd-Frank Act, see “Item 4.B. Business Overview—Regulations in the United States.”

For a more detailed description of regulations to which we are subject, risks associated with regulatory development and our management policy under this environment, see “Item 3.D. Risk Factors—Risks Related to Our Business, and Risks Related to Our Industry,” “Item 4.B. Business Overview—Regulations in Japan, Regulations in the United States, Regulations in Other Jurisdictions and Description of Operations and Principal Activities—Management Policies.”

Factors Affecting Results of Operation

Income (Loss)

We have three principal sources of operating income: net interest income, net fee and commission income, and net income from trading/investment securities.

Net Interest Income. Net interest income, or the difference between interest income and interest expense, is determined by:

• the amount of interest-earning assets and interest-bearing liabilities;

• the interest spread;

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• the general level of interest rates; and

• the proportion of interest-earning assets to interest-bearing liabilities.

Our principal interest-earning assets are loans and advances, investment securities, and deposits with banks. Our principal interest-bearing liabilities are deposits, borrowings and debt securities in issue. The interest income and expense on trading assets and liabilities are not included in net interest income. Our net interest income is earned mainly by the Bank. The Bank controls its exposure to interest rate fluctuations through asset and liability management operations.

The Bank, like other banks in Japan, makes most domestic loans based on a short-term interest rate, the TIBOR, or a short-term prime rate, which are generally intended to reflect its cost of short-term yen funding. The Bank’s short-term prime rate is affected mainly by changes in the policy interest rates set by the BOJ, which is an uncollateralized overnight call rate.

Prime rates in Japan have been relatively stable since 2000. This is mainly because short-term interest rates, for example, the three-month TIBOR, have declined to nearly zero, and prime rates, which are adjusted according to changes in short-term interest rates, had little room for further decline. The BOJ lowered its target for the uncollateralized overnight call rate from 0.5% to 0.3% in October 2008 and by an additional 0.2 percentage points to 0.1% in December 2008 in order to address market conditions. Following these policy interest rate changes, we lowered our short-term prime rate by 0.2 percentage points from 1.675% to 1.475% in January 2009 and our ordinary deposit rate by 0.02 percentage points from 0.04% to 0.02% in September 2010. In October 2010, the BOJ lowered its target for the uncollateralized overnight call rate to a range of 0% to 0.1% to pursue a virtual zero interest rate policy. In February 2012, the BOJ clarified its monetary policy stance to enhance monetary easing, with the aim of achieving the goal of 1% year-on-year rate of increase in the consumer price index (“CPI”). Moreover, in January 2013, the BOJ decided to set the price stability target at 2% in terms of the year-on-year rate of increase in the CPI and pursue aggressive monetary easing. In order to achieve the price stability target at the earliest possible time, the BOJ announced in April 2013 the introduction of “quantitative and qualitative monetary easing” including doubling the monetary base and the amounts outstanding of Japanese government bonds as well as exchange-traded funds in two years. In addition, the BOJ announced on October 31, 2014 the expansion of its “quantitative and qualitative monetary easing.” The following table sets forth the Bank’s short-term prime rate, three-month TIBOR, ordinary deposit rate, long-term prime rate and ten-year swap rate, at the dates indicated:

	At March 31,
	2015			2014			2013
Short-term prime rate		1.475	%		1.475	%		1.475	%
Three-month TIBOR		0.172			0.212			0.250
Ordinary deposit rate		0.020			0.020			0.020
Long-term prime rate		1.150			1.200			1.150
Ten-year swap rate		0.576			0.825			0.686

It is difficult to earn a wide interest spread when interest rates are at a low level, as they currently are in Japan. When interest rates rise from extremely low levels, interest spreads at commercial banks generally increase. However, interest spreads may temporarily decrease immediately after an increase in interest rates because it may take time for banks to increase lending rates correspondingly, in contrast to their funding rates. After an adjustment period, lending rates generally also increase and banks are able to secure a wider interest spread than in a low interest rate environment. Conversely, interest spreads may temporarily increase immediately after a decrease in interest rates because it may take time for banks to decrease lending rates correspondingly, in contrast to their funding rates. After an adjustment period, lending rates generally also decrease and banks generally are not able to maintain a wide interest spread. While various factors may affect the level of net interest income, generally the loan-to-deposit interest spread increases when short-term interest rates rise, particularly in the current low interest-rate environment.

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Net Fee and Commission Income. We earn fees and commissions from a variety of services. The primary components of the Bank’s net fee and commission income are fees and commissions related to money remittances and transfers, investment trusts, loans (such as loan commitment fees and loan arrangement fees), securities transactions (such as bond trustee fees and bond recording agency fees) and guarantees and acceptances. Other fees and commissions include fees from investment banking and electronic banking.

In addition, we earn a significant amount of fees and commissions from our credit card business, conducted through Sumitomo Mitsui Card and Cedyna, and from our securities business, conducted through SMBC Nikko Securities and SMBC Friend Securities. The principal components of Sumitomo Mitsui Card’s and Cedyna’s fees and commissions are membership fees from retailers and annual cardholder membership fees, while those of SMBC Nikko Securities’ and SMBC Friend Securities’ fees and commissions are subscription and agent commissions from investment trusts and underwriting commissions.

The principal factors affecting fees and commissions are the demand for the services provided, the fees charged for those services and fees charged by competitors for similar services. The volume of services provided also affects profitability, as our fee businesses have significant economies of scale. In order to diversify sources of revenue and enhance return on assets, we are expanding our fees and commissions businesses, including sales of investment trusts and life insurance products, and investment banking businesses.

Net Income from Trading/Investment Securities. We undertake significant trading activities involving a variety of financial instruments, including derivatives. Our income from these activities is subject to volatility caused by, among other things, changes in interest rates, foreign exchange rates, equity prices or other market variables. Any unexpected change in interest rates could affect the fair value of our interest rate derivative positions and our net income from trading activities. Net trading income consists of margins made on market-making and our customer business as well as changes in fair value of trading assets and liabilities and derivative financial instruments. It also includes net interest and dividend income on these instruments.

We have substantial investments in debt securities as available-for-sale financial assets. In particular, Japanese government bonds represent a significant part of our bond portfolio. We also own debt securities denominated in foreign currencies, principally the U.S. dollars. We also have investments in equity securities as available-for-sale financial assets, which include our strategic investments in stocks issued by our customers. Net investment income includes the gains and losses arising from the sales or redemptions of available-for-sale financial assets and the dividend income earned from available-for-sale equity instruments. Increases in interest rates or declines in equity prices could substantially decrease the fair value of our available-for-sale financial assets.

Operating income from other than these three principal sources is included in “Net income from financial assets at fair value through profit or loss” or “Other income.” Net income from financial assets at fair value through profit or loss includes gains and losses arising from sales and the change in the fair value of the instruments such as hybrid instruments classified as financial assets at fair value through profit or loss. It also includes interest and dividend income on these instruments. Other income consists primarily of income from operating leases conducted by SMFL and income related to IT solution services.

Expenses

Impairment Charges on Financial Assets. Our impairment charges are recorded primarily due to impairment on loans and advances and on investment securities.

Impairment charges on loans and advances are affected by the economic environment and financial conditions of borrowers. During periods of economic slowdown, corporate and individual borrowers are generally more likely to suffer credit rating downgrades, or become delinquent or default on their borrowings. The slowdown in the domestic or global economy may increase credit costs relating to a wide range of industries.

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Declines in market prices for domestic and foreign investment securities may result in our recording impairment charges. We assess at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity instruments classified as available-for-sale, a significant or prolonged decline in the fair value of the instrument below its cost is also considered to be such evidence in determining whether the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss, measured as the difference between the cost and the current fair value less any impairment charges on that financial asset previously recognized in profit or loss, is removed from equity and recognized in profit or loss.

General and Administrative Expenses. General and administrative expenses consist primarily of personnel expenses (salaries and related expenses), depreciation and amortization expenses, and other expenses (rent and lease expenses, premiums for deposit insurance, publicity and advertising expenses, and communication expenses).

Other Expenses. Other expenses consist primarily of cost of operating leases, costs related to IT solution services and IT systems, losses on disposal of property, plant and equipment, and other intangible assets, and impairment losses of property, plant and equipment.

Unrealized Gains or Losses on Investment Securities Portfolio

Changes in the fair value of domestic and foreign investment securities result in an increase or a decrease in unrealized gains or losses on available-for-sale financial assets. Unrealized gains or losses arising from changes in the fair value of the investments in these securities are recognized directly in equity, until they are derecognized or impaired.

Most of our domestic equity instruments consist of publicly traded Japanese stocks. The Nikkei Stock Average increased by 19.6% from ¥12,397.91 at March 29, 2013, to ¥14,827.83 at March 31, 2014, and increased by 29.5% to ¥19,206.99 at March 31, 2015. At March 31, 2015, we had net unrealized gains on domestic equity securities of ¥3,031,726 million, an increase of ¥1,005,748 million from ¥2,025,978 million at March 31, 2014. For more information, see “Item 5.A. Operating Results—Financial Condition—Investment Securities.”

Strengthening of Equity Capital

In response to the imposition of more stringent regulatory capital requirements, we have been taking a proactive approach to managing our risk-weighted capital ratio by focusing on increasing qualifying capital, including by building up our retained earnings, identifying risks, and controlling risk-weighted assets.

Foreign Currency Fluctuations

The average exchange rate used to convert dollars to yen in the consolidated financial statements included elsewhere in this annual report for the fiscal year ended March 31, 2015 was ¥109.76 per $1.00, compared to the previous fiscal year’s average exchange rate of ¥100.17 per $1.00. The percentage of revenue we earned from our foreign operations for the fiscal years ended March 31, 2015 and 2014 was 24% and 22%, respectively. For more information, see “Item 4.B. Business Overview—Revenues by Region.”

Critical Accounting Estimates and Judgments

Our financial position and results of operations are influenced by estimates and judgments that management employs in the course of preparation of our consolidated financial statements. We identified the following areas of significant accounting policies to be particularly sensitive in terms of estimates and judgments made by management. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable.

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Allowance for Loan Losses

Allowance for loan losses represents management’s estimate of the losses incurred in the loan portfolios at the end of each reporting period. Management exercises judgments in making assumptions and estimations when calculating the allowance for loan losses on both individually and collectively assessed loans.

The allowance for loan losses for individually significant impaired loans is estimated by management based on the expected future cash flows, taking into account factors such as historical loss information, the appropriateness of the borrower’s business plan or operational improvement plan, the status of progress of its plan, the overall support from financial institutions, and the realizable value of any collateral held. The allowance for loan losses is the difference between the carrying amount of a loan and the discounted present value of expected future cash flows that are estimated by management. The actual future cash flows may differ from the estimates by management and consequently may cause actual loan losses to differ from the reported allowance for loan losses.

The allowance for loan losses for impaired loans that are not individually significant and non-impaired loans is collectively calculated based on the historical loss experience for loans which have similar credit risk characteristics to those in the current loan portfolio using statistical methods. These statistical methods are subject to estimation uncertainty. In normal circumstances, the use of statistical methods evidenced by historical information provides the most objective methodology in assessing inherent losses on loans with similar credit risk characteristics. However, in certain circumstances, the use of historical loss experience alone may not be representative of current loss experiences and as a result it may provide less relevant information about the loss incurred in a given portfolio at the end of the reporting period, particularly in a situation where there have been changes in economic conditions. In these circumstances, we make a judgment to update the historical loss experience based on the most recent loss information, taking into account, among others, the effect of the current economic environment. To estimate the allowance for loan losses for non-impaired loans, which reflects incurred but not yet identified losses for the period between the impairment occurring and the loss being identified, management develops assumptions and methodologies to estimate the loss identification period.

Management estimates and judgments may change from time to time as the economic environment changes or new information becomes available. Changes in these estimates and judgments will result in a different allowance for loan losses and may have a direct impact on impairment charges. Impairment charges on loans and advances amounting to ¥79,552 million and ¥138,375 million were recognized for the fiscal years ended March 31, 2015 and 2013 respectively, whereas previously recognized impairment charges on loans and advances amounting to ¥25,806 million were reversed for the fiscal year ended March 31, 2014.

Fair Value of Financial Instruments

Some of our financial instruments are measured at fair value with changes in fair value recognized in profit or loss, such as trading assets and liabilities, financial assets at fair value through profit or loss, and derivative financial instruments. Available-for-sale financial assets are also measured at fair value with changes in fair value reported in other comprehensive income.

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Our financial assets and liabilities measured at fair value are mostly valued based on quoted prices in active markets, or using valuation techniques that incorporate inputs, other than quoted market prices, that are observable either directly or indirectly in the market, including dealers’ quotes. We principally use valuation techniques that are commonly used by market participants to price the instruments. To the extent practical, the valuation models make maximum use of observable data. However, for certain financial assets and liabilities, the fair values are measured by using valuation techniques with significant unobservable inputs. In such cases, significant management estimates are made, resulting in a less objective measurement of fair value.

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The risk management departments in each subsidiary regularly review significant valuation methodologies and recalibrate model parameters and inputs, both observable and unobservable, in an effort to ensure an appropriate estimation of fair value has been made. Where significant management judgments are required in valuation, we establish a valuation control framework to validate the valuation models and fair values calculated based on such valuation models. Under the framework, the accounting department is responsible for ensuring that the accounting policies and procedures to determine the fair values are in compliance with the relevant accounting standards.

If the fair value at the trade date, which is measured using a valuation technique with significant unobservable inputs, differs from the transaction price, any gain or loss on the trade date is adjusted to be deferred. Management judgment is required to determine whether significant unobservable inputs exist in the valuation technique.

The financial assets and liabilities are classified into one of three levels within a fair value hierarchy based on the inputs used in the fair value measurement. The three levels of the fair value hierarchy are as follows:

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

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

• Level 3. Significant unobservable inputs for the asset or liability.

Management judgment is involved in determining the level of hierarchy to which each financial instrument should be categorized and in periodical assessments of market liquidity for inputs and price transparency.

In addition to the fair value hierarchy disclosure, we provide a sensitivity analysis of the impact on the Level 3 financial instruments carried at fair value by using reasonably possible alternatives for the unobservable parameters in Note 43 “Fair Value of Financial Assets and Liabilities” to our consolidated financial statements included elsewhere in this annual report. The determination of reasonably possible alternatives requires significant management judgment.

Impairment of Available-for-sale Financial Assets

Available-for-sale financial assets are measured at fair value with changes in fair value reported in available-for-sale financial assets reserve as a separate component of equity until the financial assets are either derecognized or become impaired. If there is objective evidence of impairment as a result of loss events which have an impact on the estimated future cash flows of the financial assets that can be reliably estimated, the cumulative loss previously recognized in equity is removed and recognized in profit or loss as an impairment charge.

We exercise judgment in determining whether there is objective evidence of occurrence of loss events which result in a decrease in estimated future cash flows. The estimation of future cash flows also requires judgment. In the assessment of impairment of available-for-sale equity instruments, we also consider whether there has been a significant or prolonged decline in fair value below their cost. The determination of what is a significant or prolonged decline requires management judgment.

Impairment may occur when there is objective evidence of deterioration in the financial conditions of the investee, industry and sector performance, or changes in operating and financing cash flows. The determination of impairment in this respect also includes significant management judgment.

Management estimates and judgments may change from time to time upon future events that may or may not occur and changes in these estimates and judgments could adversely affect the carrying amounts of available-

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for-sale financial assets. Impairment charges on available-for-sale financial assets reclassified from equity to profit or loss totaled ¥10,586 million, ¥11,531 million and ¥131,770 million for the fiscal years ended March 31, 2015, 2014 and 2013, respectively.

Impairment of Goodwill

Goodwill is tested for impairment at least annually and whenever events or changes in circumstances indicate that it may be impaired. The first step of the impairment test is identifying the cash-generating units (“CGUs”), which represent the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill is then allocated to the CGUs, considering how the goodwill is recognized and other relevant factors.

In the impairment test, the carrying amount of the CGU to which goodwill is allocated is compared against its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Such recoverable amounts are determined based on significant management judgments and assumptions.

We determine the recoverable amount using the estimated future cash flows, pre-tax discount rates, growth rates and other factors. The estimation of future cash flows inherently reflects management judgments, even though such forecasts are prepared taking into account actual past performance and external economic data. The pre-tax discount rates and growth rates may be significantly affected by market interest rates or other market conditions, which are beyond management’s control, and therefore significant management judgments are made to determine these assumptions.

These management judgments are made based on the facts and circumstances at the time of the impairment test, and may vary depending on the situation and time. Changes in management judgments may result in different impairment test results and different impairment losses recognized. There were no impairment losses recognized on goodwill for the fiscal years ended March 31, 2015, 2014 and 2013.

Provision for Interest Repayment

Provision for interest repayment represents management’s estimate of 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.

Management estimates and judgments may change from time to time as the legal environment and market conditions change or new information becomes available. Changes in these estimates and judgments could affect the balance of provision for interest repayment. Provision for interest repayment is recorded in provisions as a liability, and it totaled ¥166,715 million and ¥189,993 million at March 31, 2015 and 2014, respectively.

Retirement Benefits

We have defined benefit plans such as defined benefit pension plans and lump-sum severance indemnity plans. The present value of the defined benefit obligation is calculated based on actuarial valuations that are dependent upon a number of assumptions, including discount rates, mortality rates and future salary (benefit) increases. The discount rates are equivalent to market yields of AA credit-rated corporate bonds that have terms to maturity approximating those of the related obligations. Future mortality rates are based on the official mortality table generally used for actuarial assumptions in Japan. Other assumptions used for the calculation of the defined benefit obligation are based on historical records. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. While we believe that these assumptions are appropriate, any change in these assumptions will impact actuarial gains and losses, as well as the present value of the defined benefit obligations and the net retirement benefit expense for each period. Actuarial gains and losses arising from

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experience adjustments and changes in actuarial assumptions in the year, and return on plan assets excluding interest income are recognized in other comprehensive income and are never reclassified to profit or loss.

The difference between the fair value of the plan assets and the present value of the defined benefit obligation at the end of the reporting period is recognized as assets and liabilities in the consolidated statement of financial position. When this calculation for each plan results in a benefit to us, the recognized asset is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. An economic benefit is available to us, if it is realizable during the life of the plan or on settlement of the plan obligation. The net total of assets and liabilities in the consolidated statement of financial position amounted to net assets of ¥332,674 million and ¥122,118 million at March 31, 2015 and 2014, respectively.

Deferred Tax Assets

We recognize deferred tax assets relating to tax losses carried forward and deductible temporary differences, only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the deductible temporary differences can be utilized. This assessment requires significant management judgments and assumptions. Future taxable profit is estimated based on, among other relevant factors, forecasted results of operations, which are based on historical financial performance and the business plans that management believes to be prudent and feasible. While we carefully assess the realization of tax losses carried forward and deductible temporary differences, the actual taxable profit in the future may be less than the forecast. The deferred tax assets amounted to ¥117,500 million and ¥147,241 million at March 31, 2015 and 2014, respectively, while the net total of deferred tax assets and liabilities amounted to net liabilities of ¥446,305 million and ¥2,010 million in the consolidated statement of financial position at March 31, 2015 and 2014, respectively.

New and Amended Accounting Standards and Recent Accounting Pronouncements

See “New and Amended Accounting Standards Adopted by the SMFG Group” and “Recent Accounting Pronouncements” under Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this annual report.

5.A.    OPERATING RESULTS

Under the economic and financial circumstances described in “Item 5. Operating and Financial Review and Prospects—Overview—Operating Environment,” we made a profit through our commercial banking and other financial services businesses. Our net profit decreased by ¥169,275 million from ¥892,236 million for the fiscal year ended March 31, 2014 to ¥722,961 million for the fiscal year ended March 31, 2015. Although our total operating income increased by ¥108,080 million from ¥3,224,353 million for the fiscal year ended March 31, 2014 to ¥3,332,433 million for the fiscal year ended March 31, 2015, primarily due to increases in net investment income and other income, our net profit decreased primarily due to increases in impairment charges on financial assets and operating expenses.

Our total assets increased by ¥20,550,425 million from ¥158,631,041 million at March 31, 2014 to ¥179,181,466 million at March 31, 2015, primarily due to increases in cash and deposits with banks and loans and advances.

Our total liabilities increased by ¥18,944,765 million from ¥149,215,851 million at March 31, 2014 to ¥168,160,616 million at March 31, 2015, primarily due to increases in deposits, borrowings and debt securities in issue.

Our total equity increased by ¥1,605,660 million from ¥9,415,190 million at March 31, 2014 to ¥11,020,850 million at March 31, 2015, primarily due to increases in retained earnings and other reserves.

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Operating Results

The following table presents information as to our income, expenses and net profit for the fiscal years ended March 31, 2015, 2014 and 2013.

	For the fiscal year ended March 31,
	2015		2014(1)			2013(1)
	(In millions, except per share data)
Interest income	¥	1,782,621	¥	1,714,044		¥	1,725,723
Interest expense		371,107		320,511			321,570
Net interest income		1,411,514		1,393,533			1,404,153
Fee and commission income		1,002,766		1,003,169			948,685
Fee and commission expense		129,253		127,959			127,054
Net fee and commission income		873,513		875,210			821,631
Net trading income		127,759		135,218			105,302
Net income from financial assets at fair value through profit or loss		22,678		58,586			15,794
Net investment income		371,064		332,265			223,404
Other income		525,905		429,541			324,403
Total operating income		3,332,433		3,224,353			2,894,687
Impairment charges (reversals) on financial assets		90,138		(14,275	)		270,145
Net operating income		3,242,295		3,238,628			2,624,542
General and administrative expenses		1,621,897		1,522,990			1,447,116
Other expenses		505,614		428,780			287,896
Operating expenses		2,127,511		1,951,770			1,735,012
Share of post-tax profit of associates and joint ventures		18,124		19,454			19,593
Profit before tax		1,132,908		1,306,312			909,123
Income tax expense		409,947		414,076			255,300
Net profit	¥	722,961	¥	892,236		¥	653,823
Profit attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.	¥	614,070	¥	766,388		¥	535,976
Non-controlling interests		108,891		125,848			117,847
Earnings per share:
Basic	¥	449.13	¥	560.97		¥	395.87
Diluted		448.86		560.68			395.32

(1) Comparative information has been restated to reflect the adoption of IFRIC Interpretation 21 “Levies.” For more information, see Note 2 “Summary of Significant Accounting Policies—New and Amended Accounting Standards Adopted by the SMFG Group” to our consolidated financial statements included elsewhere in this annual report.

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Total operating income increased by ¥108,080 million, or 3%, from ¥3,224,353 million for the fiscal year ended March 31, 2014 to ¥3,332,433 million for the fiscal year ended March 31, 2015, primarily due to increases in net investment income of ¥38,799 million and other income of ¥96,364 million as discussed in detail below. Although impairment charges on financial assets increased, net operating income also increased by ¥3,667 million from ¥3,238,628 million for the fiscal year ended March 31, 2014 to ¥3,242,295 million for the fiscal year ended March 31, 2015, due to the increase in total operating income described above.

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Net profit decreased by ¥169,275 million from ¥892,236 million for the fiscal year ended March 31, 2014 to ¥722,961 million for the fiscal year ended March 31, 2015, as a result of increases in general and administrative expenses and other expenses.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Total operating income increased by ¥329,666 million, or 11%, from ¥2,894,687 million for the fiscal year ended March 31, 2013 to ¥3,224,353 million for the fiscal year ended March 31, 2014, primarily due to increases in net investment income of ¥108,861 million and other income of ¥105,138 million as discussed in detail below. In addition, due to a decrease in impairment charges on financial assets, net operating income increased by ¥614,086 million from ¥2,624,542 million for the fiscal year ended March 31, 2013 to ¥3,238,628 million for the fiscal year ended March 31, 2014.

Net profit increased by ¥238,413 million from ¥653,823 million for the fiscal year ended March 31, 2013 to ¥892,236 million for the fiscal year ended March 31, 2014, as a result of the increase in net operating income described above, which was partially offset by increases in operating expenses and income tax expenses.

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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 rates for the fiscal years ended March 31, 2015, 2014 and 2013.

	For the fiscal year ended March 31,
	2015							2014							2013
	Average balance(3)		Interest income		Average rate			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	¥	741,738	¥	4,548		0.61	%	¥	609,023	¥	2,807		0.46	%	¥	351,808	¥	1,185		0.34	%
Foreign offices		5,892,983		37,348		0.63	%		6,027,100		34,521		0.57	%		4,491,108		28,285		0.63	%
Total		6,634,721		41,896		0.63	%		6,636,123		37,328		0.56	%		4,842,916		29,470		0.61	%
Call loans and bills bought:
Domestic offices		226,409		1,177		0.52	%		273,903		1,583		0.58	%		304,331		1,519		0.50	%
Foreign offices		972,643		17,429		1.79	%		1,154,049		16,559		1.43	%		1,076,378		11,347		1.05	%
Total		1,199,052		18,606		1.55	%		1,427,952		18,142		1.27	%		1,380,709		12,866		0.93	%
Reverse repurchase agreements and cash collateral on securities borrowed:
Domestic offices		4,766,205		7,875		0.17	%		3,749,260		7,339		0.20	%		3,922,361		7,535		0.19	%
Foreign offices		726,427		9,146		1.26	%		419,274		7,631		1.82	%		283,262		5,465		1.93	%
Total		5,492,632		17,021		0.31	%		4,168,534		14,970		0.36	%		4,205,623		13,000		0.31	%
Held-to-maturity investments(1):
Domestic offices		4,086,502		20,509		0.50	%		5,238,921		30,303		0.58	%		5,659,267		39,786		0.70	%
Total		4,086,502		20,509		0.50	%		5,238,921		30,303		0.58	%		5,659,267		39,786		0.70	%
Available-for-sale financial assets(1):
Domestic offices		10,385,945		32,703		0.31	%		12,119,698		35,539		0.29	%		23,444,037		65,814		0.28	%
Foreign offices		2,250,294		29,282		1.30	%		1,780,684		19,956		1.12	%		1,687,202		21,572		1.28	%
Total		12,636,239		61,985		0.49	%		13,900,382		55,495		0.40	%		25,131,239		87,386		0.35	%
Loans and advances(2):
Domestic offices		62,005,587		1,099,119		1.77	%		61,524,516		1,138,102		1.85	%		60,183,531		1,200,792		2.00	%
Foreign offices		23,292,666		523,485		2.25	%		19,553,229		419,704		2.15	%		15,301,802		342,423		2.24	%
Total		85,298,253		1,622,604		1.90	%		81,077,745		1,557,806		1.92	%		75,485,333		1,543,215		2.04	%
Total interest-earning assets:
Domestic offices		82,212,386		1,165,931		1.42	%		83,515,321		1,215,673		1.46	%		93,865,335		1,316,631		1.40	%
Foreign offices		33,135,013		616,690		1.86	%		28,934,336		498,371		1.72	%		22,839,752		409,092		1.79	%
Total	¥	115,347,399	¥	1,782,621		1.55	%	¥	112,449,657	¥	1,714,044		1.52	%	¥	116,705,087	¥	1,725,723		1.48	%

69

	For the fiscal year ended March 31,
	2015							2014							2013
	Average balance(3)		Interest expense		Average rate			Average balance(3)		Interest expense		Average rate			Average balance(3)		Interest expense		Average rate
	(In millions, except percentages)
Interest-bearing liabilities:
Deposits:
Domestic offices	¥	74,397,836	¥	49,356		0.07	%	¥	72,376,165	¥	48,446		0.07	%	¥	70,452,092	¥	51,975		0.07	%
Foreign offices		21,263,919		116,211		0.55	%		17,014,587		91,944		0.54	%		12,801,814		71,403		0.56	%
Total		95,661,755		165,567		0.17	%		89,390,752		140,390		0.16	%		83,253,906		123,378		0.15	%
Call money and bills sold:
Domestic offices		2,040,724		1,504		0.07	%		1,497,244		1,222		0.08	%		1,233,733		1,039		0.08	%
Foreign offices		877,127		2,510		0.29	%		651,839		2,261		0.35	%		642,899		3,098		0.48	%
Total		2,917,851		4,014		0.14	%		2,149,083		3,483		0.16	%		1,876,632		4,137		0.22	%
Repurchase agreements and cash collateral on securities lent:
Domestic offices		5,584,584		6,091		0.11	%		4,167,460		4,558		0.11	%		4,970,577		7,781		0.16	%
Foreign offices		1,455,125		3,829		0.26	%		990,721		2,989		0.30	%		1,079,763		4,228		0.39	%
Total		7,039,709		9,920		0.14	%		5,158,181		7,547		0.15	%		6,050,340		12,009		0.20	%
Borrowings:
Domestic offices		9,170,288		54,915		0.60	%		5,879,723		50,833		0.86	%		6,999,912		63,926		0.91	%
Foreign offices		790,516		16,122		2.04	%		787,217		17,433		2.21	%		808,775		21,293		2.63	%
Total		9,960,804		71,037		0.71	%		6,666,940		68,266		1.02	%		7,808,687		85,219		1.09	%
Debt securities in issue:
Domestic offices		7,000,273		109,960		1.57	%		6,223,653		92,481		1.49	%		5,804,668		87,980		1.52	%
Foreign offices		2,819,687		9,829		0.35	%		2,355,748		7,636		0.32	%		1,884,813		8,132		0.43	%
Total		9,819,960		119,789		1.22	%		8,579,401		100,117		1.17	%		7,689,481		96,112		1.25	%
Other interest-bearing liabilities:
Domestic offices		96,873		731		0.75	%		90,049		689		0.77	%		81,915		683		0.83	%
Foreign offices		3,025		49		1.62	%		2,898		19		0.66	%		7,732		32		0.41	%
Total		99,898		780		0.78	%		92,947		708		0.76	%		89,647		715		0.80	%
Total interest-bearing liabilities:
Domestic offices		98,290,578		222,557		0.23	%		90,234,294		198,229		0.22	%		89,542,897		213,384		0.24	%
Foreign offices		27,209,399		148,550		0.55	%		21,803,010		122,282		0.56	%		17,225,796		108,186		0.63	%
Total	¥	125,499,977	¥	371,107		0.30	%	¥	112,037,304	¥	320,511		0.29	%	¥	106,768,693	¥	321,570		0.30	%
Net interest income and interest rate spread.			¥	1,411,514		1.25	%			¥	1,393,533		1.23	%			¥	1,404,153		1.18	%

(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.

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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 fiscal year ended March 31, 2015 compared to the fiscal year ended March 31, 2014, and those for the fiscal year ended March 31, 2014 compared to the fiscal year ended March 31, 2013.

	Fiscal year ended March 31, 2015 compared to fiscal year ended March 31, 2014 Increase / (decrease)									Fiscal year ended March 31, 2014 compared to fiscal year ended March 31, 2013 Increase / (decrease)
	Volume			Rate			Net change			Volume			Rate			Net change
	(In millions)
Interest income:
Interest-earning deposits with other banks:
Domestic offices	¥	690		¥	1,051		¥	1,741		¥	1,083		¥	539		¥	1,622
Foreign offices		(779	)		3,606			2,827			8,956			(2,720	)		6,236
Total		(89	)		4,657			4,568			10,039			(2,181	)		7,858
Call loans and bills bought:
Domestic offices		(258	)		(148	)		(406	)		(162	)		226			64
Foreign offices		(2,845	)		3,715			870			865			4,347			5,212
Total		(3,103	)		3,567			464			703			4,573			5,276
Reverse repurchase agreements and cash collateral on securities borrowed:
Domestic offices		1,837			(1,301	)		536			(337	)		141			(196	)
Foreign offices		4,379			(2,864	)		1,515			2,491			(325	)		2,166
Total		6,216			(4,165	)		2,051			2,154			(184	)		1,970
Held-to-maturity investments:
Domestic offices		(6,117	)		(3,677	)		(9,794	)		(2,790	)		(6,693	)		(9,483	)
Total		(6,117	)		(3,677	)		(9,794	)		(2,790	)		(6,693	)		(9,483	)
Available-for-sale financial assets:
Domestic offices		(5,262	)		2,426			(2,836	)		(32,763	)		2,488			(30,275	)
Foreign offices		5,785			3,541			9,326			1,151			(2,767	)		(1,616	)
Total		523			5,967			6,490			(31,612	)		(279	)		(31,891	)
Loans and advances:
Domestic offices		8,841			(47,824	)		(38,983	)		26,359			(89,049	)		(62,690	)
Foreign offices		83,406			20,375			103,781			91,889			(14,608	)		77,281
Total		92,247			(27,449	)		64,798			118,248			(103,657	)		14,591
Total interest income:
Domestic offices		(269	)		(49,473	)		(49,742	)		(8,610	)		(92,348	)		(100,958	)
Foreign offices		89,946			28,373			118,319			105,352			(16,073	)		89,279
Total	¥	89,677		¥	(21,100	)	¥	68,577		¥	96,742		¥	(108,421	)	¥	(11,679	)

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	Fiscal year ended March 31, 2015 compared to fiscal year ended March 31, 2014 Increase / (decrease)									Fiscal year ended March 31, 2014 compared to fiscal year ended March 31, 2013 Increase / (decrease)
	Volume			Rate			Net change			Volume			Rate			Net change
	(In millions)
Interest expense:
Deposits:
Domestic offices	¥	1,415		¥	(505	)	¥	910		¥	1,347		¥	(4,876	)	¥	(3,529	)
Foreign offices		23,342			925			24,267			22,831			(2,290	)		20,541
Total		24,757			420			25,177			24,178			(7,166	)		17,012
Call money and bills sold:
Domestic offices		394			(112	)		282			211			(28	)		183
Foreign offices		698			(449	)		249			42			(879	)		(837	)
Total		1,092			(561	)		531			253			(907	)		(654	)
Repurchase agreements and cash collateral on securities lent:
Domestic offices		1,559			(26	)		1,533			(1,148	)		(2,075	)		(3,223	)
Foreign offices		1,249			(409	)		840			(326	)		(913	)		(1,239	)
Total		2,808			(435	)		2,373			(1,474	)		(2,988	)		(4,462	)
Borrowings:
Domestic offices		22,744			(18,662	)		4,082			(9,777	)		(3,316	)		(13,093	)
Foreign offices		73			(1,384	)		(1,311	)		(554	)		(3,306	)		(3,860	)
Total		22,817			(20,046	)		2,771			(10,331	)		(6,622	)		(16,953	)
Debt securities in issue:
Domestic offices		12,006			5,473			17,479			6,270			(1,769	)		4,501
Foreign offices		1,579			614			2,193			1,769			(2,265	)		(496	)
Total		13,585			6,087			19,672			8,039			(4,034	)		4,005
Other interest-bearing liabilities:
Domestic offices		52			(10	)		42			65			(59	)		6
Foreign offices		1			29			30			(26	)		13			(13	)
Total		53			19			72			39			(46	)		(7	)
Total interest expense:
Domestic offices		38,170			(13,842	)		24,328			(3,032	)		(12,123	)		(15,155	)
Foreign offices		26,942			(674	)		26,268			23,736			(9,640	)		14,096
Total	¥	65,112		¥	(14,516	)	¥	50,596		¥	20,704		¥	(21,763	)	¥	(1,059	)
Net interest income:
Domestic offices	¥	(38,439	)	¥	(35,631	)	¥	(74,070	)	¥	(5,578	)	¥	(80,225	)	¥	(85,803	)
Foreign offices		63,004			29,047			92,051			81,616			(6,433	)		75,183
Total	¥	24,565		¥	(6,584	)	¥	17,981		¥	76,038		¥	(86,658	)	¥	(10,620	)

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Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Interest Income

Our interest income increased by ¥68,577 million, or 4%, from ¥1,714,044 million for the fiscal year ended March 31, 2014 to ¥1,782,621 million for the fiscal year ended March 31, 2015. This increase reflected an increase in interest income on loans and advances, which was partially offset by a decrease in interest income on held-to-maturity investments. Interest income on loans and advances increased by ¥64,798 million, or 4%, from ¥1,557,806 million for the fiscal year ended March 31, 2014 to ¥1,622,604 million for the fiscal year ended March 31, 2015. Interest income on loans and advances at foreign offices increased by ¥103,781 million, or 25%, from ¥419,704 million for the fiscal year ended March 31, 2014 to ¥523,485 million for the fiscal year ended March 31, 2015, due to an increase in the average balances of loans to foreign customers, reflecting our allocation of assets primarily to Asian countries and the United States. Interest income on loans and advances at domestic offices decreased by ¥38,983 million, or 3%, from ¥1,138,102 million for the fiscal year ended March 31, 2014 to ¥1,099,119 million for the fiscal year ended March 31, 2015, due to a decrease in average rate reflecting increasing competition in the commercial banking industry. Interest income on held-to-maturity investments decreased by ¥9,794 million, or 32%, from ¥30,303 million for the fiscal year ended March 31, 2014 to ¥20,509 million for the fiscal year ended March 31, 2015, due to a decrease in average balances at our domestic offices reflecting a decrease in investments in Japanese government bonds.

Interest Expense

Our interest expense increased by ¥50,596 million, from ¥320,511 million for the fiscal year ended March 31, 2014 to ¥371,107 million for the fiscal year ended March 31, 2015, primarily due to increases in interest expense on deposits and debt securities in issue. Our interest expense on deposits increased by ¥25,177 million, or 18%, from ¥140,390 million for the fiscal year ended March 31, 2014 to ¥165,567 million for the fiscal year ended March 31, 2015, primarily due to an increase at foreign offices. Interest expense on debt securities in issue increased by ¥19,672 million, or 20%, from ¥100,117 million for the fiscal year ended March 31, 2014 to ¥119,789 million for the fiscal year ended March 31, 2015, primarily due to an increase in average balances.

Net Interest Income

Our net interest income increased by ¥17,981 million, or 1%, from ¥1,393,533 million for the fiscal year ended March 31, 2014 to ¥1,411,514 million for the fiscal year ended March 31, 2015. The net interest income increased primarily due to an increase in interest income on loans and advances, which was partially offset by increases in the interest expense on deposits and debt securities in issue.

From the fiscal year ended March 31, 2014 to March 31, 2015, the average rate on loans and advances at domestic offices decreased by 0.08 percentage points from 1.85% to 1.77%, primarily due to the increasing competition in the commercial banking industry. The average rate on loans and advances at foreign offices increased by 0.10 percentage points from 2.15% to 2.25%, resulting in the total for loans and advances decreasing by 0.02 percentage points from 1.92% to 1.90%. On the other hand, the average rate on deposits at domestic offices was 0.07%, the same level as that of the previous fiscal year, and the average rate on deposits at foreign offices slightly increased by 0.01 percentage points from 0.54% to 0.55%, resulting in the total for deposits increasing slightly by 0.01 percentage points from 0.16% to 0.17%.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Interest Income

Our interest income decreased by ¥11,679 million, or 1%, from ¥1,725,723 million for the fiscal year ended March 31, 2013 to ¥1,714,044 million for the fiscal year ended March 31, 2014. This decrease reflected a decrease in interest income on available-for-sale financial assets, which was partially offset by an increase in

73

interest income on loans and advances. Interest income on available-for-sale financial assets decreased by ¥31,891 million, or 36%, from ¥87,386 million for the fiscal year ended March 31, 2013 to ¥55,495 million for the fiscal year ended March 31, 2014, primarily due to a decrease in average balances at our domestic offices reflecting a decrease in investments in Japanese government bonds. Interest income on loans and advances increased by ¥14,591 million, or 1%, from ¥1,543,215 million for the fiscal year ended March 31, 2013 to ¥1,557,806 million for the fiscal year ended March 31, 2014. Interest income on loans and advances at foreign offices increased by ¥77,281 million, or 23%, from ¥342,423 million for the fiscal year ended March 31, 2013 to ¥419,704 million for the fiscal year ended March 31, 2014, due to an increase in the average balances of loans to foreign customers, reflecting our allocation of assets primarily to Asian countries. Interest income on loans and advances at domestic offices decreased by ¥62,690 million, or 5%, from ¥1,200,792 million for the fiscal year ended March 31, 2013 to ¥1,138,102 million for the fiscal year ended March 31, 2014, due to a decrease in average rates reflecting increasing competition in the commercial banking industry and a decrease in short-term interest rates in Japanese financial and capital markets.

Interest Expense

Our interest expense decreased by ¥1,059 million, from ¥321,570 million for the fiscal year ended March 31, 2013 to ¥320,511 million for the fiscal year ended March 31, 2014, primarily due to a decrease in interest expense on borrowings, which was partially offset by an increase in interest expense on deposits. Interest expense on borrowings decreased by ¥16,953 million, or 20%, from ¥85,219 million for the fiscal year ended March 31, 2013 to ¥68,266 million for the fiscal year ended March 31, 2014. Interest expense on deposits increased by ¥17,012 million, or 14%, from ¥123,378 million for the fiscal year ended March 31, 2013 to ¥140,390 million for the fiscal year ended March 31, 2014, primarily due to an increase in average balance at foreign offices.

Net Interest Income

Our net interest income decreased by ¥10,620 million, or 1%, from ¥1,404,153 million for the fiscal year ended March 31, 2013 to ¥1,393,533 million for the fiscal year ended March 31, 2014. The net interest income decreased primarily due to a decrease in the interest income on available-for-sale financial assets and an increase in interest expense on deposits, although the interest income on loans and advances increased.

From the fiscal year ended March 31, 2013 to March 31, 2014, the average rate on loans and advances at domestic offices decreased by 0.15 percentage points from 2.00% to 1.85%, primarily due to the increasing competition in the commercial banking industry and a decrease in short-term interest rates in Japanese financial and capital markets. The average rate on loans and advances at foreign offices also decreased by 0.09 percentage points from 2.24% to 2.15%, resulting in the total for loans and advances decreasing by 0.12 percentage points from 2.04% to 1.92%. On the other hand, the average rate on deposits at domestic offices was 0.07%, the same level as that of the previous fiscal year, and the average rate on deposits at foreign offices decreased by 0.02 percentage points from 0.56% to 0.54%, resulting in the total for deposits increasing by 0.01 percentage points from 0.15% to 0.16%.

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Net Fee and Commission Income

The following table sets forth our net fee and commission income for the periods shown.

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Fee and commission income from:
Loans	¥	103,486	¥	109,788	¥	111,153
Credit card business		245,133		234,060		225,071
Guarantees		51,794		45,229		54,067
Securities-related business		130,164		137,184		80,076
Deposits		14,976		18,234		17,622
Remittances and transfers		129,465		130,864		128,647
Safe deposits		5,748		5,832		5,989
Trust fees		2,833		2,421		1,488
Investment trusts		147,021		159,424		162,950
Agency		16,854		17,966		18,146
Others		155,292		142,167		143,476
Total fee and commission income		1,002,766		1,003,169		948,685
Fee and commission expense from:
Remittances and transfers		36,669		36,413		42,192
Guarantees		3,012		1,607		1,843
Others		89,572		89,939		83,019
Total fee and commission expense		129,253		127,959		127,054
Net fee and commission income	¥	873,513	¥	875,210	¥	821,631

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Fee and commission income slightly decreased by ¥403 million from ¥1,003,169 million for the fiscal year ended March 31, 2014 to ¥1,002,766 million for the fiscal year ended March 31, 2015. Primary sources of fee and commission income are fees obtained through our credit card business, investment trust sales commissions, fees obtained through securities-related business, remittance and transfer fees, and loan transaction fees. Investment trust sales commissions and fees and commissions from securities-related business decreased, reflecting the relatively stable Japanese stock market in the first half of the fiscal year ended March 31, 2015, which was partially offset by an increase in fees obtained through our credit card business.

Fee and commission expense was ¥129,253 million for the fiscal year ended March 31, 2015, increased by ¥1,294 million, or 1%, from ¥127,959 million for the fiscal year ended March 31, 2014.

As a result, net fee and commission income slightly decreased by ¥1,697 million from ¥875,210 million for the fiscal year ended March 31, 2014 to ¥873,513 million for the fiscal year ended March 31, 2015.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Fee and commission income increased by ¥54,484 million, or 6%, from ¥948,685 million for the fiscal year ended March 31, 2013 to ¥1,003,169 million for the fiscal year ended March 31, 2014. Primary sources of fee and commission income are fees obtained through our credit card business, investment trust sales commissions, fees obtained through securities-related business, remittance and transfer fees, and loan transaction fees. Fees and commissions from securities-related business increased primarily due to an increase in equity commissions, coupled with the positive trend in Japanese stock markets.

75

Fee and commission expense was ¥127,959 million for the fiscal year ended March 31, 2014, increased by ¥905 million, or 1%, from ¥127,054 million for the fiscal year ended March 31, 2013.

As a result, net fee and commission income increased by ¥53,579 million, or 7%, from ¥821,631 million for the fiscal year ended March 31, 2013 to ¥875,210 million for the fiscal year ended March 31, 2014.

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

The following table sets forth our net income from trading, financial assets at fair value through profit or loss and investment securities for the periods shown.

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions)
Net trading income:
Interest rate	¥	248,372		¥	184,859		¥	269,030
Foreign exchange		(136,708	)		(81,154	)		(141,025	)
Equity		499			10,496			(32,987	)
Credit		16,970			20,983			9,955
Others		(1,374	)		34			329
Total net trading income	¥	127,759		¥	135,218		¥	105,302
Net income from financial assets at fair value through profit or loss:
Net income from debt instruments	¥	13,123		¥	53,142		¥	10,265
Net income from equity instruments		9,555			5,444			5,529
Total net income from financial assets at fair value through profit or loss	¥	22,678		¥	58,586		¥	15,794
Net investment income:
Net gain (loss) from disposal of debt instruments	¥	45,193		¥	(1,753	)	¥	99,855
Net gain from disposal of equity instruments		190,570			225,185			41,140
Dividend income		135,301			108,833			82,409
Total net investment income	¥	371,064		¥	332,265		¥	223,404

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Net trading income, which includes income and losses from trading assets and liabilities and derivative financial instruments, decreased by ¥7,459 million from ¥135,218 million for the fiscal year ended March 31, 2014 to ¥127,759 million for the fiscal year ended March 31, 2015. The decrease was due to an increase in net trading loss from foreign exchange transactions and a decrease in net trading income from equity related transactions and other transactions in spite of an increase in net trading income from interest rate related transactions.

The increase in net trading loss from foreign exchange transactions was primarily due to an increase in the impact of the depreciation of the yen against the U.S. dollar on gains or losses arising from foreign exchange transactions related to the “economic hedges.”

We have carried out hedging transactions to hedge the foreign exchange risk of foreign currency denominated assets and liabilities. Of those hedges, the economic hedges are economically effective for risk management but are not accounted for as hedge accounting under IFRS as they do not meet the conditions for hedge accounting under IFRS. Hedged items and hedging instruments related to the economic hedges are

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classified into three types: (1) net investments in foreign subsidiaries and associates hedged by using foreign currency denominated financial liabilities such as deposits and borrowings, (2) foreign currency denominated equity instruments classified as available-for-sale financial assets hedged by using foreign currency denominated financial liabilities, and (3) foreign currency denominated financial assets and liabilities such as loans and deposits hedged by using derivative financial instruments such as currency swaps.

As those economic hedge transactions lead to accounting mismatches (i.e., when the gains or losses on the hedged items and hedging instruments do not offset each other either in profit or loss, or in other comprehensive income), large depreciations or appreciations of the yen against other currencies may result in significant fluctuations to net trading income from foreign exchange transactions.

The yen exchange rate against the U.S. dollar was ¥120.15, ¥102.88 and ¥94.01 at March 31, 2015, 2014 and 2013, respectively. This resulted in the 17.27-yen depreciation of the yen against the U.S. dollar during the fiscal year ended March 31, 2015, which was larger than the 8.87-yen depreciation during the previous fiscal year. Therefore, this contributed to the increase in the impact of the depreciation of the yen against the U.S. dollar mentioned above. For information about the yen exchange rates, see “Item 3. Key Information—3.A. Selected Financial Data—Exchange Rates.”

On the other hand, net trading income from interest rate related transactions increased primarily due to an increase in income related to fixed income products.

Net income from financial assets at fair value through profit or loss decreased by ¥35,908 million from ¥58,586 million for the fiscal year ended March 31, 2014 to ¥22,678 million for the fiscal year ended March 31, 2015, primarily due to a decrease in the fair value of debt instruments.

Net investment income increased by ¥38,799 million from ¥332,265 million for the fiscal year ended March 31, 2014 to ¥371,064 million for the fiscal year ended March 31, 2015. This was primarily due to an increase in net gains from sales of bonds, which was partially offset by a decrease in net gains from sales of listed stocks.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Net trading income, which includes income and losses from trading assets and liabilities and derivative financial instruments, increased by ¥29,916 million from ¥105,302 million for the fiscal year ended March 31, 2013 to ¥135,218 million for the fiscal year ended March 31, 2014. The increase was primarily due to a decrease in net trading loss from foreign exchange transactions and an increase in net trading income from equity related transactions, partially offset by a decrease in net trading income from interest rate related transactions.

The decrease in net trading loss from foreign exchange transactions was primarily due to a decrease in the impact of the depreciation of the yen against the U.S. dollar on gains or losses arising from foreign exchange transactions related to the economic hedges as described in the previous section.

The yen exchange rate against the U.S. dollar was ¥102.88, ¥94.01 and ¥82.13 at March 31, 2014, 2013 and 2012, respectively. This resulted in the 8.87-yen depreciation of the yen against the U.S. dollar during the fiscal year ended March 31, 2014, which was smaller than the 11.88-yen depreciation during the previous fiscal year. Therefore, this contributed to the decrease in the impact of the depreciation of the yen against the U.S. dollar mentioned above. For information about the yen exchange rates, see “Item 3. Key Information—3.A. Selected Financial Data—Exchange Rates.”

In addition, the increase in net trading income from equity related transactions was due to our appropriate response to, or forecast for Japanese stock markets.

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On the other hand, net trading income from interest rate related transactions decreased primarily due to a decrease in income related to fixed income products.

Net income from financial assets at fair value through profit or loss increased by ¥42,792 million from ¥15,794 million for the fiscal year ended March 31, 2013 to ¥58,586 million for the fiscal year ended March 31, 2014 primarily due to an increase in the fair value of debt instruments.

Net investment income increased by ¥108,861 million from ¥223,404 million for the fiscal year ended March 31, 2013 to ¥332,265 million for the fiscal year ended March 31, 2014. This was primarily due to an increase in net gains from sales of equity index-linked investment trusts, which was partially offset by a decrease in net gains from sales of bonds.

Other Income

The following table sets forth our other income for the periods shown.

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Income from operating leases	¥	179,632	¥	148,211	¥	110,906
Income related to disposal of assets leased		183,590		149,448		84,631
Income related to IT solution services		35,506		41,043		30,709
Gains on disposal of property, plant and equipment, and other intangible assets		538		2,634		240
Reversal of impairment losses of investments in associates and joint ventures		—		—		14,970
Gains on step acquisition of subsidiaries		—		1,565		141
Gains on step acquisition of associates and joint ventures		37,997		—		—
Others		88,642		86,640		82,806
Total other income	¥	525,905	¥	429,541	¥	324,403

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Other income increased by ¥96,364 million, or 22%, from ¥429,541 million for the fiscal year ended March 31, 2014 to ¥525,905 million for the fiscal year ended March 31, 2015. The increase was primarily due to increases in income from operating leases and income related to disposal of assets leased.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Other income increased by ¥105,138 million, or 32%, from ¥324,403 million for the fiscal year ended March 31, 2013 to ¥429,541 million for the fiscal year ended March 31, 2014. The increase was primarily due to increases in income from operating leases and income related to disposal of assets leased. On the other hand, no reversal of impairment losses of investments in associates and joint ventures was recognized for the fiscal year ended March 31, 2014 as the fair values of previously impaired investments in associates and joint ventures were not recovered.

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Impairment Charges on Financial Assets

The following table sets forth our impairment charges on financial assets for the periods shown.

	For the fiscal year ended March 31,
	2015		2014			2013
	(In millions)
Loans and advances	¥	79,552	¥	(25,806	)	¥	138,375
Available-for-sale financial assets		10,586		11,531			131,770
Total impairment charges (reversals) on financial assets	¥	90,138	¥	(14,275	)	¥	270,145

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Our impairment charges on financial assets consist of losses relating to loans and advances and available-for-sale financial assets. Impairment charges on loans and advances are mainly affected by the economic environment and financial conditions of borrowers. On the other hand, impairment charges on available-for-sale financial assets are mainly affected by not only the economic environment and financial conditions of issuers but the fair value of the instruments, such as market prices on stock markets in the case of equity instruments.

For the fiscal year ended March 31, 2015, impairment charges on loans and advances amounting to ¥79,552 million were recognized, whereas previously recognized impairment charges on loans and advances amounting to ¥25,806 million were reversed for the fiscal year ended March 31, 2014.

For detailed information on provision for loan losses and impaired loans and advances, see “—Financial Condition—Allowance for Loan Losses.”

Impairment charges on available-for-sale financial assets decreased by ¥945 million from ¥11,531 million for the fiscal year ended March 31, 2014 to ¥10,586 million for the fiscal year ended March 31, 2015.

In determining the amount of impairment charges, we consider whether there is objective evidence of impairment as a result of loss events, such as any significant financial difficulty of the issuer. Our assessments of issuers are focused by industry and geographical area, taking into consideration the adverse impact of any specific issues such as significant changes in the technological, market, economic or legal environment of the issuer indicating that the cost of our investment may not be recovered. Additionally, in the case of available-for-sale equity instruments, we take into consideration whether there has been a significant or prolonged decline in the fair value of the equity instruments below their cost.

For the fiscal year ended March 31, 2015, the types of securities on which the impairment charges were recognized included investments in limited partnerships and listed stocks.

For detailed information on our available-for-sale financial assets, which include a diversified portfolio of domestic equity instruments, see “—Financial Condition—Investment Securities.”

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

For the first half of the fiscal year ended March 31, 2014, the Japanese economy continued its gradual recovery. Quarter-on-quarter growth rates of Japanese GDP were 0.7% for the period from April to June 2013 and 0.3% for the period from July to September 2013. For the second half of the fiscal year, resilient private consumption, a pick-up in private investment, and rush demand ahead of the consumption tax increase in April 2014 supported the growth of the Japanese economy. As a result, Japanese GDP increased, on a quarter-on-quarter basis, by 0.1% for the period from October to December 2013 and by 1.6% for the period from January to March 2014. Consequently, Japanese GDP increased by 2.3% for the fiscal year ended March 31, 2014, compared with an increase of 0.7% in the previous fiscal year.

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For the fiscal year ended March 31, 2014, previously recognized impairment charges on loans and advances amounting to ¥25,806 million were reversed, whereas impairment charges on loans and advances amounting to ¥138,375 million were recognized for the fiscal year ended March 31, 2013. This reflected the continuing gradual recovery of the Japanese economy and improvement of our loan portfolio. Impaired loans and advances decreased by ¥534,328 million from ¥2,483,141 million for the fiscal year ended March 31, 2013 to ¥1,948,813 million for the fiscal year ended March 31, 2014. Allowance for loan losses for impaired loans and advances also decreased by ¥287,035 million from ¥1,144,130 million for the fiscal year ended March 31, 2013 to ¥857,095 million for the fiscal year ended March 31, 2014.

For detailed information on provision for loan losses and impaired loans and advances, see “—Financial Condition—Allowance for Loan Losses,” and “—Financial Condition—Impaired Loans and Advances,” respectively.

Impairment charges on available-for-sale financial assets significantly decreased by ¥120,239 million from ¥131,770 million for the fiscal year ended March 31, 2013 to ¥11,531 million for the fiscal year ended March 31, 2014.

For the fiscal year ended March 31, 2014, the types of securities on which the impairment charges were recognized included investments in limited partnerships, investment trusts, unlisted stocks and publicly traded Japanese stocks. Impairment charges on publicly traded Japanese stocks, which had accounted for the majority of the impairment charges on available-for-sale financial assets in the previous years, were very small, reflecting the positive trend in Japanese stock markets.

For detailed information on our available-for-sale financial assets, which include a diversified portfolio of domestic equity instruments, see “—Financial Condition—Investment Securities.”

General and Administrative Expenses

The following table sets forth our general and administrative expenses for the periods shown.

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Personnel expenses	¥	749,480	¥	706,376	¥	666,073
Depreciation and amortization		146,233		137,742		130,382
Rent and lease expenses		116,745		113,314		111,327
Building and maintenance expenses		10,068		8,886		7,926
Supplies expenses		14,865		15,482		14,267
Communication expenses		35,126		35,017		33,099
Publicity and advertising expenses		68,481		56,791		48,979
Taxes and dues		67,913		57,782		57,617
Outsourcing expenses		91,189		88,072		87,583
Premiums for deposit insurance		56,789		54,532		53,687
Office equipment expenses		47,318		40,388		35,749
Others		217,690		208,608		200,427
Total general and administrative expenses	¥	1,621,897	¥	1,522,990	¥	1,447,116

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

General and administrative expenses increased by ¥98,907 million, or 6%, from ¥1,522,990 million for the fiscal year ended March 31, 2014 to ¥1,621,897 million for the fiscal year ended March 31, 2015, primarily due

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to increases in expenses related to overseas business development including an increase in our overseas staff, expenses to enhance operating income from our securities and credit card businesses, and taxes and dues reflecting the consumption tax increase.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

General and administrative expenses increased by ¥75,874 million, or 5%, from ¥1,447,116 million for the fiscal year ended March 31, 2013 to ¥1,522,990 million for the fiscal year ended March 31, 2014, primarily due to increases in expenses to enhance operating income from the securities business, and expenses related to overseas business development including an increase in our overseas staff.

Other Expenses

The following table sets forth our other expenses for the periods shown.

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Cost of operating leases	¥	87,206	¥	72,268	¥	58,252
Cost related to disposal of assets leased		171,707		146,196		81,083
Cost related to IT solution services and IT systems		84,300		75,173		69,636
Provision for interest repayment		64,195		49,764		416
Losses on disposal of property, plant and equipment, and other intangible assets		6,703		6,763		5,432
Impairment losses of property, plant and equipment		5,108		3,157		4,333
Impairment losses of intangible assets		4		193		35
Losses on sale of investments in subsidiaries and associates		2,221		—		8
Impairment losses of investments in associates and joint ventures		4,631		4,686		7,347
Others		79,539		70,580		61,354
Total other expenses	¥	505,614	¥	428,780	¥	287,896

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Other expenses increased by ¥76,834 million, or 18%, from ¥428,780 million for the fiscal year ended March 31, 2014 to ¥505,614 million for the fiscal year ended March 31, 2015, primarily due to increases in cost of operating leases and cost related to disposal of assets leased.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Other expenses increased by ¥140,884 million, or 49%, from ¥287,896 million for the fiscal year ended March 31, 2013 to ¥428,780 million for the fiscal year ended March 31, 2014, primarily due to increases in cost of operating leases and cost related to disposal of assets leased.

Share of Post-tax Profit of Associates and Joint Ventures

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Share of post-tax profit of associates and joint ventures decreased by ¥1,330 million from ¥19,454 million for the fiscal year ended March 31, 2014 to ¥18,124 million for the fiscal year ended March 31, 2015. This was primarily due to the exclusion of our share of the profit of Mobit Co., LTD., which had been our equity-method associate but became our subsidiary in March 2014, and a decrease in our share of the profit from the investment business of associates and joint ventures. The decrease was partially offset by the effect of The Japan Net Bank, which had been our subsidiary but became our equity-method associate in April 2014.

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Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Share of post-tax profit of associates and joint ventures decreased by ¥139 million from ¥19,593 million for the fiscal year ended March 31, 2013 to ¥19,454 million for the fiscal year ended March 31, 2014. This was primarily due to a decrease in our share of the profit from the investment business of associates and joint ventures, which was partially offset by the inclusion of our share of the profit from PT Bank Tabungan Pensiunan Nasional Tbk, which became our equity-method associate in May 2013.

Income Tax Expense

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Income tax expense decreased by ¥4,129 million from ¥414,076 million for the fiscal year ended March 31, 2014 to ¥409,947 million for the fiscal year ended March 31, 2015, due to a decrease in deferred tax expense. The decrease was primarily due to a decrease in a reversal of deductible temporary differences attributable to loans and advances. The decrease was partially offset by an increase in deferred tax expense associated with a decrease of net deferred tax assets which resulted from changes in Japanese corporation tax rates. For a more detailed description of changes in Japanese corporation tax rates, see Note 22 “Deferred Income Tax” to our consolidated financial statements included elsewhere in this annual report.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Income tax expense increased by ¥158,776 million from ¥255,300 million for the fiscal year ended March 31, 2013 to ¥414,076 million for the fiscal year ended March 31, 2014, primarily due to an increase in profit before tax and an increase in deferred tax expense relating to a reversal of temporary differences attributable to loans and advances.

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: Commercial Banking, Leasing, Securities and Consumer Finance, with the remaining operations recorded in Others. The Commercial Banking segment covers the Bank, which accounts for the major portion of our total assets and revenue, other domestic banking subsidiaries, such as KUBC, The Minato Bank and SMBC Trust Bank, as well as foreign banking subsidiaries, such as SMBC Europe, SMBC (China) and Manufacturers Bank. We have SMFL in the Leasing segment, SMBC Nikko Securities and SMBC Friend Securities in the Securities segment and Sumitomo Mitsui Card, Cedyna and SMBC Consumer Finance in the Consumer Finance segment. Since the Bank has a significant impact on our overall performance, its performance is reported to management in more detail by each business unit based on customer market.

Until March 31, 2014, the Bank conducted its primary banking business through five business units: the Consumer Banking Unit, the Middle Market Banking Unit, the Corporate Banking Unit, the International Banking Unit and the Treasury Unit. On April 1, 2014, the Bank restructured its domestic business operations and reorganized its domestic business units, in order to further enhance its capability to meet the needs of our clients and deliver higher value-added products and services. Under the new structure, the Consumer Banking Unit, the Middle Market Banking Unit and the Corporate Banking Unit were reorganized into two business units: the Wholesale Banking Unit and the Retail Banking Unit. Accordingly, the Bank operates its primary banking business through four business units. Comparative information has been restated to reflect this change. In addition to the four business units, the Bank also has several cross-sectional units and divisions, including the Investment Banking Unit, the Corporate Advisory Division, the Private Advisory Division and the Transaction Business Division. The revenues and expenses of these units and divisions are generally allocated to each business unit. Organizational charts of SMFG and the Bank are provided in “Item 4.C. Organizational Structure.” Since figures reported to management are prepared under Japanese GAAP, the segment information does not

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agree to figures in the consolidated financial statements under IFRS. This difference is addressed in Note 4 “Segment Analysis—Reconciliation of Segmental Results of Operation to Consolidated Income Statement” to our consolidated financial statements included elsewhere in this annual report.

Segmental Results of Operation

For the fiscal year ended March 31, 2015:

	Commercial Banking
	SMBC																		Others(2)			Total
	Wholesale Banking Unit			Retail Banking Unit			International Banking  Unit			Treasury Unit			Others			SMBC Total
	(In billions)
Gross profit	¥	555.4		¥	386.8		¥	345.3		¥	354.0		¥	(7.2	)	¥	1,634.3		¥	289.4		¥	1,923.7
Net interest income		315.8			313.2			227.8			212.4			52.2			1,121.4			171.3			1,292.7
Net non-interest income		239.6			73.6			117.5			141.6			(59.4	)		512.9			118.1			631.0
General and administrative expenses and others		(206.8	)		(350.1	)		(106.6	)		(25.9	)		(101.8	)		(791.2	)		(203.0	)		(994.2	)
Consolidated net business profit(1)(7)	¥	348.6		¥	36.7		¥	238.7		¥	328.1		¥	(109.0	)	¥	843.1		¥	86.4		¥	929.5

	Leasing						Securities									Consumer Finance												Others			Total
	SMFL(3)			Total(4)			SMBC Nikko Securities(5)			SMBC Friend Securities			Total(4)			Sumitomo Mitsui Card			Cedyna(6)			SMBC Consumer Finance(3)			Total(4)
	(In billions)
Gross profit	¥	137.0		¥	149.3		¥	346.3		¥	50.4		¥	393.9		¥	196.4		¥	164.2		¥	215.5		¥	576.9		¥	(63.4	)	¥	2,980.4
Net interest income		19.3			24.4			1.5			1.2			3.8			13.6			25.9			149.0			178.7			5.6			1,505.2
Net non-interest income		117.7			124.9			344.8			49.2			390.1			182.8			138.3			66.5			398.2			(69.0	)		1,475.2
General and administrative expenses and others		(56.5	)		(60.8	)		(248.7	)		(40.0	)		(301.9	)		(146.0	)		(121.7	)		(96.1	)		(381.9	)		68.9			(1,669.9	)
Consolidated net business profit(1)(7)	¥	80.5		¥	88.5		¥	97.6		¥	10.4		¥	92.0		¥	50.4		¥	42.5		¥	119.4		¥	195.0		¥	5.5		¥	1,310.5

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For the fiscal year ended March 31, 2014:

	Commercial Banking
	SMBC																		Others(2)			Total
	Wholesale Banking  Unit			Retail Banking Unit			International Banking  Unit			Treasury Unit			Others			SMBC Total
	(In billions)
Gross profit	¥	558.5		¥	405.4		¥	296.0		¥	325.5		¥	(27.3	)	¥	1,558.1		¥	249.1		¥	1,807.2
Net interest income		323.4			321.3			174.6			225.2			20.4			1,064.9			171.1			1,236.0
Net non-interest income		235.1			84.1			121.4			100.3			(47.7	)		493.2			78.0			571.2
General and administrative expenses and others		(200.7	)		(336.4	)		(89.1	)		(22.9	)		(96.6	)		(745.7	)		(195.6	)		(941.3	)
Consolidated net business profit(1)(7)	¥	357.8		¥	69.0		¥	206.9		¥	302.6		¥	(123.9	)	¥	812.4		¥	53.5		¥	865.9

	Leasing						Securities									Consumer Finance												Others			Total
	SMFL(3)			Total(4)			SMBC Nikko Securities(5)			SMBC Friend Securities			Total(4)			Sumitomo Mitsui Card			Cedyna(6)			SMBC Consumer Finance(3)			Total(4)
	(In billions)
Gross profit	¥	127.9		¥	138.4		¥	339.3		¥	58.2		¥	397.8		¥	189.9		¥	167.6		¥	181.8		¥	540.1		¥	14.7		¥	2,898.2
Net interest income		29.1			35.2			0.2			1.4			2.7			13.9			28.3			124.4			156.6			53.7			1,484.2
Net non-interest income		98.8			103.2			339.1			56.8			395.1			176.0			139.3			57.4			383.5			(39.0	)		1,414.0
General and administrative expenses and others		(52.9	)		(54.4	)		(235.3	)		(42.5	)		(292.0	)		(139.6	)		(123.6	)		(73.0	)		(352.8	)		80.8			(1,559.7	)
Consolidated net business profit(1)(7)	¥	75.0		¥	84.0		¥	104.0		¥	15.7		¥	105.8		¥	50.3		¥	44.0		¥	108.8		¥	187.3		¥	95.5		¥	1,338.5

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For the fiscal year ended March 31, 2013:

	Commercial Banking
	SMBC																		Others(2)			Total
	Wholesale Banking  Unit			Retail Banking Unit			International Banking  Unit			Treasury Unit			Others			SMBC Total
	(In billions)
Gross profit	¥	549.3		¥	445.8		¥	240.5		¥	295.3		¥	9.2		¥	1,540.1		¥	258.7		¥	1,798.8
Net interest income		320.3			351.8			142.0			125.5			31.6			971.2			156.0			1,127.2
Net non-interest income		229.0			94.0			98.5			169.8			(22.4	)		568.9			102.7			671.6
General and administrative expenses and others		(198.3	)		(335.5	)		(72.7	)		(20.9	)		(100.3	)		(727.7	)		(180.6	)		(908.3	)
Consolidated net business profit(1)(7)	¥	351.0		¥	110.3		¥	167.8		¥	274.4		¥	(91.1	)	¥	812.4		¥	78.1		¥	890.5

	Leasing						Securities									Consumer Finance												Others			Total
	SMFL(3)			Total(4)			SMBC Nikko Securities(5)			SMBC Friend Securities			Total(4)			Sumitomo Mitsui Card			Cedyna(6)			SMBC Consumer Finance(3)			Total(4)
	(In billions)
Gross profit	¥	114.8		¥	120.4		¥	278.7		¥	59.4		¥	341.5		¥	183.1		¥	166.2		¥	165.8		¥	520.0		¥	12.2		¥	2,792.9
Net interest income		40.8			46.2			(1.6	)		0.4			—			15.5			30.8			117.6			157.5			61.7			1,392.6
Net non-interest income		74.0			74.2			280.3			59.0			341.5			167.6			135.4			48.2			362.5			(49.5	)		1,400.3
General and administrative expenses and others		(50.0	)		(47.7	)		(204.0	)		(41.4	)		(260.7	)		(132.6	)		(125.1	)		(64.3	)		(336.5	)		62.2			(1,491.0	)
Consolidated net business profit(1)(7)	¥	64.8		¥	72.7		¥	74.7		¥	18.0		¥	80.8		¥	50.5		¥	41.1		¥	101.5		¥	183.5		¥	74.4		¥	1,301.9

(1) The calculation method of consolidated net business profit was changed on April 1, 2014 in order to improve the group management. Under the new method, consolidated net business profit is calculated based on consolidated income statement under Japanese GAAP. Consolidated net business profit = Gross profit (*) – General and administrative expenses + share of profit or loss of equity-method associates. Comparative information has been restated accordingly.

(*)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 in Commercial Banking consist of SMFG’s banking subsidiaries except SMBC, such as KUBC, The Minato Bank, SMBC Europe, and SMBC (China).

(3) The figures represent consolidated figures of respective companies.

(4) Total under each business segment, except Commercial Banking, includes the aggregation of the results from the operating units that were not separately identified.

(5) The figures are the sum of SMBC Nikko Securities (nonconsolidated basis) and its overseas securities subsidiaries.

(6) The figures represent Cedyna’s consolidated figures excluding insignificant subsidiaries.

(7) The Group’s total credit cost (reversal) for the fiscal years ended March 31, 2015, 2014 and 2013 were ¥7.8 billion, ¥(49.1) billion and ¥173.1 billion, respectively, of which ¥(68.3) billion, ¥(116.5) billion and ¥63.7 billion were for Commercial Banking, ¥(6.1) billion, ¥(0.9) billion and ¥5.3 billion were for Leasing, ¥(0.2) billion, nil and ¥0.3 billion were for Securities and ¥78.8 billion, ¥66.8 billion and ¥69.3 billion were for Consumer Finance. Total credit costs include gains on recoveries of written-off claims. The Group’s total credit costs (reversal) are not included in the consolidated net business profit.

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Commercial Banking

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Our consolidated net business profit from our Commercial Banking segment increased by ¥64 billion from ¥866 billion for the fiscal year ended March 31, 2014 to ¥930 billion for the fiscal year ended March 31, 2015. This was due to an increase in gross profit, which was partially offset by an increase in general and administrative expenses.

The Bank’s Wholesale Banking Unit

Both gross profit and consolidated net business profit from the Bank’s Wholesale Banking Unit decreased by ¥4 billion and ¥9 billion from ¥559 billion and ¥358 billion for the fiscal year ended March 31, 2014 to ¥555 billion and ¥349 billion for the fiscal year ended March 31, 2015, respectively. Net interest income decreased primarily due to a decrease in the interest rate spreads for loans as a result of the increasing lending competition in the commercial banking industry in Japan, although loans to domestic companies increased.

The Bank’s Retail Banking Unit

Both gross profit and consolidated net business profit from the Bank’s Retail Banking Unit decreased by ¥18 billion and ¥32 billion from ¥405 billion and ¥69 billion for the fiscal year ended March 31, 2014 to ¥387 billion and ¥37 billion for the fiscal year ended March 31, 2015, respectively. Net interest income decreased primarily due to a decrease in the interest rate spreads for and the balance of housing loans, reflecting the increasing competition in the housing loan market in Japan. Non-interest income decreased primarily due to a decrease in fees and commissions related to investment trust.

The Bank’s International Banking Unit

Both gross profit and consolidated net business profit from the Bank’s International Banking Unit increased by ¥49 billion and ¥32 billion from ¥296 billion and ¥207 billion for the fiscal year ended March 31, 2014 to ¥345 billion and ¥239 billion for the fiscal year ended March 31, 2015, respectively. Net interest income increased due to an increase in the balance of loans to the foreign customers, reflecting our allocation of assets primarily to Asian countries and the United States. The increase in gross profit was partially offset by an increase in general and administrative expenses as a result of an increase in expenses related to overseas business development.

The Bank’s Treasury Unit

Both gross profit and consolidated net business profit from the Bank’s Treasury Unit increased by ¥28 billion and ¥25 billion from ¥326 billion and ¥303 billion for the fiscal year ended March 31, 2014 to ¥354 billion and ¥328 billion for the fiscal year ended March 31, 2015, respectively. This was primarily due to an increase in profits from equity index-linked investment trusts and sales of bonds.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Our consolidated net business profit from our Commercial Banking segment decreased by ¥25 billion from ¥891 billion for the fiscal year ended March 31, 2013 to ¥866 billion for the fiscal year ended March 31, 2014. This was due to a decrease in net non-interest income and an increase in general and administrative expenses, which were partially offset by an increase in net interest income.

The Bank’s Wholesale Banking Unit

Both gross profit and consolidated net business profit from the Bank’s Wholesale Banking Unit increased by ¥10 billion and ¥7 billion from ¥549 billion and ¥351 billion for the fiscal year ended March 31, 2013 to ¥559 billion and ¥358 billion for the fiscal year ended March 31, 2014, respectively. The increase was primarily due

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to a growing demand for financing of M&A deals and leveraged buyout transactions, although the interest rate spreads for loans decreased due to the increasing lending competition in the commercial banking industry in Japan.

The Bank’s Retail Banking Unit

Both gross profit and consolidated net business profit from the Bank’s Retail Banking Unit decreased by ¥41 billion and ¥41 billion from ¥446 billion and ¥110 billion for the fiscal year ended March 31, 2013 to ¥405 billion and ¥69 billion for the fiscal year ended March 31, 2014, respectively. Net interest income decreased primarily due to a decrease in the interest rate spreads for and the balance of housing loans, reflecting the increasing competition in the housing loan market in Japan. Non-interest income decreased due to a decrease in fees and commissions related to investment trust and life insurance products.

The Bank’s International Banking Unit

Both gross profit and consolidated net business profit from the Bank’s International Banking Unit increased by ¥55 billion and ¥39 billion from ¥241 billion and ¥168 billion for the fiscal year ended March 31, 2013 to ¥296 billion and ¥207 billion for the fiscal year ended March 31, 2014, respectively. Net interest income increased due to an increase in the balance of loans to the foreign customers, reflecting our allocation of assets primarily to Asian countries. Net non-interest income also increased due to an increase in commissions in relation to loan transactions. The increase in gross profit was partially offset by an increase in general and administrative expenses as a result of an increase in our overseas staff and expenses related to overseas business development.

The Bank’s Treasury Unit

Both gross profit and consolidated net business profit from the Bank’s Treasury Unit increased by ¥31 billion and ¥29 billion from ¥295 billion and ¥274 billion for the fiscal year ended March 31, 2013 to ¥326 billion and ¥303 billion for the fiscal year ended March 31, 2014, respectively. This was primarily due to an increase in profits from equity index-linked investment trusts, which was partially offset by a decrease in net gains from sales of bonds.

Leasing

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Both gross profit and consolidated net business profit in our Leasing segment increased by ¥11 billion and ¥5 billion from ¥138 billion and ¥84 billion for the fiscal year ended March 31, 2014 to ¥149 billion and ¥89 billion for the fiscal year ended March 31, 2015, respectively. Although net interest income decreased, net non-interest income increased primarily due to an increase in net non-interest income of SMFL.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Both gross profit and consolidated net business profit in our Leasing segment increased by ¥18 billion and ¥11 billion from ¥120 billion and ¥73 billion for the fiscal year ended March 31, 2013 to ¥138 billion and ¥84 billion for the fiscal year ended March 31, 2014, respectively. Although net interest income decreased, net non-interest income increased primarily due to an increase in net non-interest income of SMFL.

Securities

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Both gross profit and consolidated net business profit in our Securities segment decreased by ¥4 billion and ¥14 billion from ¥398 billion and ¥106 billion for the fiscal year ended March 31, 2014 to ¥394 billion and ¥92 billion for the fiscal year ended March 31, 2015, respectively. This was primarily due to an increase in general and administrative expenses of SMBC Nikko Securities associated with its business development and a decrease in net non-interest income of SMBC Friend Securities.

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Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Both gross profit and consolidated net business profit in our Securities segment increased by ¥56 billion and ¥25 billion from ¥342 billion and ¥81 billion for the fiscal year ended March 31, 2013 to ¥398 billion and ¥106 billion for the fiscal year ended March 31, 2014, respectively. This was primarily due to an increase in net non-interest income of SMBC Nikko Securities mainly as a result of an increase in fees and commissions from securities-related businesses and investment trusts, coupled with the positive trend in the Japanese stock market.

Consumer Finance

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

Both gross profit and consolidated net business profit in our Consumer Finance segment increased by ¥37 billion and ¥8 billion from ¥540 billion and ¥187 billion for the fiscal year ended March 31, 2014 to ¥577 billion and ¥195 billion for the fiscal year ended March 31, 2015, respectively. This was primarily due to increases in the gross profit and consolidated net business profit of SMBC Consumer Finance.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Both gross profit and consolidated net business profit in our Consumer Finance segment increased by ¥20 billion and ¥3 billion from ¥520 billion and ¥184 billion for the fiscal year ended March 31, 2013 to ¥540 billion and ¥187 billion for the fiscal year ended March 31, 2014, respectively. This was primarily due to an increase in net non-interest income of Sumitomo Mitsui Card and SMBC Consumer Finance, which was partially offset by an increase in general and administrative expenses attributable to those companies.

Financial Condition

Assets

Our total assets increased by ¥20,550,425 million from ¥158,631,041 million at March 31, 2014 to ¥179,181,466 million at March 31, 2015, primarily due to increases in cash and deposits with banks and loans and advances.

Our assets at March 31, 2015 and 2014 were as follows.

	At March 31,
	2015		2014(1)
	(In millions)
Cash and deposits with banks	¥	40,112,783	¥	33,208,724
Call loans and bills bought		1,326,965		1,248,235
Reverse repurchase agreements and cash collateral on securities borrowed		7,218,498		4,303,121
Trading assets		3,243,185		3,557,545
Derivative financial instruments		6,471,203		4,891,382
Financial assets at fair value through profit or loss		1,785,684		1,840,255
Investment securities		24,239,656		22,052,998
Loans and advances		86,971,716		81,244,982
Investments in associates and joint ventures		619,814		383,590
Property, plant and equipment		2,496,497		2,078,927
Intangible assets		975,995		955,746
Other assets		3,485,123		2,655,512
Current tax assets		116,847		62,783
Deferred tax assets		117,500		147,241
Total assets	¥	179,181,466	¥	158,631,041

(1) Comparative information has been restated to reflect the adoption of IFRIC Interpretation 21 “Levies.” For more information, see Note 2 “Summary of Significant Accounting Policies—New and Amended Accounting Standards Adopted by the SMFG Group” to our consolidated financial statements included elsewhere in this annual report.

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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 and sovereign customers in foreign countries.

At March 31, 2015, our loans and advances were ¥86,971,716 million, or 49% of total assets, representing an increase of ¥5,726,734 million, or 7%, from ¥81,244,982 million at March 31, 2014. The increase in loans and advances was due to increases in both those to domestic customers and foreign customers. The increase in loans and advances to our domestic customers was primarily due to an increase in those to corporate customers supported by the improvement in corporate earnings and business sentiment, as we actively responded to the demand for financing, which was partially offset by a decrease in loans and advances to individual customers as a result of a decline in new housing loans, reflecting a decline in housing demand following the rush demand ahead of the consumption tax increase in April 2014. The increase in loans and advances to our foreign customers was primarily due to our allocation of assets to Asian countries and the United States, and the depreciation of the yen.

Domestic

Through the Bank 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 March 31,
	2015		2014
	(In millions)
Manufacturing	¥	8,061,654	¥	8,018,568
Agriculture, forestry, fisheries and mining		171,855		177,012
Construction		1,150,616		1,152,388
Transportation, communications and public enterprises		5,175,949		5,086,361
Wholesale and retail		5,664,385		5,505,570
Finance and insurance		2,869,967		2,537,347
Real estate and goods rental and leasing		8,766,724		8,117,000
Services		4,776,706		4,855,536
Municipalities		1,353,949		1,279,010
Lease financing		2,211,773		2,133,760
Consumer(1)		18,817,259		19,086,241
Others		3,211,240		3,159,438
Total domestic	¥	62,232,077	¥	61,108,231

(1) The balance in Consumer mainly consists of housing loans. The housing loan balances amounted to ¥14,087,453 million and ¥14,420,225 million at March 31, 2015 and 2014, respectively.

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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 March 31,
	2015		2014
	(In millions)
Public sector	¥	164,495	¥	163,685
Financial institutions		3,880,655		3,450,482
Commerce and industry		20,010,729		16,435,047
Lease financing		308,128		267,394
Others		1,375,624		947,826
Total foreign	¥	25,739,631	¥	21,264,434

Allowance for Loan Losses

We calculate the allowance for loan losses using the latest assignment of obligor grades (our internal credit rating) and supplementary data such as the borrowers’ operating cash flows, realizable value of collateral and recent economic conditions.

Our consistent implementation of consultative actions tailored to our borrowers’ businesses and financial condition, such as by supporting the development of operational improvement plans for borrowers, contributed to the improvement of our loan portfolio and the containment of credit costs.

Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014

For the fiscal year ended March 31, 2015, the allowance for loan losses decreased by ¥157,113 million, or 17%, from ¥950,665 million at March 31, 2014 to ¥793,552 million at March 31, 2015. The balance of the allowance for loan losses increases when the 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 ¥79,552 million and charge-offs of ¥249,896 million for the fiscal year ended March 31, 2015, and charge-offs exceeded the provision for loan losses, the overall allowance for loan losses decreased.

Charge-offs decreased by ¥52,785 million from the previous fiscal year to ¥249,896 million for the fiscal year ended March 31, 2015. Charge-offs of domestic loans and advances decreased by ¥42,371 million compared to the previous fiscal year to ¥240,663 million for the fiscal year ended March 31, 2015, primarily due to a decrease in charge-offs related to customers from the real estate and goods rental and leasing, and construction industries. Charge-offs of foreign loans and advances decreased by ¥10,414 million compared to the previous fiscal year to ¥9,233 million for the fiscal year ended March 31, 2015.

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

For the fiscal year ended March 31, 2014, the allowance for loan losses decreased by ¥311,813 million, or 25%, from ¥1,262,478 million at March 31, 2013 to ¥950,665 million at March 31, 2014, as the previously recognized allowance for loan losses amounting to ¥25,806 million was reversed.

For the first half of the fiscal year ended March 31, 2014, the Japanese economy continued its gradual recovery. Quarter-on-quarter growth rates of Japanese GDP were 0.7% for the period from April to June 2013 and 0.3% for the period from July to September 2013. For the second half of the fiscal year, resilient private consumption, a pick-up in private investment, and rush demand ahead of the consumption tax increase in April

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2014 supported the growth of the Japanese economy. As a result, Japanese GDP increased, on a quarter-on-quarter basis, by 0.1% for the period from October to December 2013 and by 1.6% for the period from January to March 2014. Consequently, Japanese GDP increased by 2.3% for the fiscal year ended March 31, 2014, compared with an increase of 0.7% in the previous fiscal year.

Charge-offs increased by ¥38,483 million from the previous fiscal year to ¥302,681 million for the fiscal year ended March 31, 2014. The overall charge-offs of domestic loans and advances increased by ¥41,897 million compared to the previous fiscal year to ¥283,034 million for the fiscal year ended March 31, 2014, primarily due to an increase in charge-offs related to customers from the real estate and goods rental and leasing industries. Charge-offs of foreign loans and advances decreased by ¥3,414 million compared to the previous fiscal year to ¥19,647 million for the fiscal year ended March 31, 2014.

Because both charge-offs, which are recognized through the sales of loans and write-offs, and a reversal of provision for loan losses decrease the balance of the allowance for loan losses, the overall allowance for loan losses decreased by ¥311,813 million at March 31, 2014 compared to March 31, 2013. The decrease was primarily due to a decrease in allowance for loan losses related to customers from the real estate and goods rental and leasing industries.

The following table shows our allowance for loan losses for each of the periods indicated.

	For the fiscal year ended March 31,
	2015		2014			2013
	(In millions)
Allowance for loan losses at beginning of period	¥	950,665	¥	1,262,478		¥	1,381,164
Provision (credit) for loan losses		79,552		(25,806	)		138,375
Charge-offs:
Domestic		240,663		283,034			241,137
Foreign		9,233		19,647			23,061
Total		249,896		302,681			264,198
Recoveries:
Domestic		9,517		9,293			10,103
Foreign		380		362			333
Total		9,897		9,655			10,436
Net charge-offs		239,999		293,026			253,762
Others(1)		3,334		7,019			(3,299	)
Allowance for loan losses at end of period	¥	793,552	¥	950,665		¥	1,262,478

(1) Others mainly include foreign exchange translations for the fiscal years ended March 31, 2015 and 2014, whereas the amount for the fiscal year ended March 31, 2013 mainly includes foreign exchange translations as well as the exclusion of the allowance for loan losses related to ORIX Credit, as the Bank transferred all of its shares of ORIX Credit to ORIX in June 2012.

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, effectively 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.

“Potentially bankrupt, effectively 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.

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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, effectively 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, effectively bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” or “restructured (loans),” but for which information about credit problems cause management to classify them as impaired loans and advances.

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The following table shows the distribution of impaired loans and advances by “potentially bankrupt, effectively bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” “restructured (loans)” and “other impaired (loans and advances)” at March 31, 2015 and 2014 by domicile and type of industry of the borrowers. At March 31, 2015, gross impaired loans and advances were ¥1,598,102 million, a decrease of ¥350,711 million from ¥1,948,813 million at March 31, 2014. 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 1.8% at March 31, 2015, a decrease of 0.6 percentage points from 2.4% at March 31, 2014.

	At March 31,
	2015			2014
	(In millions)
Potentially bankrupt, effectively bankrupt and bankrupt (loans and advances):
Domestic:
Manufacturing	¥	149,686		¥	183,257
Agriculture, forestry, fisheries and mining		7,146			3,251
Construction		36,903			69,144
Transportation, communications and public enterprises		52,168			56,782
Wholesale and retail		156,753			208,491
Finance and insurance		9,551			13,378
Real estate and goods rental and leasing		198,714			291,665
Services		161,384			192,191
Lease financing		18,522			21,079
Consumer		223,464			238,563
Others		43,443			59,812
Total domestic		1,057,734			1,337,613
Foreign:
Public sector		14			14
Financial institutions		19,720			2,647
Commerce and industry		146,821			131,254
Lease financing		8,969			8,623
Others		6,152			4,566
Total foreign		181,676			147,104
Total		1,239,410			1,484,717
Past due three months or more (loans):
Domestic		23,586			25,959
Foreign		398			437
Total		23,984			26,396
Restructured (loans):
Domestic		144,628			247,351
Foreign		43,330			37,475
Total		187,958			284,826
Other impaired (loans and advances):
Domestic		140,858			152,873
Foreign		5,892			1
Total		146,750			152,874
Gross impaired loans and advances		1,598,102			1,948,813
Less: Allowance for loan losses for impaired loans and advances		(699,207	)		(857,095	)
Net impaired loans and advances	¥	898,895		¥	1,091,718

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In addition to the discussion in this section, see Note 45 “Financial Risk Management—Credit Risk” to our consolidated financial statements included elsewhere in this annual report.

Investment Securities

Our investment securities, including available-for-sale financial assets and held-to-maturity investments, totaled ¥24,239,656 million at March 31, 2015, an increase of ¥2,186,658 million, or 10%, from ¥22,052,998 million at March 31, 2014. The increase of our investment securities was primarily due to an increase in our holdings of available-for-sale bonds.

Our bond portfolio is principally held for asset and liability management purposes. Our bond portfolio mostly consisted of Japanese government bonds, U.S. Treasury and other U.S. government agency bonds, and bonds issued by other governments and official institutions.

Our held-to-maturity investments amounted to ¥3,396,895 million at March 31, 2015, a decrease of ¥1,131,359 million, or 25%, from ¥4,528,254 million at March 31, 2014, primarily due to a decrease in Japanese government bonds, which are the principal components of our held-to-maturity investments portfolio.

Domestic available-for-sale financial assets included ¥9,673,700 million of domestic debt instruments at March 31, 2015, which was an increase of ¥770,807 million, or 9%, from ¥8,902,893 million at March 31, 2014. The increase was primarily due to an increase in our holdings of Japanese government bonds. Moreover, we manage the average duration of our Japanese government bonds to be short, and Japanese government bonds with a maturity of less than a year and those with a maturity of less than five years accounted for 18% and 100%, respectively, of our total Japanese government bonds at March 31, 2015. As for our foreign available-for-sale financial assets, we had ¥4,739,748 million of foreign debt instruments, including ¥4,267,705 million of bonds issued by foreign governments, government agencies and official institutions, at March 31, 2015, which was an increase of ¥1,168,345 million, or 33%, from ¥3,571,403 million at March 31, 2014. The increase was primarily due to an increase in our holdings of non-U.S. foreign government bonds. Of our bonds issued by foreign governments, government agencies and official institutions, which mainly consisted of U.S. government bonds, 66% had a maturity of less than five years.

We had ¥5,676,371 million of domestic equity instruments and ¥752,942 million of foreign equity instruments at March 31, 2015. Our domestic equity instruments, which consisted principally of publicly traded Japanese stocks and included common and preferred stocks issued by our customers, increased by ¥1,206,124 million, or 27%, from ¥4,470,247 million at March 31, 2014. Net unrealized gains on our domestic equity instruments increased by ¥1,005,748 million, or 50%, from ¥2,025,978 million at March 31, 2014 to ¥3,031,726 million at March 31, 2015. The increase was primarily due to a rise in the market prices of these stocks in a market environment where, as described in “Item 5. Operating and Financial Review and Prospects—Overview—Operating Environment,” the Nikkei Stock Average rose from ¥14,827.83 at March 31, 2014 to ¥19,206.99 at March 31, 2015. Net unrealized gains on our foreign equity instruments increased by ¥101,904 million, or 47%, from ¥215,814 million at March 31, 2014 to ¥317,718 million at March 31, 2015.

We recognize the risks associated with our equity portfolio, owing to its volatility, and have been actively looking to minimize the negative effect of holding a large equity portfolio through economic hedging and derivative transactions.

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.

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The following tables show the amortized cost, gross unrealized gains and losses and fair value of our investment securities, which are classified as held-to-maturity investments and available-for-sale financial assets at March 31, 2015, 2014 and 2013.

	At March 31, 2015
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
	(In millions)
Held-to-maturity investments:
Domestic:
Japanese government bonds	¥	3,282,787	¥	20,441	¥	—	¥	3,303,228
Japanese municipal bonds		67,843		222		—		68,065
Japanese corporate bonds		46,265		174		—		46,439
Total domestic		3,396,895		20,837		—		3,417,732
Foreign		—		—		—		—
Total	¥	3,396,895	¥	20,837	¥	—	¥	3,417,732
Available-for-sale financial assets:
Domestic:
Japanese government bonds	¥	9,376,173	¥	17,318	¥	3,532	¥	9,389,959
Japanese municipal bonds		51,882		281		13		52,150
Japanese corporate bonds		229,726		1,928		63		231,591
Total domestic debt instruments		9,657,781		19,527		3,608		9,673,700
Equity instruments		2,644,645		3,033,813		2,087		5,676,371
Total domestic		12,302,426		3,053,340		5,695		15,350,071
Foreign:
U.S. Treasury and other U.S. government agency bonds		2,064,938		2,497		5,392		2,062,043
Bonds issued by other governments and official institutions		2,178,318		27,976		632		2,205,662
Mortgage-backed securities		257,277		231		408		257,100
Other debt instruments		213,815		1,621		493		214,943
Total foreign debt instruments		4,714,348		32,325		6,925		4,739,748
Equity instruments		435,224		317,801		83		752,942
Total foreign		5,149,572		350,126		7,008		5,492,690
Total	¥	17,451,998	¥	3,403,466	¥	12,703	¥	20,842,761

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	At March 31, 2014
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
	(In millions)
Held-to-maturity investments:
Domestic:
Japanese government bonds	¥	4,330,877	¥	32,095	¥	125	¥	4,362,847
Japanese municipal bonds		102,580		847		2		103,425
Japanese corporate bonds		94,797		1,306		27		96,076
Total domestic		4,528,254		34,248		154		4,562,348
Foreign		—		—		—		—
Total	¥	4,528,254	¥	34,248	¥	154	¥	4,562,348
Available-for-sale financial assets:
Domestic:
Japanese government bonds	¥	8,242,654	¥	19,212	¥	57	¥	8,261,809
Japanese municipal bonds		125,095		736		27		125,804
Japanese corporate bonds		512,904		2,519		143		515,280
Total domestic debt instruments		8,880,653		22,467		227		8,902,893
Equity instruments		2,444,269		2,032,382		6,404		4,470,247
Total domestic		11,324,922		2,054,849		6,631		13,373,140
Foreign:
U.S. Treasury and other U.S. government agency bonds		1,891,918		194		20,355		1,871,757
Bonds issued by other governments and official institutions		1,215,260		1,478		541		1,216,197
Mortgage-backed securities		256,389		108		14,848		241,649
Other debt instruments		239,757		2,527		484		241,800
Total foreign debt instruments		3,603,324		4,307		36,228		3,571,403
Equity instruments		364,387		216,625		811		580,201
Total foreign		3,967,711		220,932		37,039		4,151,604
Total	¥	15,292,633	¥	2,275,781	¥	43,670	¥	17,524,744

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	At March 31, 2013
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
	(In millions)
Held-to-maturity investments:
Domestic:
Japanese government bonds	¥	5,514,196	¥	57,018	¥	37	¥	5,571,177
Japanese municipal bonds		159,148		1,883		—		161,031
Japanese corporate bonds		166,913		2,547		4		169,456
Total domestic		5,840,257		61,448		41		5,901,664
Foreign		—		—		—		—
Total	¥	5,840,257	¥	61,448	¥	41	¥	5,901,664
Available-for-sale financial assets:
Domestic:
Japanese government bonds	¥	19,529,436	¥	47,954	¥	255	¥	19,577,135
Japanese municipal bonds		196,263		1,658		14		197,907
Japanese corporate bonds		522,489		4,194		419		526,264
Total domestic debt instruments		20,248,188		53,806		688		20,301,306
Equity instruments		2,325,705		1,616,621		3,795		3,938,531
Total domestic		22,573,893		1,670,427		4,483		24,239,837
Foreign:
U.S. Treasury and other U.S. government agency bonds		3,803,402		3,068		1,990		3,804,480
Bonds issued by other governments and official institutions		1,213,015		2,997		346		1,215,666
Mortgage-backed securities		331,881		517		3,794		328,604
Other debt instruments		296,004		3,559		420		299,143
Total foreign debt instruments		5,644,302		10,141		6,550		5,647,893
Equity instruments		340,528		184,183		99		524,612
Total foreign		5,984,830		194,324		6,649		6,172,505
Total	¥	28,558,723	¥	1,864,751	¥	11,132	¥	30,412,342

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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 March 31, 2015, 2014 and 2013. None of the available-for-sale equity instruments included in the tables have been in a continuous unrealized loss position for twelve months or more, since under our accounting policy, a significant or prolonged decline in the fair value of an equity instrument below its cost is considered to be an objective evidence of impairment.

	At March 31, 2015
	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)
Held-to-maturity investments:
Domestic:
Japanese government bonds	¥	—	¥	—	¥	—	¥	—	¥	—	¥	—
Japanese municipal bonds		—		—		—		—		—		—
Japanese corporate bonds		—		—		—		—		—		—
Total domestic		—		—		—		—		—		—
Foreign		—		—		—		—		—		—
Total	¥	—	¥	—	¥	—	¥	—	¥	—	¥	—
Available-for-sale financial assets:
Domestic:
Japanese government bonds	¥	2,067,924	¥	3,531	¥	22	¥	1	¥	2,067,946	¥	3,532
Japanese municipal bonds		1,550		8		1,476		5		3,026		13
Japanese corporate bonds		36,668		61		498		2		37,166		63
Total domestic debt instruments		2,106,142		3,600		1,996		8		2,108,138		3,608
Equity instruments		37,689		2,087		—		—		37,689		2,087
Total domestic		2,143,831		5,687		1,996		8		2,145,827		5,695
Foreign:
U.S. Treasury and other U.S. government agency bonds		387,664		2,535		441,641		2,857		829,305		5,392
Bonds issued by other governments and official institutions		633,935		604		23,507		28		657,442		632
Mortgage-backed securities		—		—		15,208		408		15,208		408
Other debt instruments		89,627		110		1,909		383		91,536		493
Total foreign debt instruments		1,111,226		3,249		482,265		3,676		1,593,491		6,925
Equity instruments		5,066		83		—		—		5,066		83
Total foreign		1,116,292		3,332		482,265		3,676		1,598,557		7,008
Total	¥	3,260,123	¥	9,019	¥	484,261	¥	3,684	¥	3,744,384	¥	12,703

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	At March 31, 2014
	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)
Held-to-maturity investments:
Domestic:
Japanese government bonds	¥	—	¥	—	¥	269,649	¥	125	¥	269,649	¥	125
Japanese municipal bonds		1,882		2		—		—		1,882		2
Japanese corporate bonds		6,585		19		1,208		8		7,793		27
Total domestic		8,467		21		270,857		133		279,324		154
Foreign		—		—		—		—		—		—
Total	¥	8,467	¥	21	¥	270,857	¥	133	¥	279,324	¥	154
Available-for-sale financial assets:
Domestic:
Japanese government bonds	¥	35,592	¥	57	¥	22	¥	—	¥	35,614	¥	57
Japanese municipal bonds		4,740		18		2,277		9		7,017		27
Japanese corporate bonds		48,777		74		22,476		69		71,253		143
Total domestic debt instruments		89,109		149		24,775		78		113,884		227
Equity instruments		123,013		6,404		—		—		123,013		6,404
Total domestic		212,122		6,553		24,775		78		236,897		6,631
Foreign:
U.S. Treasury and other U.S. government agency bonds		1,095,165		15,531		97,688		4,824		1,192,853		20,355
Bonds issued by other governments and official institutions		540,015		541		—		—		540,015		541
Mortgage-backed securities		224,568		14,846		426		2		224,994		14,848
Other debt instruments		25,733		444		51,751		40		77,484		484
Total foreign debt instruments		1,885,481		31,362		149,865		4,866		2,035,346		36,228
Equity instruments		13,704		811		—		—		13,704		811
Total foreign		1,899,185		32,173		149,865		4,866		2,049,050		37,039
Total	¥	2,111,307	¥	38,726	¥	174,640	¥	4,944	¥	2,285,947	¥	43,670

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	At March 31, 2013
	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)
Held-to-maturity investments:
Domestic:
Japanese government bonds	¥	269,676	¥	37	¥	—	¥	—	¥	269,676	¥	37
Japanese municipal bonds		373		—		—		—		373		—
Japanese corporate bonds		716		—		507		4		1,223		4
Total domestic		270,765		37		507		4		271,272		41
Foreign		—		—		—		—		—		—
Total	¥	270,765	¥	37	¥	507	¥	4	¥	271,272	¥	41
Available-for-sale financial assets:
Domestic:
Japanese government bonds	¥	1,714,251	¥	255	¥	23	¥	—	¥	1,714,274	¥	255
Japanese municipal bonds		2,244		14		127		—		2,371		14
Japanese corporate bonds		41,272		115		13,890		304		55,162		419
Total domestic debt instruments		1,757,767		384		14,040		304		1,771,807		688
Equity instruments		78,378		3,795		—		—		78,378		3,795
Total domestic		1,836,145		4,179		14,040		304		1,850,185		4,483
Foreign:
U.S. Treasury and other U.S. government agency bonds		1,148,832		1,990		—		—		1,148,832		1,990
Bonds issued by other governments and official institutions		429,021		309		33,638		37		462,659		346
Mortgage-backed securities		299,869		3,794		—		—		299,869		3,794
Other debt instruments		15,120		55		68,011		365		83,131		420
Total foreign debt instruments		1,892,842		6,148		101,649		402		1,994,491		6,550
Equity instruments		17,831		99		—		—		17,831		99
Total foreign		1,910,673		6,247		101,649		402		2,012,322		6,649
Total	¥	3,746,818	¥	10,426	¥	115,689	¥	706	¥	3,862,507	¥	11,132

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Trading Assets

The following table shows our trading assets at March 31, 2015 and 2014. Our trading assets were ¥3,243,185 million at March 31, 2015, a decrease of ¥314,360 million from ¥3,557,545 million at March 31, 2014. The decrease in trading assets was primarily due to a decrease in our holdings of Japanese government bonds.

	At March 31,
	2015		2014
	(In millions)
Debt instruments	¥	2,618,593	¥	3,263,085
Equity instruments		624,592		294,460
Total trading assets	¥	3,243,185	¥	3,557,545

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 March 31, 2015 and 2014. The fair value was ¥1,785,684 million at March 31, 2015, a decrease of ¥54,571 million from ¥1,840,255 million at March 31, 2014, primarily due to a decrease in our holdings of debt instruments.

	At March 31,
	2015		2014
	(In millions)
Debt instruments	¥	1,654,259	¥	1,697,872
Equity instruments		131,425		142,383
Total financial assets at fair value through profit or loss	¥	1,785,684	¥	1,840,255

Exposures to Selected European Countries

The following tables show exposures to Greece, Italy, Ireland, Portugal and Spain at March 31, 2015 and 2014. Our exposures to those countries consisted mainly of loans, trade financing, leases, guarantees and unused commitments to large corporations, and project finance transactions. All figures in this subsection are based on the data collected for our internal risk management.

	At March 31, 2015
	Sovereign		Financial institutions		Non-financial corporations		Total
	(In billions)
Greece	¥	—	¥	—	¥	7.6	¥	7.6
Italy		—		0.9		221.9		222.8
Ireland		—		—		236.0		236.0
Portugal		—		—		6.1		6.1
Spain		2.3		0.2		260.5		263.0
Total	¥	2.3	¥	1.1	¥	732.1	¥	735.5

	At March 31, 2014
	Sovereign		Financial institutions		Non-financial corporations		Total
	(In billions)
Greece	¥	—	¥	—	¥	6.4	¥	6.4
Italy		0.2		1.1		290.5		291.8
Ireland		—		—		103.7		103.7
Portugal		—		—		4.4		4.4
Spain		1.2		0.2		249.7		251.1
Total	¥	1.4	¥	1.3	¥	654.7	¥	657.4

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Liabilities

Our total liabilities increased by ¥18,944,765 million from ¥149,215,851 million at March 31, 2014 to ¥168,160,616 million at March 31, 2015, primarily due to increases in deposits, borrowings and debt securities in issue.

The following table shows our liabilities at March 31, 2015 and 2014.

	At March 31,
	2015		2014(1)
	(In millions)
Deposits	¥	115,833,980	¥	108,370,494
Call money and bills sold		5,873,124		4,112,429
Repurchase agreements and cash collateral on securities lent		8,820,083		7,041,075
Trading liabilities		2,193,400		1,865,243
Derivative financial instruments		6,739,787		4,980,991
Borrowings		11,217,052		8,463,363
Debt securities in issue		11,051,431		8,769,094
Provisions		207,624		225,473
Other liabilities		5,548,965		5,143,853
Current tax liabilities		111,365		94,585
Deferred tax liabilities		563,805		149,251
Total liabilities	¥	168,160,616	¥	149,215,851

(1) Comparative information has been restated to reflect the adoption of IFRIC Interpretation 21 “Levies.” For more information, see Note 2 “Summary of Significant Accounting Policies—New and Amended Accounting Standards Adopted by the SMFG Group” to our consolidated financial statements included elsewhere in this annual report.

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 80% 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, with the balance from governmental bodies (including municipal authorities) and financial institutions.

The Bank’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. These deposits typically pay interest rates determined with reference to market rates such as LIBOR.

Our deposit balances at March 31, 2015 were ¥115,833,980 million, an increase of ¥7,463,486 million, or 7%, from ¥108,370,494 million at March 31, 2014, primarily due to increases in demand deposits at domestic offices and time deposits and deposits at notice at foreign offices, reflecting our efforts to expand and diversify our foreign currency funding sources.

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The following table shows a breakdown of our domestic and foreign offices’ deposits at the dates indicated.

	At March 31,
	2015		2014
	(In millions)
Domestic offices:
Non-interest-bearing demand deposits	¥	15,387,795	¥	14,465,654
Interest-bearing demand deposits		40,593,134		38,652,993
Deposits at notice		821,717		871,081
Time deposits		24,186,585		24,136,904
Negotiable certificates of deposit		5,705,862		5,458,722
Others		5,736,495		4,977,829
Total domestic offices		92,431,588		88,563,183
Foreign offices:
Non-interest-bearing demand deposits		862,698		607,657
Interest-bearing demand deposits		1,448,643		1,129,154
Deposits at notice		7,968,300		6,499,694
Time deposits		4,897,880		3,200,421
Negotiable certificates of deposit		8,120,036		8,254,818
Others		104,835		115,567
Total foreign offices		23,402,392		19,807,311
Total deposits	¥	115,833,980	¥	108,370,494

Borrowings

Borrowings include short-term borrowings, unsubordinated and subordinated long-term borrowings, liabilities associated with securitization transactions of our own assets, and lease obligations. At March 31, 2015, our borrowings were ¥11,217,052 million, an increase of ¥2,753,689 million, or 33%, from ¥8,463,363 million at March 31, 2014, primarily due to an increase in short-term borrowings.

At March 31, 2015, our short-term borrowings accounted for 60% of our total borrowings, and our long-term borrowings accounted for 29% of our total borrowings.

The following table shows the balances with respect to our borrowings at March 31, 2015 and 2014.

	At March 31,
	2015		2014
	(In millions)
Short-term borrowings	¥	6,746,249	¥	3,092,892
Long-term borrowings:
Unsubordinated		2,947,573		3,885,678
Subordinated		317,461		282,450
Liabilities associated with securitization transactions		1,103,929		1,108,720
Lease obligations		101,840		93,623
Total borrowings	¥	11,217,052	¥	8,463,363

For more information, see Note 18 “Borrowings” to our consolidated financial statements included elsewhere in this annual report, which sets forth summaries of short- and long-term borrowings with their contractual interest rates and currencies.

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Debt Securities in Issue

Debt securities in issue at March 31, 2015 were ¥11,051,431 million, an increase of ¥2,282,337 million, or 26%, from ¥8,769,094 million at March 31, 2014, primarily due to increases in commercial paper and senior bonds, which primarily reflects our efforts to expand foreign currency funding sources.

	At March 31,
	2015		2014
	(In millions)
Commercial paper	¥	4,813,902	¥	3,669,912
Bonds		4,461,425		3,399,672
Subordinated bonds		1,776,104		1,699,510
Total debt securities in issue	¥	11,051,431	¥	8,769,094

For additional information, see Note 19 “Debt Securities in Issue” to our consolidated financial statements included elsewhere in this annual report, which sets forth summaries of debt securities in issue with their contractual interest rates and currencies.

In the normal course of business, we enter into contractual obligations that require future cash payments. “Item 5.F. Tabular Disclosure of Contractual Obligations” sets forth a summary of our contractual cash obligations at March 31, 2015.

Total Equity

Our total equity increased by ¥1,605,660 million from ¥9,415,190 million at March 31, 2014 to ¥11,020,850 million at March 31, 2015, primarily due to increases in retained earnings and other reserves. The increase in retained earnings mainly reflected our net profit. The increase in other reserves was primarily due to increases in available-for-sale financial assets reserve reflecting a rise in market prices of domestic equity instruments, and exchange differences on translating the foreign operations reserve reflecting the depreciation of the yen. For more information, see Note 24 “Shareholders’ Equity” and Note 25 “Non-controlling Interests” to our consolidated financial statements included elsewhere in this annual report.

	At March 31,
	2015			2014(1)
	(In millions)
Capital stock	¥	2,337,896		¥	2,337,896
Capital surplus		862,971			862,518
Retained earnings		3,554,688			3,112,571
Other reserves		2,759,084			1,546,826
Treasury stock		(175,261	)		(175,115	)
Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc.		9,339,378			7,684,696
Non-controlling interests		1,681,472			1,730,494
Total equity	¥	11,020,850		¥	9,415,190

(1) Comparative information has been restated to reflect the adoption of IFRIC Interpretation 21 “Levies.” For more information, see Note 2 “Summary of Significant Accounting Policies—New and Amended Accounting Standards Adopted by the SMFG Group” to our consolidated financial statements included elsewhere in this annual report.

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Reconciliation with Japanese GAAP

Our consolidated financial statements are prepared in accordance with IFRS as summarized in Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this annual report. These policies differ in some respects from Japanese GAAP. Under Japanese banking regulations, we report our annual financial results prepared under Japanese GAAP. To show the major reconciling items between our IFRS and Japanese GAAP consolidated financial statements, we have provided below, with respect to our most recent fiscal year, a reconciliation of consolidated net profit and total equity under IFRS with those amounts under Japanese GAAP.

	At and for the fiscal year ended March 31, 2015
	Total equity			Net profit
	(In millions)
IFRS	¥	11,020,850		¥	722,961
Differences arising from different accounting for:
1.   Scope of consolidation		111,553			3,910
2.   Derivative financial instruments		103,591			84,499
3.   Investment securities		(296,041	)		(10,232	)
4.   Loans and advances		(695	)		116,318
5.   Investments in associates and joint ventures		(33,149	)		(23,604	)
6.   Property, plant and equipment		(8,039	)		1,018
7.   Lease accounting		(2,001	)		2,000
8.   Defined benefit plans		(4,796	)		(3,080	)
9.   Deferred tax assets		(64,501	)		13,110
10. Foreign currency translation		—			23,054
Others		(133,204	)		(17,413	)
Tax effect of the above		2,704			(44,525	)
Japanese GAAP	¥	10,696,272		¥	868,016

The explanations below summarize certain differences between IFRS and Japanese GAAP that may be significant. The paragraphs below refer to the corresponding items as set forth in the table above.

1. Scope of consolidation

Under Japanese GAAP, we consolidate an entity when we effectively control the decision making body of the entity’s operating and financing policies. Control is generally presumed to exist when we own more than half of the voting power, or own from 40% to 50% of the voting power and certain facts exist indicating control. Certain entities established for securitization are presumed not to be controlled. Under IFRS, we consolidate an entity when we control the entity. Control is generally presumed to exist when we are exposed, or have rights, to variable returns from our involvement with the entity and have the ability to affect those returns through our power over the entity. The existence and effect of potential voting rights that are deemed to be substantive are taken into account when assessing the control. When assessing control of an entity under IFRS, we apply a single consolidation model to all types of entities, irrespective of their nature. This results in a difference in the scope of consolidation between Japanese GAAP and IFRS. Most significantly, certain entities designed for special purpose such as securitization, usually in the form of trusts under the Trust Act of Japan, are not consolidated under Japanese GAAP but consolidated under IFRS. Accordingly, both the cumulative gains on transfers of financial assets to these securitization vehicles and amortization of our retained subordinate interest under Japanese GAAP were not recognized under IFRS due to consolidation of such vehicles.

2. Derivative financial instruments

Under Japanese GAAP, an embedded derivative shall be separately accounted for when the host contract may suffer losses arising from the embedded derivative. Also, an entity may separately account for an embedded

105

derivative if the entity manages it separately, even though the criteria for separation are not fully met. Under IFRS, an embedded derivative shall be separated from the host contract and accounted for as a derivative if, and only if its economic characteristics and risks are not closely related to those of the host contract. Accordingly, certain embedded derivatives that are separately accounted for under Japanese GAAP but do not meet the criteria for separation under IFRS are adjusted such that they are combined with the host contract, and vice versa. In addition, the separation of the embedded derivatives from the host contract is adjusted so as not to result in any gain or loss at initial recognition under IFRS.

We apply hedge accounting under Japanese GAAP. However, IFRS imposes onerous documentation and effectiveness testing requirements on entities wishing to apply hedge accounting. The result of these requirements is that it is more difficult to achieve hedge accounting under IFRS than under Japanese GAAP, and the effects of hedge accounting under Japanese GAAP have therefore been reversed under IFRS.

Japanese GAAP and IFRS require OTC derivatives to be measured at fair value. In principle, there is no significant difference in the definitions of fair value, but in practice there is diversity in the application of valuation techniques used for fair value under Japanese GAAP and IFRS. Therefore to meet the requirements of fair value under IFRS, adjustments have been made to the fair values under Japanese GAAP to reflect credit risk adjustments for OTC derivatives. Certain guarantees under Japanese GAAP do not meet the definition of a financial guarantee under IFRS but meet that of a derivative. These guarantees are measured at fair value and the change in fair value is recognized in the consolidated income statement under IFRS.

3. Investment securities

Under Japanese GAAP, certain financial assets classified as available-for-sale, such as unlisted stocks, are measured at cost. However, under IFRS available-for-sale financial assets (and financial assets at fair value through profit or loss) should be measured at fair value. The fair value of financial instruments where there is no quoted price in an active market is determined by using valuation techniques. In addition, the fair values of financial instruments under Japanese GAAP have been adjusted in order to meet the requirements of fair value under IFRS. For example, the SMFG Group uses the last 1-month average of the closing transaction prices for the fair value measurement of available-for-sale financial assets (listed stocks) under Japanese GAAP, whereas closing spot prices are used under IFRS. Additionally under IFRS, we classify certain hybrid instruments as financial assets at fair value through profit or loss as we are unable to measure the embedded derivative separately from its host contract although it is required to separate the embedded derivative from the host contract. Accordingly, the change in fair value of such hybrid instruments is recognized in profit or loss.

Under Japanese GAAP, we recognize impairment of available-for-sale equity instruments if the decline in fair value below the cost, less previously recognized impairment loss, is in general 50% or more. Under IFRS, we assess whether there is objective evidence that available-for-sale equity instruments are impaired, including a significant or prolonged decline in the fair value below cost and other qualitative impairment indicators. Additionally, under Japanese GAAP, we reverse impairment losses recognized in a previous interim period, whereas the reversal of the impairment losses on equity instruments is not allowed under IFRS.

4. Loans and advances

Under Japanese GAAP, the reserve for possible loan losses for specifically identified significant loans is calculated by the discounted cash flow (“DCF”) method, which is based on the present value of reasonably estimated cash flows discounted at the original contractual interest rate of the loan. The reserve for possible loan losses for the remaining loans is collectively calculated using the historical loss experience, or individually calculated based on the estimated uncollectible amount considering the historical loss experience and the recoveries from collateral, guarantees and any other collectible cash flows. The historical loss experience for 1 year or 3 years, according to the obligor grade, is calculated basically based on the averaged historical results of at least the past three years. Under IFRS, the allowance for loan losses for individually significant impaired loans is calculated by the DCF method based on the best estimate of cash flows discounted at the original

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effective interest rate which differs from the calculation of the DCF method under Japanese GAAP. The scope of the loans that are subject to the DCF method under IFRS is wider than that under Japanese GAAP. The allowance for loan losses for the remaining loans is collectively calculated by homogeneous group using statistical methods based on the historical loss experience and incorporating the effect of the time value of money. A qualitative analysis based on related economic factors is then performed to reflect the current conditions at the end of the reporting period. The allowance for the non-impaired loan losses is calculated as incurred but not yet identified losses for the period between the impairment occurring and the loss being identified, which are different from the expected losses under Japanese GAAP.

Under Japanese GAAP, loan origination fees and costs are generally recognized in the consolidated income statement as incurred. Under IFRS, loan origination fees and costs that are incremental and directly attributable to the origination of a loan are deferred and thus, included in the calculation of the effective interest rate.

Under Japanese GAAP, loan commitments are not recognized in the consolidated statement of financial position. Provision for the credit risk on these commitments is included as part of the reserve for possible loan losses. Under IFRS, loan commitments are not recognized in the consolidated statement of financial position and a provision for the expected losses to us in relation to the loan commitments is measured based on IAS 37 “Provisions, Contingent Liabilities and Contingent Assets.” Under Japanese GAAP, all guarantee contracts are accounted for by accruing both asset and liability accounts at the nominal guarantee amount. A provision for the credit risk of the guarantee is calculated using the same method as the reserve for possible loan losses and is included as part of it. Under IFRS, a financial guarantee contract is specifically defined in IAS 39 “Financial Instruments: Recognition and Measurement” as a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of the debt instruments. Financial guarantees are initially recognized at fair value and subsequently measured at the higher of the amount determined in accordance with IAS 37 or the amount initially recognized (i.e., fair value) less, when appropriate, cumulative amortization recognized in accordance with IAS 18 “Revenue.”

5. Investments in associates and joint ventures

Under Japanese GAAP, although goodwill related to investments in associates and joint ventures is included in the carrying amount of the investments, we are required to recognize and measure impairment losses only on goodwill separately from the investments if impairment indicators for the goodwill are identified. Under IFRS, for investments in associates and joint ventures, if we identify objective evidence of impairment, the entire carrying amount of the investment is tested for impairment since goodwill is not separately recognized on the initial acquisition of the investment. Additionally, the net profit of associates is adjusted for differences between Japanese GAAP and IFRS in accordance with our accounting policy prior to applying the equity method under IFRS.

6. Property, plant and equipment

For certain assets that are depreciated using the declining balance method under Japanese GAAP, we apply the straight-line method of depreciation to those assets under IFRS as we consider that the straight-line method most closely reflects the expected pattern of consumption of the future economic benefits embodied in those assets. Additionally under IFRS, residual values of assets are reviewed at least at the end of each reporting period. After reviews of all categories of property, plant and equipment, the residual values of assets are considered to be zero under IFRS, whereas residual values are assigned to certain assets under Japanese GAAP.

7. Lease accounting

We account for finance lease transactions without a transfer of ownership commencing before April 1, 2008 as operating leases under Japanese GAAP. However, such accounting treatment is not allowed under IFRS. Thus, we made certain adjustments for those transactions in order to comply with the accounting treatment under IFRS.

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From the fiscal year beginning after April 1, 2008, a new Japanese GAAP standard for lease accounting became effective, which removed the differences for finance leases (with or without a transfer of ownership) between Japanese GAAP and IFRS. Therefore, no adjustment is needed for finance lease transactions entered into after April 1, 2008.

8. Defined benefit plans

Under Japanese GAAP, the present value of the defined benefit obligation is discounted by the rates based on the market yields of long-term Japanese government bonds. Additionally, the discount rates for the previous reporting period can be used for the current reporting period, if the change in the present value of the defined benefit obligation caused by a change in the discount rates from the previous reporting period to the current reporting period is less than 10%. Under IFRS, the discount rates are determined by market yields on high quality corporate bonds at the end of each reporting period.

Under Japanese GAAP, the expected rates of return on plan assets for the previous reporting period can be used for the current reporting period, unless the impact of the profit or loss for the current reporting period is considered to be significant. Under IFRS, the interest cost and expected return on plan assets are replaced with a net interest amount which is calculated by applying the discount rate to the net defined benefit liability (asset).

Under Japanese GAAP, the actuarial gains and losses are recognized in other comprehensive income, and are amortized using the straight-line method. Under IFRS, actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in the year, and return on plan assets excluding interest income are recognized in other comprehensive income and are never reclassified to profit and loss.

Under Japanese GAAP, past service costs are recognized in other comprehensive income and are amortized using the straight-line method. Under IFRS, past service costs are recognized immediately in the consolidated income statement.

9. Deferred tax assets

Under Japanese GAAP, pursuant to the practical guidelines issued by the Japanese Institute of Certified Public Accountants, we recognize deferred tax assets to the extent that the realization of the tax benefit is highly probable based on the schedule. Under IFRS, deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. For example, deferred tax assets for deductible temporary differences relating to impairment of financial instruments of which the timing of the reversal is difficult to estimate cannot be recognized under Japanese GAAP, whereas they can be recognized under IFRS to the extent that it is probable that future taxable profit will be available.

10. Foreign currency translation

Under Japanese GAAP, the income statement items of foreign operations are translated into Japanese yen, our presentation currency, using the (spot) closing rate, whereas under IFRS they are translated into the presentation currency using the exchange rate at the dates of the transactions or, if the exchange rates do not fluctuate significantly, at average exchange rates. In addition, under Japanese GAAP, certain foreign operations’ monetary items denominated in foreign currencies are translated into Japanese yen using the exchange rate at the end of the reporting period. However, under IFRS the monetary items for which settlement is neither planned nor likely to occur in the foreseeable future are translated using the exchange rates at the dates of initial transactions.

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5.B    LIQUIDITY AND CAPITAL RESOURCES

We consistently endeavor to enhance the management of our liquidity profile and strengthen our capital base to meet our customers’ loan requirements and deposit withdrawals and respond to unforeseen situations such as adverse movements in stock, foreign currency, interest rate and other markets, or changes in general domestic or international conditions.

Liquidity

We derive funding for our operations both from domestic and international sources. Our domestic funding is derived primarily from deposits placed with the Bank 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 the Bank to domestic and international customers. Our international sources of funds are principally from deposits from corporate customers and inter-bank market, negotiable certificates of deposit, 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 ¥7,463,486 million, or 7%, from ¥108,370,494 million at March 31, 2014 to ¥115,833,980 million at March 31, 2015. The balance of deposits at March 31, 2015 exceeded the balance of loans and advances by ¥28,862,264 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 75%, 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 March 31,
	2015		2014
	(In millions)
Loans and advances	¥	86,971,716	¥	81,244,982
Deposits		115,833,980		108,370,494

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. The Bank’s Treasury Unit actively monitors the movement of interest rates and maturity profile of its bond portfolio as part of the Bank’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. For further information, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Market Risk and Liquidity Risk—Framework for Market and Liquidity Risk Management.”

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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 SMFG by S&P and Fitch at June 30, 2015:

At June 30, 2015
S&P			Fitch
Long-term	Outlook	Short-term	Long-term	Outlook	Short-term
A	N	A-1	A-	S	F1

The following table shows credit ratings assigned to the Bank by S&P and Fitch at June 30, 2015:

At June 30, 2015
S&P			Fitch
Long-term	Outlook	Short-term	Long-term	Outlook	Short-term
A+	N	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.

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 (“SA”), the foundation IRB approach and the advanced IRB approach for credit risk, and the basic indicator approach (“BIA”), the standardized approach (“TSA”) and the 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 the Bank have adopted the advanced IRB approach since March 31, 2009 and the AMA since March 31, 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 on January 1, 2013 and will be fully applied from January 1, 2019.

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These capital reforms increase the minimum common equity requirement from 2% to 4.5% and require banks to hold a capital conservation buffer of 2.5% to withstand future periods of stress, bringing the total common equity requirement to 7%. The Tier 1 capital requirement will also be increased from 4% to 6%, resulting in a total requirement of 8.5% when combined with the above-mentioned conservation buffer. The total capital requirement remains at the existing level of 8% but also increases to 10.5% due to the capital conservation buffer. In addition, a countercyclical buffer within a range of 0% to 2.5% of common equity or other fully loss absorbing capital will be implemented according to national circumstances. The Group of Central Bank Governors and Heads of Supervision also agreed on transitional arrangements for implementing the new requirements.

To reflect the Basel III framework, the FSA changed its capital adequacy guidelines. Under the FSA capital adequacy guidelines, the new capital requirements are being phased in from March 31, 2013 through March 31, 2019. On March 31, 2013, the minimum Common Equity Tier 1 capital requirement and Tier 1 capital requirement were raised to 3.5% and 4.5%, respectively. The minimum Common Equity Tier 1 capital requirement and Tier 1 capital requirement rose to 4% and 5.5%, respectively on March 31, 2014, and rose to 4.5% and 6%, respectively on March 31, 2015. Meanwhile the capital conservation buffer and countercyclical buffer, which will be phased in from January 1, 2016 under the Basel III accord, have not yet been incorporated into the FSA capital adequacy guidelines.

The table below presents our total risk-weighted capital ratio, total capital, and risk-weighted assets under Japanese GAAP at March 31, 2015, based on the Basel III rules.

	At March 31, 2015
	(In billions, except percentages)
Total risk-weighted capital ratio (consolidated)		16.58	%
Tier 1 risk-weighted capital ratio (consolidated)		12.89	%
Common Equity Tier 1 risk-weighted capital ratio (consolidated)		11.30	%
Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)	¥	10,965.9
Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital)		8,528.6
Common Equity Tier 1 capital		7,476.5
Risk-weighted assets		66,136.8
The amount of minimum capital requirements		5,290.9

Common Equity Tier 1 capital consists primarily of capital stock, capital surplus and retained earnings relating to common shares, and minority interests that meet the criteria set forth in the FSA capital adequacy guidelines for inclusion in Common Equity Tier 1 capital.

Minority 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 minority 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.

Minority interests that will no longer qualify as Common Equity Tier 1 capital, additional Tier 1 capital, or Tier 2 capital under Basel III are being phased out beginning March 31, 2014 by increments of 20% and will be fully phased out by March 31, 2018.

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 to be applied mainly to the calculation of Common Equity Tier 1 capital in the form of a deduction. Such regulatory adjustments are being phased in from March 31, 2014 through March 31, 2018.

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Additional Tier 1 capital consists primarily of preferred securities.

Tier 2 capital consists primarily of subordinated debt securities.

Capital instruments such as preferred securities and 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. However, if those capital instruments meet the requirements for transitional arrangements set forth in such guidelines, they can qualify as additional Tier 1 or Tier 2 capital during the phase-out period beginning March 31, 2013. The remaining balance of those non-qualifying capital instruments recognized as additional Tier 1 or Tier 2 capital will be reduced in annual 10% increments and be fully phased out by March 31, 2022.

At March 31, 2015, our consolidated total capital was ¥10,966 billion, Tier 1 capital was ¥8,529 billion, and Common Equity Tier 1 capital was ¥7,477 billion. Our total risk-weighted assets at March 31, 2015 were ¥66,137 billion.

On a consolidated basis, our total risk-weighted capital ratio was 16.58%, Tier 1 risk-weighted capital ratio was 12.89% and Common Equity Tier 1 risk-weighted capital ratio was 11.30% at March 31, 2015.

Our capital position and the Bank’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. At March 31, 2013, unrealized gains and losses were counted as Tier 2 capital and Additional Tier 1 capital, respectively, but started to be counted as Common Equity Tier 1 capital from March 31, 2014 by increments of 20% and will be fully counted as Common Equity Tier 1 capital from March 31, 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 the Bank.

In addition, our capital position and the Bank’s capital position would be negatively affected if deferred tax assets cannot be recognized. Under guidelines issued by the JICPA, a company will lose its ability to recognize deferred tax assets if, in principle, it has substantial amounts of negative annual taxable income for each of three consecutive years or more and is expected to have significant negative taxable income in the following fiscal year.

Set forth below are tables of risk-weighted capital ratios of the Bank at March 31, 2015 on a consolidated and nonconsolidated basis.

	At March 31, 2015
	(In billions, except percentages)
Total risk-weighted capital ratio (consolidated)		17.93	%
Tier 1 risk-weighted capital ratio (consolidated)		13.91	%
Common Equity Tier 1 risk-weighted capital ratio (consolidated)		12.61	%
Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)	¥	10,449.2
Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital)		8,111.7
Common Equity Tier 1 capital		7,352.0
Risk-weighted assets		58,277.1
The amount of minimum capital requirements		4,662.2

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	At March 31, 2015
	(In billions, except percentages)
Total risk-weighted capital ratio (nonconsolidated)		18.89	%
Tier 1 risk-weighted capital ratio (nonconsolidated)		14.26	%
Common Equity Tier 1 risk-weighted capital ratio (nonconsolidated)		12.80	%
Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)	¥	9,682.5
Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital)		7,309.1
Common Equity Tier 1 capital		6,559.2
Risk-weighted assets		51,232.8
The amount of minimum capital requirements		4,098.6

Our securities subsidiaries in Japan, SMBC Nikko Securities and SMBC Friend Securities, are also subject to capital adequacy requirements under the FIEA described in “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity.” At March 31, 2015, the capital adequacy ratios were 478.3% for SMBC Nikko Securities and 984.1% for SMBC Friend Securities, and sufficiently above the 140%, below which level they would be required to file daily reports with the Commissioner of the FSA.

5.C.    RESEARCH, DEVELOPMENT, PATENTS AND LICENSES

We did not conduct any significant research and development activities for the fiscal year ended March 31, 2015. However, there are certain research and development activities conducted by subsidiaries in charge of systems development and information processing for our information system infrastructure.

5.D.    TREND INFORMATION

Our trend information is contained elsewhere in this annual report, including but not limited to “Item 4.B. Business Overview,” and “—A. Operating Results,” and “—B. Liquidity and Capital Resources” in this Item.

5.E.    OFF-BALANCE SHEET ARRANGEMENTS

To meet our customers’ financing needs, we engage in various types of off-balance sheet arrangements in the ordinary course of business.

Our arrangements include loan commitments, 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. 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.

The table below shows the nominal amounts of undrawn loan commitments, and financial guarantees and other credit-related contingent liabilities at March 31, 2015 and 2014.

	At March 31,
	2015		2014
	(In millions)
Loan commitments	¥	53,665,583	¥	49,285,032
Financial guarantees and other credit-related contingent liabilities		7,076,536		6,396,144
Total	¥	60,742,119	¥	55,681,176

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The nominal amounts of these off-balance sheet instruments generally represent the maximum potential amounts of future payments without consideration of possible recoveries under recourse provisions or from collateral held. For example, 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 we can reject an application from customers or reduce the contract amounts in cases where economic conditions change, we need to secure claims, or some other significant event occurs. In addition, we may request the customers to pledge collateral such as premises and securities at the time of the contracts, and take necessary measures such as monitoring customers’ financial positions, revising contracts when the need arises and securing claims after the contracts are made. We regularly review the credit quality of the customer based on our risk management system as set forth in “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk” and Note 45 “Financial Risk Management” to our consolidated financial statements included elsewhere in this annual report.

In addition to the above-mentioned off-balance sheet arrangements, some of the Group’s off-balance sheet arrangements are related to activities of structured entities. For further information, see Note 48 “Structured Entities” to our consolidated financial statements included elsewhere in this annual report.

5.F.     TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

In the normal course of business, we enter into contractual obligations that require future cash payments. The following table sets forth a summary of our contractual cash obligations at March 31, 2015.

	At March 31, 2015
	Due in one year or less		Due from one year to three years		Due from three years to five years		Due after five years		Total(1)
	(In millions)
Time deposits	¥	24,033,835	¥	3,597,782	¥	607,580	¥	826,224	¥	29,065,421
Negotiable certificate of deposits		13,506,712		286,742		30,254		2,190		13,825,898
Borrowings		7,356,140		665,327		926,245		2,166,598		11,114,310
Debt securities in issue		5,837,166		1,799,923		942,988		2,461,070		11,041,147
Capital (finance) lease obligation		21,905		35,407		29,340		19,389		106,041
Operating lease obligation		44,637		68,515		44,741		126,404		284,297
Purchase obligation(2)		161,579		401,237		679,115		1,646,785		2,888,716
Total	¥	50,961,974	¥	6,854,933	¥	3,260,263	¥	7,248,660	¥	68,325,830

(1) The amount of interest on debt instruments is not included in the maturity table above due to its insignificance.

(2) Purchase obligation in the above table includes the contractual commitments to purchase aircraft to be leased to customers and to purchase goods or services of construction and information technology that are binding on us for the payment of more than ¥100 million. The contractual commitments to purchase aircraft are based upon fixed price agreements with the manufacturers, an element of which are adjusted for inflation and include price escalation formulas, but are also subject to agreed price concessions where applicable.

5.G.     SAFE HARBOR

See the discussion under “Cautionary Statement Regarding Forward-Looking Statements.”

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Item 6. Directors, Senior Management and Employees

6.A.    DIRECTORS AND SENIOR MANAGEMENT

Directors, Senior Management and Corporate Auditors

Under our corporate governance system, our board of directors is responsible for supervising the business operations of the Group as a whole, and has established four board committees to enhance the effectiveness of governance by our board of directors in exercising its management responsibilities. Those committees are:

• the risk management committee;

• the auditing committee;

• the compensation committee; and

• the nominating committee.

For more information, see “Item 6.C. Board Practices.”

Our board of directors is comprised of thirteen directors, five of whom are outside directors as defined under the Companies Act, and our board of corporate auditors is comprised of six corporate auditors, three of whom are outside corporate auditors as defined under the Companies Act.

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At June 26, 2015, the following persons held the indicated positions with us:

Name (Date of birth)	Current positions and principal outside positions	Business experience		Expiration of current term as director or corporate auditor
Masayuki Oku (December 2, 1944)	Chairman of the Board and Director of the Company	April 1968	Joined Sumitomo Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		June 1994	Director of Sumitomo Bank
		November 1998	Managing Director of Sumitomo Bank
		June 1999	Managing Director and Managing Executive Officer of Sumitomo Bank
		January 2001	Senior Managing Director and Senior Managing Executive Officer of Sumitomo Bank
		April 2001	Senior Managing Director and Senior Managing Executive Officer of the Bank
		December 2002	Resigned as Director of the Bank
		December 2002	Senior Managing Director of the Company
		June 2003	Retired as Director of the Company
			Deputy President and Executive Officer of the Bank
		June 2005	Chairman of the Board and Director of the Company (to present)
			President and Chief Executive Officer of the Bank
		April 2011	Resigned as Director of the Bank
Koichi Miyata (November 16, 1953)	President and Representative Director of the Company Director of the Bank	April 1976	Joined Mitsui Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2016.
		June 2003	Executive Officer of the Bank
		October 2006	Managing Executive Officer of the Bank
		April 2009	Director and Senior Managing Executive Officer of the Bank
		April 2010	Senior Managing Executive Officer of the Company
		June 2010	Director of the Company
		April 2011	Director and President of the Company (to present)
			Director of the Bank (to present)
Takeshi Kunibe (March 8, 1954)	Director of the Company President and Chief Executive Officer of the Bank	April 1976	Joined Sumitomo Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		June 2003	Executive Officer of the Bank
		October 2006	Managing Executive Officer of the Bank
		April 2007	Managing Executive Officer of the Company
		June 2007	Director of the Company (to present)
		April 2009	Director and Senior Managing Executive Officer of the Bank
		April 2011	President and Chief Executive Officer of the Bank (to present)

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Name (Date of birth)	Current positions and principal outside positions	Business experience		Expiration of current term as director or corporate auditor
Yujiro Ito (August 3, 1955)	Representative Director of the Company Officer in charge of General Affairs Department and Human Resources Department Director and Deputy President of the Bank	April 1979	Joined Sumitomo Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		June 2005	Executive Officer of the Bank
		April 2009	Managing Executive Officer of the Bank
		April 2011	Managing Executive Officer of the Company
			Director and Managing Executive Officer of the Bank
		June 2011	Director of the Company (to present)
		April 2012	Director and Senior Managing Executive Officer of the Bank
		April 2014	Director and Deputy President of the Bank (to present)
Kozo Ogino (May 9, 1958)	Director of the Company Officer in charge of Audit Department Director and Senior Managing Executive Officer of the Bank	April 1981	Joined Mitsui Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		April 2010	Executive Officer of the Bank
		April 2011	Managing Executive Officer of the Bank
		April 2013	Managing Executive Officer of the Company
		June 2013	Director of the Company (to present)
		April 2014	Director and Senior Managing Executive Officer of the Bank (to present)
Toshiyuki Teramoto (September 15, 1958)	Director of the Company Officer in charge of Corporate Risk Management Department Director and Senior Managing Executive Officer of the Bank	April 1981	Joined Mitsui Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		April 2008	Executive Officer of the Bank
		April 2011	Managing Executive Officer of the Bank
		April 2014	Director and Senior Managing Executive Officer of the Bank (to present)
		April 2015	Senior Managing Executive Officer of the Company
		June 2015	Director of the Company (to present)
Jun Ohta (February 12, 1958)	Director of the Company Officer in charge of Public Relations Department, Corporate Planning Department, Financial Accounting Department and Subsidiaries & Affiliates Department Director and Senior Managing Executive Officer of the Bank	April 1982	Joined Sumitomo Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2016.
		April 2009	Executive Officer of the Bank
		May 2009	General Manager of Investment Banking Planning Department of the Company
		April 2012	Managing Executive Officer of the Bank
		April 2013	Managing Executive Officer of the Company
		April 2014	Senior Managing Executive Officer of the Company
			Senior Managing Executive Officer of the Bank
		June 2014	Director of the Company (to present)
		April 2015	Director and Senior Managing Executive Officer of the Bank (to present)

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Name (Date of birth)	Current positions and principal outside positions	Business experience		Expiration of current term as director or corporate auditor
Katsunori Tanizaki (April 12, 1957)	Director of the Company Officer in charge of IT Planning Department Director and Senior Managing Executive Officer of the Bank	April 1982	Joined Sumitomo Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		April 2010	Executive Officer of the Bank
		April 2011	General Manager of IT Planning Department of the Company
		April 2013	Managing Executive Officer of the Bank
		April 2015	Senior Managing Executive Officer of the Company
			Director and Senior Managing Executive Officer of the Bank (to present)
		June 2015	Director of the Company (to present)
Yoshinori Yokoyama(1) (September 16, 1942)	Director of the Company	April 1966	Joined Mayekawa Kunio Associates, Architects & Engineers	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2016.
		September 1973	Joined Davis Brody & Associates
		September 1975	Joined McKinsey & Company, Inc.
		July 1987	Director (Senior Partner) of McKinsey & Company, Inc.
		June 2002	Retired from McKinsey & Company, Inc.
		June 2002	Director of ORIX Corporation
		April 2003	Corporate Auditor of Industrial Revitalization Corporation of Japan
		June 2006	Director of the Company (to present) Director of the Bank
		June 2015	Resigned as Director of the Bank
Kuniaki Nomura(1) (June 13, 1945)	Director of the Company	April 1970	Registered as an attorney at law (to present)	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
			Attorney at law at Yanagida Law Office (currently, Yanagida & Partners)
		June 2009	Director of the Company (to present) Director of the Bank
		June 2009	Attorney at law at Nomura & Partners (to present)
		June 2015	Retired as Director of the Bank
Arthur M. Mitchell(1) (July 23,1947)	Director of the Company	July 1976	Registered as an attorney at law, admitted in New York, the U.S.A. (to present)	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		January 2003	General Counsel of the Asian Development Bank
		September 2007	Joined White & Case LLP
		January 2008	Registered as Foreign Attorney in Japan (to present)
			Registered Foreign Attorney in Japan at White & Case LLP (to present)
		June 2015	Director of the Company (to present)

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Name (Date of birth)	Current positions and principal outside positions	Business experience		Expiration of current term as director or corporate auditor
Masaharu Kohno(1) (December 21, 1948)	Director of the Company	April 1973	Joined Ministry of Foreign Affairs of Japan	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		August 2005	Director-General of Foreign Policy Bureau in Ministry of Foreign Affairs of Japan
		January 2007	Deputy Minister for Foreign Affairs (in charge of economy) of Ministry of Foreign Affairs of Japan
		February 2009	Ambassador of Japan to Russia
		May 2009	Ambassador of Japan to Russia, Armenia, Turkmenistan and Belarus
		March 2011	Ambassador of Japan to Italy
		May 2011	Ambassador of Japan to Italy, Albania, San Marino and Malta
		September 2014	Retired from office
		June 2015	Director of the Company (to present)
Eriko Sakurai(1) (November 16, 1960)	Director of the Company	June 1987	Joined Dow Corning Corporation	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		May 2008	Director of Dow Corning Toray Co., Ltd.
		March 2009	Chairman and Chief Executive Officer of Dow Corning Toray Co., Ltd. (to present)
		May 2011	Regional President -Japan/Korea of Dow Corning Corporation (to present)
		February 2015	President and Representative Director of Dow Corning Holding Japan Co., Ltd (to present)
		June 2015	Director of the Company (to present)
Koichi Minami (March 21, 1955)	Corporate Auditor of the Company Corporate Auditor of the Bank	April 1977	Joined Sumitomo Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		June 2005	Executive Officer of the Bank
		April 2008	Managing Executive Officer of the Bank
		April 2011	Director and Senior Managing Executive Officer of the Bank
		April 2013	Director of the Bank
		June 2013	Corporate Auditor of the Company (to present)
			Corporate Auditor of the Bank (to present)
Kazuhiko Nakao (July 1, 1959)	Corporate Auditor of the Company	April 1982	Joined Taiyo Kobe Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2018.
		April 2010	General Manager of Himeji Corporate Business Office of the Bank
		April 2011	Senior General Manager of Himeji Corporate Business Office of the Bank
		April 2012	Co-General Manager of General Affairs Department of the Company
			Senior General Manager of Administrative Services Department of the Bank
		April 2014	Senior General Manager of Head Office of the Bank
		June 2014	Corporate Auditor of the Company (to present)

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Name (Date of birth)	Current positions and principal outside positions	Business experience		Expiration of current term as director or corporate auditor
Toru Mikami (August 27, 1960)	Corporate Auditor of the Company	April 1984	Joined Sumitomo Bank	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2019.
		April 2006	General Manager of Legal Department of the Bank
		April 2013	Co-General Manager of General Affairs Department of the Company
		April 2015	Senior Manager of Head Office of the Bank
		June 2015	Corporate Auditor of the Company (to present)
Ikuo Uno(2) (January 4, 1935)	Corporate Auditor of the Company	March 1959	Joined Nippon Life Insurance Company	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
	Executive Advisor to the Board of Nippon Life Insurance Company	April 1997	President of Nippon Life Insurance Company
		April 2005	Chairman of the Board and Representative Director of Nippon Life Insurance Company
		June 2005	Corporate Auditor of the Company (to present)
		June 2006	Corporate Auditor of the Bank
		April 2011	Director and Executive Advisor to the Board of Nippon Life Insurance Company
		July 2011	Executive Advisor to the Board of Nippon Life Insurance Company (to present)
		June 2015	Resigned as Corporate Auditor of the Bank
Satoshi Itoh(2) (July 25, 1942)	Corporate Auditor of the Company	January 1967	Joined Tokyo Office of Arthur Andersen & Co.	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2017.
		December 1970	Registered as a certified public accountant (to present)
		September 1978	Partner of Arthur Andersen & Co.
		October 1993	Representative Partner of Asahi & Co. (currently, KPMG AZSA LLC)
		August 2001	Retired from Arthur Andersen & Co.
			Retired from Asahi & Co. (currently, KPMG AZSA LLC)
		April 2002	Special Professor at Chuo University Graduate School of International Accounting
		March 2007	Retired as Special Professor from Chuo University Graduate School of International Accounting
		June 2009	Corporate Auditor of the Company (to present)
			Corporate Auditor of the Bank
		June 2015	Resigned as Corporate Auditor of the Bank

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Name (Date of birth)	Current positions and principal outside positions	Business experience		Expiration of current term as director or corporate auditor
Rokuro Tsuruta(2) (June 16, 1943)	Corporate Auditor of the Company	April 1970	Appointed as a Prosecutor at Tokyo District Public Prosecutors Office	At the close of the annual general meeting of shareholders to be held for the fiscal year ending March 31, 2016.
		April 2005	Superintending Prosecutor of Nagoya High Public Prosecutors Office
		June 2006	Retired from his position as Prosecutor
		July 2006	Registered as an attorney at law (to present)
		October 2006	Professor at Chiba University Law School
		September 2008	Retired from his position as Professor at Chiba University Law School
		April 2009	Professor at Surugadai University Law School
		March 2012	Retired from his position as Professor at Surugadai University Law School
		June 2012	Corporate Auditor of the Company (to present)
			Corporate Auditor of the Bank
		June 2015	Resigned as Corporate Auditor of the Bank

(1) Messrs. and Ms. Yokoyama, Nomura, Mitchell, Kohno and Sakurai satisfy the requirements for an “outside director” under the Companies Act.

(2) Messrs. Uno, Itoh and Tsuruta satisfy the requirements for an “outside corporate auditor” under the Companies Act.

For more information, see “Item 6.C. Board Practices.”

Familial Relationships

There are no familial relationships between any of the directors and corporate auditors listed above.

Arrangements and Understandings

There is no arrangement or understanding with any major shareholder, customer, supplier or other party, pursuant to which any of the directors and corporate auditors listed above were selected as a director or member of corporate auditors.

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6.B.    COMPENSATION

The aggregate amounts of compensation paid by us during the fiscal year ended March 31, 2015 to our directors and to our corporate auditors were ¥940 million and ¥192 million, respectively.

The following table sets forth the details of individual compensation, disclosed pursuant to the provision of the FIEA and related ordinance, by SMFG and its subsidiaries in amounts equal to or exceeding ¥100 million during the fiscal year ended March 31, 2015:

	Compensation
Director	Aggregate amount		Paid by		Annual salary		Stock option		Bonus
	(In millions)(1)
Masayuki Oku	¥	122		SMFG	¥	86	¥	10	¥	26
				SMBC		—		—		—
Koichi Miyata	¥	129		SMFG	¥	69	¥	8	¥	22
				SMBC		21		1		4
Takeshi Kunibe	¥	129		SMFG	¥	21	¥	1	¥	4
				SMBC		69		8		22

(1) Amounts less than one million yen have been truncated.

Compensation for our directors, including bonuses and incentive stock options, must be approved at our general meeting of shareholders, unless otherwise provided in our articles of incorporation. The shareholders’ approval may specify the upper limit of the aggregate amount of compensation or calculation methods, but if compensation includes benefits in kind, the shareholders’ approval must include the description of such benefits. Similarly, compensation to our corporate auditors must be approved by our shareholders at our general meeting of shareholders unless otherwise specified in our articles of incorporation. Our articles of incorporation currently do not have such provisions with respect to compensation for directors and corporate auditors.

Compensation for an individual director and corporate auditor is determined by our board of directors and by consultation among our corporate auditors, respectively, in accordance with our internal rules and our standard practice of approval at our general meeting of shareholders. To ensure objectivity in the process of determining such compensation, bonuses and stock options to our board of directors and the board of directors of the Bank, we have formed a compensation committee in which an outside director serves as the chairman of the committee.

In June 2010, a shareholders resolution was passed at the general meeting of shareholders to introduce a stock option compensation program to certain directors and corporate auditors in connection with the abolition of their retirement benefit program. Following such resolution, we granted stock options for certain directors, corporate auditors and executive officers of the Company and the Bank on August 13, 2010. Because the resolution also abolished the retirement benefit program for our corporate directors and auditors, no amounts were set aside for the payment of any retirement benefits for them during the fiscal year ended March 31, 2015. For additional information, see “Item 6.E. Share Ownership” or Note 39 “Share-Based Payment” to our consolidated financial statements included elsewhere in this annual report.

6.C.    BOARD PRACTICES

General

The Companies Act permits three types of governance systems for large public companies. The first system is for companies with a nominating committee, an audit committee and a compensation committee, and the second one is for companies with an audit and supervisory committee. The last one is for companies with a board of corporate auditors. We employ the board of corporate auditors governance system. Pursuant to Article 4 of our

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articles of incorporation, we maintain a corporate governance system consisting of a general meeting of shareholders, individual directors, a board of directors, individual corporate auditors, a board of corporate auditors and an accounting auditor as its primary components.

Our articles of incorporation provide for a board of directors consisting of not fewer than three directors. We currently have thirteen directors. Our board of directors has ultimate responsibility for the administration of our affairs.

By resolution, our board of directors elects representative directors from the directors who are severally authorized to represent us. Our board of directors may elect directors with titles (yakutsuki-torishimariyaku), and executive officers with titles (yakutsuki-shikkoyakuin), and may elect or remove executive officers and other important employees by resolution. In addition, our board of directors may assign or change the designation of the duties of the directors and executive officers by resolution.

Our president executes business affairs in accordance with resolutions adopted by the board of directors. Our deputy presidents, senior managing directors and managing directors assist the president in the management of our day-to-day operations. Our chairman serves as the chairman of and presides over our board of directors. This is done in order to separate the role of our president, whose responsibility is to exercise overall supervision of our business activities and other group companies, from the role of our chairman.

The Companies Act requires a resolution of the board of directors for a company to execute important business strategies, including acquiring and disposing of material assets; borrowing substantial amounts of money; establishing, changing or abolishing branch offices or other material corporate organizations; issuing bonds; establishing internal control systems; and exempting directors and corporate auditors from liability to the Company in accordance with applicable laws and regulations.

Under the Companies Act, a company with a board of corporate auditors is not obligated to have any outside directors or to have any audit, nomination or compensation committees. However, we have five outside directors as part of our efforts to enhance corporate governance. In addition, we have voluntarily established our auditing, risk management, compensation and nominating committees to enhance the effectiveness of our board of directors. To ensure the compliance of our execution of our business operations with legal regulations and generally accepted practices, the outside directors are selected from among experts (including certified public accountants, lawyers and persons with consulting or business management experience).

“Outside director” means a director of any corporation who satisfies all of the following requirements: (a) a person who is not an executive director, executive officer (shikkoyaku), or an employee, including a manager (“Executive Director, etc.”), and has not been an Executive Director, etc. of such corporation or any of its subsidiaries for the ten years prior to assuming his/her office; (b) if the person has been a director, accounting advisor or corporate auditor of such corporation or any of its subsidiaries (excluding a person who has been an Executive Director, etc.) at any time within the ten years prior to assuming his/her office, a person who has not been an Executive Director, etc. of such corporation or any of its subsidiaries for the ten years prior to assuming his/her office as director, accounting advisor, or corporate auditor; (c) a person who is not a parent corporation or any entity which is prescribed by the applicable Ordinance of the Ministry of Justice as a person who controls the management of the corporation (excluding entities who are juridical persons) (“parent corporation, etc.”) of such corporation (limited to a natural person) or director or executive officer (shikkoyaku), or other employee, including a manager, of a parent corporation, etc.; (d) a person who is not an Executive Director, etc. of a subsidiary or any entity which is prescribed by the applicable Ordinance of the Ministry of Justice as the juridical person for which management is controlled by the person other than the corporation (“subsidiary, etc.”) of a parent corporation, etc. of such corporation; and (e) a person who is not a spouse or relative within the second degree of kinship of a director or executive officer (shikkoyaku), manager, or other important employee of such corporation, or its parent corporation, etc. (limited to a natural person).

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Under the Companies Act, a corporation with a board of corporate auditors shall have three or more corporate auditors, half or more of whom shall be outside corporate auditors. The board of corporate auditors shall appoint full-time corporate auditors from among the corporate auditors.

“Outside corporate auditor” means a corporate auditor of any corporation who satisfies all of the following requirements: (a) a person who has not been a director, accounting advisor (kaikei-sanyo) or executive officer (shikkoyaku), or an employee, including a manager, of such corporation or any of its subsidiaries for the ten years prior to assuming his/her office; (b) in cases where a person who has been a corporate auditor of such corporation or its subsidiary at any time within the ten years prior to assuming his/her office, the person has not been a director, accounting advisor or executive officer (shikkoyaku), or an employee including a manager, of such corporation or its subsidiary for the ten years prior to assuming his/her office as corporate auditor; (c) a person who is not a parent corporation, etc. of such corporation (limited to a natural person) or director or executive officer (shikkoyaku) or an employee, including a manager, of a parent corporation, etc.; (d) a person who is not an Executive Director, etc. of a subsidiary, etc. of a parent corporation, etc. of such corporation; and (e) a person who is not a spouse or relative within the second degree of kinship of a director, manager, or other important employee of such corporation, or its parent corporation, etc. (limited to a natural person).

We have six corporate auditors, three of whom are outside corporate auditors. The auditors monitor the execution of business operations of us and our subsidiaries by attending meetings of the board of directors and receiving reports on operations from the directors and others. They also review documents relating to important decisions and receive reports from the internal audit departments, representatives of our subsidiaries and our accounting auditor.

Our corporate auditors (who are not required to be and most of whom are not certified public accountants) have a statutory duty to examine the financial statements and business reports submitted by the board of directors to the general meeting of shareholders. They also have the duty to supervise the administration of our affairs by the directors in accordance with the auditing policy and rules prescribed by resolutions of the board of corporate auditors.

All directors and corporate auditors are elected by our shareholders at a general meeting of shareholders. The term of office of a director shall expire upon conclusion of the annual general meeting of shareholders to be held for the last fiscal year ending within two years after the election of the director. The term of office of a corporate auditor shall expire upon conclusion of the annual general meeting of shareholders to be held for the last fiscal year ending within four years after the election of the corporate auditor. Directors and corporate auditors may serve any number of consecutive terms.

As mentioned above, the committees of our board of directors were created to enhance effectiveness of governance by our board of directors to oversee our operations.

The auditing committee is responsible for matters relating to internal audits on a Group-wide basis, under delegated authority from the board of directors. Such matters include internal auditing policies and control systems for the Group, the Company and the Bank, and other important auditing issues of the Group. The committee regularly reports to the board of directors.

The chairman of the auditing committee is Kuniaki Nomura, who is an outside director. Other outside directors on the auditing committee are Yoshinori Yokoyama and Masaharu Kohno. Other directors on the auditing committee are Masayuki Oku, chairman of our board of directors, Koichi Miyata, our president, Takeshi Kunibe, president and chief executive officer of the Bank and Kozo Ogino, the officer in charge of the audit department.

The compensation committee is responsible for matters relating to the compensation of the directors and executive officers of both the Company and the Bank, under delegated authority from the board of directors.

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Such matters include the determination of bonuses and stock option awards. The compensation committee seeks to determine appropriate levels of compensation in a transparent and objective manner. The committee reports to the board of directors.

The chairman of the compensation committee is Yoshinori Yokoyama, who is an outside director. Other outside directors on the compensation committee are Kuniaki Nomura, Arthur M. Mitchell, Masaharu Kohno and Eriko Sakurai. Other directors on the compensation committee are Masayuki Oku, chairman of our board of directors, Koichi Miyata, our president, and Takeshi Kunibe, president and chief executive officer of the Bank.

In addition, the risk management committee supervises and reports to our board of directors on material Group-wide risk management and compliance issues. The nominating committee supervises and reports to our board of directors on the selection of directors of both the Company and the Bank, issues related to selection of candidates for directorships, the appointment of managing directors and the appointment of representative directors and other material director personnel issues.

These committees are each composed of seven to nine members including the chairman of the board, the president, and three or more outside directors. Outside directors are appointed to all these committees to facilitate corporate governance from an objective perspective. As noted above, because the need for objectivity is particularly acute in the case of the auditing committee and the compensation committee, the chairmanship of these committees is assigned to outside directors.

At the operational level, we have created the Management Committee to act as the top decision-making body with respect to business administration and management supervision of the entire Group. The committee, composed of directors designated by our president, considers important matters relating to the execution of business in accordance with the basic policies set by the board of directors and based on discussions held by the committee members.

For the purpose of protecting the interests of shareholders in general, some Japanese securities exchanges, including the Tokyo Stock Exchange, requires a listed company to have, from amongst its outside directors or outside corporate auditors, at least one independent director or corporate auditor who does not have conflicting interests with shareholders as specified under the rule. All companies on these securities exchanges are required to report the name of such independent director or corporate auditor, which is disclosed to the public. In addition, the Japan’s Corporate Governance Code (“Corporate Governance Code”) formulated by the Tokyo Stock Exchange, which establishes fundamental principles for effective corporate governance at listed companies in Japan and took effect in June 2015, provides that listed companies should appoint at least two independent directors. The independence standard for such independent directors will be determined by the subject listed company taking into consideration the independence standards of the Japanese stock exchanges. We also established the SMFG Corporate Governance Guideline in consideration of the content of the Corporate Governance Code and such Corporate Governance Guideline provides that one-third or more of the directors, and at least two of them, will be elected as independent outside directors. We designated all five outside directors and outside corporate auditors as independent directors and independent corporate auditors, respectively.

Exemption from Liability

Under the Companies Act and our articles of incorporation, we may exempt our non-executive directors and corporate auditors from liabilities to us arising in connection with their failure to execute their duties, within the limits stipulated by applicable laws and regulations. Pursuant to such authority, we have entered into a liability limitation agreement with each non-executive directors and corporate auditor which limits the maximum amount of their liability to the Company arising in connection with a failure to execute their duties to the greater of either ¥10 million or the minimum liability amount prescribed in applicable laws.

Corporate Governance Practices

Companies listed on the NYSE, must comply with certain corporate governance standards provided under Section 303A of the NYSE Listed Company Manual. However, NYSE-listed companies that are foreign private

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issuers, including us, are permitted to follow home country practices in lieu of certain provisions of Section 303A if such foreign private issuers meet certain criteria. See “Item 16.G. Corporate Governance” for a summary of significant ways in which our corporate governance practices differ from those required to be followed by NYSE-listed U.S. companies.

Independent Registered Public Accounting Firm

We are required to appoint an independent registered public accounting firm, whose appointment is approved at a general meeting of shareholders. The independent registered public accounting firm has the statutory duty to examine the financial statements prepared in accordance with the Companies Act and approved by the board of directors, and report its opinion thereon to the designated corporate auditors and to the designated directors for notification to the shareholders. Examination by independent registered public accounting firm of our financial statements is also required for the purpose of the securities report filed through the Kanto Local Finance Bureau to the Prime Minister for public inspection in accordance with the FIEA. Our independent registered public accounting firm for these purposes is KPMG AZSA LLC (“KPMG AZSA”).

Benefits upon Termination of Employment

Neither we nor our subsidiaries maintain any directors’ service contracts providing for benefits upon termination of employment.

6.D.    EMPLOYEES

At March 31, 2015, 2014 and 2013, on a consolidated basis, we had approximately 68,700, 66,500, and 64,600 employees, respectively, including locally hired staff in our foreign offices but excluding temporary employees. We also had an average of approximately 16,300 temporary employees during the fiscal year ended March 31, 2015.

The following tables show our full-time employees at March 31, 2015 on a consolidated basis under Japanese GAAP broken down based on business segment and geographical location:

	Percentage of full-time employees at March 31, 2015
Business segment:
Commercial Banking(1)		50	%
Leasing		4
Securities		16
Consumer Finance		16
Others		14
Total		100	%

(1) The number of employees of the Bank represents 39% of the number of our employees on a consolidated basis. Further, the number of employees in the Bank’s Wholesale Banking Unit, Retail Banking Unit, International Banking Unit, Treasury Unit and Others represent 7%, 16%, 6%, 1% and 9% of the number of our employees on a consolidated basis, respectively.

	Percentage of full-time employees at March 31, 2015
Location:
Japan		89	%
Americas		2
Europe and Middle East		2
Asia and Oceania		7
Total		100	%

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Most of the employees of the Bank are members of the Sumitomo Mitsui Banking Corporation Workers’ Union, which negotiates with the Bank concerning remuneration and working conditions. The union is affiliated with the Federation of City Bank Workers’ Unions. The Bank considers its labor relations to be excellent.

We consider our level of remuneration, fringe benefits (including an employee share ownership program), working conditions and other allowances, which include lump-sum payments and annuities to employees upon retirement, to be generally competitive with those offered by other large enterprises in Japan.

6.E.    SHARE OWNERSHIP

Shareholdings by Directors, Senior Management and Corporate Auditors

The following table shows the number of shares of our common stock owned by our directors and corporate auditors at June 26, 2015:

	Number of shares owned
Directors and corporate auditors:
Masayuki Oku		16,300
Koichi Miyata		13,000
Takeshi Kunibe		12,788
Yujiro Ito		8,022
Kozo Ogino		7,000
Toshiyuki Teramoto		7,000
Jun Ohta		5,900
Katsunori Tanizaki		5,800
Yoshinori Yokoyama		—
Kuniaki Nomura		—
Arthur M. Mitchell		—
Masaharu Kohno		—
Eriko Sakurai		—
Koichi Minami		8,100
Kazuhiko Nakao		1,000
Toru Mikami		300
Ikuo Uno		—
Satoshi Itoh		—
Rokuro Tsuruta		—

None of our directors or corporate auditors is the owner of more than one percent of our common stock, and no director or corporate auditor has voting rights with respect to our common stock that are different from any other holder of our common stock.

Stock Option Plans and Other Remuneration for Directors and Senior Management

In June 2010, a resolution was passed at the general meeting of shareholders to introduce a stock option compensation program for directors, corporate auditors and executive officers of the Company and the Bank (“SMFG Stock Acquisition Rights”). This serves to incentivize grantees to further contribute to the equity appreciation and improved corporate performance through a sharing of the benefits and risks of share price performance of our shares. These changes reflected a review of our compensation system and the elimination of retirement benefits for directors, corporate auditors and executive officers.

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The following table provides an overview of the significant terms and conditions of our stock option plans:

	Date of resolution	Number of grantees	Shares granted	Exercise period	Exercise price
SMFG Stock Acquisition Rights (1st series)	July 28, 2010	82 directors, corporate auditors and executive officers of the Company and the Bank	102,600 shares of common stock of the Company	August 13, 2010 to August 12, 2040	¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted
SMFG Stock Acquisition Rights (2nd series)	July 29, 2011	85 directors, corporate auditors and executive officers of the Company and the Bank	268,200 shares of common stock of the Company	August 16, 2011 to August 15, 2041	¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted
SMFG Stock Acquisition Rights (3rd series)	July 30, 2012	85 directors, corporate auditors and executive officers of the Company and the Bank	280,500 shares of common stock of the Company	August 15, 2012 to August 14, 2042	¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted
SMFG Stock Acquisition Rights (4th series)	July 29, 2013	82 directors, corporate auditors and executive officers of the Company and the Bank	115,700 shares of common stock of the Company	August 14, 2013 to August 13, 2043	¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted
SMFG Stock Acquisition Rights (5th series)	July 30, 2014	82 directors, corporate auditors and executive officers of the Company and the Bank	121,900 shares of common stock of the Company	August 15, 2014 to August 14, 2044	¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted

We have employee stock ownership associations in Japan for our, the Bank’s and other subsidiaries’ employees. Members of the employee stock ownership associations set aside certain amounts from their monthly salary to purchase our common stock through the relevant employee stock ownership association. The administrator of each association makes open-market purchases of our common stock for the account of the association on a monthly basis. We, the Bank and other subsidiaries contribute matching funds equivalent to 5% of the amount purchased by the relevant association. At March 31, 2015, none of the employee stock ownership associations held more than 1% of our common stock.

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Item 7. Major Shareholders and Related Party Transactions

7.A.    MAJOR SHAREHOLDERS

Major Shareholders

Our major shareholders, appearing on our register of common shareholders at March 31, 2015, were as follows:

	Number of shares held(3)		Percentage of shares issued(1)(3)
Name:
Japan Trustee Services Bank, Ltd. (Trust Account)		62,360,718		4.41	%
The Master Trust Bank of Japan, Ltd. (Trust Account)		55,116,000		3.89	%
Sumitomo Mitsui Banking Corporation(2)		42,820,924		3.02	%
NATSCUMCO		32,725,584		2.31	%
THE BANK OF NEW YORK MELLON SA/NV 10		26,405,825		1.86	%
JP MORGAN CHASE BANK 380055		25,338,302		1.79	%
Japan Trustee Services Bank, Ltd. (Trust Account 9)		21,712,300		1.53	%
CBNY-GOVERNMENT OF NORWAY		19,704,600		1.39	%
STATE STREET BANK AND TRUST COMPANY 505225		18,109,699		1.28	%
STATE STREET BANK WEST CLIENT—TREATY 505234		16,848,201		1.19	%

(1) Percentages are calculated based on the total number of shares of common stock then issued, including our treasury stock, and have been truncated to the nearest second decimal point.

(2) Pursuant to Article 67 of the Enforcement Ordinance of the Company Act, our subsidiary Sumitomo Mitsui Banking Corporation is not entitled to exercise the voting rights of our common shares it holds.

(3) In January 2015, we received a copy of a filing made by BlackRock Japan Co., Ltd. with the Kanto Local Finance Bureau on January 21, 2015 indicating that BlackRock Japan Co., Ltd. and its affiliates held 70,812,990 shares of our common stock, representing 5.01% of our outstanding common stock, as of January 15, 2015. We are aware of a Schedule 13G filing made by BlackRock Inc. with the SEC on February 3, 2015 indicating that BlackRock Inc. and its subsidiaries beneficially held 74,998,164 shares of our common stock, representing 5.3% of our outstanding common stock, as of December 31, 2014. However, we have not confirmed the status of these shareholdings as of March 31, 2015.

Our major shareholders do not have different voting rights.

Shareholders in the United States

Because some of our common stock was held by brokers or other nominees, the number of shares held by and the number of beneficiary holders with addresses in the United States is not fully ascertainable. At March 31, 2015, there were 245 record holders of our common stock with addresses in the United States, whose shareholdings represented approximately 21% of our outstanding common stock on that date.

Control of the Company

To our knowledge, we are not directly or indirectly owned or controlled by any another corporation(s), by any foreign government or by any other natural or legal person(s), severally or jointly.

Arrangements for Change in Control of the Company

We know of no arrangements the operation of which may at a later time result in a change of control.

7.B.    RELATED PARTY TRANSACTIONS

We and our banking subsidiaries had, and expect to have in the future, banking transactions and other transactions in the ordinary course of business with our related parties. For the fiscal year ended March 31, 2015,

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such transactions included, but were not limited to, loans, deposits and guarantees. Furthermore, such transactions were immaterial and were made at prevailing market rates, terms and conditions, and did not involve more than the normal risk of collectibility or present other unfavorable features.

During the fiscal year ended March 31, 2015, none of our directors or corporate auditors or the Bank’s directors, and none of the close members of their respective families, had any transactions that were material or any transactions that were unusual in their nature or conditions, involving goods, services or tangible or intangible assets, to which we were a party, and no such transactions were proposed at March 31, 2015. During the fiscal year ended March 31, 2015, we made no loans to our directors or corporate auditors or the Bank’s directors other than those that were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectibility or present other unfavorable features.

7.C.    INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

Item 8. Financial Information

8.A.    CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Financial Statements

All relevant financial statements are attached hereto. See “Item 18. Financial Statements.” See “Item 5.A. Operating Results—Reconciliation with Japanese GAAP” for a reconciliation of consolidated net profit and total equity for the fiscal year ended March 31, 2015 under IFRS, with those amounts under Japanese GAAP.

Export Sales

Not applicable.

Legal Proceedings

We are party to routine litigation incidental to our business, none of which is currently expected to have a material adverse effect on our financial condition or results of operations. However, there can be no assurance that an adverse decision in one or more of these lawsuits will not have a material adverse effect.

Dividend Policy and Dividends

The declaration, payment and determination of any year-end dividend are subject to the approval of shareholders of our common stock at our general meeting of shareholders and to statutory restrictions. The declaration, payment and determination of the amount of any interim dividend require a resolution of our board of directors and are subject to statutory restrictions. Dividend payments are made to shareholders or pledgees of record at the record dates for each payment. March 31 is the record date for year-end dividends and September 30 is the record date for interim dividends. The payment of year-end and interim dividends on common stock is subject to prior payment of dividends on our preferred stock, if any.

We have a basic policy of pursuing the sustainable growth of shareholder value and increasing the dividend per share in a stable manner, by achieving higher profitability and growth through growth investments with a focus on capital efficiency, while enhancing retained earnings to maintain financial soundness.

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The following table shows historical aggregate dividend payments per share of our common stock for each of the fiscal years from the fiscal year ended March 31, 2013 through the fiscal year ended March 31, 2015:

	Dividend per share
	Paid(1)			Declared(2)
Fiscal year ended March 31,
2013	¥	120	(3)	¥	100
2014		120			125
2015		140			125

(1) Dividend per share based on dividends in respect of each fiscal year including dividends proposed after current fiscal year-end but not recognized in the financial statements and excluding dividends in respect of the previous fiscal year declared in current fiscal year.

(2) Dividend per share based on dividends declared and recognized in the financial statements during each fiscal year.

(3) Annual dividends for the fiscal year ended March 31, 2013 were ¥120 per share, consisting of a ¥110 per share ordinary dividend and a ¥10  per share commemorative dividend, celebrating our 10th anniversary in December 2012.

8.B.    SIGNIFICANT CHANGES

Except as otherwise described in this annual report, no significant change in our financial position has occurred since the date of the financial statements included elsewhere in this annual report.

Item 9. The Offer and Listing

9.A.    OFFER AND LISTING DETAILS

Offering Details

Not applicable.

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Price History of the Shares

Market Price Information for Our American Depositary Shares

The following table sets forth, for the periods indicated, the high and low trading prices, and average daily trading volume for our ADSs on the NYSE since their listing on November 1, 2010:

	Price per ADS				Average daily trading volume
	High		Low
	(In dollars)				(Number of shares)
Fiscal year ended March 31, except quarter and month data:
2011 (from November 1, 2010)	$	7.77	$	5.75		539,906
2012		7.06		5.12		432,531
2013		9.46		5.55		888,210
2014:
First quarter		9.96		7.32		2,512,657
Second quarter		10.20		8.82		1,136,321
Third quarter		10.59		9.45		1,436,759
Fourth quarter		10.45		8.11		1,301,701
Full year		10.59		7.32		1,600,359
2015:
First quarter		8.83		7.59		1,319,744
Second quarter		8.61		7.90		1,195,001
Third quarter		8.42		6.95		2,062,355
Fourth quarter		8.24		6.74		2,494,071
Full year		8.83		6.74		1,760,924
Most recent six months:
January		7.34		6.74		2,687,278
February		8.12		6.74		3,008,254
March		8.24		7.70		1,874,362
April		8.96		7.74		1,916,344
May		9.15		8.58		2,737,568
June		9.25		8.39		2,571,116
July (through July 10, 2015)		8.92		8.42		1,281,131

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Market Price Information for Our Shares

See “Item 9.C. Markets” for information on the stock exchanges on which our common stock is listed.

The following table sets forth, for the periods indicated, the high and low trading prices, and average daily trading volume for our common stock since the fiscal year ended March 31, 2011 on the Tokyo Stock Exchange.

	Price per shares				Average daily trading volume
	High		Low
	(In yen)				(Number of shares)
Fiscal year ended March 31, except quarter and month data:
2011	¥	3,355	¥	2,235		12,022,607
2012		2,933		2,003		8,339,526
2013		4,255		2,231		7,228,299
2014:
First quarter		4,995		3,545		14,108,235
Second quarter		4,990		4,320		6,453,141
Third quarter		5,470		4,605		7,291,623
Fourth quarter		5,468		4,061		8,351,850
Full year		5,470		3,545		9,052,026
2015:
First quarter		4,608		3,800		8,256,444
Second quarter		4,537		3,978		5,746,754
Third quarter		4,699		3,823		7,553,595
Fourth quarter		4,915		3,902		8,954,048
Full year		4,915		3,800		7,609,582
Most recent six months:
January		4,350		3,952		7,919,100
February		4,788		3,902		10,727,974
March		4,915		4,560		8,315,841
April		5,324		4,530		8,508,181
May		5,744		5,055		10,167,139
June		5,747		5,192		8,241,555
July (through July 10, 2015)		5,657		5,025		9,421,250

9.B.    PLAN OF DISTRIBUTION

Not applicable.

9.C.    MARKETS

The primary trading market for our common stock is the Tokyo Stock Exchange (First Section), and our common stock is also listed on the Nagoya Stock Exchange (First Section). Our common stock is not listed on any stock exchange outside of Japan.

Our ADSs have been listed on the NYSE since November  1, 2010 and are quoted under the ticker symbol “SMFG.”

9.D.     SELLING SHAREHOLDERS

Not applicable.

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9.E.    DILUTION

Not applicable.

9.F.    EXPENSES OF THE ISSUE

Not applicable.

Item 10. Additional Information

10.A.    SHARE CAPITAL

Not applicable.

10.B.    MEMORANDUM AND ARTICLES OF INCORPORATION

Set out below is information concerning our share capital, including a summary of provisions of our articles of incorporation and share handling regulations and of the Companies Act relating to joint stock corporations (kabushiki-kaisha) and related legislation, each as currently in effect.

Register and Entry, Objects and Purposes of the Company

The Company is a joint stock corporation (kabushiki-kaisha) incorporated in Japan under the Companies Act (kaishaho) of Japan. It is registered in the commercial register (shogyo-tokibo) maintained by the Chiyoda Branch Office of the Tokyo Bureau of Legal Affairs.

Article 2 of our articles of incorporation provides that our purpose is to engage in the following business activities:

• management of banks and other corporations which are permitted to become, or to be established as, subsidiaries under the Banking Act; and

• any business incidental to the business mentioned in the foregoing item.

Provisions Relating to Directors

With respect to directors, the Companies Act and our articles of incorporation, bylaws and associated internal rules issued pursuant to the articles provide in summary as follows:

• a director is not entitled to vote on a proposal or arrangement or contract in which the director has a special interest;

• the aggregate remuneration for directors are determined at a general meeting of shareholders and, within the upper limit approved at the general meeting of shareholders, our board of directors will determine the amount of compensation for each director; our board of directors may, by its resolution, leave such decision to the discretion of our representative director;

• the board of directors has authority to approve transactions between the directors and us;

• there are no provisions requiring the mandatory retirement of directors at a specified age; and

• share ownership is not required in order to be eligible to serve as a director.

Rights, Preferences and Restrictions of the Shares

A joint stock corporation is a legal entity incorporated under the Companies Act. The rights of shareholders of a joint stock corporation are represented by shares of stock in the corporation, and shareholders’ liability is limited to the amount of the subscription for the shares.

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We may issue shares within our authorized but unissued share capital following a resolution by our board of directors. An increase in our authorized share capital requires an amendment of our articles of incorporation, which generally requires approval of our common and preferred shareholders, if any.

Common Stock

General

On January 5, 2009, a central clearing system of shares of Japanese listed companies was enacted under the Act Concerning Book-Entry Transfer of Corporate Bonds, Shares and Other Securities (“Book-Entry Transfer Act”) and the shares of all Japanese companies listed on any Japanese stock exchange, including our shares, became subject to this system, and all share certificates of companies then listed in Japan became null and void on the effective date of the Book-Entry Transfer Act.

Under the clearing system, a person must have an account at an account managing institution or at Japan Securities Depository Center, Inc. (“JASDEC”) in order to purchase, hold, sell or otherwise dispose of listed shares. Account managing institutions include financial instruments traders (i.e., securities companies), banks, trust companies and certain other financial institutions which meet the requirements prescribed by the Book-Entry Transfer Act, and only those financial institutions that meet further stringent requirements of the Book-Entry Transfer Act can open accounts directly at JASDEC. Under the Book-Entry Transfer Act, any transfer of shares is effected through book entry, and title to the shares passes to the transferee at the time when the transferred number of the shares is recorded in the transferee’s account at an account managing institution. The holder of an account at an account managing institution is presumed to be the legal owner of the shares held in such account.

Under the Companies Act and the Book-Entry Transfer Act, in order to assert shareholders’ rights against us, a shareholder’s name and address must be registered in our register of shareholders, except in limited circumstances. Under the clearing system, such registration is made upon our receipt of the necessary information from JASDEC. Nonresidents of Japan or non-Japanese corporations without a permanent establishment in Japan (“Nonresident Shareholders”) are required to appoint a standing proxy in Japan or provide a mailing address in Japan. Each Nonresident Shareholder must give notice of a standing proxy or a mailing address to the relevant account managing institution. That notice will be forwarded to us through JASDEC. Japanese securities companies and commercial banks customarily act as standing proxies and provide related services for standard fees. Notices from us to Nonresident Shareholders are delivered to standing proxies or their mailing addresses in Japan.

Our transfer agent is Sumitomo Mitsui Trust Bank, Limited.

Distributions of Surplus

As a holding company, we expect that most of our cash flow will come from dividends that the Bank pays us. Under some circumstances, various statutory or contractual provisions may restrict the dividends the Bank can pay us. For example, if the Bank does not have sufficient distributable amounts, it will be unable to pay dividends and we, in turn, may be unable to pay dividends on shares of our common stock. Therefore, our ability to pay dividends mainly depends on the financial performance of our principal operating subsidiary, the Bank.

Under the Companies Act, distribution of cash or other assets by a joint stock corporation to its shareholders, including dividends, takes the form of distributions of surplus (as described in “—Restriction on Distributions of Surplus”). We are permitted to make distributions of surplus to our shareholders any number of times per fiscal year, subject to limitations described in “—Restriction on Distributions of Surplus.” Distributions of surplus are required in principle to be authorized by a resolution of a general meeting of shareholders. Distributions of surplus are, however, permitted pursuant to a resolution of the board of directors if:

(1) our articles of incorporation so provide (our current articles of incorporation do not have a provision to that effect);

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(2) the normal term of office of our directors is no longer than one year (our current articles of incorporation provide that the normal term of office of our directors expires upon the close of the general meeting of shareholders to be held for the last fiscal year ending within two years after the election); and

(3) our nonconsolidated annual financial statements and certain documents for the latest fiscal year fairly present our assets and profit or loss, as required by an ordinance of the Ministry of Justice.

In an exception to the above rule, even if the requirements described in (1) through (3) are not met, we are permitted to make distributions of surplus in cash to our shareholders by resolutions of the board of directors once per fiscal year if our articles of incorporation so provide. Our current articles of incorporation provide for distributions of surplus as interim dividends, the record date for which is September 30 of each year.

Distributions of surplus may be made in cash or in kind in proportion to the number of shares of common stock held by each shareholder. A resolution of a general meeting of shareholders or by the board of directors authorizing a distribution of surplus must specify the kind and aggregate book value of assets to be distributed, the manner of allocation of the assets to shareholders, and the effective date of the distribution. If a distribution of surplus is to be made in kind, we may, pursuant to a resolution of a general meeting of shareholders or by the board of directors, grant the right to our shareholders to require us to make the distribution in cash instead of in kind. If that right is not granted to shareholders, then the relevant distribution of surplus must be approved by a special resolution of a general meeting of shareholders.

Under our articles of incorporation, the record dates for annual dividends and interim dividends are March 31 and September 30, respectively, in each year. In Japan, both “ex-dividend date” (the date from which purchasers at shares through Japanese stock exchanges will not be entitled to the dividends to be paid to registered shareholders as any record date) and the record date for dividends precede the date of determination of the amount of the dividend to be paid. The ex-dividend date of the shares of common stock is generally the third business day prior to the record date. Under our articles of incorporation, we are not obligated to pay any distributions of surplus to be made in cash which have not been received after five years from the commencement date of those distributions.

Restriction on Distributions of Surplus

Payment of dividends on shares of common stock is also subject to the prior payment of dividends on shares of preferred stock, if any. In the event we pay an interim dividend on shares of our common stock, the interim dividend payment is also subject to the prior payment of interim dividends on the shares of preferred stock, if any.

When we make a distribution of surplus, we must set aside in our capital reserve or retained earnings reserve an amount equal to one-tenth of the amount of surplus so distributed as required by an ordinance of the Ministry of Justice.

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The amount of surplus at any given time must be calculated in accordance with the following formula:

A + B + C + D – (E + F + G)

In the above formula:

“A”	=	the total amount of other capital surplus and other retained earnings, each being the amount that appears on our nonconsolidated balance sheet as of the end of the last fiscal year;
“B”	=	if we have disposed of treasury stock after the end of the last fiscal year, the amount of the consideration for that treasury stock received by us less the book value thereof;
“C”	=	if we have reduced our stated capital after the end of the last fiscal year, the amount of that reduction less the portion thereof that has been transferred to capital reserve or retained earnings reserve, if any:
“D”	=	if we have reduced our capital reserve or retained earnings reserve after the end of the last fiscal year, the amount of that reduction less the portion thereof that has been transferred to stated capital, if any:
“E”	=	if we have cancelled treasury stock after the end of the last fiscal year, the book value of that treasury stock;
“F”	=	if we have distributed surplus to our shareholders after the end of the last fiscal year, the total book value of the surplus so distributed; and
“G”	=	other amounts set forth in an ordinance of the Ministry of Justice, including:

• if we have reduced surplus and increased our stated capital, capital reserve or retained earnings reserve after the end of the last fiscal year, the amount of that reduction; and

• if we have distributed surplus to shareholders after the end of the last fiscal year, the amount set aside in our capital reserve or retained earnings reserve, if any, as required by ordinances of the Ministry of Justice.

The aggregate book value of surplus distributed by us may not exceed a prescribed distributable amount as calculated on the effective date of the distribution. Our prescribed distributable amount at any given time shall be the amount of surplus less the aggregate of (a) the book value of our treasury stock, (b) the amount of consideration for any treasury stock we disposed of after the end of the last fiscal year, (c) the sum of net unrealized losses on other securities and unrealized losses on land valuation, and (d) other amounts set forth in an ordinance of the Ministry of Justice, including (if the sum of one-half of our goodwill and deferred assets exceeds the total of the stated capital, capital reserve and retained earnings reserve, each being the amount in our nonconsolidated balance sheet at the end of the last fiscal year) all or a certain part of the exceeding amount as calculated in accordance with the ordinances of the Ministry of Justice. If we have prepared interim financial statements in accordance with the ordinances of the Ministry of Justice as described below, and if the interim financial statements have been approved by the board of directors or (if so required) by a general meeting of shareholders, then the prescribed distributable amount must be adjusted to take into account the amount of profit or loss, and the amount of consideration for any of our treasury stock disposed of by us, during the period for which the interim financial statements have been prepared. We will be permitted to prepare nonconsolidated interim financial statements consisting of a balance sheet at any date subsequent to the end of the last fiscal year and an income statement for the period from the first day of the current fiscal year to the date of the balance sheet. Interim financial statements so prepared by us must be audited by our corporate auditors and/or accounting auditors, as required by an ordinance of the Ministry of Justice.

Voting Rights

Holders of shares of common stock have one voting right for each unit of shares held by them. Except as otherwise provided by law or by our articles of incorporation, a resolution can be adopted at a general meeting of

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shareholders by the holder of a majority of the total number of the voting rights represented at the meeting. In our articles of incorporation the quorum to elect directors and corporate auditors is one-third of the total number of voting rights. Our shareholders are not entitled to cumulative voting in the election of directors. Our shareholders may cast their votes by mail or via the internet. Our shareholders may also exercise their voting rights through proxies, provided that the proxies are also holders of shares with voting rights.

The Companies Act provides that certain important matters shall be approved by a special resolution of a general meeting of shareholders. Under our articles of incorporation, the quorum for a special resolution is one-third of the total number of voting rights and the approval of at least two-thirds of the voting rights represented at the meeting is required for adopting a special resolution. Important matters include:

• amending the articles of incorporation (except for amendments that may be authorized by the board of directors under the Companies Act);

• reducing stated capital which meets certain requirements, with some exceptions;

• removing a corporate auditor;

• dissolving, merging or consolidating requiring shareholders’ approval;

• establishing a parent and a wholly owned subsidiary relationship by way of a share transfer (kabushiki-iten) or share exchange (kabushiki-kokan) requiring shareholders’ approval;

• transferring the whole or a substantial part of our business;

• transferring all or part of the shares of a subsidiary which meets certain requirements;

• taking over the whole business of another company requiring shareholders’ approval;

• corporate split requiring shareholders’ approval;

• consolidating shares of common stock;

• acquiring shares of common stock from a specific shareholder other than one of our subsidiaries;

• issuing or transferring new shares or existing shares held by us as treasury stock to persons other than the shareholders at a specially favorable price;

• issuing stock acquisition rights (including those incorporated in bonds with stock acquisition rights) to persons other than the shareholders under specially favorable conditions;

• exempting some liability of a director or corporate auditor; and

• distributing surplus in-kind if shareholders are not granted the right to require us to make a distribution in cash instead of in-kind.

Capital and Reserves

When we issue new shares, the amount of the cash or assets paid or contributed by subscribers for new shares (with some exceptions) is required to be accounted for as stated capital, although we may account for an amount not exceeding one-half of the cash or assets as capital reserve by resolutions of the board of directors.

We may reduce our capital reserve or retained earnings reserve generally by resolution of a general meeting of shareholders. We may account for the whole or any part of the reduction as stated capital if we so decide by the same resolution. On the other hand, we may reduce our stated capital generally by special resolution of a general meeting of shareholders and may account for the whole or any part of the reduction as capital reserve if we so decide by the same resolution. We may reduce our surplus and increase either (1) stated capital or (2) capital reserve and/or retained earnings reserve by the same amount, in either case by resolution of a general meeting of shareholders.

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Stock Splits

We may at any time split our outstanding shares of common stock into a greater number of shares of common stock by resolution of the board of directors. When a stock split is to be made, so long as our only class of outstanding stock is the common stock, we may increase the number of authorized shares in the same ratio as that of the stock split by amending our articles of incorporation. We may effect such an amendment by resolution of the board of directors without shareholder approval.

We must give public notice of a stock split, specifying the record date therefore, not less than two weeks prior to the record date.

Unit Share System

We have a unit share system, under which 100 shares of our common stock constitute one unit. Under the unit share system, shareholders have one voting right for each unit of shares held by them at a general meeting of shareholders, and shares constituting a fractional unit carry no voting rights. Under our articles of incorporation, the holders of shares constituting a fractional unit do not have shareholder rights except for those specified in the Companies Act or an ordinance of the Ministry of Justice, which include the rights (1) to receive dividends, (2) to receive cash or other assets in case of consolidation or split of shares, share exchange or share transfer, or merger, or (3) to be allotted rights to subscribe for free new shares and stock acquisition rights when those rights are granted to shareholders. We may cease to use the unit share system by amendment to the articles of incorporation without shareholders’ approval even though amendments to the articles of incorporation generally require a special resolution of the general meeting of shareholders.

A holder of shares of our common stock constituting less than one unit may at any time request us to purchase those shares. In addition, a holder of shares of our common stock constituting less than one unit may at any time request us to sell to it the number of shares necessary to raise its share ownership to a whole unit. Under the clearing system operated by JASDEC, such request must be made through the financial institution where the shareholder has opened its account.

The price at which shares of our common stock constituting less than one unit will be purchased or sold by us pursuant to such request will be equal to either (a) the closing price of shares of our common stock reported by the Tokyo Stock Exchange on the day when such request is received by our transfer agent, or (b) if no sale takes place on the Tokyo Stock Exchange on that day, the price at which sale of such shares is executed on the Tokyo Stock Exchange immediately thereafter. Pursuant to our share handling regulations, an amount equal to the applicable brokerage commission will be deducted from the price so determined.

Under the new clearing system, shares constituting less than one unit are transferable. Under the rules of the Japanese stock exchanges, however, shares constituting less than one unit do not comprise a trading unit, except in limited circumstances, and accordingly, may not be sold on the Japanese stock exchanges.

Liquidation Rights

In the event of our liquidation, the assets remaining after payment of all debts, liquidation expenses, taxes and required distribution payments to preferred shareholders, if any, will be distributed among shareholders of common stock in proportion to the respective number of shares which they hold. For liquidation preference for residual assets to the holders of preferred stock, see “—Preferred Stock—Liquidation Rights.”

Redemption Provisions and Sinking Fund Provisions

Our common stock has no redemption provisions or sinking fund provisions.

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Liability to Further Calls or Assessments

Our shares of common stock outstanding, including shares represented by the ADSs, are fully paid and nonassessable.

Legal Restrictions on Acquisitions of Shares

The FIEA and its related regulations require any person who has become solely or jointly a beneficial holder of more than 5% of the total issued shares of capital stock of a company listed on any Japanese stock exchange, to file with the director of an appropriate local finance bureau of the Ministry of Finance within five business days a report concerning the shareholdings. With some exceptions, a similar report must also be filed in respect of any subsequent change of 1% or more in those holdings or any change in material matters set out in reports previously filed. For this purpose, shares issuable to a holder upon conversion of convertible securities or exercise of share subscription warrants or stock acquisition rights are taken into account in determining both the number of shares held by such holder and the issuer’s total issued share capital. Copies of each report must also be furnished to the company and to all the Japanese stock exchanges on which the shares are listed.

Under the Banking Act, a person who desires to hold 20% (in some exceptional cases, 15%) or more of the voting rights of a bank is required to obtain advance approval of the FSA Commissioner. In addition, any person who becomes a holder of more than 5% of the voting rights of a bank holding company or a bank must report the ownership of the voting rights to the director of an appropriate local finance bureau within five business days. This requirement is separate from the significant shareholdings report required under the FIEA. See “Item 4.B. Business Overview—Regulations in Japan—Regulations for Stabilizing the Financial System—Examination and Reporting Applicable to Shareholders of a Bank.”

Subscription Rights

Holders of shares of our common stock have no preemptive rights. Authorized but unissued shares of common stock may be issued at the times, and upon the terms the board of directors determines, subject to the limitations as to the issuance of new shares of common stock at a specially favorable price mentioned in “—Voting Rights” above. The board of directors may, however, determine that the holders of shares of common stock be given subscription rights to new shares of common stock, in which case they must be given on uniform terms to all holders of shares of common stock at a record date of which not less than two weeks’ prior public notice must be given. Each of the shareholders to whom subscription rights is given must also be given at least two weeks’ prior notice of the date on which the rights expire.

Stock Acquisition Rights

We may issue stock acquisition rights (shinkabu-yoyakuken). Holders of stock acquisition rights are entitled to acquire shares from us upon payment of the applicable exercise price and subject to other terms and conditions thereof. We may also issue bonds with stock acquisition rights (shinkabu-yoyakuken-tsuki-shasai). The issuance of stock acquisition rights and bonds with stock acquisition rights may be authorized by the board of directors unless it is made under specially favorable conditions, as described in “—Voting Rights.”

Record Date

March 31 is the record date for the payment of year-end dividends and the determination of shareholders entitled to vote at the annual general meeting of shareholders. September 30 is the record date for payment of interim dividends. In addition, by a resolution of the board of directors and after giving at least two weeks’ prior public notice, we may at any time set a record date in order to determine the shareholders who are entitled to certain rights pertaining to the common stock.

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Under the Book-Entry Transfer Act, we are required to give notice of each record date to JASDEC at least two weeks prior to such record date. JASDEC is required to give us notice of the names and addresses of our shareholders, the numbers of shares held by them, and other relevant information at a record date promptly after we set it.

Our Acquisition of Our Own Shares of Common Stock

We may acquire shares of our common stock (1) by way of purchase on any Japanese stock exchange on which shares of our common stock are listed, or by way of tender offer (in either case, pursuant to an ordinary resolution of a general meeting of shareholders or a resolution of the board of directors), (2) from a specific shareholder other than any of our subsidiaries (pursuant to a special resolution of a general meeting of shareholders), or (3) from any of our subsidiaries (pursuant to a resolution of the board of directors). In the case of (2) above, any other shareholder may make a request to a director, at least five days prior to the relevant general meeting of shareholders, to include the shareholder as a seller in the proposed purchase. However, that right is not available if the purchase price or any other consideration to be received by the relevant specific shareholder does not exceed the then market price of the shares to be purchased from the shareholder.

The total amount of the purchase price of shares of common stock may not exceed the prescribed distributable amount, as described in “—Common Stock—Restriction on Distributions of Surplus.”

We may hold the shares of common stock acquired, and may generally dispose of or cancel those shares by resolution of the board of directors.

Disposal of Shares of Our Common Stock Held by Shareholders Whose Location Is Unknown

We are not required to send notices to a shareholder if notices have failed to arrive for five consecutive years or more at his or her address in our register of shareholders unless we are notified of a new address. If the shareholder also fails to receive distributions of surplus on the shares for five or more consecutive years at his or her address in our register of shareholders or otherwise as specified, then we may in general dispose of those shares at their then-market price and hold or deposit the proceeds of that disposal on behalf of that shareholder.

Preferred Stock

The following is a summary of information concerning provisions of our articles of incorporation.

General

At the date of this annual report, under our articles of incorporation, we are authorized to issue 167,000 shares of Type 5 preferred stock, 167,000 shares of Type 7 preferred stock, 115,000 shares of Type 8 preferred stock and 115,000 shares of Type 9 preferred stock. In June 2013, our articles of incorporation were amended to delete the provisions regarding Type 6 preferred stock, as these provisions have become unnecessary.

In March 2005, we issued 70,001 shares of our 1st series Type 6 preferred stock for an aggregate issue price of ¥210 billion. The Type 6 preferred stock was allocated using a third-party allocation of shares at a price of ¥3,000,000 per share, ¥1,500,000 of which was accounted for as stated capital. Sumitomo Life Insurance Company acquired 23,334 shares, Nippon Life Insurance Company acquired 20,000 shares, Mitsui Life Insurance Company, Limited acquired 16,667 shares and Mitsui Sumitomo Insurance Company, Limited acquired 10,000 shares. On April 1, 2011, we acquired and cancelled all of the outstanding 1st series Type 6 preferred stock.

At the date of this annual report, we have no preferred stock outstanding. The following is a summary of the relevant provisions of our articles of incorporation regarding preferred stock.

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Preferred Dividends

Our articles of incorporation provide that, if we pay dividends, we must pay cash dividends to holders of shares of our preferred stock in preference to the holders of our common stock. If preferred interim dividends stipulated in our articles of incorporation were paid during the relevant fiscal year, the amount of the preferred interim dividends shall be subtracted from the amount of annual preferred dividends.

Our failure to declare annual preferred dividends in full in respect of any fiscal year on a series of preferred stock gives the holders of that preferred stock certain voting rights.

Liquidation Rights

In the event of our voluntary or involuntary liquidation, holders of our preferred stock will be entitled, equally in rank as among themselves and in preference over shares of our common stock, to receive out of our residual assets upon liquidation a distribution of ¥3,000,000 per share.

Preferred stockholders are not entitled to any further dividends or other participation or distribution of our residual assets upon our liquidation.

Voting Rights

Our articles of incorporation provide that holders of preferred stock are only entitled to receive notice of, and to vote at, a general meeting of shareholders;

• from the commencement of our annual general meeting of shareholders if an agenda for approval to declare a preferred dividend is not submitted to the meeting; or

• from the close of our annual general meeting of shareholders if a proposed resolution to declare a preferred dividend is not approved at the meeting.

In both cases, these rights of our preferred stockholders lapse when a resolution of a general meeting of shareholders declaring a preferred dividend is approved.

The Companies Act provides that a separate resolution of a meeting of the holders of the preferred stock is required in order to approve certain matters which would prejudice their interests, including;

• amendments to the articles of incorporation to add new classes of shares to be issued, alter the terms of the shares or increase the number of shares or authorized number of any class of shares, with certain exceptions;

• consolidations or splits of shares;

• dividends of shares or stock acquisition rights to shareholders without any consideration;

• grants of preemptive rights for new shares or stock acquisition rights;

• amalgamations or mergers;

• certain corporate splits;

• share exchanges;

• share transfers; and

• other matters set forth in the articles of incorporation.

Except for the amendments described above, the articles of incorporation may expressly permit certain of the above matters to be approved without a separate resolution. Our articles of incorporation do not include that express permission.

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Ranking

If issued, the outstanding shares of our preferred stock would rank pari passu with each other as to participation in our profits or assets, including dividends and distributions of residual assets upon our liquidation.

Unless holders of our preferred stock give approval, we may not create or issue any other shares ranking in priority in terms of the right to receive distributions of surplus or the right to receive distributions of residual assets or otherwise in priority to the preferred stock already issued. However, without obtaining the consent of holders of the preferred stock, we may issue other preferred stock ranking pari passu with the preferred stock already issued as to the order of participation in our profits or assets, carrying rights to preferred dividends, or terms of conversion that our board of directors may determine, subject to limitations set forth in our articles of incorporation and the Companies Act.

Purchase or Redemption of Preferred Stock

Subject to the requirements of the Companies Act, we may purchase out of our prescribed distributable amounts any shares of our preferred stock outstanding at any time and cancel that preferred stock. In June 2013, we amended our articles of incorporation in order to qualify our preferred stock for inclusion in our regulatory capital in accordance with the new FSA capital adequacy guidelines based on the Basel III framework. Under the amended articles of incorporation, we will acquire our outstanding preferred stock without consideration or in exchange for common stock if we become non-viable.

Mandatory Redemption Provisions and Sinking Fund Provisions

Our articles of incorporation do not provide any mandatory redemption provisions and sinking fund provisions.

Stock Splits

Our articles of incorporation provide that no stock split shall be made to the preferred stock unless otherwise provided for in any law or regulation.

Subscription Rights

Our articles of incorporation provide that we shall not grant holders of preferred stock any right to subscribe for new shares or stock acquisition rights.

Conditions to Change Shareholders’ Rights

Our articles of incorporation do not specify what actions or quorums are required to change the rights of holders of our stock.

General Meeting of Shareholders

Our annual general meeting of shareholders is held within three months after the end of each fiscal year. In addition, we may hold an extraordinary general meeting of shareholders whenever necessary. Notice of a general meeting of shareholders stating the place, the time and the purpose thereof, and certain matters set forth in the Companies Act and in ordinances of the Ministry of Justice, must be given to each holder of shares of common stock with voting rights (or to the standing proxy or mailing address in Japan of a nonresident shareholder) at least two weeks prior to the date set for the meeting. The record date for an annual general meeting of shareholders is March 31 of each year.

Any shareholder or group of shareholders holding at least three percent of the total outstanding voting rights, for a continuous period of six months or longer, may require the convocation of a general meeting of

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shareholders for a particular purpose. Unless such a general meeting of shareholders is convened promptly, or a convocation notice of a meeting which is to be held not later than eight weeks from the day of such demand is dispatched, the requiring shareholders may, upon obtaining court approval, convene such general meeting of shareholders.

Any shareholder holding at least 300 voting rights or one percent of our total number of voting rights for six months or longer may propose a matter to be considered at a general meeting of shareholders by submitting a written request to a director at least eight weeks prior to the date of the meeting. Any of the minimum percentages, time periods and number of voting rights necessary for exercising the minority shareholder rights described above may be decreased or shortened if our articles of incorporation so provide. Our articles of incorporation currently do not include any of those provisions.

To attend a general meeting of shareholders in person or by proxy, shareholders must provide proof of identity upon request. Shareholders may appoint a proxy by a written power of attorney for the meeting. Such proxy must be one of our shareholders with voting rights.

Limitations on the Rights to Hold Our Common Stock by Foreign Investors

There are no specific limitations imposed by the laws of Japan, our articles of incorporation, or our other constituent documents, on the rights of nonresidents or foreign shareholders to hold or exercise voting rights on our shares of common stock or preferred stock. For additional information, See “Common Stock—Voting Rights.”

Anti-Change in Control Provisions

There is no provision in our articles of incorporation that would have the effect of delaying, deferring or preventing a change in control of us, and that would operate only with respect to a merger, consolidation, acquisition or corporate restructuring involving us.

Provisions Governing Changes in the Company’s Capital

We have no conditions more stringent than are required by law imposed by our articles of incorporation governing changes in capital.

10.C.    MATERIAL CONTRACTS

All contracts that we are currently a party to, or were a party to during our two most recently completed fiscal years up to the date of this annual report, were entered into in the ordinary course of business or were otherwise immaterial.

10.D.    EXCHANGE CONTROLS

Japanese Foreign Exchange Regulations

The Foreign Exchange and Foreign Trade Act of Japan, and the cabinet orders and ministerial ordinances, collectively known as the Foreign Exchange Act, set forth, among other things, the regulations relating to the receipt by nonresidents of Japan of payment with respect to our shares, and the acquisition and holding of our shares by nonresidents of Japan and foreign investors, both as defined below.

Nonresidents of Japan are individuals who are not residents in Japan and corporations whose principal offices are located outside Japan. Generally, branches and offices of nonresident corporations located in Japan are regarded as residents of Japan while the branches and offices of Japanese corporations located outside Japan are regarded as nonresidents of Japan.

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“Foreign investors” are defined as:

• individuals not residing in Japan;

• corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan;

• corporations of which 50% or more of the voting rights are held, directly or indirectly, by individuals not residing in Japan and/or corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan; and

• corporations, a majority of officers (or a majority of officers having the power of representation) of which are individuals not residing in Japan.

Acquisition of Shares

In general, a nonresident who acquires our shares from a resident of Japan is not subject to any prior filing requirement, although the Foreign Exchange Act authorizes the Minister of Finance of Japan and the Ministers responsible for the business to require a prior submission for any such acquisition in certain limited circumstances.

If a foreign investor acquires shares of our common stock, and, together with parties who have a special relationship with such foreign investor, holds 10% or more of the issued shares of our common stock as a result of the acquisition, the foreign investor must file a report of the acquisition with the Minister of Finance and any other competent minister by the fifteenth day of the month immediately following the month to which the date of such acquisition belongs.

Except for the general limitation under Japanese antitrust and antimonopoly regulations against shareholdings in the capital stock of a Japanese corporation, which lead or may lead to a restraint of trade or monopoly, and general limitations under the Companies Act or our articles of incorporation on the rights of shareholders applicable, regardless of residence or nationality, there is no limitation under Japanese law and regulations applicable to us, or under our articles of incorporation on the rights of nonresident or foreign shareholders to hold or exercise voting rights on our shares.

Dividends and Proceeds of Sale

Under the Foreign Exchange Act, dividends paid on, and the proceeds of sales in Japan of, shares held by nonresidents of Japan, may, in general, be converted into any foreign currency and repatriated abroad. The acquisition of our shares by nonresidents by way of a stock split is not, in general, subject to any notification or reporting requirements.

10.E.    TAXATION

Japanese Taxation

The following is a summary of the principal Japanese national tax consequences to owners of shares of our common stock or ADSs representing shares of our common stock who are Nonresident Shareholders. The statements regarding Japanese tax laws set forth below are based on the laws and treaties currently in force and as interpreted by the Japanese tax authorities at the date of this annual report and are subject to changes in the applicable Japanese law or tax treaties, conventions or agreements, or in the interpretation thereof, occurring after that date. This summary does not include all possible tax considerations which may apply to a particular investor and potential investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership and disposition of shares of our common stock or ADSs, including specifically the tax consequences under Japanese law, the laws of the jurisdiction of which they are resident, and any tax treaty, convention or agreement between Japan and their country of residence, by consulting their own tax advisors.

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For the purpose of Japanese taxation, a Nonresident Shareholder of ADSs will generally be treated as the owner of the shares underlying the ADSs, which may be evidenced by one or more American Depositary Receipts (“ADRs”).

Generally, a Nonresident Shareholder of shares of our common stock or ADSs will be subject to Japanese income tax collected by way of withholding on dividends we pay. Stock splits are, in general, not subject to Japanese income tax or corporation tax.

In the absence of any applicable tax treaty, convention or agreement reducing the maximum rate of Japanese withholding tax or allowing exemption from Japanese withholding tax, the rate of Japanese withholding tax applicable to dividends paid by a Japanese corporation to Nonresident Shareholders is generally 20.42%. However, with respect to dividends paid on listed shares issued by a Japanese corporation (including shares of our common stock or ADSs) to Nonresident Shareholders, except for any individual shareholder who owns 3% or more of the total number of shares issued by the relevant Japanese corporation, the aforementioned 20.42% withholding tax rate is reduced to 15.315% for dividends due and payable on or before December 31, 2037. Due to the imposition of a special additional withholding tax (2.1% of the original withholding tax amount) to secure funds for reconstruction from the Great East Japan Earthquake, the original withholding tax rate of 15% and 20%, as applicable, has been effectively increased, respectively, to 15.315% and 20.42%, during the period beginning on January 1, 2013 and ending on December 31, 2037.

At the date of this annual report, Japan has income tax treaties in force, whereby the above-mentioned withholding tax rate is reduced, generally, to 15% for portfolio investors, with, among others, Belgium, Canada, Denmark, Finland, Germany, Ireland, Italy, Luxembourg, New Zealand, Norway, Singapore and Spain, while the income tax treaties with, among others, Australia, France, Hong Kong, the Netherlands, Portugal, Sweden, Switzerland, the United Kingdom and the United States generally reduce the withholding tax rate to 10% for portfolio investors. In addition, under the income tax treaty between Japan and the United States, dividends paid to pension funds which are qualified U.S. residents eligible to enjoy treaty benefits are exempt from Japanese income taxation by way of withholding or otherwise unless the dividends are derived from the carrying on of a business, directly or indirectly, by those pension funds. Under the income tax treaties with the Netherlands, Switzerland and the United Kingdom, similar treatment will be applied to dividends. Under Japanese tax law, any reduced maximum rate applicable under a tax treaty will be available when the maximum rate is below the rate otherwise applicable under Japanese tax law referred to in the preceding paragraph with respect to the dividends to be paid by us on shares of common stock or ADSs. A Nonresident Shareholder of shares of our common stock who is entitled, under any tax treaty, to a reduced rate of Japanese withholding tax, or exemption therefrom, as the case may be, is required to submit an Application Form for Income Tax Convention Regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends (together with any other required forms and documents) in advance, through the withholding agent, to the relevant tax authority before payment of dividends. A standing proxy for a Nonresident Shareholder may provide the application services. See “Item 10.B. Memorandum and Articles of Incorporation—Common Stock—General.” In addition, a simplified special filing procedure is available for Nonresident Shareholders to claim treaty benefits of exemption from or reduction of Japanese withholding tax by submitting a Special Application Form for Income Tax Convention Regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends of Listed Stocks (together with any other required forms and documents). With respect to ADSs, this reduced rate or exemption will be applicable to Nonresident Shareholders of ADSs if the Depositary or its agent submits two Application Forms (one before payment of dividends and the other within eight months after the record date concerning such payment of dividends), together with certain other documents. To claim this reduced rate or exemption, Nonresident Shareholders of ADSs will be required to file a proof of taxpayer status, residence and beneficial ownership, as applicable, and to provide other information or documents as may be required by the Depositary. A Nonresident Shareholder who is entitled, under any applicable tax treaty, to a reduced rate of Japanese withholding tax below the rate otherwise applicable under Japanese tax law mentioned above, or exemption therefrom, as the case may be, but fails to submit the required application in advance may nevertheless be entitled to claim a refund from the relevant Japanese tax authority of withholding taxes withheld in excess of the

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rate under an applicable tax treaty (if the Nonresident Shareholder is entitled to a reduced treaty rate under the applicable tax treaty) or the full amount of tax withheld (if the Nonresident Shareholder is entitled to an exemption under the applicable tax treaty), as the case may be, by complying with certain subsequent filing procedures. We do not assume any responsibility to ensure withholding at the reduced treaty rate, or exemption therefrom, for shareholders who would be so eligible under an applicable tax treaty but where the required procedures as stated above are not followed.

Gains derived from the sale outside Japan of shares of our common stock or ADSs by a Nonresident Shareholder who is a portfolio investor are, in general, not subject to Japanese income tax or corporation tax.

Any deposits or withdrawals of shares of our common stock by a Nonresident Shareholder in exchange for ADSs are, in general, not subject to Japanese income or corporation tax.

Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has acquired shares of our common stock or ADSs from another individual as a legatee, heir or donee, even if the individual is not a Japanese resident.

Potential investors should consult with their own tax advisors regarding the Japanese tax consequences of the ownership and disposition of shares of common stock or ADSs in light of their particular situations.

United States Federal Income Taxation

The following is a discussion of material U.S. federal income tax consequences to the U.S. Holders described below of owning and disposing of shares or ADSs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a particular person’s decision to hold the shares or ADSs. This discussion does not address U.S. state, local or non-U.S. tax consequences. As used herein, a U.S. Holder is a beneficial owner of shares or ADSs that is, for U.S. federal income tax purposes: (1) a citizen or individual resident of the United States; (2) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; or (3) an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

The discussion applies only to U.S. Holders who hold the shares or ADSs as capital assets for U.S. federal income tax purposes. The discussion does not address any alternative minimum or Medicare contribution tax consequences, nor does it address all of the tax consequences which may be applicable to special classes of holders, such as:

• certain financial institutions;

• insurance companies;

• dealers and certain traders in securities;

• persons holding shares or ADSs as part of a hedge, straddle, conversion or other integrated transaction;

• persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

• regulated investment companies;

• real estate investment trusts;

• partnerships or other entities classified as partnerships for U.S. federal income tax purposes;

• persons liable for the alternative minimum tax;

• tax-exempt entities, including “individual retirement accounts” or “Roth IRAs”;

• persons who acquired our shares or ADSs pursuant to the exercise of an employee stock option or otherwise as compensation;

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• persons holding shares or ADSs that own or are deemed to own 10% or more of our voting stock; or

• persons holding shares or ADSs in connection with a trade or business conducted outside the United States.

If a partnership holds shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding shares or ADSs, and partners in such partnerships, should consult their own tax advisors.

This discussion is based on the Internal Revenue Code of 1986, as amended, administrative pronouncements, judicial decisions and final, temporary and proposed United States Treasury regulations, as well as the double taxation treaty between Japan and the United States (“Treaty”) all as of the date hereof. These laws are subject to change, possibly on a retroactive basis. It is also based in part on representations by the Depositary and assumes that each obligation under the Deposit Agreement and any related agreement or undertaking will be performed in accordance with its terms.

In general, a U.S. Holder who owns ADSs will be treated as the owner of the underlying shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADSs for the underlying shares represented by those ADSs.

The U.S. Treasury has expressed concern that parties to whom ADSs are released before shares are delivered to the depositary, or intermediaries in the chain of ownership between holders and the issuer of the security underlying the ADSs, may be taking actions that are inconsistent with the claiming of foreign tax credits by holders of ADSs. These actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain noncorporate holders. Accordingly, the creditability of Japanese taxes, and the availability of the reduced tax rate for dividends received by certain noncorporate U.S. Holders, each described below, could be affected by actions taken by such parties or intermediaries.

U.S. Holders should consult their own tax advisors concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of shares or ADSs in their particular circumstances.

This discussion assumes that we are not, and will not become, a passive foreign investment company (a “PFIC”), as described below.

Taxation of Distributions

Distributions received by a U.S. Holder on shares or ADSs, including the amount of any Japanese taxes withheld, other than certain pro rata distributions of shares, will constitute foreign-source dividend income to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, we expect that distributions generally will be reported to a U.S. Holder as dividends. The amount of the dividend a U.S. Holder will be required to include in income will equal the U.S. dollar value of the yen dividend, calculated by reference to the exchange rate in effect on the date the payment is received by the holder, or in the case of ADSs, by the Depositary, regardless of whether the payment is converted into U.S. dollars on the date of receipt. If the dividend is converted into U.S. dollars on the date of receipt, the U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend payment. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt. Any foreign currency gain or loss realized by a U.S. Holder on a sale or other disposition of yen will be U.S.-source ordinary income or loss. Corporate U.S. Holders will not be entitled to claim a dividends-received deduction with respect to our dividends. Subject to applicable limitations, and the discussion above regarding concerns expressed by the U.S. Treasury, dividends received from us by certain noncorporate U.S. Holders may be taxable at favorable rates. Noncorporate U.S. Holders should consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to be taxed at these favorable rates.

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Subject to applicable restrictions and limitations that vary depending upon the U.S. Holder’s circumstances and the discussion above regarding concerns expressed by the U.S. Treasury, Japanese taxes withheld from dividends on shares or ADSs (at a rate not exceeding the applicable rate provided by the Treaty, in the case of a U.S. Holder who is eligible for the Treaty’s benefits) will be creditable against the U.S. Holder’s U.S. federal income tax liability. Instead of claiming a credit, a U.S. Holder may elect to deduct such Japanese taxes in computing its taxable income, subject to generally applicable limitations. The limitation on foreign taxes eligible for credit is calculated separately with respect to two categories of income, passive income and general income. The rules governing foreign tax credits are complex. U.S. Holders should consult their own tax advisors regarding the availability of foreign tax credits and deductions in their particular circumstances.

Sale and Other Disposition of the Shares or ADSs

A U.S. Holder will generally recognize capital gain or loss on the sale or other disposition of shares or ADSs, which will be long-term capital gain or loss if the U.S. Holder has held the shares or ADSs for more than one year. The amount of the U.S. Holder’s gain or loss will equal the difference between the amount realized on the sale or other disposition and the U.S. Holder’s tax basis in the shares or ADSs, each as determined in U.S. dollars. The deductibility of capital losses is subject to limitations. Any gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes.

PFIC Rules

Based upon certain proposed Treasury regulations that are not yet in effect, but are generally proposed to become effective for taxable years beginning after December 31, 1994, we believe that we were not a PFIC for U.S. federal income tax purposes for our taxable year ended March 31, 2015. However, since PFIC status depends upon the composition of our income and assets and the market value of our assets from time to time, there can be no assurance that we will not be a PFIC for any taxable year. If we were a PFIC for any taxable year during which a U.S. Holder held shares, certain adverse U.S. federal income tax consequences could apply to the U.S. Holder.

Information Reporting and Backup Withholding

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding unless the U.S. Holder is an exempt recipient or, in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

Certain U.S. Holders who are individuals may be required to report information relating to their ownership of an interest in certain foreign financial assets, including stock of a non-U.S. person, generally on Form 8938, subject to exceptions (including an exception for stock held through a U.S. financial institution). Certain U.S. Holders that are entities may be subject to similar rules in the future. U.S. Holders should consult their tax advisors regarding their reporting obligations with respect to the shares or ADSs.

10.F.    DIVIDENDS AND PAYING AGENTS

Not applicable.

10.G.    STATEMENT BY EXPERTS

Not applicable.

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10.H.    DOCUMENTS ON DISPLAY

We are subject to the reporting requirements of the Securities Exchange Act of 1934. In accordance with these requirements, we file annual reports on Form 20-F and furnish periodic reports on Form 6-K with the SEC.

These materials, including this annual report and the exhibits thereto, may be inspected and copied at the Commission’s Public Reference Room at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330. The Commission also maintains a website at http://www.sec.gov that contains reports and proxy information regarding issuers that file electronically with the Commission. Some of the information may also be found on our website at http://www.smfg.co.jp.

10.I.    SUBSIDIARY INFORMATION

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk

Quantitative and Qualitative Information about Risk Management

Basic Approach

As risks in the financial services industry increase in diversity and complexity, risk management (identifying, measuring, and controlling risk) has never been more important in the management of a financial institution. We have established a basic approach to be employed in risk management and include these in the manual entitled Regulations on Integrated Risk Management. The fundamental principles are as follows:

• Risk management on a Group-wide basis. Various risks taken at the Group companies are managed on a consolidated basis according to the nature of their business and significance in conformity with the relevant laws and regulations.

• Risk management based on quantification. The risks are quantitatively managed according to the relevant risk characteristics after specifying the scope of quantification.

• Ensuring consistency with the business strategy. Risk management is consistent with the business strategy.

• System for check and balance. The risk management framework is developed to ensure effective check and balance function for business operations.

• Measures for emergencies and critical situations. Necessary measures are developed by assuming situations and scenarios as to materialization of risk which would have a significant impact on the business and financial management of the Group.

• Verification of the actual situation. The actual risk management process is verified by the Internal Audit Unit.

Types of Risk to Be Managed

We classify risk into the following categories:

Credit Risk. Credit risk is the possibility of a loss arising from a credit event, such as deterioration in the financial condition of a borrower, that causes an asset (including off-balance sheet transactions) to lose value or become worthless.

Market Risk. Market risk is the possibility that fluctuations in interest rates, foreign exchange rates or stock prices will change the market value of financial products, leading to a loss.

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Liquidity Risk. Liquidity risk is the risk that there may be difficulties in raising funds needed for settlements, as a result of the mismatching of uses of funds and sources of funds or unexpected outflows of funds, which may make it necessary to raise funds at higher rates than normal.

Operational Risk (including Processing Risk and System Risk). Operational risk is the possibility of losses arising from inadequate or failed internal processes, people, and systems or from external events.

Processing Risk. Processing risk is the possibility of losses arising from negligent processing by employees, accidents or unauthorized activities.

System Risk. System risk is the possibility of losses arising from failure, malfunction, or unauthorized use of computer systems.

Risk Management System

The Group-wide basic policies for risk management are determined by the Management Committee, which consists of designated board members, and they are authorized by the board of directors.

The policies also include fundamental principles for each risk category, which each Group company has to follow when establishing its own risk management system. The Corporate Risk Management Department, in cooperation with the Corporate Planning Department, performs risk management according to the above policies. In addition, the Internal Audit Department is responsible for the independent review of risk management within the Group.

Risk management systems are in place at individual Group companies and they have been established in accordance with the Group-wide basic policies for risk management and implementation guidance provided by us. Based on these policies and guidance, each Group company implements guidelines and establishes processes for risk management. On an ongoing basis, these processes and risks are monitored by us.

For example, at the Bank, specific departments have been appointed to oversee the handling of the four risk categories listed above, in addition to the risks associated with settlement. Each risk category is managed taking into account the particular characteristics of that category. In addition, the Risk Management Unit has been established—independent of the business units—and the risk management system has been strengthened by consolidating the functions for managing risks—credit, market, liquidity, operational and settlement—into the Risk Management Unit and enhancing our across-the-board risk monitoring ability. One board member is assigned to oversee the Risk Management Unit comprising the Corporate Risk Management Department and the Credit & Investment Planning Department. The Corporate Risk Management Department—the unit’s planning department—seeks to manage all categories of risk in cooperation with the Corporate Planning Department. Moreover the Internal Audit Unit—independent of all business units—conducts periodic audits to ensure that the management system is functioning properly.

The decision-making process for addressing the risks at the operating level is also strengthened by the Credit Risk Management Committee and the Market Risk Management Committee, which are subcommittees of the Management Committee of the Bank.

Integrated Risk Management

Risk Capital-Based Management

In order to maintain a balance between risk and return, we employ a risk capital-based management method. We measure “risk capital” based on value at risk (“VaR”), and other specific measures such as uniform basic measures of credit, market and operational risks, taking into account the special characteristics of each type of risk and the business activities of each Group company.

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We then allocate risk capital to each unit to keep the total exposure to various risks within the scope of our resources, i.e., capital. The allocation to each unit is determined by the Management Committee and authorized by the board of directors. In this framework, risk capital includes credit concentration risk and interest rate risk in the banking book, which are taken into account under Pillar 2 of the Basel Capital Accord. In addition, we conduct risk capital-based management activities on a consolidated basis, including each Group company.

Liquidity risk is managed within the context of cash-flow plans and funding gap. Other risk categories are managed with procedures closely attuned to the nature of the risk, as described in the following paragraphs.

Disclosures of the objectives, policies and processes to manage each risk and the methods used to measure each risk have been included in “Credit Risk,” “Market Risk and Liquidity Risk,” “Operational Risk, Processing Risk and System Risk” and “Other Risk.”

Stress Tests

In the current volatile business environment, stress tests are essential to analyze and estimate the effects of stress events brought about by the economic recession and market turbulence. When establishing our medium-term management plan or annual business plan, we conduct stress testing to appraise the likely financial impact on the Group, so that we can prepare actions in advance to deal with emerging stress events as they occur.

Stress testing consists of four processes: scenario design, scenario setting, estimation of the impact on financial items, and reporting to the Management Committee and Board of Directors. In the scenario design process, we create some scenarios such as a global economic slowdown or a sharp increase in Japanese government bond rates based on the economic environment and global trends at the time, including those on macroeconomic indicators such as Japanese GDP, stock prices, interest rates and foreign exchange rates, via discussions of the future trends in the global situation with related departments. In the scenario setting process, the Risk Management Unit and the business units of the Bank discuss the scenarios and the scenarios may be revised as necessary. In the estimation of the impact on financial items process, we estimate the financial impact under the scenarios and analyze their impact on financial items such as the common equity Tier 1 ratios. After these three processes, the scenarios and impact on financial items are reported to the Management Committee and Board of Directors.

Furthermore, the Bank has in place a system enabling flexible control of operations at a time of sudden changes in its business environment. The Risk Management Unit and other relevant business units regularly hold joint meetings in order to share understanding of macro-environment, assume hypothetical stress events that might affect our business operation, and consider appropriate responses to those stress events.

Risk Appetite Framework

To ensure an appropriate risk-return balance, and to avoid enormous unforeseen losses, we have in place a risk appetite framework. Specifically, we define risk appetite as the types and levels of risk we are willing to undertake or prepared to tolerate in order to drive earnings growth and incorporate it into our business operations.

Furthermore, to quantitatively grasp the risk appetite, we set risk appetite indicators from each category: financial soundness, profitability, liquidity and others. The target levels and limits of risk appetite indicators are decided by the Management Committee and the Board of Directors at the beginning of each fiscal year and monitored during the period.

Implementation of Basel Regulation

Basel III is an international agreement on minimum capital, leverage, liquidity and other requirements applicable to internationally active banks. The Basel III capital framework was implemented in Japan from March 31, 2013 pursuant to revised capital adequacy guidelines adopted by the FSA, subject to the phase-in of some requirements, as contemplated by Basel III.

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The framework of Basel III is a continuation of Basel II, with multiple approaches to calculating capital requirements; we adopted the advanced IRB approach for credit risk from March 31, 2009, and the AMA for operational risk from March 31, 2008.

Details of relevant initiatives are provided below, and detailed information on our capital ratio is provided in the discussion on Capital Ratio Information in “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity” and “Item 5.B. Liquidity and Capital Resources—Capital Management.”

Credit Risk

Credit risk is the risk of incurring losses from decline or loss of the value of an asset (including off-balance sheet items) that is caused by a credit event including but not limited to the deterioration of financial condition of a borrower. Overseas credits transactions also entail country risk, which is closely related to credit risk. Country risk is the risk of incurring losses caused by changes in political or economic conditions. Credit exposures arise primarily from lending activities such as loans and advances, acquiring investment securities, derivative transactions, and off-balance sheet transactions such as unused portion of loan commitments.

Credit Risk Management System

Credit risk is the most significant risk to which we are exposed. The purpose of credit risk management is to keep the credit risk exposure to a permissible level relative to capital, to maintain the quality of assets and to ensure returns commensurate with risk.

On the basis of Group-wide basic policies for risk management, our Group companies follow the fundamental principles established by us to assess and manage credit risk. Each of our Group companies manages credit risk according to the nature of its business, and assesses and manages the credit risks of individual loans and credit portfolios quantitatively, using consistent standards.

At the Bank, our significant banking subsidiary, the Credit & Investment Planning Department within the Risk Management Unit is responsible for the comprehensive management of credit risk. This department drafts and administers credit policies, the internal rating system, credit authority guidelines, and credit application guidelines, and manages NPLs, including impaired loans, and other aspects of credit portfolio management. The department also cooperates with the Corporate Risk Management Department in quantifying credit risk (risk capital and risk-weighted assets) and controls the Bank’s entire credit risk. Further, the Credit Portfolio Management Department within the Credit & Investment Planning Department strives to stabilize the credit portfolio and manage the risk through credit derivatives, loan asset sales and other instruments.

The credit departments within each business unit conduct credit risk management for loans handled by their units and manage their units’ portfolios. The credit limits they use are based on the baseline amounts that the Credit & Investment Planning Department establishes for each grading category, with particular attention paid to evaluating and managing customers or loans perceived to have particularly high credit risk. The Corporate Research Department engages in research on industries and analyzes the business and financial conditions of borrower enterprises to detect early signs of problems or growth potential.

The Credit Administration Department is responsible for handling NPLs of borrowers classified as potentially bankrupt or lower, and formulates plans for workouts, including write-offs, and corporate rehabilitation. The department closely liaises with SMBC Servicer Co., Ltd., our Group company, which engages in related services to efficiently reduce the amount of NPLs, including through the sale of loans.

The Internal Audit Unit, operating independently of the business units, audits asset quality, accuracy of grading and state of credit risk management, and reports the results directly to the board of directors and the Management Committee.

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The Bank has established the Credit Risk Committee to undertake control of credit risk and to ensure the overall soundness of the loan operations.

Credit Risk Management Methods

To effectively manage the risk involved in individual loans as well as its credit portfolio as a whole, the Bank first acknowledges that every loan entails credit risk, assesses the credit risk posed by each borrower and loan using an internal rating system, and quantifies that risk for control purposes.

Credit Risk Evaluation

The Credit & Investment Planning Department manages an internal rating system for each asset control category set according to portfolio characteristics. For example, credits to commercial and industrial (“C&I”) companies, individuals for business purposes (domestic only), sovereigns, public sector entities, and financial institutions are assigned an “obligor grade,” which indicates the borrower’s creditworthiness, and/or “facility grade,” which indicates the collectability of assets taking into account the transaction conditions such as guarantee/collateral, and tenor. The business units determine an obligor grade by first assigning a financial grade using a financial strength grading model and data obtained from the obligor’s financial statements, including net worth and cash flows. The financial grade is then adjusted taking into account the actual state of the obligor’s financial position and qualitative factors to derive the obligor grade. The qualitative factors mainly include the expected future cash flows taking into account factors such as historical loss information, the appropriateness of the borrower’s business plan or operational improvement plan, the status of progress of its plan, and the overall support from financial institutions. In the event that the borrower is domiciled overseas, internal ratings for credit are made after taking into consideration the country rank, which represents an assessment of the credit quality of each country based on its political and economic situation, as well as its current account balance and external debt. Obligor grades and facility grades are reviewed once a year and as otherwise necessary, such as when there are changes in the credit situation. Our subsidiaries carry out credit risk evaluations in line with the Bank.

There are also grading systems for loans to individuals such as housing loans and structured finance including project finance, where the repayment source is limited to the cash flows generated by a particular business or asset. For example, the obligor grade of housing loans is determined taking into account various relevant factors such as proportion of the repayment to revenue, proportion of down payment to the value and past due information.

The Credit & Investment Planning Department centrally manages the internal rating systems, and designs, operates, supervises and validates the grading models. It validates the grading models (including statistical validation) of main assets following the procedure manual once a year to ensure their effectiveness and suitability.

Quantification of Credit Risk

Credit risk quantification refers to the process of estimating the degree of credit risk of a portfolio or individual loan taking into account not just the obligor’s PD, but also the concentration of risk in a specific customer or industry and the loss impact of fluctuations in the value of collateral, such as real estate and securities.

Specifically, the PD by grade, loss given default (“LGD”), credit quality correlation among obligors, and other parameter values are estimated using the historical data of obligors and facilities stored in a database to calculate the credit risk. Then, based on these parameters, the Bank runs a simulation of simultaneous default using the Monte Carlo Simulation to calculate the Bank’s maximum loss exposure to the estimated amount of the maximum losses/expected shortfall that may be incurred. Based on these quantitative results, the Bank allocates risk capital.

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Risk quantification is also executed for purposes such as to determine the portfolio’s risk concentration or to simulate economic movements (stress tests), and the results are used for making optimal decisions across the whole range of business operations, including formulating business plans and providing a standard against which individual credit applications are assessed.

Credit Assessment

At the Bank, the credit assessment of corporate loans involves a variety of financial analyses, including cash flows, to predict an enterprise’s capability of loan repayment and its growth prospects. These quantitative measures, when combined with qualitative analyses of industrial trends, the enterprise’s research and development capabilities, the competitiveness of its products or services, and its management caliber, result in a comprehensive credit assessment. The loan application is analyzed in terms of the intended utilization of the funds and the repayment schedule. In the assessment of housing loans for individuals, the Bank employs a credit assessment model based on credit data amassed and analyzed by the Bank over many years, taking into account various relevant factors including proportion of the repayment to revenue, proportion of down payment to the value and past due information.

Credit Monitoring

At the Bank, in addition to analyzing loans at the application stage, the Credit Monitoring System is utilized to reassess obligor grades, and review credit policies for each obligor so that problems can be detected at an early stage, and quick and effective action can be taken. The system includes annual monitoring that is carried out each time the financial results of the obligor enterprise are obtained, as well as ad-hoc monitoring that is performed each time credit conditions change.

Credit Portfolio Management

Risk-Taking Within the Scope of Capital

To keep the credit risk exposure to a permissible level relative to capital, the Bank’s Corporate Risk Management Department sets a credit risk capital limit for internal control purposes. Under this limit, sub-limits are set for each business unit. The Corporate Risk Management Department conducts monthly monitoring to make sure that these limits are being followed.

Controlling Concentration Risk

Once the credit concentration risk is realized, the equity capital of the Bank may be materially impaired. The Bank’s Credit & Investment Planning Department therefore takes measures to manage concentration risks, such as introducing large exposure limits and conducting intensive loan reviews for obligors with large exposures, with an increased focus on industrial sectors with an excessive concentration of credit risk. Further, to manage country risk, the Credit Management Department of the International Banking Unit has credit limit guidelines based on each country’s creditworthiness.

Toward Active Portfolio Management

The Bank’s Credit Portfolio Management Department makes use of credit derivatives, loan asset sales, and other instruments to proactively and flexibly manage its portfolio to stabilize credit risk.

Market Risk and Liquidity Risk

Market risk is the possibility that fluctuations in interest rates, foreign exchange rates, stock prices or other market prices will change the market value of financial products, leading to a loss. The purpose of market risk management is to keep the market risk exposure to a permissible level relative to capital.

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Liquidity risk is defined as the uncertainty around our ability to meet our debt obligations without incurring unacceptably large losses. An example of such risk is the possible inability to meet our current and future cash flow/collateral needs, both expected and unexpected. In such cases, we may be required to raise funds at less than favorable rates or be unable to raise sufficient funds for settlement. The purpose of liquidity risk management is to ensure that we are in a position to address its liquidity obligations through monitoring the liquidity gap between assets and liabilities, and maintaining highly liquid supplementary funding resources.

On the basis of the Group-wide basic policies for risk management, we have a quantitative management process to control market and liquidity risks on a Group-wide basis by setting allowable risk limits by company. We at least annually review and identify which companies primarily carry the market and liquidity risks within the Group. We set permissible levels and upper limits of risk for each identified company in consideration of those companies’ business plans. We ensure that each identified company establishes a risk management system that is appropriate to the risks it faces, and has built-in transparent risk management processes, clearly separating front office, middle office and back office operations, and establishing a control system of mutual checks and balances.

Framework for Market and Liquidity Risk Management

The board of directors authorizes important matters relating to the management of market and liquidity risks, such as the basic policies and risk limits, which are decided by the Management Committee.

Additionally, at the Bank, the Corporate Risk Management Department manages market and liquidity risks in an integrated manner. The Corporate Risk Management Department is the planning department of the Risk Management Unit, which is independent of the business units that directly handle market transactions, and not only monitors the current risk situations but also reports regularly to the Management Committee and the board of directors. Furthermore, the Bank’s Asset Liability Management (“ALM”) Committee meets on a monthly basis to examine reports on the state of observance of the Bank’s limits on market and liquidity risks and to review and discuss the Bank’s ALM operations.

To prevent unforeseen processing errors as well as fraudulent transactions, it is important to establish a system of checks on the business units (front office). At the Bank, both the processing departments (back office) and the administrative departments (middle office) conduct the checks. In addition, the Internal Audit Unit of the Bank periodically performs internal audits to verify that the risk management framework is functioning properly.

Market Risk Management Methods

Market Risk Management Process

We manage market risk from trading activities and non-trading activities, including strategic equity investment and other transactions within the risk capital limit, which is determined taking into account our shareholders’ equity and other principal indicators of our financial position. We also establish an upper limit on VaR and losses within the risk capital limits.

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 employing the 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.

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Market Risk Measurement Techniques—Value at Risk

The principal 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 strategic equity investment portfolio); and

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

The relationship between the VaR calculated with the model and the actual profit and loss data is back-tested periodically. The back-testing results for the Group’s trading accounts during the fiscal year ended March 31, 2015 are shown below. A data point below the diagonal line indicates a loss in excess of the predicted VaR for that day; however, there were no significant excess losses as with the previous year. This demonstrates that the Group’s VaR model, with a one-sided confidence interval of 99.0%, is sufficiently reliable.

Back-Testing Results (Trading Book—SMFG consolidated)

Marginal Profit or Loss (in ¥100 million)

VaR (in ¥100 million)

Trading Activities

Most of our trading activity is undertaken to accommodate the needs of commercial banking customers for interest rate and foreign exchange transactions. However, some interest rate and foreign exchange rate positions are taken using derivatives and other on-balance sheet instruments with the objective of earning a profit from favorable movements in market rates. The overall objective of managing market risk is to avoid unexpected losses due to changes in market prices.

Non-trading Activities

The market risk for non-trading activity arises principally from the interest rate risk of our ALM operations, or banking, including loans, debt investment securities, deposits, and long- and short-term borrowings, and from

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the equity risk of our strategic investments. ALM operations are regularly reviewed and discussed by the ALM Committee so as not to be heavily exposed to market fluctuations. Strategic equity investment is a portfolio that consists principally of publicly traded Japanese equities. This portfolio, like that of other financial institutions in Japan, has historically included shares of our customers.

VaR Summary for the Fiscal Years Ended March 31, 2015 and 2014

The following tables show our VaR by risk category and these figures are prepared based on the internal reporting provided to management.

Our material market risk exposure categories consist of interest rate risk, foreign exchange risk, equities and commodities risk and others. The section headed “VaR for Trading Activity” shows our VaR for instruments entered into for trading purposes and the VaR model for the trading book includes principal consolidated subsidiaries. The section headed “VaR for Non-Trading Activity” shows our VaR for instruments entered into for purposes other than trading purposes. “Strategic Equity Investment” in the “VaR for Non-Trading Activity” section is a portfolio that consists principally of publicly traded Japanese equities. This portfolio, like that of other financial institutions in Japan, has historically included shares of our customers.

VaR for Trading Activity

The aggregate VaR for our total trading activities at March 31, 2015 was ¥14.5 billion, an increase from ¥9.5 billion at March 31, 2014 primarily due to an increase in the net risk exposure of equities.

	Interest rate risk		Foreign exchange risk		Equities and commodities risk		Others		Total(1)
	(In billions)
For the fiscal year ended March 31, 2015:
SMBC Consolidated
Maximum	¥	11.9	¥	3.6	¥	9.6	¥	1.1	¥	19.0
Minimum		4.6		0.7		3.1		0.6		8.9
Daily average		6.7		1.7		5.9		0.8		13.9
At March 31, 2015		6.5		1.3		5.9		1.0		13.8
SMFG Consolidated
Maximum	¥	12.5	¥	3.6	¥	9.9	¥	1.1	¥	20.2
Minimum		5.4		0.7		3.2		0.6		9.9
Daily average		7.4		1.7		6.2		0.8		14.8
At March 31, 2015		7.2		1.3		6.0		1.0		14.5

	Interest rate risk		Foreign exchange risk		Equities and commodities risk		Others		Total(1)
	(In billions)
For the fiscal year ended March 31, 2014:
SMBC Consolidated
Maximum	¥	7.7	¥	4.6	¥	19.0	¥	1.1	¥	27.9
Minimum		3.6		0.5		2.8		0.2		7.6
Daily average		5.0		2.0		7.3		0.6		13.7
At March 31, 2014		4.3		0.6		3.2		0.9		8.5
SMFG Consolidated
Maximum	¥	8.3	¥	4.6	¥	19.3	¥	1.1	¥	28.8
Minimum		4.2		0.5		3.0		0.2		8.2
Daily average		5.7		2.0		7.5		0.6		14.6
At March 31, 2014		5.2		0.6		3.3		0.9		9.5

(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.

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VaR for Non-trading Activity

• Banking

The aggregate VaR for our total banking activities at March 31, 2015 was ¥39.0 billion, a decrease from ¥41.5 billion at March 31, 2014 primarily due to a decrease in the net risk exposure of equities.

	Interest rate risk		Foreign exchange risk		Equities and commodities risk		Others		Total(1)
	(In billions)
For the fiscal year ended March 31, 2015:
SMBC Consolidated
Maximum	¥	23.7	¥	0.0	¥	40.3	¥	0.0	¥	45.1
Minimum		13.6		0.0		28.4		0.0		35.6
Daily average		18.2		0.0		33.7		0.0		40.7
At March 31, 2015		16.8		0.0		31.0		0.0		37.8
SMFG Consolidated
Maximum	¥	24.6	¥	0.0	¥	40.4	¥	0.0	¥	46.1
Minimum		14.4		0.0		28.5		0.0		36.6
Daily average		19.2		0.0		33.8		0.0		41.7
At March 31, 2015		18.0		0.0		31.1		0.0		39.0

	Interest rate risk		Foreign exchange risk		Equities and commodities risk		Others		Total(1)
	(In billions)
For the fiscal year ended March 31, 2014:
SMBC Consolidated
Maximum	¥	27.9	¥	0.0	¥	39.9	¥	0.0	¥	48.0
Minimum		13.3		0.0		21.0		0.0		29.3
Daily average		18.9		0.0		30.6		0.0		39.1
At March 31, 2014		17.6		0.0		32.7		0.0		40.3
SMFG Consolidated
Maximum	¥	29.0	¥	0.0	¥	40.0	¥	0.0	¥	49.2
Minimum		13.9		0.0		21.0		0.0		29.9
Daily average		20.0		0.0		30.6		0.0		40.2
At March 31, 2014		18.6		0.0		32.8		0.0		41.5

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

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• Strategic Equity Investment

The aggregate VaR for our strategic equity investment at March 31, 2015 was ¥1,447.7 billion, an increase from ¥1,142.2 billion at March 31, 2014 primarily due to an increase in the fair value of the strategic equity investment portfolio.

	Equities risk
	(In billions)
For the fiscal year ended March 31, 2015:
SMBC Consolidated
Maximum	¥	1,500.4
Minimum		1,067.9
Daily average		1,261.9
At March 31, 2015		1,400.5
SMFG Consolidated
Maximum	¥	1,549.1
Minimum		1,105.3
Daily average		1,304.3
At March 31, 2015		1,447.7

	Equities risk
	(In billions)
For the fiscal year ended March 31, 2014:
SMBC Consolidated
Maximum	¥	1,201.1
Minimum		906.7
Daily average		1,075.3
At March 31, 2014		1,103.0
SMFG Consolidated
Maximum	¥	1,247.0
Minimum		939.5
Daily average		1,114.9
At March 31, 2014		1,142.2

Stress Tests

The market occasionally undergoes extreme fluctuations that exceed projections. Therefore, to manage market risk, it is important to run simulations of situations that may occur only once in many years, or so-called stress tests. To prepare for unexpected market swings, the Bank performs stress tests on a monthly basis based on various scenarios.

The limitations of the VaR methodology include the following:

• The use of historical data as a proxy for estimating future events may underestimate the probability of extreme market movements. Past market movement is not necessarily a good indicator of future events;

• The use of a holding period assumes that all positions can be liquidated or hedged in that period of time. This assumption does not fully capture the market risk arising during periods of illiquidity, when liquidation or hedging in that period of time may not be possible;

• The use of a confidence level neither takes account of, nor makes any statement about, any losses that might occur beyond this level of confidence; and

• VaR does not capture all of the complex effects of the risk factors on the value of positions and portfolios and could underestimate potential losses.

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Additional Information for Certain Risks

Interest Rate Risk

To supplement the above limitations of VaR methodologies, the Group adopts various indices to measure and monitor the sensitivity of interest rates, including delta, gamma and vega risks. The 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 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. The table “Outlier Ratio” presented below is one of the sensitivity analyses for interest rate risk concerning the banking book using the BPV approach. In addition, as previously addressed, the 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 the Bank, the maturity of demand deposits that are expected to be left with the Bank 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.

Outlier Ratio

In the event the economic value of a bank declines by more than 20% of total capital as a result of interest rate shocks, that bank would fall into the category of “outlier bank,” as stipulated under Pillar 2 of the Basel Capital Accord. This ratio, known as the outlier ratio, was 1.3% for the Bank on a consolidated basis at March 31, 2015, substantially below the 20% criterion. The decline in economic value based on outlier framework of the Bank on a consolidated basis is shown in the following table.

	At March 31,
	2015			2014
	(In billions, except percentages)
SMBC Consolidated
Total	¥	132.6		¥	83.0
Impact of yen interest rates		21.2			31.1
Impact of U.S. dollar interest rates		57.4			25.7
Impact of euro interest rates		25.5			18.6
Percentage of total capital		1.3	%		0.9	%

Note: Decline in economic value is the decline of the present value of a banking portfolio after interest rate shocks (1st and 99th percentile of observed interest rate changes using a one-year holding period and an observation period of five years).

Foreign Exchange Risk

The principal Group companies set risk limits for each currency to manage the concentration of the foreign currency position. The foreign exchange risk is immaterial as shown above in VaR by risk category.

Strategic Equity Investment Risk

We establish limits on allowable risk for strategic equity investments, and monitor the observance of those limits to keep stock price fluctuation risk within acceptable parameters. We have been reducing our strategic equity investments, and the balance is within a permitted level, which is less than 100% of our consolidated Tier 1 Capital. See “Item 4.B. Business Overview—Regulations in Japan—Regulations for Stabilizing the Financial System—Restriction on Aggregate Shareholdings by a Bank.”

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Liquidity Risk Management Methods

We and the Bank regard liquidity risk as one of the major risks and we identify our Group companies which have significant liquidity risk. Each of our identified Group companies, including the Bank, establishes a fundamental risk management framework. For example, the Bank manages liquidity risk based on a framework consisting of setting upper limits for “funding gaps,” maintaining highly liquid supplementary funding sources and establishing contingency plans.

A funding gap is defined as a maturity mismatch between a source of funds and the use of funds. The Bank actively manages this funding gap by setting limits on the size of gaps over a given time horizon and limiting reliance on short-term funding. These limits are established on both a Bank-wide basis and individual branch basis, taking into account cash management planning, systemic factors and funding status, among other factors. Additionally, funding gap limits are set for individual currencies if necessary. The Bank actively monitors funding gaps on a daily basis. Further, stress tests are regularly carried out by simulating the impact triggered, for example, by the outflow of deposits or having difficulties in funding from money markets, in order to thoroughly comprehend the amount required to fund when the liquidity risk is realized. Additionally, funding liquidity is maintained by holding assets, such as U.S. government bonds, which can be immediately converted to cash, or establishing borrowing facilities to be used as supplementary funding sources in an emergency, in order to smoothly raise the required funds even during market disruption.

Furthermore, contingency plans are developed to respond to the liquidity risk when being realized, by creating detailed action plans such as lowering the upper limit for the funding gap, depending on the existing situation (i.e. normal, concerned, or critical) and the respective circumstances.

Operational Risk, Processing Risk and System Risk

Operational risk is the possibility of losses arising from inadequate or failed internal processes, people and systems or from external events. We have prepared operational risk management regulations to define the basic rules to be observed across our Group. Under these regulations, we are working to raise the level of sophistication of our management of operational risk across the group by providing an effective framework for the identification, assessment, control and monitoring of significant risk factors and by establishing a system for executing contingency and business continuity plans.

Processing risk is the possibility of losses arising from negligent processing by employees, accidents, or unauthorized activities. We recognize that all operations entail processing risk. We are, therefore, working to raise the level of sophistication of our management of processing risk across the whole Group by ensuring that each branch conducts its own regular investigations of processing risk; minimizing losses in the event of processing errors or negligence by drafting exhaustive contingency plans; and carrying out thorough quantification of the risk under management.

System risk is the possibility of a loss arising from the failure, malfunction or unauthorized use of computer systems. We recognize that reliable computer systems are essential for the effective implementation of management strategy. We strive to minimize system risk by adopting and implementing risk management regulations and specific management standards, including a security policy. We also have contingency plans with the goal of minimizing losses in the event of a system failure. To prevent computer system breakdowns, we have also implemented numerous measures, including the duplication of various systems and infrastructures, maintaining the Bank’s computer system to facilitate steady, uninterrupted operation, and establishing a disaster-prevention system consisting of computer centers in eastern and western Japan.

Other Risk

Settlement risk is the possibility of a loss arising from a transaction that cannot be settled as planned. As this risk crosses over numerous categories of risk, including credit, liquidity, processing and system risks, it is required to appropriately manage according to characteristics of such risks.

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Item 12. Description of Securities other than Equity Securities

12.A.    DEBT SECURITIES

Not applicable.

12.B.    WARRANTS AND RIGHTS

Not applicable.

12.C.    OTHER SECURITIES

Not applicable.

12.D.    AMERICAN DEPOSITARY SHARES

Under the terms of the deposit agreement, an ADSs holder may have to pay the following service fees to the depositary:

Service	Fees
Issuance of ADSs	Up to U.S. 5¢ per ADS issued
Cancellation of ADSs	Up to U.S. 5¢ per ADS canceled
Distribution of cash dividends or other cash distributions	Up to U.S. 5¢ per ADS held
Distribution of ADSs pursuant to stock dividends, free stock distributions or exercises of rights	Up to U.S. 5¢ per ADS held
Distribution of securities other than ADSs or rights to purchase additional ADSs	Up to U.S. 5¢ per ADS held
Depositary services	Up to U.S. 5¢ per ADS held on the applicable record date(s) established by the depositary

An ADS holder will also be responsible for paying certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as:

• taxes (including applicable interest and penalties) and other governmental charges;

• the registration fees applicable to transfers of shares or other deposited securities to or from the name of the custodian, the depositary or any nominees upon the making of deposits or withdrawals, respectively;

• the cable, telex and facsimile transmission and delivery expenses expressly provided in the deposit agreement to be at the expense of the person depositing or withdrawing shares or holders and beneficial owners of ADSs;

• the expenses and charges incurred by the depositary in the conversion of foreign currency;

• the fees and expenses incurred by the depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to shares, deposited securities, ADSs and ADRs; and

• the fees and expenses incurred by the depositary, the custodian or any nominee in connection with the servicing or delivery of deposited securities.

163

Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation. The brokers in turn charge these transaction fees to their clients.

Citibank, N.A., as depositary, has agreed to reimburse us annually for expenses related to the administration and maintenance of the depositary receipt facility, subject to certain criteria. We did not receive any reimbursements from Citibank, N.A. in the fiscal year ended March 31, 2015.

164

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation under the supervision and with the participation of our management, including Koichi Miyata, our President and Representative Director, and Jun Ohta, our Director, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) at March 31, 2015. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based upon the evaluation referred to above, Mr. Miyata and Mr. Ohta concluded that the design and operation of our disclosure controls and procedures at March 31, 2015 were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management evaluated the effectiveness of our internal control over financial reporting at March 31, 2015 based on the criteria established in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation, management has concluded that we maintained effective internal control over financial reporting at March 31, 2015.

165

The effectiveness of our internal control over financial reporting at March 31, 2015 has been audited by KPMG AZSA, our independent registered public accounting firm, as stated in their report appearing on page F-4.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

Our board of corporate auditors has determined that Mr. Satoshi Itoh is an “audit committee financial expert” as defined in Item 16A. of Form 20-F and is “independent” as defined in the listing standards of the NYSE. Mr. Itoh, an outside corporate auditor under the Companies Act, has spent most of his career auditing Japanese corporations as a certified public accountant and was a special professor at Chuo University Graduate School of International Accounting from April 2002 to March 2007.

Item 16B. Code of Ethics

We have adopted a code of ethics, which is comprised of internal rules included in our business ethics and compliance manual, each of which applies to all our directors, officers and other employees.

Our business ethics are commonly applicable principles of Corporate Social Responsibility (“CSR”) in which observance of the compliance system is regarded as very important. Our compliance manual sets forth the necessity of adherence to our management philosophy and code of conduct by our directors, officers and other employees, and the roles and responsibilities of our employees, compliance officers, Compliance Division and others in the event of a breach of the compliance rules.

This manual was created to identify, and to promote compliance by our directors, officers and other employees with relevant laws and regulations in conjunction with our management philosophy and code of conduct and compliance rules. This manual also sets forth the procedures regarding the handling of conflicts of interest for our directors and the promotion of conduct that meets our management philosophy and code of conduct and compliance rules for employees. For a detailed discussion of our management philosophy and code of conduct, see “Item 4.B. Business Overview—Management Philosophy.”

A copy of the sections of our business ethics and compliance manual equivalent to the “code of ethics” (as defined in paragraph (b) of Item 16B. of Form 20-F) is attached as Exhibit 11 to this annual report.

There were no material changes to the code of ethics during the fiscal year ended March 31, 2015. No waivers of the business ethics and compliance manual have been granted to any of our directors, officers or other employees, during the fiscal year ended March 31, 2015.

166

Item 16C. Principal Accountant Fees and Services

Fees for Services Provided by KPMG AZSA and its Affiliates

The aggregate fees billed by KPMG AZSA, our independent registered public accounting firm, and its affiliates, for the fiscal years ended March 31, 2015 and 2014 are presented in the following table:

	For the fiscal year ended March 31,
	2015		2014
	(In millions)
Audit fees(1)	¥	4,087	¥	4,012
Audit-related fees(2)		160		119
Tax fees(3)		151		184
All other fees(4)		12		34
Total	¥	4,410	¥	4,349

(1) Audit fees primarily include fees for the audit of our and our subsidiaries’ annual financial statements and fees for the services that are normally provided in connection with our statutory and regulatory filings.

(2) Audit-related fees primarily include fees for attestation and related services that are not reported under audit fees.

(3) Tax fees primarily include fees for tax compliance, assistance with preparation of tax return filings and tax advisory services.

(4) All other fees primarily include fees for advisory services in relation to existing accounting policies of our subsidiaries.

Pre-Approval Policies and Procedures

Pursuant to Rule 2-01(c)(7) of Regulation S-X, our board of corporate auditors pre-approves all engagements with KPMG AZSA and its affiliates. Under the policies and procedures established by our board of corporate auditors, SMFG and its subsidiaries must apply to our board of corporate auditors for pre-approval on either a periodic basis twice a year for services expected to be performed in the coming months or case-by-case basis before entering into the engagement with KPMG AZSA and its affiliates to perform audit and permitted non-audit services.

Pre-approval is granted by our board of corporate auditors prior to entering into the engagement. Additionally, if necessary, full-time corporate auditors may consider any case-by-case application for pre-approval on behalf of our board of corporate auditors prior to the next scheduled board meeting. Such pre-approvals made by full-time corporate auditors are reported to our board of corporate auditors at the next scheduled board meeting.

Fees approved pursuant to the procedures described in paragraph 2-01(c)(7)(i)(C) of Regulation S-X, which provides for an exception to the general requirement for pre-approval in certain circumstances, were none for the fiscal years ended March 31, 2015 and 2014.

Item 16D. Exemptions from the Listing Standards for the Audit Committee

We do not have an audit committee defined under the Securities Exchange Act of 1934. We are relying on the general exemption contained in Rule 10A-3(c)(3) under the Securities Exchange Act of 1934, which provides an exemption from the NYSE’s listing standards relating to audit committees for foreign companies that have a board of corporate auditors that meets the requirements set forth in Rule 10A-3(c)(3). Our reliance on Rule 10A-3(c)(3) does not, in our opinion, materially adversely affect the ability of our board of corporate auditors to act independently and to satisfy the other requirements of Rule 10A-3.

167

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table sets forth purchases of our common stock by us and our affiliated purchasers during the fiscal year ended March 31, 2015:

	Total number of shares purchased(1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs
April 1 to April 30, 2014		1,837	¥	4,318		—		—
May 1 to May 31, 2014		1,863		4,024		—		—
June 1 to June 30, 2014		1,560		4,242		—		—
July 1 to July 31, 2014		4,045		4,200		—		—
August 1 to August 31, 2014		4,380		4,134		—		—
September 1 to September 30, 2014		3,142		4,347		—		—
October 1 to October 31, 2014		2,318		4,225		—		—
November 1 to November 30, 2014		3,761		4,447		—		—
December 1 to December 31, 2014		4,368		4,393		—		—
January 1 to January 31, 2015		2,358		4,219		—		—
February 1 to February 28, 2015		3,248		4,275		—		—
March 1 to March 31, 2015		4,430		4,748		—		—
Total		37,310	¥	4,325		—		—

(1) A total of 37,310 shares were purchased other than through a publicly announced plan or program during the fiscal year ended March 31, 2015, due to our purchases of shares constituting less than one unit from registered holders of such shares at the current market prices of those shares.

Item 16F. Change in Registrant’s Certifying Accountant

None.

Item 16G. Corporate Governance

Companies listed on the NYSE must comply with certain corporate governance standards provided under Section 303A of the NYSE Listed Company Manual. However, NYSE-listed companies that are foreign private issuers, including us, are permitted to follow home country practices in lieu of certain provisions of Section 303A if such foreign private issuers meet certain criteria. We rely on the exemption for home country practices concerning the listing of our ADSs on the NYSE.

Foreign private issuers listed on the NYSE are required to provide to their U.S. investors a brief, general summary of the significant differences of corporate governance practices that differ from U.S. companies under NYSE listing standards. The following is a summary of the significant ways in which our corporate governance practices differ from NYSE standards followed by U.S. companies:

• U.S. companies listed on the NYSE are required to have an audit committee composed entirely of independent directors. Under the Companies Act of Japan, we are required to have a corporate governance system based on (i) a board of corporate auditors, (ii) a nominating committee, an audit committee and a compensation committee, or (iii) an audit and supervisory committee. We adopt a corporate governance system based on a board of corporate auditors. The basic function of the board of corporate auditors is similar to that of independent directors, including those who are members of the audit committee, of a NYSE-listed U.S. company, i.e., to monitor the performance of the directors and review and express opinions on the method of auditing by the independent registered public accounting

168

firm and on such accounting firm’s audit reports for the protection of the company’s shareholders. Under the Companies Act, we are required to have at least half of our corporate auditors be outside corporate auditors who meet the independence requirements under the Companies Act. Currently, three of our six corporate auditors are outside corporate auditors that meet such independence requirements. In addition, none of the corporate auditors may at the same time be directors, managers or employees of the company or any of its subsidiaries, or accounting advisors or executive officers (shikkoyaku) of such subsidiaries. While the Companies Act does not require corporate auditors to have expertise in accounting or other special knowledge and experience, one of our corporate auditors is a certified public accountant in Japan. We rely on an exemption from the audit committee requirements imposed by Rule 10A-3 of the Securities Exchange Act of 1934, which is available to foreign private issuers with a board of auditors (or similar body) meeting specified criteria. With respect to our board of corporate auditors, the criteria that we meet include the following:

• responsible, to the extent permitted by law, for the appointment, retention and supervision of the work of an independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for us;

• subject to procedures for the receipt, retention and treatment of complaints and the confidential, anonymous submission of concerns by employees regarding the status of our internal control system on accounting and financial reporting and internal and external audits;

• each corporate auditor has the authority to engage independent counsel and other advisers if such engagement is necessary to carry out his or her duties; and

• each corporate auditor has the ability to require us to pay any and all expenses necessary for carrying out his or her duties.

Under the Companies Act, companies that adopt a corporate governance system based on a board of corporate auditors, such as us, are not required to maintain directors that are outside directors who meet the independence requirements under the Companies Act. However, five of our thirteen directors are outside directors who meet such requirements.

• A NYSE-listed U.S. company is required to have a nominating/corporate governance committee and a compensation committee, all of which must be composed entirely of independent directors. The members of the compensation committee must satisfy additional requirements set forth in Section 303A.02(a)(ii) of the NYSE Listed Company Manual. A compensation committee must also have the authority to, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser. This authority is subject to the committee’s consideration of certain criteria set forth in Section 303A.05(c) of the NYSE Listed Company Manual regarding the independence of the adviser. While we, a company which has corporate auditors, are not required to establish a nominating committee or a compensation committee under the Companies Act, we voluntarily established similar committees, each with eight members, five of whom are outside directors, to advise the board of directors on these matters in order to ensure transparency and impartiality in matters of personnel decisions affecting the board of directors and directors’ compensation.

• A NYSE-listed U.S. company must hold regularly scheduled executive sessions where participants are limited to non-management directors. Under the Companies Act, Japanese corporations are not obliged to hold executive sessions where participants are limited to non-management directors.

• The Companies Act requires that the aggregate amount of remuneration to be paid to all directors and the aggregate amount of remuneration to be paid to all corporate auditors to be determined by a resolution of a general meeting of shareholders, unless their remuneration is provided for in the articles of incorporation. Based on the above resolution, the distribution of remuneration among directors is broadly delegated to our board of directors, which takes into consideration the advisory opinion by the compensation committee, and the distribution of remuneration among corporate auditors is determined by consultation among our corporate auditors.

169

• A NYSE-listed U.S. company must adopt a code of business conduct and ethics and must post the code on its website. While we are not required to adopt such code under Japanese law or the rules of stock exchanges in Japan on which we are listed, we maintain our code of conduct as our standard for corporate conduct to be observed by our directors, officers and employees.

• A NYSE-listed U.S. company must adopt corporate governance guidelines and must post the guidelines on its website. While we are not required to adopt such guidelines under Japanese law, the rules of the stock exchanges in Japan on which we are listed, including the Tokyo Stock Exchange, require listed companies, including us, to comply with the principles of the Corporate Governance Code established by those stock exchanges and, in cases of noncompliance with some or all of the principles, to disclose the reasons for such noncompliance. In May 2015, we established the SMFG Corporate Governance Guideline, in consideration of the Corporate Governance Code, to present our basic views and guidelines on corporate governance and improve our corporate governance system. Our Corporate Governance Guideline is available on our website at http://www.smfg.co.jp.

• A NYSE-listed U.S. company must generally obtain shareholder approval with respect to any equity compensation plan, subject to limited exemptions. Under the Companies Act of Japan, the adoption of an equity compensation plan including stock option-based plans for directors and corporate auditors requires shareholder approval. In order to issue stock options, a public company such as us must obtain the approval of its board of directors, unless stock options are granted on preferential terms to the recipient, in which case it must obtain shareholder approval by a “special resolution” of a general meeting of shareholders. Under our articles of incorporation, the quorum for such a special resolution of our shareholders is at least one-third of the total number of voting rights of all of shareholders, and approval by at least two-thirds of the number of voting rights represented at the meeting is required.

We obtained shareholder approval at our June 2010 general meeting of shareholders to introduce stock compensation-type stock options to our directors and corporate auditors. Under the terms resolved at the meeting we may issue stock options to our directors and corporate auditors as part of their remuneration upon the approval of our board of directors unless stock options are issued on preferential terms to the recipient. For additional information, see “Item 6.E. Share Ownership.”

Item 16H. Mine Safety Disclosure

Not applicable.

170

PART III

Item 17. Financial Statements

We have responded to Item 18 in lieu of this item.

Item 18. Financial Statements

The information required by this item is set forth in our consolidated financial statements starting on page F-1 of this annual report.

Item 19. Exhibits

We have filed the following documents as exhibits to this document:

Exhibit 1.1	Articles of Incorporation of Sumitomo Mitsui Financial Group, Inc., as amended on June 26, 2015
Exhibit 1.2	Regulations of Board of Directors of Sumitomo Mitsui Financial Group, Inc., as amended on May 1, 2015
Exhibit 1.3	Share Handling Regulations of Sumitomo Mitsui Financial Group, Inc., as amended on April 1, 2012, incorporated by reference from our annual report on Form 20-F (Commission file number 001-34919) filed on July 23, 2012
Exhibit 2.1	Form of Deposit Agreement among the registrant, Citibank, N.A., as Depositary, and all owners and holders from time to time of American Depositary Shares issued thereunder, incorporated by reference from our registration statement on Form 20-F (Commission file number 001-34919) filed on October 20, 2010
Exhibit 8	List of subsidiaries of Sumitomo Mitsui Financial Group, Inc., at March 31, 2015
Exhibit 11	Code of Ethics of Sumitomo Mitsui Financial Group, Inc., incorporated by reference from our annual report on Form 20-F (File No. 001-34919) filed on July 29, 2011
Exhibit 12.1	CEO Certification Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
Exhibit 12.2	CFO Certification Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
Exhibit 13.1	Certification Required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
Exhibit 13.2	Certification Required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)

We have not included as exhibits certain instruments with respect to our long-term debt. The total amount of our long-term debt securities or that of our subsidiaries, authorized under any instrument does not exceed 10% of our total assets. We hereby agree to furnish to the SEC, upon its request, a copy of any instrument defining the rights of holders of our long-term debt or that of our subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.

171

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Sumitomo Mitsui Financial Group, Inc.
By:	/s/ Koichi Miyata
	Name:	Koichi Miyata
	Title:	President and Representative Director

Date: July 22, 2015

172

SELECTED STATISTICAL DATA

I. Distribution of Assets, Liabilities and Equity; Interest Rates and Interest Differential

Average Statements of Financial Positions, Interest and Average Rates

The following tables show the average balances of our statement of financial positions items and related interest and average interest rates for the fiscal years ended March 31, 2015, 2014 and 2013. 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 the applicable daily averages. The average balances determined by such methods are considered to be representative of our operations. The allocation of amounts between domestic and foreign is based on the location of the office.

	For the fiscal year ended March 31,
	2015									2014(5)								2013(5)
	Average balance			Interest income			Average rate			Average balance			Interest income		Average rate			Average balance			Interest income		Average rate
	(In millions, except percentages)
Interest-earning assets:
Interest-earning deposits with other banks:
Domestic offices		¥       741,738			¥       4,548			0.61	%		¥       609,023			¥       2,807		0.46	%		¥       351,808			¥       1,185		0.34	%
Foreign offices		5,892,983			37,348			0.63	%		6,027,100			34,521		0.57	%		4,491,108			28,285		0.63	%
Total		6,634,721			41,896			0.63	%		6,636,123			37,328		0.56	%		4,842,916			29,470		0.61	%
Call loans and bills bought:
Domestic offices		226,409			1,177			0.52	%		273,903			1,583		0.58	%		304,331			1,519		0.50	%
Foreign offices		972,643			17,429			1.79	%		1,154,049			16,559		1.43	%		1,076,378			11,347		1.05	%
Total		1,199,052			18,606			1.55	%		1,427,952			18,142		1.27	%		1,380,709			12,866		0.93	%
Reverse repurchase agreements and cash collateral on securities borrowed:
Domestic offices		4,766,205			7,875			0.17	%		3,749,260			7,339		0.20	%		3,922,361			7,535		0.19	%
Foreign offices		726,427			9,146			1.26	%		419,274			7,631		1.82	%		283,262			5,465		1.93	%
Total		5,492,632			17,021			0.31	%		4,168,534			14,970		0.36	%		4,205,623			13,000		0.31	%
Trading assets(1):
Domestic offices		3,284,505			24,313			0.74	%		2,967,303			25,770		0.87	%		4,232,218			35,507		0.84	%
Foreign offices		84,006			1,661			1.98	%		43,857			525		1.20	%		38,889			565		1.45	%
Total		3,368,511			25,974			0.77	%		3,011,160			26,295		0.87	%		4,271,107			36,072		0.84	%
Financial assets at fair value through profit or loss(2):
Domestic offices		1,672,433			(4,373	)		(0.26	%)		1,788,442			16,534		0.92	%		1,979,187			1,112		0.06	%
Held-to-maturity investments(3):
Domestic offices		4,086,502			20,509			0.50	%		5,238,921			30,303		0.58	%		5,659,267			39,786		0.70	%
Available-for-sale financial assets(3):
Domestic offices		10,385,945			32,703			0.31	%		12,119,698			35,539		0.29	%		23,444,037			65,814		0.28	%
Foreign offices		2,250,294			29,282			1.30	%		1,780,684			19,956		1.12	%		1,687,202			21,572		1.28	%
Total		12,636,239			61,985			0.49	%		13,900,382			55,495		0.40	%		25,131,239			87,386		0.35	%
Loans and advances(4):
Domestic offices		62,005,587			1,099,119			1.77	%		61,524,516			1,138,102		1.85	%		60,183,531			1,200,792		2.00	%
Foreign offices		23,292,666			523,485			2.25	%		19,553,229			419,704		2.15	%		15,301,802			342,423		2.24	%
Total		85,298,253			1,622,604			1.90	%		81,077,745			1,557,806		1.92	%		75,485,333			1,543,215		2.04	%
Total interest-earning assets:
Domestic offices		87,169,324			1,185,871			1.36	%		88,271,066			1,257,977		1.43	%		100,076,740			1,353,250		1.35	%
Foreign offices		33,219,019			618,351			1.86	%		28,978,193			498,896		1.72	%		22,878,641			409,657		1.79	%
Total		120,388,343			¥1,804,222			1.50	%		117,249,259			¥1,756,873		1.50	%		122,955,381			¥1,762,907		1.43	%
Non-interest-earning assets:
Cash and due from banks		24,523,995									13,653,126								2,953,149
Other non-interest-earning assets		19,075,392									15,647,012								16,561,418
Allowance for loan losses		(873,853	)								(1,157,839	)							(1,343,024	)
Total non-interest-earning assets		42,725,534									28,142,299								18,171,543
Total assets		¥163,113,877									¥145,391,558								¥141,126,924
Total assets attributable to foreign offices		23.6	%								22.3	%							18.7	%

A-1

	For the fiscal year ended March 31,
	2015								2014(5)								2013(5)
	Average balance			Interest expense		Average rate			Average balance			Interest expense		Average rate			Average balance			Interest expense		Average rate
	(In millions, except percentages)
Interest-bearing liabilities:
Deposits:
Domestic offices		¥  74,397,836			¥     49,356		0.07	%		¥  72,376,165			¥     48,446		0.07	%		¥  70,452,092			¥     51,975		0.07	%
Foreign offices		21,263,919			116,211		0.55	%		17,014,587			91,944		0.54	%		12,801,814			71,403		0.56	%
Total		95,661,755			165,567		0.17	%		89,390,752			140,390		0.16	%		83,253,906			123,378		0.15	%
Call money and bills sold:
Domestic offices		2,040,724			1,504		0.07	%		1,497,244			1,222		0.08	%		1,233,733			1,039		0.08	%
Foreign offices		877,127			2,510		0.29	%		651,839			2,261		0.35	%		642,899			3,098		0.48	%
Total		2,917,851			4,014		0.14	%		2,149,083			3,483		0.16	%		1,876,632			4,137		0.22	%
Repurchase agreements and cash collateral on securities lent:
Domestic offices		5,584,584			6,091		0.11	%		4,167,460			4,558		0.11	%		4,970,577			7,781		0.16	%
Foreign offices		1,455,125			3,829		0.26	%		990,721			2,989		0.30	%		1,079,763			4,228		0.39	%
Total		7,039,709			9,920		0.14	%		5,158,181			7,547		0.15	%		6,050,340			12,009		0.20	%
Trading liabilities(1):
Domestic offices		2,197,851			19,634		0.89	%		1,916,419			20,341		1.06	%		1,953,735			22,474		1.15	%
Foreign offices		27,840			830		2.98	%		9,123			120		1.32	%		3,417			48		1.40	%
Total		2,225,691			20,464		0.92	%		1,925,542			20,461		1.06	%		1,957,152			22,522		1.15	%
Borrowings:
Domestic offices		9,170,288			54,915		0.60	%		5,879,723			50,833		0.86	%		6,999,912			63,926		0.91	%
Foreign offices		790,516			16,122		2.04	%		787,217			17,433		2.21	%		808,775			21,293		2.63	%
Total		9,960,804			71,037		0.71	%		6,666,940			68,266		1.02	%		7,808,687			85,219		1.09	%
Debt securities in issue:
Domestic offices		7,000,273			109,960		1.57	%		6,223,653			92,481		1.49	%		5,804,668			87,980		1.52	%
Foreign offices		2,819,687			9,829		0.35	%		2,355,748			7,636		0.32	%		1,884,813			8,132		0.43	%
Total		9,819,960			119,789		1.22	%		8,579,401			100,117		1.17	%		7,689,481			96,112		1.25	%
Other interest-bearing liabilities:
Domestic offices		96,873			731		0.75	%		90,049			689		0.77	%		81,915			683		0.83	%
Foreign offices		3,025			49		1.62	%		2,898			19		0.66	%		7,732			32		0.41	%
Total		99,898			780		0.78	%		92,947			708		0.76	%		89,647			715		0.80	%
Total interest-bearing liabilities:
Domestic offices		100,488,429			242,191		0.24	%		92,150,713			218,570		0.24	%		91,496,632			235,858		0.26	%
Foreign offices		27,237,239			149,380		0.55	%		21,812,133			122,402		0.56	%		17,229,213			108,234		0.63	%
Total		127,725,668			¥   391,571		0.31	%		113,962,846			¥   340,972		0.30	%		108,725,845			¥   344,092		0.32	%
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		13,440,486								12,772,713								12,301,269
Other non-interest-bearing liabilities		11,834,101								11,168,374								12,079,016
Total non-interest-bearing liabilities		25,274,587								23,941,087								24,380,285
Total equity		10,113,622								7,487,625								8,020,794
Total equity and liabilities		¥163,113,877								¥145,391,558								¥141,126,924
Total liabilities attributable to foreign offices		20.0	%							18.1	%							15.3	%
Net interest income and interest rate spread					¥1,412,651		1.19	%					¥1,415,901		1.20	%					¥1,418,815		1.11	%
Net interest income as a percentage of total interest-earning assets							1.17	%							1.21	%							1.15	%

(1) The net amount of interest income on trading assets and interest expense on trading liabilities is reported as net trading income in our consolidated income statement.

(2) Interest income on financial assets at fair value through profit or loss is reported in net income from financial assets at fair value through profit or loss in our consolidated income statement.

(3) 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.

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

(5) Comparative information has been restated to reflect the adoption of IFRIC Interpretation 21 “Levies.” For more information, see Note 2 “Summary of Significant Accounting Policies—New and Amended Accounting Standards Adopted by the SMFG Group” to our consolidated financial statements included elsewhere in this annual report.

A-2

Analysis of Net Interest Income

The following tables show the changes to our net interest income attributable to changes in the volume and changes in the rates for the fiscal year ended March 31, 2015 compared to the fiscal year ended March 31, 2014 and for the fiscal year ended March 31, 2014 compared to the fiscal year ended March 31, 2013.

Changes attributable to the combined impact of changes in the rates and the volume have been allocated proportionately to the changes in the volume and changes in the rates.

	Fiscal year ended March 31, 2015 compared to fiscal year ended March 31, 2014 Increase / (decrease)									Fiscal year ended March 31, 2014 compared to fiscal year ended March 31, 2013 Increase / (decrease)(3)
	Volume			Rate			Net change			Volume			Rate			Net change
	(In millions)
Interest income:
Interest-earning deposits with other banks:
Domestic offices	¥	690		¥	1,051		¥	1,741		¥	1,083		¥	539		¥	1,622
Foreign offices		(779	)		3,606			2,827			8,956			(2,720	)		6,236
Total		(89	)		4,657			4,568			10,039			(2,181	)		7,858
Call loans and bills bought:
Domestic offices		(258	)		(148	)		(406	)		(162	)		226			64
Foreign offices		(2,845	)		3,715			870			865			4,347			5,212
Total		(3,103	)		3,567			464			703			4,573			5,276
Reverse repurchase agreements and cash collateral on securities borrowed:
Domestic offices		1,837			(1,301	)		536			(337	)		141			(196	)
Foreign offices		4,379			(2,864	)		1,515			2,491			(325	)		2,166
Total		6,216			(4,165	)		2,051			2,154			(184	)		1,970
Trading assets(1):
Domestic offices		2,588			(4,045	)		(1,457	)		(10,964	)		1,227			(9,737	)
Foreign offices		665			471			1,136			67			(107	)		(40	)
Total		3,253			(3,574	)		(321	)		(10,897	)		1,120			(9,777	)
Financial assets at fair value through profit or loss(2):
Domestic offices		(1,001	)		(19,906	)		(20,907	)		(125	)		15,547			15,422
Held-to-maturity investments:
Domestic offices		(6,117	)		(3,677	)		(9,794	)		(2,790	)		(6,693	)		(9,483	)
Available-for-sale financial assets:
Domestic offices		(5,262	)		2,426			(2,836	)		(32,763	)		2,488			(30,275	)
Foreign offices		5,785			3,541			9,326			1,151			(2,767	)		(1,616	)
Total		523			5,967			6,490			(31,612	)		(279	)		(31,891	)
Loans and advances:
Domestic offices		8,841			(47,824	)		(38,983	)		26,359			(89,049	)		(62,690	)
Foreign offices		83,406			20,375			103,781			91,889			(14,608	)		77,281
Total		92,247			(27,449	)		64,798			118,248			(103,657	)		14,591
Total interest income:
Domestic offices		1,318			(73,424	)		(72,106	)		(19,699	)		(75,574	)		(95,273	)
Foreign offices		90,611			28,844			119,455			105,419			(16,180	)		89,239
Total	¥	91,929		¥	(44,580	)	¥	47,349		¥	85,720		¥	(91,754	)	¥	(6,034	)

A-3

	Fiscal year ended March 31, 2015 compared to fiscal year ended March 31, 2014 Increase / (decrease)									Fiscal year ended March 31, 2014 compared to fiscal year ended March 31, 2013 Increase / (decrease)(3)
	Volume			Rate			Net change			Volume			Rate			Net change
	(In millions)
Interest expense:
Deposits:
Domestic offices	¥	1,415		¥	(505	)	¥	910		¥	1,347		¥	(4,876	)	¥	(3,529	)
Foreign offices		23,342			925			24,267			22,831			(2,290	)		20,541
Total		24,757			420			25,177			24,178			(7,166	)		17,012
Call money and bills sold:
Domestic offices		394			(112	)		282			211			(28	)		183
Foreign offices		698			(449	)		249			42			(879	)		(837	)
Total		1,092			(561	)		531			253			(907	)		(654	)
Repurchase agreements and cash collateral on securities lent:
Domestic offices		1,559			(26	)		1,533			(1,148	)		(2,075	)		(3,223	)
Foreign offices		1,249			(409	)		840			(326	)		(913	)		(1,239	)
Total		2,808			(435	)		2,373			(1,474	)		(2,988	)		(4,462	)
Trading liabilities(1):
Domestic offices		2,754			(3,461	)		(707	)		(423	)		(1,710	)		(2,133	)
Foreign offices		440			270			710			75			(3	)		72
Total		3,194			(3,191	)		3			(348	)		(1,713	)		(2,061	)
Borrowings:
Domestic offices		22,744			(18,662	)		4,082			(9,777	)		(3,316	)		(13,093	)
Foreign offices		73			(1,384	)		(1,311	)		(554	)		(3,306	)		(3,860	)
Total		22,817			(20,046	)		2,771			(10,331	)		(6,622	)		(16,953	)
Debt securities in issue:
Domestic offices		12,006			5,473			17,479			6,270			(1,769	)		4,501
Foreign offices		1,579			614			2,193			1,769			(2,265	)		(496	)
Total		13,585			6,087			19,672			8,039			(4,034	)		4,005
Other interest-bearing liabilities:
Domestic offices		52			(10	)		42			65			(59	)		6
Foreign offices		1			29			30			(26	)		13			(13	)
Total		53			19			72			39			(46	)		(7	)
Total interest expense:
Domestic offices		40,924			(17,303	)		23,621			(3,455	)		(13,833	)		(17,288	)
Foreign offices		27,382			(404	)		26,978			23,811			(9,643	)		14,168
Total	¥	68,306		¥	(17,707	)	¥	50,599		¥	20,356		¥	(23,476	)	¥	(3,120	)
Net interest income:
Domestic offices	¥	(39,606	)	¥	(56,121	)	¥	(95,727	)	¥	(16,244	)	¥	(61,741	)	¥	(77,985	)
Foreign offices		63,229			29,248			92,477			81,608			(6,537	)		75,071
Total	¥	23,623		¥	(26,873	)	¥	(3,250	)	¥	65,364		¥	(68,278	)	¥	(2,914	)

(1) The net amount of interest income on trading assets and interest expense on trading liabilities is reported as net trading income in our consolidated income statement.

(2) Interest income on financial assets at fair value through profit or loss is reported in net income from financial assets at fair value through profit or loss in our consolidated income statement.

(3) Comparative information has been restated to reflect the adoption of IFRIC Interpretation 21 “Levies.” For more information, see Note 2 “Summary of Significant Accounting Policies—New and Amended Accounting Standards Adopted by the SMFG Group” to our consolidated financial statements included elsewhere in this annual report.

A-4

II. Investment Portfolio

The information as to the value of held-to-maturity investments and available-for-sale financial assets at March 31, 2015, 2014 and 2013 is presented on “Item 5.A. Operating Results—Financial Condition—Investment Securities.”

The following table shows the book values, maturities and weighted average yields of held-to-maturity investments and available-for-sale financial assets, excluding equity instruments, at March 31, 2015. Weighted average yields are calculated based on amortized cost. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect of such a calculation would not be material.

	Not later than one year					Later than one year and not later than five years					Later than five years and not later than ten years					Later than ten years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
	(In millions, except percentages)
Held-to-maturity investments:
Domestic:
Japanese government bonds	¥	1,301,296		0.53	%	¥	1,981,491		0.42	%	¥	—		—		¥	—		—		¥	3,282,787		0.46	%
Japanese municipal bonds		51,350		1.02	%		16,493		0.35	%		—		—			—		—			67,843		0.86	%
Japanese corporate bonds		41,066		1.33	%		5,199		0.25	%		—		—			—		—			46,265		1.21	%
Total domestic		1,393,712		0.57	%		2,003,183		0.42	%		—		—			—		—			3,396,895		0.48	%
Foreign:
U.S. Treasury and other U.S. government agency bonds		—		—			—		—			—		—			—		—			—		—
Bonds issued by other governments and official institutions		—		—			—		—			—		—			—		—			—		—
Other debt instruments		—		—			—		—			—		—			—		—			—		—
Total foreign		—		—			—		—			—		—			—		—			—		—
Total	¥	1,393,712		0.57	%	¥	2,003,183		0.42	%	¥	—		—		¥	—		—		¥	3,396,895		0.48	%
Available-for-sale financial assets:
Domestic:
Japanese government bonds	¥	1,719,098		0.17	%	¥	7,639,074		0.17	%	¥	31,787		0.37	%	¥	—		—		¥	9,389,959		0.17	%
Japanese municipal bonds		27,367		0.55	%		23,237		0.72	%		1,505		1.00	%		41		1.96	%		52,150		0.64	%
Japanese corporate bonds		55,699		0.62	%		148,239		0.46	%		27,653		0.79	%		—		—			231,591		0.54	%
Total domestic		1,802,164		0.19	%		7,810,550		0.18	%		60,945		0.57	%		41		1.96	%		9,673,700		0.18	%
Foreign:
U.S. Treasury and other U.S. government agency bonds		805,873		0.08	%		806,839		0.87	%		449,331		1.72	%		—		—			2,062,043		0.75	%
Bonds issued by other governments and official institutions		991,404		1.47	%		230,321		3.63	%		704,755		0.51	%		279,182		1.28	%		2,205,662		1.37	%
Mortgage-backed securities		—		—			—		—			—		—			257,100		2.66	%		257,100		2.66	%
Other debt instruments		160,402		1.48	%		53,886		3.33	%		—		—			655		0.00	%		214,943		1.93	%
Total foreign		1,957,679		0.90	%		1,091,046		1.57	%		1,154,086		0.99	%		536,937		1.96	%		4,739,748		1.19	%
Total	¥	3,759,843		0.56	%	¥	8,901,596		0.35	%	¥	1,215,031		0.97	%	¥	536,978		1.96	%	¥	14,413,448		0.51	%

Excluding U.S. Treasury and other U.S. government agency bonds and Japanese government bonds, there are no investments in any individual issuers held in our investment portfolio which exceeded 10% of shareholders’ equity in the consolidated statement of financial position at March 31, 2015.

A-5

III. Loan Portfolio

The following table shows our outstanding loans and advances by the domicile and industry type of the borrowers at March 31, 2015, 2014, 2013, 2012 and 2011. The classification of loans and advances by industry is based on the industry segment loan classification as defined by the Bank of Japan (“BOJ”) for regulatory reporting purposes.

	At March 31,
	2015			2014			2013			2012			2011
	(In millions)
Domestic:
Manufacturing	¥	8,061,654		¥	8,018,568		¥	8,071,044		¥	8,462,004		¥	8,344,261
Agriculture, forestry, fisheries and mining		171,855			177,012			164,420			152,128			162,727
Construction		1,150,616			1,152,388			1,167,115			1,284,882			1,327,475
Transportation, communications and public enterprises		5,175,949			5,086,361			4,708,870			4,414,102			4,036,780
Wholesale and retail		5,664,385			5,505,570			5,388,032			5,480,393			5,616,084
Finance and insurance		2,869,967			2,537,347			2,715,862			2,170,776			2,568,670
Real estate and goods rental and leasing		8,766,724			8,117,000			8,145,769			7,982,741			8,281,048
Services		4,776,706			4,855,536			4,404,359			4,076,818			4,316,724
Municipalities		1,353,949			1,279,010			1,270,981			1,234,355			1,440,167
Lease financing		2,211,773			2,133,760			2,058,284			2,056,972			2,205,451
Consumer(1)		18,817,259			19,086,241			18,834,079			19,185,574			18,552,987
Others		3,211,240			3,159,438			3,341,636			4,155,960			4,378,791
Total domestic		62,232,077			61,108,231			60,270,451			60,656,705			61,231,165
Foreign:
Public sector		164,495			163,685			121,611			130,426			83,109
Financial institutions		3,880,655			3,450,482			2,500,624			2,012,751			1,794,794
Commerce and industry		20,010,729			16,435,047			13,502,283			10,364,685			8,949,629
Lease financing		308,128			267,394			208,099			191,966			172,361
Others		1,375,624			947,826			793,653			706,175			528,847
Total foreign		25,739,631			21,264,434			17,126,270			13,406,003			11,528,740
Gross loans and advances		87,971,708			82,372,665			77,396,721			74,062,708			72,759,905
Adjust: Unearned income, unamortized premiums-net and deferred loan fees-net		(206,440	)		(177,018	)		(147,186	)		(144,731	)		(152,443	)
Less: Allowance for loan losses		(793,552	)		(950,665	)		(1,262,478	)		(1,381,164	)		(1,587,133	)
Net loans and advances	¥	86,971,716		¥	81,244,982		¥	75,987,057		¥	72,536,813		¥	71,020,329

(1) The balance in Consumer mainly consists of housing loans. The housing loan balances amounted to ¥14,087,453 million, ¥14,420,225 million, ¥14,520,154 million, ¥14,574,702 million and ¥14,577,945 million at March 31, 2015, 2014, 2013, 2012 and 2011, respectively.

A-6

Maturities and Sensitivities of Loans and Advances to Changes in Interest Rates

The following table shows the maturities of loans and advances by the domicile and industry type of the borrower at March 31, 2015.

	Maturity
	Not later than one year		Later than one year and not later than five years		Later than five years		Total
	(In millions)
Domestic:
Manufacturing	¥	4,292,111	¥	2,873,454	¥	896,089	¥	8,061,654
Agriculture, forestry, fisheries and mining		43,432		60,399		68,024		171,855
Construction		659,700		359,753		131,163		1,150,616
Transportation, communications and public enterprises		1,462,533		2,540,869		1,172,547		5,175,949
Wholesale and retail		3,197,166		1,940,952		526,267		5,664,385
Finance and insurance		2,002,563		730,669		136,735		2,869,967
Real estate and goods rental and leasing		2,186,402		4,046,000		2,534,322		8,766,724
Services		1,770,026		1,877,180		1,129,500		4,776,706
Municipalities		485,913		501,451		366,585		1,353,949
Lease financing		737,995		1,239,050		234,728		2,211,773
Consumer		3,413,407		4,180,000		11,223,852		18,817,259
Others		749,832		737,362		1,724,046		3,211,240
Total domestic		21,001,080		21,087,139		20,143,858		62,232,077
Foreign:
Public sector		19,667		43,829		100,999		164,495
Financial institutions		1,920,600		1,638,442		321,613		3,880,655
Commerce and industry		6,239,854		9,602,528		4,168,347		20,010,729
Lease financing		71,444		139,232		97,452		308,128
Others		502,899		726,847		145,878		1,375,624
Total foreign		8,754,464		12,150,878		4,834,289		25,739,631
Total	¥	29,755,544	¥	33,238,017	¥	24,978,147	¥	87,971,708

The above loans and advances due after one year which had predetermined interest rates and floating or adjustable interest rates at March 31, 2015 are shown below:

	Domestic		Foreign		Total
	(In millions)
Predetermined rate	¥	13,008,393	¥	2,313,545	¥	15,321,938
Floating or adjustable rate		28,222,604		14,671,622		42,894,226
Total	¥	41,230,997	¥	16,985,167	¥	58,216,164

A-7

Impaired Loans and Advances

Our credit risk elements analyzed by categories for loans and advances differ from those required by the U.S. Securities and Exchange Commission. Our impaired loans and advances are comprised of “potentially bankrupt, effectively bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” “restructured (loans)” and “other impaired (loans and advances).” “Potentially bankrupt, effectively bankrupt and bankrupt (loans and advances)” comprises of loans and advances to the 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, effectively bankrupt and bankrupt (loans and advances).” The category “restructured (loans)” comprises of loans not included above for which the terms of the loans have been modified to grant concessions because of problems with the borrower. Examples of modifications to grant concessions include reductions of the original interest rate, deferrals of interest payments, deductions of the contractual repayment amounts and extensions of principal repayments such as the extension of the repayment date and the suspension of contracted repayments. “Other impaired (loans and advances)” represent impaired loans and advances, which are not included in “potentially bankrupt, effectively bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” or “restructured (loans),” but for which information about credit problems cause management to classify them as impaired loans and advances. All 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 included in impaired loans and advances.

An allowance is recorded if there is objective evidence of impairment and the carrying value of the loans and advances exceeds the present value of their estimated future cash flows discounted at the original effective interest rate. Cash receipts on impaired loans and advances are recorded as a credit to the balance of loans and advances on the statement of financial position. To the extent that cash receipts are different from expectations built into the calculation of the recoverable amount of the loans and advances, the amount of allowance for loan losses is revised. In accordance with IFRS, the accrual of interest as per the contractual terms is discontinued when loans and advances are determined to be impaired. Interest income recognized in the consolidated income statement on impaired loans and advances represents the accretion of the net present value of the written down amount due to the passage of time based on the original effective interest rate of the loans and advances.

A-8

The following table shows the distribution of impaired loans and advances by “potentially bankrupt, effectively bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” “restructured (loans),” and “other impaired (loans and advances)” at March 31, 2015, 2014, 2013, 2012 and 2011 by the domicile and industry type of the borrowers.

	At March 31,
	2015			2014			2013			2012			2011
	(In millions)
Potentially bankrupt, effectively bankrupt and bankrupt (loans and advances):
Domestic:
Manufacturing	¥	149,686		¥	183,257		¥	215,600		¥	187,982		¥	211,597
Agriculture, forestry, fisheries and mining		7,146			3,251			5,210			5,295			6,635
Construction		36,903			69,144			101,255			118,413			120,696
Transportation, communications and public enterprises		52,168			56,782			109,449			68,768			59,775
Wholesale and retail		156,753			208,491			232,779			225,399			243,346
Finance and insurance		9,551			13,378			15,822			13,350			11,496
Real estate and goods rental and leasing		198,714			291,665			449,163			499,485			534,596
Services		161,384			192,191			203,197			213,142			249,093
Lease financing		18,522			21,079			17,030			10,742			27,716
Consumer		223,464			238,563			270,060			312,181			297,732
Others		43,443			59,812			69,859			67,174			55,909
Total domestic		1,057,734			1,337,613			1,689,424			1,721,931			1,818,591
Foreign:
Public sector		14			14			14			14			14
Financial institutions		19,720			2,647			6,191			19,383			42,350
Commerce and industry		146,821			131,254			178,022			162,509			128,534
Lease financing		8,969			8,623			7,522			4,140			5,037
Others		6,152			4,566			2,271			3,019			3,831
Total foreign		181,676			147,104			194,020			189,065			179,766
Total		1,239,410			1,484,717			1,883,444			1,910,996			1,998,357
Past due three months or more (loans):
Domestic		23,586			25,959			27,102			32,069			40,699
Foreign		398			437			557			1,130			1,336
Total		23,984			26,396			27,659			33,199			42,035
Restructured (loans):
Domestic		144,628			247,351			337,494			390,060			296,751
Foreign		43,330			37,475			29,650			24,644			59,296
Total		187,958			284,826			367,144			414,704			356,047
Other impaired (loans and advances):
Domestic		140,858			152,873			204,775			255,615			252,457
Foreign		5,892			1			119			2,588			527
Total		146,750			152,874			204,894			258,203			252,984
Gross impaired loans and advances		1,598,102			1,948,813			2,483,141			2,617,102			2,649,423
Less: Allowance for loan losses for impaired loans and advances		(699,207	)		(857,095	)		(1,144,130	)		(1,234,299	)		(1,395,659	)
Net impaired loans and advances	¥	898,895		¥	1,091,718		¥	1,339,011		¥	1,382,803		¥	1,253,764

A-9

Interest Foregone on Impaired Loans and Advances

Interest income which would have been accrued at the original terms on domestic impaired loans and advances during the fiscal year ended March 31, 2015 was ¥42.6 billion, of which ¥23.1 billion was included in profit or loss for the fiscal year then ended. Interest income which would have been accrued at the original terms on foreign impaired loans and advances during the fiscal year ended March 31, 2015 was ¥0.8 billion, of which ¥0.4 billion was included in profit or loss for the fiscal year then ended.

Cross-border Outstanding

Cross-border outstandings are defined as loans, acceptances, interest-earning deposits with other banks, other interest-earning investments and any other monetary assets denominated in Japanese yen or other non-local currencies. Local currency outstandings are netted out from cross-border outstandings. This cross-border disclosure is based on the reports to the BOJ required under Japanese foreign exchange-related laws. The following table lists the country for which cross-border outstandings exceeded 0.75% of consolidated total assets at March 31, 2015. There were no cross-border outstandings to borrowers in any foreign country which in total exceeded 0.75% of consolidated total assets at March 31, 2014 and 2013.

	At March 31, 2015
	Public institutions		Banks		Others		Total		% of total assets			Undrawn commitments
	(In millions, except percentages)
United Kingdom	¥	7,483	¥	775,915	¥	1,007,531	¥	1,790,929		0.99	%	¥	1,155,306

Loan Concentrations

At March 31, 2015, there were no concentrations of loans and advances to a single industry group of borrowers, as defined by the BOJ industry segment loan and advance classifications, which exceeded 10% of our consolidated total loans and advances, except for loans and advances in a category disclosed in the table of outstanding loans and advances above.

A-10

IV. Summary of Loan Loss Experience

The following table shows an analysis of our loan loss experience by the borrowers’ domicile and industry type for the fiscal years ended March 31, 2015, 2014, 2013, 2012 and 2011.

	For the fiscal year ended March 31,
	2015			2014			2013			2012			2011
	(In millions, except percentages)
Allowance for loan losses at beginning of period	¥	950,665		¥	1,262,478		¥	1,381,164		¥	1,587,133		¥	1,533,555
Provision (credit) for loan losses		79,552			(25,806	)		138,375			144,022			259,292
Charge-offs:
Domestic:
Manufacturing		26,516			25,610			16,037			46,229			27,355
Agriculture, forestry, fisheries and mining		112			187			553			173			372
Construction		8,593			20,958			7,848			14,204			12,190
Transportation, communications and public enterprises		8,662			5,309			7,062			11,296			26,126
Wholesale and retail		27,357			27,944			18,062			64,492			29,602
Finance and insurance		1,117			533			354			679			172
Real estate and goods rental and leasing		54,003			73,025			36,003			61,683			33,371
Services		21,143			30,970			17,325			35,498			13,078
Lease financing		1,433			1,582			3,689			3,319			1,364
Consumer		88,795			93,616			127,804			64,329			29,481
Others		2,932			3,300			6,400			4,705			2,606
Total domestic		240,663			283,034			241,137			306,607			175,717
Foreign:
Public sector		—			—			—			—			600
Financial institutions		1,017			599			4,063			14,784			9,332
Commerce and industry		4,571			14,959			13,735			33,173			13,087
Lease financing		167			1,292			2,060			38			15
Others		3,478			2,797			3,203			623			1,010
Total foreign		9,233			19,647			23,061			48,618			24,044
Total		249,896			302,681			264,198			355,225			199,761
Recoveries:
Domestic:
Manufacturing		62			12			14			252			195
Agriculture, forestry, fisheries and mining		—			—			—			—			3
Construction		17			16			21			64			64
Transportation, communications and public enterprises		14			3			12			52			241
Wholesale and retail		72			19			22			328			266
Finance and insurance		1			—			19			3			1
Real estate and goods rental and leasing		47			20			19			283			97
Services		63			33			16			142			65
Consumer		9,234			9,186			9,976			3,453			1,648
Others		7			4			4			18			44
Total domestic		9,517			9,293			10,103			4,595			2,624
Foreign:
Public sector		—			—			—			—			6
Financial institutions		—			25			2			3			—
Commerce and industry		14			3			18			187			117
Others		366			334			313			17			67
Total foreign		380			362			333			207			190
Total		9,897			9,655			10,436			4,802			2,814
Net charge-offs		239,999			293,026			253,762			350,423			196,947
Others(1)		3,334			7,019			(3,299	)		432			(8,767	)
Allowance for loan losses at end of period	¥	793,552		¥	950,665		¥	1,262,478		¥	1,381,164		¥	1,587,133
Allowance for loan losses applicable to foreign activities:
Balance at beginning of period	¥	73,030		¥	74,868		¥	87,344		¥	108,612		¥	121,797
Balance at end of period	¥	100,783		¥	73,030		¥	74,868		¥	87,344		¥	108,612
Provision for loan losses	¥	32,712		¥	10,462		¥	1,692		¥	30,675		¥	19,501
Ratio of net charge-offs to average loans outstanding during the period		0.28	%		0.36	%		0.34	%		0.47	%		0.27	%

(1) Others mainly include foreign exchange translations for the fiscal years ended March 31, 2015 and 2014 and 2011, whereas the amount for the fiscal year ended March 31, 2013 mainly includes foreign exchange translations as well as the exclusion of the allowance for loan losses related to ORIX Credit Corporation, as the Bank transferred all of its shares of ORIX Credit Corporation to ORIX Corporation in June 2012.

A-11

The following table shows an allocation of the allowance for loan losses by the borrower’s domicile and industry type at March 31, 2015, 2014, 2013, 2012 and 2011.

	At March 31,
	2015					2014					2013					2012					2011
	Amount		% of loans in each category to total loans			Amount		% of loans in each category to total loans			Amount		% of loans in each category to total loans			Amount		% of loans in each category to total loans			Amount		% of loans in each category to total loans
	(In millions, except percentages)
Domestic:
Manufacturing	¥	82,938		9.16	%	¥	113,463		9.73	%	¥	140,424		10.43	%	¥	126,773		11.43	%	¥	178,030		11.47	%
Agriculture, forestry, fisheries and mining		2,673		0.20	%		3,310		0.21	%		3,968		0.21	%		4,374		0.21	%		4,499		0.22	%
Construction		22,532		1.31	%		40,289		1.40	%		63,032		1.51	%		69,605		1.73	%		87,514		1.82	%
Transportation, communications and public enterprises		30,555		5.88	%		27,196		6.17	%		50,789		6.08	%		47,723		5.96	%		52,832		5.55	%
Wholesale and retail		84,941		6.44	%		116,862		6.68	%		151,075		6.96	%		159,740		7.40	%		197,995		7.72	%
Finance and insurance		7,990		3.26	%		11,209		3.08	%		12,373		3.51	%		14,045		2.93	%		15,418		3.53	%
Real estate and goods rental and leasing		127,205		9.97	%		194,706		9.85	%		312,614		10.53	%		338,162		10.78	%		385,889		11.38	%
Services		77,829		5.43	%		96,465		5.89	%		132,377		5.69	%		144,984		5.50	%		176,388		5.93	%
Municipalities		1		1.54	%		1		1.55	%		1		1.64	%		2		1.67	%		3		1.98	%
Lease financing		13,600		2.51	%		14,487		2.59	%		17,151		2.66	%		11,942		2.78	%		25,071		3.03	%
Consumer		208,661		21.39	%		215,882		23.17	%		250,282		24.33	%		315,211		25.90	%		290,468		25.50	%
Others		33,844		3.65	%		43,765		3.87	%		53,524		4.32	%		61,259		5.61	%		64,414		6.02	%
Total domestic		692,769		70.74	%		877,635		74.19	%		1,187,610		77.87	%		1,293,820		81.90	%		1,478,521		84.15	%
Foreign:
Public sector		48		0.19	%		303		0.20	%		209		0.16	%		568		0.18	%		135		0.11	%
Financial institutions		1,871		4.41	%		3,325		4.19	%		5,454		3.23	%		15,217		2.72	%		34,926		2.47	%
Commerce and industry		86,007		22.75	%		60,646		19.95	%		63,261		17.45	%		64,014		13.99	%		67,805		12.30	%
Lease financing		4,654		0.35	%		3,285		0.32	%		3,195		0.27	%		4,324		0.26	%		2,905		0.24	%
Others		8,203		1.56	%		5,471		1.15	%		2,749		1.02	%		3,221		0.95	%		2,841		0.73	%
Total foreign		100,783		29.26	%		73,030		25.81	%		74,868		22.13	%		87,344		18.10	%		108,612		15.85	%
Total	¥	793,552		100.00	%	¥	950,665		100.00	%	¥	1,262,478		100.00	%	¥	1,381,164		100.00	%	¥	1,587,133		100.00	%

A-12

V. Deposits

The following table shows the average amount of, and the average rate paid on, the following deposit categories for the fiscal years ended March 31, 2015, 2014 and 2013.

	For the fiscal year ended March 31,
	2015					2014					2013
	Average amount		Average rate			Average amount		Average rate			Average amount		Average rate
	(In millions, except percentages)
Domestic offices:
Non-interest-bearing demand deposits	¥	12,747,566		—		¥	12,258,970		—		¥	11,878,091		—
Interest-bearing demand deposits		38,953,418		0.02	%		37,248,316		0.02	%		34,555,344		0.02	%
Deposits at notice		747,898		0.03	%		809,233		0.03	%		852,078		0.02	%
Time deposits		24,202,595		0.10	%		24,962,120		0.10	%		25,333,058		0.11	%
Negotiable certificates of deposit		5,969,374		0.09	%		5,385,616		0.11	%		6,279,012		0.14	%
Others		4,524,551		0.24	%		3,970,880		0.22	%		3,432,600		0.23	%
Total domestic offices		87,145,402					84,635,135					82,330,183
Foreign offices:
Non-interest-bearing demand deposits		692,920		—			513,743		—			423,178		—
Interest-bearing demand deposits		1,277,325		0.26	%		1,062,723		0.16	%		986,801		0.21	%
Deposits at notice		7,285,133		0.29	%		5,896,158		0.30	%		4,426,059		0.31	%
Time deposits		3,672,870		1.46	%		2,730,564		1.42	%		2,041,210		1.24	%
Negotiable certificates of deposit		8,922,100		0.42	%		7,210,274		0.45	%		5,231,609		0.55	%
Others		106,491		1.09	%		114,868		1.04	%		116,135		1.44	%
Total foreign offices		21,956,839					17,528,330					13,224,992
Total	¥	109,102,241				¥	102,163,465				¥	95,555,175

Deposits at notice represent interest-bearing demand deposits which require the depositor to give two or more days notice in advance of withdrawal.

The total amount of deposits by foreign depositors included in domestic offices for the fiscal years ended March 31, 2015, 2014 and 2013 were ¥1,748,689 million, ¥1,318,749 million and ¥992,016 million, respectively.

A-13

At March 31, 2015, the balances and remaining maturities of time deposits and negotiable certificates of deposit issued by domestic offices in amounts of ¥10 million (approximately $83,229 at the median exchange rate for buying and selling spot dollars for yen by telegraphic transfer as determined by the Bank at the end of the current fiscal year) or more and total foreign deposits issued in amounts of $100,000 or more are shown in the following table.

	Time deposits		Negotiable certificates of deposit		Total
	(In millions)
Domestic offices:
Not later than three months	¥	3,199,893	¥	4,445,072	¥	7,644,965
Later than three months and not later than six months		1,716,574		468,175		2,184,749
Later than six months and not later than one year		4,953,456		713,331		5,666,787
Later than one year		2,744,076		79,284		2,823,360
Total	¥	12,613,999	¥	5,705,862	¥	18,319,861
Foreign offices	¥	4,902,880	¥	8,120,026	¥	13,022,906

VI. Return on Equity and Assets

The following table shows the ratio of return on equity and assets for the fiscal years ended March 31, 2015, 2014 and 2013.

	For the fiscal year ended March 31,
	2015			2014(2)			2013(2)
Return on average total assets		0.4	%		0.5	%		0.4	%
Return on average shareholders’ equity		7.3	%		14.0	%		9.0	%
Dividends payout ratio(1):
Basic		27.8	%		22.3	%		25.3	%
Diluted		27.8	%		22.3	%		25.3	%
Average shareholders’ equity to average total assets		5.1	%		3.8	%		4.2	%

(1) Dividends declared per common share as a percentage of net profit per share.

(2) Comparative information has been restated to reflect the adoption of IFRIC Interpretation 21 “Levies.” For more information, see Note 2 “Summary of Significant Accounting Policies—New and Amended Accounting Standards Adopted by the SMFG Group” to our consolidated financial statements included elsewhere in this annual report.

A-14

VII. Short-Term Borrowings

The following table shows certain additional information with respect to our short-term borrowings for the fiscal years ended March 31, 2015, 2014 and 2013.

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions, except percentages)
Call money, and payables under repurchase agreements and securities lending transactions:
Average balance outstanding during the period	¥	9,957,560		¥	7,307,264		¥	7,926,972
Maximum balance outstanding at any month-end during the period		14,693,207			11,153,504			9,935,203
Balance at end of period		14,693,207			11,153,504			9,464,679
Weighted average interest rate during the period		0.14	%		0.15	%		0.20	%
Weighted average interest rate on balance at end of period		0.11	%		0.10	%		0.19	%
Commercial paper:
Average balance outstanding during the period		4,223,418			3,659,627			3,087,708
Maximum balance outstanding at any month-end during the period		4,839,788			3,843,285			3,190,675
Balance at end of period		4,813,902			3,669,912			3,190,675
Weighted average interest rate during the period		0.21	%		0.21	%		0.25	%
Weighted average interest rate on balance at end of period		0.24	%		0.22	%		0.21	%
Short-term borrowings:
Average balance outstanding during the period		5,342,390			1,945,575			4,136,273
Maximum balance outstanding at any month-end during the period		6,802,740			3,092,892			6,056,549
Balance at end of period		6,746,249			3,092,892			2,467,661
Weighted average interest rate during the period		0.18	%		0.38	%		0.32	%
Weighted average interest rate on balance at end of period		0.14	%		0.22	%		0.40	%

A-15

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The following consolidated financial statements and the reports thereon by its independent registered public accounting firm are filed as part of this annual report:

	Page
Report of Independent Registered Public Accounting Firm		F-3
Consolidated Financial Statements
Consolidated Statement of Financial Position at March 31, 2015, 2014 and April 1, 2013		F-5
Consolidated Income Statement for the Fiscal Years Ended March 31, 2015, 2014 and 2013		F-6
Consolidated Statement of Comprehensive Income for the Fiscal Years Ended March 31, 2015, 2014 and 2013		F-7
Consolidated Statement of Changes in Equity for the Fiscal Years Ended March 31, 2015, 2014 and 2013		F-8
Consolidated Statement of Cash Flows for the Fiscal Years Ended March 31, 2015, 2014 and 2013		F-9
Notes to Consolidated Financial Statements		F-10
1    General Information		F-10
2    Summary of Significant Accounting Policies		F-10
3    Critical Accounting Estimates and Judgments		F-29
4    Segment Analysis		F-32
5    Cash and Deposits with Banks		F-39
6    Trading Assets		F-40
7    Derivative Financial Instruments		F-40
8    Financial Assets at Fair Value Through Profit or Loss		F-43
9    Investment Securities		F-44
10  Loans and Advances		F-45
11  Investments in Associates and Joint Ventures		F-47
12  Property, Plant and Equipment		F-48
13  Leases		F-49
14  Intangible Assets		F-51
15  Other Assets		F-54
16  Deposits		F-54
17  Trading Liabilities		F-55
18  Borrowings		F-56
19  Debt Securities in Issue		F-57
20  Provisions		F-58
21  Other Liabilities		F-59
22  Deferred Income Tax		F-59
23  Retirement Benefits		F-62
24  Shareholders’ Equity		F-67
25  Non-Controlling Interests		F-70
26  Net Interest Income		F-71
27  Net Fee and Commission Income		F-72
28  Net Trading Income		F-72
29  Net Income from Financial Assets at Fair Value Through Profit or Loss		F-73
30  Net Investment Income		F-73
31  Other Income		F-73
32  Impairment Charges on Financial Assets		F-74
33  General and Administrative Expenses		F-74
34  Other Expenses		F-74
35  Income Tax Expense		F-75

F-1

	Page
36  Earnings Per Share		F-76
37  Transfers of Financial Assets		F-76
38  Assets Pledged and Received as Collateral		F-78
39  Share-Based Payment		F-79
40  Dividends Per Share		F-80
41  Contingency and Capital Commitments		F-80
42  Analysis of Financial Assets and Liabilities by Measurement Basis		F-82
43  Fair Value of Financial Assets and Liabilities		F-84
44  Offsetting of Financial Assets and Liabilities		F-98
45  Financial Risk Management		F-99
46  Related-Party Transactions		F-125
47  Principal Subsidiaries		F-127
48  Structured Entities		F-128
49  Acquisitions		F-131
50  Current and Non-Current Distinction		F-133
51  Condensed Financial Information of Registrant (SMFG)		F-134

F-2

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Sumitomo Mitsui Financial Group, Inc.:

We have audited the accompanying consolidated statement of financial position of Sumitomo Mitsui Financial Group, Inc. and subsidiaries (the “SMFG Group”) as of March 31, 2015 and 2014, and the related consolidated income statement and consolidated statements of comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended March 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the SMFG Group as of March 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2015, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sumitomo Mitsui Financial Group, Inc.’s internal control over financial reporting as of March 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated July 22, 2015 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG AZSA LLC

Tokyo, Japan

July 22, 2015

F-3

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Sumitomo Mitsui Financial Group, Inc.:

We have audited Sumitomo Mitsui Financial Group, Inc.’s internal control over financial reporting as of March 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, included in Item 15 “Controls and Procedures” of the accompanying Form 20-F. Our responsibility is to express an opinion on Sumitomo Mitsui Financial Group Inc.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Sumitomo Mitsui Financial Group, Inc. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of Sumitomo Mitsui Financial Group, Inc. and subsidiaries as of March 31, 2015 and 2014, and the related consolidated income statement and consolidated statements of comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended March 31, 2015, and our report dated July 22, 2015 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG AZSA LLC

Tokyo, Japan

July 22, 2015

F-4

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Financial Position

		At March 31,						At April 1,
	Note	2015			2014			2013
		(In millions)
Assets:
Cash and deposits with banks	5	¥	40,112,783		¥	33,208,724		¥	11,804,786
Call loans and bills bought			1,326,965			1,248,235			1,353,866
Reverse repurchase agreements and cash collateral on securities borrowed			7,218,498			4,303,121			3,927,126
Trading assets	6		3,243,185			3,557,545			3,481,619
Derivative financial instruments	7		6,471,203			4,891,382			6,851,729
Financial assets at fair value through profit or loss	8		1,785,684			1,840,255			2,045,046
Investment securities	9		24,239,656			22,052,998			36,252,599
Loans and advances	10		86,971,716			81,244,982			75,987,057
Investments in associates and joint ventures	11		619,814			383,590			260,495
Property, plant and equipment	12		2,496,497			2,078,927			1,757,994
Intangible assets	14		975,995			955,746			903,264
Other assets	15		3,485,123			2,655,512			2,610,723
Current tax assets			116,847			62,783			51,449
Deferred tax assets	22		117,500			147,241			482,722
Total assets		¥	179,181,466		¥	158,631,041		¥	147,770,475
Liabilities:
Deposits	16	¥	115,833,980		¥	108,370,494		¥	101,021,413
Call money and bills sold			5,873,124			4,112,429			2,954,052
Repurchase agreements and cash collateral on securities lent			8,820,083			7,041,075			6,510,627
Trading liabilities	17		2,193,400			1,865,243			1,910,886
Derivative financial instruments	7		6,739,787			4,980,991			6,936,356
Borrowings	18		11,217,052			8,463,363			6,475,543
Debt securities in issue	19		11,051,431			8,769,094			7,950,020
Provisions	20		207,624			225,473			279,131
Other liabilities	21		5,548,965			5,143,853			4,858,519
Current tax liabilities			111,365			94,585			206,977
Deferred tax liabilities	22		563,805			149,251			107,262
Total liabilities			168,160,616			149,215,851			139,210,786
Equity:
Capital stock	24		2,337,896			2,337,896			2,337,896
Capital surplus	24		862,971			862,518			862,305
Retained earnings	24		3,554,688			3,112,571			2,515,956
Other reserves	24		2,759,084			1,546,826			971,170
Treasury stock	24		(175,261	)		(175,115	)		(227,373	)
Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc.			9,339,378			7,684,696			6,459,954
Non-controlling interests	25		1,681,472			1,730,494			2,099,735
Total equity			11,020,850			9,415,190			8,559,689
Total equity and liabilities		¥	179,181,466		¥	158,631,041		¥	147,770,475

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

F-5

Consolidated Income Statement

		For the fiscal year ended March 31,
	Note	2015		2014			2013
		(In millions, except per share data)
Interest income		¥	1,782,621	¥	1,714,044		¥	1,725,723
Interest expense			371,107		320,511			321,570
Net interest income	26		1,411,514		1,393,533			1,404,153
Fee and commission income			1,002,766		1,003,169			948,685
Fee and commission expense			129,253		127,959			127,054
Net fee and commission income	27		873,513		875,210			821,631
Net trading income	28		127,759		135,218			105,302
Net income from financial assets at fair value through profit or loss	29		22,678		58,586			15,794
Net investment income	30		371,064		332,265			223,404
Other income	31		525,905		429,541			324,403
Total operating income			3,332,433		3,224,353			2,894,687
Impairment charges (reversals) on financial assets	32		90,138		(14,275	)		270,145
Net operating income			3,242,295		3,238,628			2,624,542
General and administrative expenses	33		1,621,897		1,522,990			1,447,116
Other expenses	34		505,614		428,780			287,896
Operating expenses			2,127,511		1,951,770			1,735,012
Share of post-tax profit of associates and joint ventures			18,124		19,454			19,593
Profit before tax			1,132,908		1,306,312			909,123
Income tax expense	35		409,947		414,076			255,300
Net profit		¥	722,961	¥	892,236		¥	653,823
Profit attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.		¥	614,070	¥	766,388		¥	535,976
Non-controlling interests			108,891		125,848			117,847
Earnings per share:
Basic	36	¥	449.13	¥	560.97		¥	395.87
Diluted	36		448.86		560.68			395.32

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

F-6

Consolidated Statement of Comprehensive Income

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions)
Net profit	¥	722,961		¥	892,236		¥	653,823
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		181,638			214,242			31,086
Share of other comprehensive income (loss) of associates and joint ventures		192			(581	)		—
Income tax relating to items that will not be reclassified		(58,081	)		(76,596	)		(12,613	)
Total items that will not be reclassified to profit or loss, net of tax		123,749			137,065			18,473
Items that may be reclassified subsequently to profit or loss:
Available-for-sale financial assets:
Gains (losses) arising during the period, before tax		1,392,139			589,766			816,721
Reclassification adjustments for (gains) losses included in net profit, before tax		(232,281	)		(212,001	)		(3,633	)
Exchange differences on translating foreign operations:
Gains (losses) arising during the period, before tax		301,796			271,619			230,764
Reclassification adjustments for (gains) losses included in net profit, before tax		(2,164	)		(1,311	)		4,579
Share of other comprehensive income (loss) of associates and joint ventures		5,562			(4,710	)		3,354
Income tax relating to items that may be reclassified		(301,129	)		(151,443	)		(310,928	)
Total items that may be reclassified subsequently to profit or loss, net of tax		1,163,923			491,920			740,857
Other comprehensive income, net of tax		1,287,672			628,985			759,330
Total comprehensive income	¥	2,010,633		¥	1,521,221		¥	1,413,153
Total comprehensive income attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.	¥	1,826,328		¥	1,342,044		¥	1,221,224
Non-controlling interests		184,305			179,177			191,929

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

F-7

Consolidated Statement of Changes in Equity

	Capital stock		Capital surplus			Retained earnings			Remeasure- ments of defined benefit plans			Available- for-sale financial assets		Exchange differences on translating foreign operations			Treasury stock			Shareholders’ equity			Non-controlling interests			Total equity
	(In millions)
Balance at April 1, 2012	¥	2,337,896	¥	862,933		¥	2,121,819		¥	(156,804	)	¥	652,718	¥	(209,996	)	¥	(236,037	)	¥	5,372,529		¥	2,047,618		¥	7,420,147
Effect of adoption of IFRIC 21		—		—			(2,332	)		—			—		—			—			(2,332	)		(959	)		(3,291	)
Balance at April 1, 2012 (Restated)		2,337,896		862,933			2,119,487			(156,804	)		652,718		(209,996	)		(236,037	)		5,370,197			2,046,659			7,416,856
Comprehensive income:
Net profit		—		—			535,976			—			—		—			—			535,976			117,847			653,823
Other comprehensive income		—		—			—			18,787			506,497		159,964			—			685,248			74,082			759,330
Total comprehensive income		—		—			535,976			18,787			506,497		159,964			—			1,221,224			191,929			1,413,153
Acquisition and disposal of subsidiaries-net		—		—			—			—			—		—			—			—			(16,239	)		(16,239	)
Transaction with non-controlling interest shareholders		—		(1,166	)		(4,254	)		4			—		—			8,900			3,484			(9,331	)		(5,847	)
Dividends to shareholders		—		—			(135,253	)		—			—		—			—			(135,253	)		(100,783	)		(236,036	)
Redemption of preferred securities		—		—			—			—			—		—			—			—			(12,500	)		(12,500	)
Purchase of treasury stock		—		—			—			—			—		—			(263	)		(263	)		—			(263	)
Sale of treasury stock		—		—			—			—			—		—			27			27			—			27
Loss on sale of treasury stock		—		(4	)		—			—			—		—			—			(4	)		—			(4	)
Others		—		542			—			—			—		—			—			542			—			542
Balance at March 31, 2013		2,337,896		862,305			2,515,956			(138,013	)		1,159,215		(50,032	)		(227,373	)		6,459,954			2,099,735			8,559,689
Comprehensive income:
Net profit		—		—			766,388			—			—		—			—			766,388			125,848			892,236
Other comprehensive income		—		—			—			136,031			238,235		201,390			—			575,656			53,329			628,985
Total comprehensive income		—		—			766,388			136,031			238,235		201,390			—			1,342,044			179,177			1,521,221
Acquisition and disposal of subsidiaries-net		—		—			—			—			—		—			—			—			(2	)		(2	)
Transaction with non-controlling interest shareholders		—		—			200			—			—		—			—			200			(1,743	)		(1,543	)
Dividends to shareholders		—		—			(169,973	)		—			—		—			—			(169,973	)		(95,215	)		(265,188	)
Redemption of preferred securities		—		—			—			—			—		—			—			—			(451,458	)		(451,458	)
Purchase of treasury stock		—		—			—			—			—		—			(501	)		(501	)		—			(501	)
Sale of treasury stock		—		—			—			—			—		—			52,759			52,759			—			52,759
Loss on sale of treasury stock		—		(281	)		—			—			—		—			—			(281	)		—			(281	)
Others		—		494			—			—			—		—			—			494			—			494
Balance at March 31, 2014		2,337,896		862,518			3,112,571			(1,982	)		1,397,450		151,358			(175,115	)		7,684,696			1,730,494			9,415,190
Comprehensive income:
Net profit		—		—			614,070			—			—		—			—			614,070			108,891			722,961
Other comprehensive income		—		—			—			122,298			837,186		252,774			—			1,212,258			75,414			1,287,672
Total comprehensive income		—		—			614,070			122,298			837,186		252,774			—			1,826,328			184,305			2,010,633
Acquisition and disposal of subsidiaries-net		—		—			—			—			—		—			—			—			(31,678	)		(31,678	)
Transaction with non-controlling interest shareholders		—		—			(1,045	)		—			—		—			—			(1,045	)		948			(97	)
Dividends to shareholders		—		—			(170,908	)		—			—		—			—			(170,908	)		(78,097	)		(249,005	)
Redemption of preferred securities		—		—			—			—			—		—			—			—			(124,500	)		(124,500	)
Purchase of treasury stock		—		—			—			—			—		—			(161	)		(161	)		—			(161	)
Sale of treasury stock		—		—			—			—			—		—			15			15			—			15
Gains on sale of treasury stock		—		2			—			—			—		—			—			2			—			2
Others		—		451			—			—			—		—			—			451			—			451
Balance at March 31, 2015	¥	2,337,896	¥	862,971		¥	3,554,688		¥	120,316		¥	2,234,636	¥	404,132		¥	(175,261	)	¥	9,339,378		¥	1,681,472		¥	11,020,850

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

F-8

Consolidated Statement of Cash Flows

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions)
Operating Activities:
Profit before tax	¥	1,132,908		¥	1,306,312		¥	909,123
Adjustments for:
Gains on financial assets at fair value through profit or loss and investment securities		(247,825	)		(270,587	)		(19,428	)
Foreign exchange gains		(726,632	)		(761,173	)		(1,098,484	)
Provision (credit) for loan losses		79,552			(25,806	)		138,375
Depreciation and amortization		240,760			219,090			198,825
Share of post-tax profit of associates and joint ventures		(18,124	)		(19,454	)		(19,593	)
Net changes in assets and liabilities:
Net (increase) decrease of term deposits with original maturities over three months		6,550			112,857			(69,047	)
Net decrease of call loans and bills bought		41,149			227,311			39,491
Net (increase) decrease of reverse repurchase agreements and cash collateral on securities borrowed		(2,817,147	)		(361,364	)		1,004,265
Net increase of loans and advances		(5,340,732	)		(4,769,916	)		(3,452,294	)
Net change of trading assets and liabilities and derivative financial instruments		744,344			(110,124	)		744,721
Net increase of deposits		7,334,698			6,867,342			7,677,011
Net increase of call money and bills sold		1,657,077			1,084,038			759,135
Net increase (decrease) of repurchase agreements and cash collateral on securities lent		1,704,138			516,851			(978,541	)
Net increase (decrease) of other unsubordinated borrowings and debt securities in issue		4,757,098			2,927,607			(3,412,568	)
Income taxes paid—net		(363,548	)		(398,612	)		(126,129	)
Other operating activities—net		(382,082	)		439,940			78,816
Net cash and cash equivalents provided by operating activities		7,802,184			6,984,312			2,373,678
Investing Activities:
Purchases of financial assets at fair value through profit or loss and available-for-sale financial assets		(34,878,497	)		(18,538,588	)		(49,421,717	)
Proceeds from sale of financial assets at fair value through profit or loss and available-for sale financial assets		27,710,948			26,780,780			45,573,617
Proceeds from maturities of financial assets at fair value through profit or loss and available-for-sale financial assets		5,429,814			5,870,597			6,114,500
Purchases of held-to-maturity investments		—			(8,185	)		(880,207	)
Proceeds from maturities of held-to-maturity investments		1,102,109			1,314,846			314,946
Acquisitions of subsidiaries, net of cash and cash equivalents acquired		(58	)		37,600			(949	)
Investments in associates and joint ventures		(101,181	)		(149,182	)		(34,085	)
Proceeds from sale of investments in associates and joint ventures		5,470			—			4,618
Purchases of property, plant and equipment, and investment properties		(572,984	)		(462,966	)		(288,533	)
Purchases of intangible assets		(144,404	)		(127,567	)		(105,966	)
Proceeds from sale of property, plant and equipment, investment properties and intangible assets		187,463			158,069			97,048
Other investing activities—net		(66,438	)		674			34,629
Net cash and cash equivalents provided by (used in) investing activities		(1,327,758	)		14,876,078			1,407,901
Financing Activities:
Proceeds from issuance of subordinated borrowings		40,011			—			33,200
Redemption of subordinated borrowings		(5,000	)		(32,000	)		(93,000	)
Proceeds from issuance of subordinated bonds		314,927			2,111			127,095
Redemption of subordinated bonds		(288,274	)		(349,884	)		(552,997	)
Redemption of preferred securities		(124,500	)		(451,458	)		(12,500	)
Dividends paid to shareholders of Sumitomo Mitsui Financial Group, Inc.		(170,918	)		(169,984	)		(135,203	)
Dividends paid to non-controlling interest shareholders		(77,970	)		(95,462	)		(100,728	)
Purchase of treasury stock and proceeds from sale of treasury stock—net		(143	)		60,166			(240	)
Transactions with non-controlling interest shareholders—net		(479	)		(1,566	)		(5,486	)
Net cash and cash equivalents used in financing activities		(312,346	)		(1,038,077	)		(739,859	)
Effect of exchange rate changes on cash and cash equivalents		748,432			654,346			624,446
Net increase of cash and cash equivalents		6,910,512			21,476,659			3,666,166
Effect of adoption of IFRS 10 on opening balance		—			—			(250	)
Cash and cash equivalents at beginning of period		32,198,245			10,721,586			7,055,670
Cash and cash equivalents at end of period	¥	39,108,757		¥	32,198,245		¥	10,721,586
Net cash and cash equivalents provided by operating activities includes:
Interest and dividends received	¥	1,913,148		¥	1,854,970		¥	1,811,647
Interest paid		355,253			319,504			326,672

Significant non-cash investing and financing activities:

The SMFG Group made SMBC Consumer Finance Co., Ltd. a wholly owned subsidiary of the SMFG Group by share exchange transaction during the fiscal year ended March 31, 2013. The details of the transactions are described in Note 24 “Shareholders’ Equity.”

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

F-9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION

Sumitomo Mitsui Financial Group, Inc. (“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 SMFG’s newly issued securities. SMFG is a joint stock corporation with limited liability (Kabushiki Kaisha) incorporated under the Companies Act of Japan (“Companies Act”). Upon the formation of SMFG and the completion of the statutory share transfer, SMBC became a direct, wholly owned subsidiary of SMFG. SMFG has a primary listing on the Tokyo Stock Exchange (First Section), with further listing on the Nagoya Stock Exchange (First Section). SMFG’s American Depositary Shares are listed on the New York Stock Exchange.

SMFG and its subsidiaries (the “SMFG Group”) offer a diverse range of financial services, including commercial banking, leasing, securities, consumer finance and other services.

The accompanying consolidated financial statements have been authorized for issue by the Management Committee on July 22, 2015.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all the fiscal years presented, unless otherwise stated.

Basis of Preparation

Compliance with International Financial Reporting Standards

The consolidated financial statements of the SMFG Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Basis of measurement

The consolidated financial statements have been prepared under the historical cost basis except for the following:

• trading assets and liabilities are measured at fair value;

• derivative financial instruments are measured at fair value;

• financial assets at fair value through profit or loss are measured at fair value;

• available-for-sale financial assets are measured at fair value; and

• liabilities and the assets recognized in consolidated statement of financial position in respect of defined benefit plans are the present value of the defined benefit obligation less the fair value of plan assets.

Functional and presentation currency

The consolidated financial statements are presented in Japanese yen, which is also SMFG’s functional currency. All financial information presented in Japanese yen has been rounded to the nearest million, except as otherwise indicated.

Critical accounting estimates and judgments

The preparation of the consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the

F-10

accounting policies. Actual results may differ from these estimates. The notes to the consolidated financial statements set out areas involving a higher degree of judgment or complexity, or areas where assumptions are significant to the consolidated financial statements, such as allowance for loan losses (Notes 10, 32), fair value of financial instruments (Note 43), impairment of available-for-sale financial assets (Notes 9, 32), impairment of goodwill (Note 14), provision for interest repayment (Note 20), retirement benefits (Note 23) and deferred tax assets (Note 22).

Refer to Note 3 “Critical Accounting Estimates and Judgments” for further information.

New and Amended Accounting Standards Adopted by the SMFG Group

The SMFG Group adopted the following new accounting interpretation during the fiscal year ended March 31, 2015.

IFRIC Interpretation 21 “Levies”

IFRIC Interpretation 21 “Levies,” an interpretation of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets,” provides guidance on when an entity should recognize liabilities to pay levies imposed by governments, government agencies and similar bodies, other than income taxes, in its financial statements. On April 1, 2014, the SMFG Group adopted IFRIC 21 retrospectively and comparative information has been restated accordingly.

The following tables show the effect of the adoption of IFRIC 21 on the SMFG Group’s consolidated financial statements.

	At March 31, 2014			At April 1, 2013
	(In millions)
Effect on consolidated statement of financial position
Assets:
Other assets	¥	13,772		¥	14,168
Deferred tax assets		1,614			1,694
Total assets	¥	15,386		¥	15,862
Liabilities:
Other liabilities	¥	18,363		¥	18,891
Total liabilities	¥	18,363		¥	18,891
Equity:
Retained earnings	¥	(2,145	)	¥	(2,165	)
Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc.		(2,145	)		(2,165	)
Non-controlling interests		(832	)		(864	)
Total equity	¥	(2,977	)	¥	(3,029	)

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	For the fiscal year ended March 31,
	2014			2013
	(In millions, except per share data)
Effect on consolidated income statement
General and administrative expenses	¥	(18	)	¥	(55	)
Other expenses		(113	)		(351	)
Operating expenses		(131	)		(406	)
Profit before tax		131			406
Income tax expense		79			143
Net profit	¥	52		¥	263
Profit attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.	¥	21		¥	167
Non-controlling interests		31			96
Earnings per share:
Basic	¥	0.02		¥	0.13
Diluted		0.01			0.12

	For the fiscal year ended March 31,
	2014		2013
	(In millions)
Effect on consolidated statement of comprehensive income
Net profit	¥	52	¥	263
Total comprehensive income	¥	52	¥	263
Total comprehensive income attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.	¥	21	¥	167
Non-controlling interests		31		96

For the fiscal year ended March 31, 2015, the SMFG Group also adopted a number of other new and amended accounting standards that have become effective; however, they have not resulted in any material impact on the SMFG Group’s consolidated financial statements.

Consolidation

Subsidiaries

Subsidiaries are all entities controlled by the SMFG Group. The SMFG Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The SMFG Group considers all facts and circumstances whether it controls an entity.

Where the relevant activities are directed through voting or similar rights, the SMFG Group considers that it controls an entity if it has the existing rights that give it the current ability to direct the operating and financing policies of the entity, in general by having a shareholding of more than 50% of the voting rights. The existence and effect of potential voting rights that are deemed to be substantive are taken into account when assessing whether the SMFG Group controls another entity.

Where the voting rights are not the dominant factor in deciding who controls the entity, the assessment of control is more complex and requires greater use of judgment. The SMFG Group assesses whether it controls an entity considering all facts and circumstances, such as the purpose and design of the entity, the relevant activities and how to make decisions about those activities.

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The SMFG Group also determines whether it is acting as an agent or a principal in assessing whether it has control of another entity. An agent is a party primarily engaged to act on behalf and for the benefit of another party or parties and therefore does not control the entity. To make such judgments, the SMFG Group considers the overall relationship, especially all of the following factors: the scope of its decision-making authority over the entity, the rights held by other parties, the remuneration to which it is entitled in accordance with the remuneration agreement, and its exposure to variability of returns from other interests that it holds in the entity.

The SMFG Group reassesses whether it controls an entity if facts and circumstances indicate that there are changes to one or more of the elements of control.

Subsidiaries are fully consolidated from the date on which the SMFG Group obtains control. They are deconsolidated from the date on which the SMFG Group loses control.

The acquisition method is used to account for the business combinations including the acquisition of subsidiaries by the SMFG Group. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred and the equity interests issued. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The SMFG Group’s previously held equity interest in the acquiree is remeasured at fair value at the acquisition date and any gain or loss is recognized in profit or loss. For each business combination, the SMFG Group measures any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. The excess of the aggregate of the consideration transferred, the amount of any non-controlling interest and the acquisition-date fair value of the SMFG Group’s previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed is recorded as goodwill in the consolidated statement of financial position. If the aggregate of the consideration transferred, the amount of any non-controlling interest and the acquisition-date fair value of the SMFG Group’s previously held equity interest in the acquiree is less than the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed, the difference is recognized immediately in the consolidated income statement.

Inter-company transactions, balances and unrealized gains on transactions between the SMFG Group companies are eliminated on consolidation. Unrealized losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. The accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the SMFG Group.

Non-controlling interests

Changes in the SMFG Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Interests in the equity of subsidiaries not attributable to the SMFG Group are reported in the consolidated statement of financial position as a separate component of equity as non-controlling interests. Profits or losses attributable to non-controlling interests are separately reported in the consolidated income statement.

Associates and joint ventures

An associate is an entity over which the SMFG Group has significant influence, but does not control the financial and operating policy decisions of the entity. Significant influence is generally presumed to exist when the SMFG Group holds 20% or more, but less than 50%, of the voting rights.

Entities that are jointly controlled by more than one party, including the SMFG Group, may be determined to be a joint venture.

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The SMFG Group accounts for investments in associates and joint ventures using the equity method from the date on which they become associates or joint ventures. The SMFG Group discontinues the use of the equity method from the date on which the SMFG Group ceases to have significant influence or joint control over the investees.

Under the equity method, the SMFG Group’s investments in associates and joint ventures are initially recognized at cost. The carrying amount of the investments are subsequently increased or decreased to recognize the SMFG Group’s share of the post-acquisition profit or loss of the associate or joint venture and other movements included directly in the equity of the associate or joint venture. The SMFG Group’s share of the results of associates and joint ventures is based on the financial statements of its associates, adjusted to conform with the accounting policies of the SMFG Group. Profits on transactions between the SMFG Group and its associates and joint ventures are eliminated to the extent of the SMFG Group’s interest in the associates or joint ventures. Losses are also eliminated to the extent of the SMFG Group’s interest in the associates or joint ventures unless the transaction provides evidence of impairment in the asset transferred.

The carrying amounts of the investments in associates and joint ventures include goodwill (net of any accumulated impairment loss) arising on the acquisition of the interests in the entities. Because goodwill arising on the acquisition of the interest in an associate or joint venture is not separately recognized, it is not tested for impairment separately. Instead, the entire carrying amount of the investment in an associate or joint venture is tested for impairment as a single asset by comparing its recoverable amount, which is the higher of value in use and fair value less costs to sell, with its carrying amount, whenever there is any objective evidence that the investment is impaired. An impairment loss recognized in prior periods for the investment is reversed only if there has been a change in the estimates used to determine the recoverable amount of the investment since the last impairment loss was recognized. If this is the case, the carrying amount of the investment is increased to its recoverable amount. That increase is a reversal of an impairment loss.

When the SMFG Group’s share of losses in an associate or joint venture exceeds the SMFG Group’s carrying amount of the investment, the SMFG Group does not recognize further losses, unless it has a binding obligation or has made payments on behalf of the entity.

Segment Reporting

The SMFG Group determines its operating segments based on the management approach, which requires operating segments to be identified on the basis of internal reports about components of the entity that are regularly reviewed by management, in order to allocate resources to a segment and to assess its performance.

Foreign Currency Translation

Items included in the financial statements of each of the SMFG Group companies are measured using the currency of the primary economic environment in which the company operates (“the functional currency”). The consolidated financial statements are presented in Japanese yen, which is also SMFG’s functional currency.

Transactions and balances

Foreign currency transactions that are denominated or settled in a foreign currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary items denominated in foreign currencies are translated using the exchange rate at the end of the reporting period. Foreign exchange gains and losses resulting from the retranslation and settlement of monetary items are recognized in the consolidated income statement. Non-monetary items that are measured at fair value in a foreign currency are translated into the functional currency using the exchange rate at the date the fair value is determined. Translation differences on non-monetary items, such as equity instruments classified as available-for-sale financial assets, are not included in the consolidated income statement but are recognized directly in equity. Non-monetary items that are measured at historical cost in a foreign currency are translated into the functional currency using the exchange rate at the date of the initial transaction.

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Foreign operations

The assets and liabilities of foreign operations are translated into the presentation currency of the SMFG Group using the exchange rate at the end of the reporting period, and their income statements are translated using the exchange rates at the dates of the transactions or average exchange rates where these approximate to actual rates.

The exchange differences arising on the translation of a foreign operation are included in other comprehensive income within equity and subsequently included in profit or loss on full or partial disposal of the operation.

Financial Assets

At initial recognition, the financial assets of the SMFG Group are classified into one of the following categories: trading assets, derivative financial instruments, financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets.

Regular way purchases and sales of trading assets, derivative financial instruments, financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets are recognized on the trade date—the date on which the SMFG Group commits to purchase or sell the assets.

Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or where the SMFG Group has transferred substantially all the risks and rewards of ownership at a consolidated level. The SMFG Group consolidates all subsidiaries in accordance with IFRS 10 “Consolidated Financial Statements” before determining derecognition of financial assets under IAS 39 “Financial Instruments: Recognition and Measurement.”

Trading assets

Financial assets are classified as held for trading and included in “Trading assets” in the consolidated statement of financial position, if they are acquired or incurred principally for the purpose of selling or repurchasing in the near term or if they are part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. Trading assets are initially recognized at fair value with transaction costs being recognized in the consolidated income statement, and subsequently measured at fair value. Gains and losses arising from changes in the fair values of trading assets are included in “Net trading income” in the consolidated income statement.

Derivative financial instruments

Derivatives are also classified as held for trading and included in “Derivative financial instruments” in the consolidated statement of financial position. The SMFG Group does not apply hedge accounting under IFRS. All derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Derivatives are initially recognized at fair value with transaction costs being recognized in the consolidated income statement, and subsequently measured at fair value. Gains and losses arising from changes in the fair values of derivatives are included in “Net trading income” in the consolidated income statement.

The derivative component of a hybrid instrument containing both a derivative and non-derivative component (“host contract”) is referred to as an embedded derivative. Certain embedded derivatives are accounted for as separate derivatives, when their economic characteristics and risks are not closely related to those of the host contract and the hybrid instrument is not carried at fair value through profit or loss. These embedded derivatives are measured at fair value and are presented in the consolidated statement of financial position together with the host contract.

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Financial assets at fair value through profit or loss

Financial assets, other than those held for trading, are classified as financial assets at fair value through profit or loss and are included in “Financial assets at fair value through profit or loss” in the consolidated statement of financial position, if they meet one of the following criteria, and are so designated by management:

• the designation eliminates or significantly reduces a measurement or recognition inconsistency;

• a group of financial assets is managed and its performance is evaluated on a fair value basis in accordance with a documented risk management or investment strategy; or

• the instrument contains one or more embedded derivatives unless (a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract or (b) it is clear with little or no analysis that separation is prohibited.

In addition, the SMFG Group classifies the entire hybrid instrument at fair value through profit or loss when the SMFG Group is required to separate an embedded derivative from its host contract, but is unable to measure the embedded derivative separately either at acquisition or at the end of a subsequent reporting period. Financial assets at fair value through profit or loss are initially recognized at fair value with transaction costs being recognized in the consolidated income statement, and subsequently measured at fair value. Gains and losses arising from changes in the fair value of such financial assets are included in “Net income from financial assets at fair value through profit or loss” in the consolidated income statement.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than:

• those that the SMFG Group intends to sell immediately or in the near term, which are classified as held for trading, and those that the SMFG Group upon initial recognition designates as at fair value through profit or loss;

• those that the SMFG Group upon initial recognition classifies as available-for-sale; or

• those for which the SMFG Group may not recover substantially all of its initial investment, other than because of credit deterioration.

The financial assets classified as loans and receivables are mainly included in “Loans and advances” in the consolidated statement of financial position. Loans and receivables are initially recognized at fair value plus directly attributable transaction costs, and are subsequently measured at amortized cost using the effective interest method.

When the SMFG Group is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to ownership of the asset to the lessee, the arrangement is classified as a finance lease and a receivable equal to the net investment in the lease is recognized and presented within “Loans and advances” in the consolidated statement of financial position.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets quoted in an active market with fixed or determinable payments and fixed maturities that the SMFG Group has the positive intention and ability to hold to maturity. If the SMFG Group were to sell other than an insignificant amount of held-to-maturity investments, the remaining investments in this category would be reclassified as available-for-sale financial assets. Held-to-maturity investments are initially recognized at fair value plus directly attributable transaction costs, and are subsequently measured at amortized cost using the effective interest method.

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Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are classified as available-for-sale at initial recognition or are not classified into any of the other categories described above. Available-for-sale financial assets are initially recognized at fair value plus directly attributable transaction costs, and are subsequently measured at fair value.

Gains and losses arising from changes in the fair value of available-for-sale financial assets are recognized in other comprehensive income, until they are derecognized or impaired. At that time, the cumulative gain or loss previously recognized in other comprehensive income is recognized in the consolidated income statement. However, interest income calculated using the effective interest method and foreign currency gains and losses on monetary assets classified as available-for-sale are recognized in the consolidated income statement. Dividends on available-for-sale equity instruments are recognized in the consolidated income statement when the entity’s right to receive payment is established.

Financial Liabilities

Financial liabilities, except for held for trading and derivatives, are initially recognized at fair value net of transaction costs incurred, including premiums, discounts and issuance costs, and subsequently measured at amortized cost based on the effective interest method. Financial liabilities carried at amortized cost are mainly “Deposits,” “Borrowings,” and “Debt securities in issue” included in the consolidated statement of financial position.

Financial liabilities held for trading and derivatives are initially measured at fair value with transaction costs being recognized in the consolidated income statement, and subsequently measured at fair value. Financial liabilities held for trading and derivatives are mainly included in “Trading liabilities” and “Derivative financial instruments,” respectively, in the consolidated statement of financial position.

Financial liabilities are derecognized when they have been redeemed or otherwise extinguished.

Hedge Accounting

The SMFG Group does not apply hedge accounting under IAS 39.

Offsetting Financial Instruments

Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position, only if the SMFG Group currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize the asset and settle the liability simultaneously. In all other situations, they are presented on a gross basis.

Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining the fair value, the SMFG Group gives the highest priority to a quoted price in an active market for identical assets or liabilities. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no active market for the asset or liability, the SMFG Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure the fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. In cases where the SMFG Group manages a group of financial assets and financial liabilities on the basis of its net credit exposure, the fair value of the group of financial assets and financial liabilities is measured on the basis of the price that would be received to sell a net long position (i.e., an asset) or paid to

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transfer a net short position (i.e., a liability) for the credit risk exposure provided that certain criteria set forth in IFRS 13 “Fair Value Measurement” are met. Details of fair value measurement are described in Note 43 “Fair Value of Financial Assets and Liabilities.”

Recognition of Deferred Day One Profit and Loss

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price (i.e., the fair value of the consideration given or received). However, if the fair value at initial recognition is not evidenced by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, the difference between the fair value at initial recognition and the transaction price, commonly referred to as “day one profit and loss,” is not recognized as a gain or loss but adjusted to be deferred. The SMFG Group did not have any significant deferred day one profit and loss for the fiscal years ended March 31, 2015 and 2014.

Repurchase and Reverse Repurchase Agreements, and Securities Borrowing and Lending Agreements

In the ordinary course of business, the SMFG Group lends or sells securities under agreements to repurchase them at a predetermined price on a future date (“repos”). Since substantially all the risks and rewards are retained by the SMFG Group, the securities remain on the consolidated statement of financial position and a liability is recorded in respect of the consideration received. On the other hand, the SMFG Group borrows or purchases securities under agreements to resell them at a predetermined price on a future date (“reverse repos”). Since the SMFG Group does not retain the risks and rewards of ownership, these transactions are treated as collateralized loans and the securities are not included in the consolidated statement of financial position.

The difference between the sale and purchase price is accrued over the life of the transactions. Securities lent to counterparties remain on the consolidated statement of financial position. Securities borrowed are not recognized in the consolidated statement of financial position, unless these are sold to third parties, at which point the obligation to repurchase the securities is recorded as a trading liability at fair value and any subsequent gain or loss is included in “Net trading income” in the consolidated income statement.

For the fiscal years ended March 31, 2015 and 2014, there were 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 were treated as sales and hence derecognized for accounting purposes.

Impairment of Financial Assets

Loans and advances and held-to-maturity investments

At the end of each reporting period, the SMFG Group assesses whether there is any objective evidence that a financial asset or a group of financial assets is impaired.

A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The criteria that the SMFG Group uses to determine that there is objective evidence of an impairment loss include:

• significant financial difficulty of an issuer or an obligor;

• a default or delinquency in interest or principal payments;

• restructuring of a financial asset by the SMFG Group due to the borrower’s financial difficulties on terms that the SMFG Group would not otherwise consider;

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• indications that a borrower or issuer will enter bankruptcy;

• disappearance of an active market for a security because of the borrower’s financial difficulties; and

• other observable data relating to a group of assets, such as adverse changes in the payment status of borrowers or issuers in the group, or national or local economic conditions that correlate with defaults in the group.

The SMFG Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the SMFG Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in the collective assessment of impairment.

The allowance for individually significant impaired financial assets is measured by the discounted cash flow (“DCF”) method, which is used to calculate the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. If financial assets have a variable interest rate, the discount rate for measuring any impairment loss is the effective interest rate determined under the contract, for the current period. The estimated future cash flows are individually calculated taking into account factors including historical loss information, the appropriateness of the borrower’s business plan or operational improvement plan, the status of progress of its plan, the overall support from financial institutions, and the realizable value of any collateral held.

The collective allowance for financial assets is classified into two types: (1) the allowance for impaired financial assets that are not individually significant, and (2) the allowance for non-impaired financial assets, which reflects incurred but not yet identified (“IBNI”) losses for the period between the impairment occurring and the loss being identified. The collective allowance is estimated by applying historical loss experience to groups of homogenous loans. The historical loss experience data includes the number of borrowers for whom objective evidence of impairment has been identified for the most recent rolling one-year period, and the amount ultimately recovered from impaired financial assets. The SMFG Group has collected and accumulated historical data on amounts ultimately recovered from impaired financial assets. The homogeneous groups are determined on the basis of similar credit risk characteristics. For every group, the SMFG Group’s grading processes are established considering asset type, industry, geographical location, collateral type, past-due status and other relevant characteristics (see Note 45 “Financial Risk Management”). These characteristics are relevant to the estimation of future cash flows for groups of such assets as being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Historical loss experience is adjusted on the basis of current observable data, including bankruptcy trends after the occurrence of significant events which had a negative effect on the global economy and the economies in which a large portion of the SMFG Group’s assets are located, to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist.

The carrying amount of the asset is reduced by the impairment loss either directly or through the use of an allowance account. Changes in the carrying amount of the allowance account are recognized in the consolidated income statement. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognized in “Impairment charges on financial assets” in the consolidated income statement.

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If a financial asset is determined to be uncollectible, it is written off against the related allowance account. Uncollectible financial assets are normally written off when there is no expectation of further recovery after any collateral is foreclosed and the amount of the loss has been determined. Those assets primarily include loans for borrowers that have been legally or formally declared bankrupt and borrowers that may not have been legally or formally declared bankrupt but are essentially bankrupt.

Loans and advances that would otherwise be past due or impaired, but whose terms have been renegotiated without providing any financial concessions, are not classified as impaired loans and advances as the terms of the renegotiated loans and advances do not result in a decrease in the net present value of the loan discounted at its original effective interest rate. The collective allowance is estimated for these loans and advances by including them in homogenous groups on the basis of applying the SMFG Group’s grading process, taking into account the renegotiation and their consequent higher risk status. These loans and advances are continually assessed for impairment until maturity or derecognition.

In addition, provisions for loan commitments are calculated where it is probable that the SMFG Group will incur a loss and recognized in other provisions (see Note 20 “Provisions”).

Available-for-sale financial assets

At the end of each reporting period, the SMFG Group assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity instruments classified as available-for-sale, a significant or prolonged decline in the fair value of the instruments below cost is also considered in determining whether the assets are impaired. In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as for loans and advances and held-to-maturity investments. If any objective evidence of impairment exists for available-for-sale financial assets, the cumulative loss—measured as the difference between the cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss—is removed from equity and recognized in the consolidated income statement.

Impairment losses recognized in the consolidated income statement on equity instruments classified as available-for-sale are not reversed through the consolidated income statement. For debt instruments classified as available-for-sale, if the fair value recovers in a subsequent period and it can be objectively associated with an event occurring after the impairment loss was recognized in the consolidated income statement, the impairment loss is reversed through the consolidated income statement.

Property, Plant and Equipment

All property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Additions and subsequent expenditures are capitalized only to the extent that they enhance the future economic benefits expected to be derived from the assets. Repairs and maintenance costs are expensed as incurred.

Land is not depreciated. Depreciation of other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

• Buildings: 7–50 years;

• Leased assets: the shorter of the lease term and the estimated useful life, which is principally 5–20 years; and

• Assets for rent (including assets for aircraft leasing business) and others: 2–40 years.

The residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount. These are included in “Other income” and “Other expenses” in the consolidated income statement.

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Intangible Assets

Goodwill

Goodwill represents the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest and the acquisition-date fair value of the SMFG Group’s previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed, and is initially recognized at the date of acquisition. Goodwill is allocated to cash-generating units for the purpose of impairment testing. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of cash inflows from other assets or groups of assets. Impairment testing is performed at least annually and whenever there is an indication that the cash-generating unit may be impaired. When the SMFG Group disposes of all or part of a cash-generating unit to which goodwill is allocated, the goodwill associated with the cash-generating unit is included in the carrying amount of the cash-generating unit when determining the gain or loss on disposal.

Software

Purchased software is carried at cost less accumulated amortization and accumulated impairment losses, if any.

Expenditure on internally generated software is recognized as an asset if the SMFG Group can demonstrate its intention and ability to complete the development and use the software in a manner that will generate future economic benefits and it can reliably measure the costs to complete the development. Internally generated software is carried at capitalized cost less accumulated amortization and accumulated impairment losses, if any. Costs associated with maintaining software are expensed as incurred.

Software is amortized using the straight-line method over the estimated useful life, which is generally five years.

Contractual customer relationships and trademarks

Contractual customer relationships and trademarks acquired in a business combination are recognized at fair value at the acquisition date. Contractual customer relationships and trademarks are carried at cost less accumulated amortization or impairment losses, if any. Contractual customer relationships and trademarks are amortized using the straight-line method over their estimated useful lives of 10 to 20 years.

Other intangible assets

Other intangible assets primarily consist of leasehold rights. They are recognized only when the SMFG Group legally obtains the rights and can reliably measure the fair value. Leasehold rights have an indefinite useful life and they are not amortized but are tested for impairment annually.

Impairment of Non-Financial Assets

Non-financial assets are reviewed for impairment at the end of each reporting period and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognized in the consolidated income statement if the asset’s carrying amount is greater than its estimated recoverable amount. The recoverable amount is estimated as the higher of the asset’s fair value less costs to sell and value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. In addition, irrespective of whether there is any indication of impairment, intangible assets that have an indefinite useful life are tested for impairment annually.

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For the purposes of conducting impairment reviews, assets are grouped into cash-generating units to which the assets belong. Non-financial assets other than impaired goodwill are reviewed for possible reversal of the impairment loss at the end of each reporting period. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Leases

As lessee

A lease agreement in which the lessor does not transfer to the lessee substantially all the risks and rewards of ownership of assets is classified as an operating lease. The leases entered into by the SMFG Group as a lessee are primarily operating leases. Operating lease payments, net of lease incentives received from the lessor, are recognized in the consolidated income statement on a straight-line basis over the lease term.

A lease agreement in which the lessor transfers to the lessee substantially all the risks and rewards of ownership of assets, with or without ultimate legal title, is classified as a finance lease. For finance leases, the SMFG Group initially recognizes the leased asset at the lower of the fair value of the asset or the present value of the minimum lease payments. Subsequent to initial recognition, assets are accounted for in accordance with the accounting policy applicable to those assets. The corresponding liability to the lessor is recognized as a lease obligation within “Borrowings” in the consolidated statement of financial position. Interest expense is recognized over the term of the lease based on the interest rate implicit in the lease so as to give a constant rate of interest on the remaining balance of the liability.

As lessor

When the SMFG Group acts as a lessor in an operating lease, the assets for rent are included in “Property, plant and equipment” in the consolidated statement of financial position and are depreciated over their expected useful lives on a basis consistent with similar assets in property, plant and equipment. Income from operating leases (net of any incentives given to the lessee) is recognized on a straight-line basis over the lease term and included in “Other income” in the consolidated income statement. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased assets and recognized as an expense on a straight-line basis over the lease term.

When the SMFG Group is a lessor in a finance lease, the leased assets are derecognized and the present value of the future lease payments is recognized as a lease receivable within “Loans and advances” in the consolidated statement of financial position. The difference between the gross receivables, i.e., undiscounted future cash flows, and the present value of the receivables is recognized as unearned finance income. Finance income is recognized over the lease term based on a pattern reflecting a constant periodic rate of return on the net investment in the finance lease.

Sale and leaseback

For sale and leaseback transactions leading to an operating lease, and the transaction took place at fair value, any profit or loss is recognized immediately. If the sale price is at or below fair value, any profit or loss is recognized immediately. However, if the loss is compensated for by future rentals at a below market price, the loss is deferred and amortized over the period that the asset is expected to be used. If the sale price is above fair value, any profit is deferred and amortized over the useful life of the asset. If the fair value of the asset is less than the carrying value of the asset at the date of transaction, that difference is recognized immediately as a loss on the sale.

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Cash and Cash Equivalents

For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand, demand deposits, and other short-term highly liquid financial assets with original maturities of three months or less, which are subject to insignificant risk of changes in their fair value.

Provisions

A provision is recognized if, as a result of a past event, the SMFG Group has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Financial Guarantee Contracts

Financial guarantee contracts 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 a debt instrument. Such financial guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities. Financial guarantees are initially recognized at fair value on the date the guarantee is given.

Subsequent to initial recognition, the SMFG Group’s liabilities under such guarantees are measured at the higher of the initial measurement, less amortization calculated to recognize in the consolidated income statement the fee income earned over the guarantee period, and the best estimate of the expenditure required to settle any financial obligation arising at the end of the reporting period. These estimates are determined based on experience of similar transactions and history of past losses, supplemented by the judgment of management.

Any increase in the liability relating to financial guarantee contracts is included in “Other expenses” in the consolidated income statement.

Employee Benefits

The SMFG Group operates various retirement benefit plans and other employee benefit plans.

Retirement benefits

The SMFG Group has defined benefit plans, such as defined benefit pension plans and lump-sum severance indemnity plans, and defined contribution plans.

Defined benefit plans

The liabilities and the assets recognized in the consolidated statement of financial position in respect of defined benefit plans are the present value of the defined benefit obligation less the fair value of plan assets.

The present value of the defined benefit obligation is calculated annually by qualified actuaries. In calculating the present value of the defined benefit obligations, the related current service cost, and past service cost, the SMFG Group attributes the retirement benefits to years of service under the benefit formula. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using market yields of AA credit-rated corporate bonds that have terms to maturity approximating those of the related obligations. In cases where there is no deep market in corporate bonds with a sufficiently long maturity to match the estimated maturity of the benefit payments, the SMFG Group uses current market rates of the appropriate term to discount shorter term payments and estimates the discount rates for longer maturities by extrapolating current market rates along the yield curve.

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Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in the year, and return on plan assets excluding interest income are recognized in other comprehensive income and are never reclassified to profit or loss.

Past service costs are recognized immediately in the consolidated income statement.

When the calculations above result in a benefit to the SMFG Group, the recognized asset is limited to the present value of any economic benefits available in the form of any refunds from the plan or reductions in future contributions to the plan. An economic benefit is available to the SMFG Group if it is realizable during the life of the plan or on settlement of the plan obligations.

Defined contribution plans

Contributions to defined contribution plans are recognized as an expense in the consolidated income statement when they are due.

Other long-term employee benefits

The SMFG Group’s net obligation with respect to long-term employee benefits other than retirement benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value and the fair value of any related assets is deducted. The discount rates are market yields of AA credit-rated corporate bonds that have terms to maturity approximating those of the related obligations. The calculation of obligations is performed using the projected unit credit method. Any actuarial gains or losses and past service costs are recognized in the consolidated income statement in the period in which they arise.

Short-term employee benefits

Short-term employee benefits, such as salaries, paid absences and other benefits are accounted for on an accrual basis over the period in which employees have provided services. Bonuses are recognized to the extent that the SMFG Group has a present obligation to its employees that can be measured reliably.

Income Tax

Income tax expense comprises current and deferred taxes. Income tax expense is recognized in the consolidated income statement except for that related to items recognized directly in equity. In such case, the income tax expense is recognized in equity.

Current tax is the expected tax payable or receivable on the taxable profit or loss for the fiscal year.

Deferred taxes are provided in full, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred taxes are determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax assets are realized or the deferred tax liabilities are settled.

Deferred tax assets principally arise from tax losses carried forward, impairment of investment securities and loans, and the allowance for loan losses.

Deferred taxes are not recognized for the following temporary differences: (a) the initial recognition of goodwill; (b) the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; and (c) the temporary differences associated with investments in subsidiaries, associates, and joint ventures, when the parent investor is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

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Deferred tax assets relating to tax losses carried forward and deductible temporary differences are recognized, only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the deductible temporary differences can be utilized.

Debt and equity securities in issue

On initial recognition, financial instruments issued by the SMFG Group are classified in accordance with the substance of the contractual agreement as financial liabilities where the contractual arrangement results in the SMFG Group having a present obligation to either deliver cash or another financial asset to the holder, or to satisfy the obligation other than by delivering a fixed number of equity shares in exchange for a fixed amount of cash or another financial asset. The instruments or their components are classified as equity where they do not meet the definition of a liability and show evidence of a residual interest in the entity’s assets after deducting all of its liabilities. Compound financial instruments that contain both liability and equity elements are accounted for separately with the equity component being assigned the residual amount after deducting from the entire value of the compound financial instrument the fair value of the liability component which has been determined separately.

Shareholders’ Equity

Stock issuance costs

Incremental costs directly attributable to the issuance of new shares or options including those issued as a result of a business combination transaction are deducted from the proceeds and shown in equity, net of tax.

Dividends on common stock and preferred stock

Dividends on common stock and preferred stock are recognized in equity in the period in which they are approved by the shareholders. Dividends for the fiscal year that are declared after the reporting period are described in Note 40 “Dividends Per Share.”

Treasury stock

Where SMFG or any other member of the Group companies purchase SMFG’s common or preferred stock, the consideration paid is deducted from equity as treasury stock until they are cancelled or sold. No gain or loss is recognized on the purchase, sale, or cancellation of SMFG’s own equity instruments and the consideration paid or received is recognized in equity.

Interest Income and Expense

Interest income and expense for all financial instruments, except for those classified as held for trading and financial assets at fair value through profit or loss, are recognized in “Interest income” and “Interest expense” in the consolidated income statement using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period.

The effective interest rate is the rate that discounts the estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the SMFG Group estimates cash flows, considering the contractual terms of the financial instrument but not including future credit losses. The calculation includes fees and points paid or received between parties to the contract that are an integral part of the effective interest rate of the financial instrument, transaction costs and other premiums or discounts.

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Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is thereafter recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. For financial assets measured at amortized cost, the interest rate is the original effective interest rate.

Fee and Commission Income

Fee and commission income includes fee and commission income arising from a diverse range of services that the SMFG Group provides to its customers. Fee and commission income can be divided into two categories: fee and commission income from providing transaction services, and fee and commission income earned from services that are provided over a certain period of time. Fee and commission income earned from providing transaction services is recognized when the service has been completed or the event has occurred. This fee and commission income includes fees on funds transfer and collection services, service charges from deposit accounts, fees and commissions on the securities business, underwriting fees, brokerage fees, and fee and commission income from other services. Fee and commission income earned from services over a period of time is recognized over that service period. This fee and commission income includes fees on credit-related businesses, investment fund businesses, and fee and commission income from other services. Loan commitment fees, together with the related direct cost, for loans that are likely to be drawn down are deferred and recognized as an adjustment to the effective interest rate on the loan. Loan commitment fees are recognized over the term of the commitment period when it is unlikely that a loan will be drawn down.

Net Trading Income

Net trading income consists of margins made on market-making and customer business, as well as changes in fair value of trading assets and liabilities and derivative financial instruments, caused by movements in interest rates, exchange rates, equity prices and other market variables. It also includes net interest and dividend income on trading assets and liabilities.

Net Income from Financial Assets at Fair Value through Profit or Loss

Net income from financial assets at fair value through profit or loss includes all gains and losses arising from changes in the fair value of these financial assets and sales of such assets, and interest and dividend income on these financial assets.

Net Investment Income

Net investment income includes gains and losses on the disposal of available-for-sale financial assets, and dividends from available-for-sale equity instruments.

Earnings Per Share

The SMFG Group presents basic and diluted earnings per share (“EPS”) data for its common stock. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the SMFG Group by the weighted average number of common stock outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common stock outstanding for the effects of all dilutive potential common stock including share options and other convertible instruments.

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Recent Accounting Pronouncements

The SMFG 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:

Defined Benefit Plan: Employee Contributions (Amendments to IAS 19)

In November 2013, the IASB issued narrow-scope amendments to IAS 19 “Employee Benefits,” which applies to contributions from employees or third parties to defined benefit plans. The amendments permit an entity to recognize the amount of the contributions as a reduction in the service cost in the period in which the related service is rendered if the amounts of such contributions are independent of the number of years of service. The amendments are effective for annual periods beginning on or after July 1, 2014 and are not expected to have a material impact on the SMFG Group’s consolidated financial statements.

Annual Improvements to IFRSs 2010-2012 Cycle/Annual Improvements to IFRSs 2011-2013 Cycle

In December 2013, the IASB issued Annual Improvements to IFRSs 2010-2012 Cycle and Annual Improvements to IFRSs 2011-2013 Cycle, which are collections of amendments to seven and four IFRSs, respectively. The IASB uses the annual improvements process to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of any other project. The amendments are generally effective for annual periods beginning on or after July 1, 2014 and are not expected to have a material impact on the SMFG Group’s consolidated financial statements.

Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

In May 2014, the IASB published amendments to IFRS 11 “Joint Arrangements,” which provides new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments require the acquirer in such acquisitions to apply all of the principles on business combinations accounting in IFRS 3 “Business Combinations” and other IFRSs except for those principles that conflict with the guidance in IFRS 11. The amendments are effective for annual periods beginning on or after January 1, 2016. The SMFG Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)

In May 2014, the IASB published amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” to clarify that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The amendments are effective for annual periods beginning on or after January 1, 2016. The SMFG Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)

In June 2014, the IASB published amendments to IAS 16 and IAS 41 “Agriculture” to change the financial reporting for bearer plants, such as grape vines, rubber trees and oil palms. The amendments require bearer plants to be accounted for in the same way as property, plant and equipment, and include them within the scope of IAS 16 instead of IAS 41. The amendments are effective for annual periods beginning on or after January 1, 2016. The SMFG Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

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Equity Method in Separate Financial Statements (Amendments to IAS 27)

In August 2014, the IASB published the narrow-scope amendments to IAS 27 “Separate Financial Statements” to allow an entity to use the equity method to account for investments in subsidiaries, joint ventures and associates in its separate financial statements. The amendments are effective for annual periods beginning on or after January 1, 2016 and are not expected to have a material impact on the SMFG Group’s consolidated financial statements.

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 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 amendments are effective for annual periods beginning on or after January 1, 2016. The SMFG Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

Annual Improvements to IFRSs 2012-2014 Cycle

In September 2014, the IASB issued Annual Improvements to IFRSs 2012-2014 Cycle, which is a collection of amendments to four IFRSs. The IASB uses the annual improvements process to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of any other project. The amendments are effective for annual periods beginning on or after January 1, 2016. The SMFG Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

Disclosure Initiative (Amendments to IAS 1)

In December 2014, the IASB issued amendments to IAS 1 “Presentation of Financial Statements” as part of its major initiative to improve presentation and disclosure in financial reports. The amendments are designed to encourage entities to apply professional judgment in determining what information to disclose in their financial statements. The amendments are effective for annual periods beginning on or after January 1, 2016.

Investment Entities: Applying the Consolidated Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)

In December 2014, the IASB issued narrow-scope amendments to IFRS 10, IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28 to introduce minor clarifications to the requirements when accounting for investment entities. The amendments also provide relief in particular circumstances, which will reduce the costs of applying the standards. The amendments are effective for annual periods beginning on or after January 1, 2016. The SMFG Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

IFRS 15 “Revenue from Contracts with Customers”

In May 2014, the IASB published IFRS 15 “Revenue from Contracts with Customers” to establish principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contract with customers. The core principle of IFRS 15 is to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 also requires enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements. The standard is effective for annual periods beginning on or after January 1, 2017. The SMFG Group is currently evaluating the potential impact that the adoption of the standard will have on its consolidated financial statements.

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IFRS 9 “Financial Instruments”

In July 2014, the IASB published IFRS 9 “Financial Instruments,” which is the comprehensive standard to replace IAS 39. The standard contains the following new requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting:

Classification and measurement. The standard requires all financial assets to be classified into three categories, namely, amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVPL”), based on the business model within which they are held and their contractual cash flow characteristics. A financial asset is measured at amortized cost if the asset is held within a business model whose objective is to hold the asset in order to collect contractual cash flows, and the asset’s contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding. Financial assets are measured at FVOCI if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and SPPI requirements are met. Any financial assets that do not meet the criteria of amortized cost or FVOCI should be classified as FVPL. The standard also requires financial assets that contain embedded derivatives to be classified in their entirety rather than being subject to bifurcation requirements. The standard maintains most of the requirements in IAS 39 regarding the classification and measurement of financial liabilities. However, with the new requirements, if an entity chooses to measure a financial liability at fair value, the amount of change in its fair value that is attributable to changes in the credit risk of that liability will be presented in other comprehensive income, rather than in profit or loss.

Impairment. The standard introduces the expected credit loss model, which is a new model for the recognition of impairment losses, to replace the incurred credit loss model in IAS 39. Under the expected credit loss model, an entity is required to account for expected credit losses from when financial instruments are first recognized and to recognize full lifetime expected losses on more timely basis. An expected credit loss model will result in the recognition of impairment losses earlier than an incurred loss model.

Hedge Accounting. The standard introduces a new hedge accounting model, together with corresponding disclosures about risk management activity for those applying hedge accounting. The hedge accounting requirements in IFRS 9 align hedge accounting more closely with risk management and establish a more principle-based approach to hedge accounting.

The standard is effective for annual periods beginning on or after January 1, 2018. The SMFG Group is currently evaluating the potential impact that the adoption of the standard will have on its consolidated financial statements.

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The consolidated financial statements are influenced by estimates and management judgment, 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.

Allowance for Loan Losses

Allowance for loan losses represents management’s estimate of the losses incurred in the loan portfolios at the end of each reporting period. Management exercises judgment in making assumptions and estimations when calculating the allowance for loan losses on both individually and collectively assessed loans.

The allowance for loan losses for individually significant impaired loans is estimated by management based on the expected future cash flows, taking into account factors such as historical loss information, the appropriateness of the borrower’s business plan or operational improvement plan, the status of progress of its

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plan, the overall support from financial institutions, and the realizable value of any collateral held. The allowance for loan losses for the remaining loans is collectively estimated by grouping financial assets into portfolios on the basis of similar credit risk characteristics and using the historical loss experience for these portfolios adjusted for the effect of the current economic environment. To assess the losses on the loan portfolios where loss events have occurred but not yet been identified, management develops assumptions and methodologies to estimate the loss identification period.

Management estimates and judgments may change from time to time as the economic environment changes or new information becomes available. Changes in these estimates and judgments will result in a different allowance for loan losses and may have a direct impact on impairment charges. Impairment charges on loans and advances amounting to ¥79,552 million and ¥138,375 million were recognized for the fiscal years ended March 31, 2015 and 2013, respectively, whereas previously recognized impairment charges on loans and advances amounting to ¥25,806 million were reversed for the fiscal year ended March 31, 2014. For additional information, refer to Note 10 “Loans and Advances” and Note 32 “Impairment Charges on Financial Assets.”

Fair Value of Financial Instruments

The fair values of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. In these cases, inputs to valuation techniques are based on observable data with respect to similar financial instruments or by using models. Where observable inputs are not available, the fair value is estimated based on appropriate assumptions that a market participant would take into account. Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed. The SMFG Group certifies significant valuation models before they are used, and calibrates them to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data; however, inputs such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the fair values of these financial instruments. More details about the SMFG Group’s valuation techniques, significant unobservable inputs used in determining fair values and sensitivity analyses are given in Note 43 “Fair Value of Financial Assets and Liabilities.”

Impairment of Available-for-sale Financial Assets

Available-for-sale financial assets are impaired if there is objective evidence of impairment as a result of loss events. The SMFG Group exercises judgment in determining whether there is objective evidence of occurrence of loss events, which result in a decrease in estimated future cash flows of the financial assets. The estimation of future cash flows also requires judgment. In the assessment of impairment of available-for-sale equity instruments, the SMFG Group also considers whether there has been a significant or prolonged decline in fair value below their cost. The determination of what is a significant or prolonged decline requires management judgment.

Impairment may occur when there is objective evidence of deterioration in the financial conditions of the investee, industry and sector performance, or changes in operating and financing cash flows. The determination of impairment in this respect also includes significant management judgment.

Management estimates and judgments may change from time to time based upon future events that may or may not occur and changes in these estimates and judgments could adversely affect the carrying amounts of available-for-sale financial assets. Impairment charges on available-for-sale financial assets totaled ¥10,586 million, ¥11,531 million and ¥131,770 million for the fiscal years ended March 31, 2015, 2014 and 2013, respectively. For additional information, refer to Note 9 “Investment Securities” and Note 32 “Impairment Charges on Financial Assets.”

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Impairment of Goodwill

Goodwill is tested for impairment on an annual basis or more frequently if events or changes in circumstances indicate that it may not be recoverable. If any such indication exists, then its recoverable amount is estimated. The process to determine the recoverable amount is inherently uncertain because such recoverable amount is determined based on a number of management estimates and judgments. The SMFG Group determines the recoverable amount using the estimated future cash flows, pre-tax discount rates, growth rates, and other factors. The estimation of future cash flows inherently reflects management judgments, even though such forecasts are prepared taking into account actual performance and external economic data. The pre-tax discount rates and growth rates may be significantly affected by market interest rates or other market conditions, which are beyond management’s control, and therefore significant management judgments are made to determine these assumptions. These management judgments are made based on the facts and circumstances at the time of the impairment test, and may vary depending on the situation and the time. Changes in management judgments may result in different impairment test results and different impairment amounts recognized. There were no impairment losses recognized on goodwill for the fiscal years ended March 31, 2015, 2014 and 2013. For additional information, refer to Note 14 “Intangible Assets.”

Provision for Interest Repayment

Provision for interest repayment represents management’s estimate of future claims for the refund of so-called “gray zone interest” (interest on loans in excess of the maximum rate prescribed by the Interest Rate Restriction Act (ranging from 15% to 20%) up to the 29.2% maximum rate permitted under the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates), 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.

Management estimates and judgments may change from time to time as the legal environment and market conditions change or new information becomes available. Changes in these estimates and judgments could affect the balance of provision for interest repayment. Provision for interest repayment is recorded in provisions as a liability, and it totaled ¥166,715 million and ¥189,993 million at March 31, 2015 and 2014, respectively. For additional information, refer to Note 20 “Provisions.”

Retirement Benefits

The SMFG Group has defined benefit plans such as defined benefit pension plans and lump-sum severance indemnity plans. The present value of the defined benefit obligation is calculated based on actuarial valuations that are dependent upon a number of assumptions, including discount rates, mortality rates and future salary (benefit) increases. The discount rates are equivalent to market yields of AA credit-rated corporate bonds that have terms to maturity approximating those of the related obligations. Future mortality rates are based on the official mortality table generally used for actuarial assumptions in Japan. Other assumptions used for the calculation of the defined benefit obligation are based on historical records. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. Any change in these assumptions will impact actuarial gains and losses, as well as the present value of the defined benefit obligations and the net retirement benefit expense for each period. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in the year, and return on plan assets excluding interest income are recognized in other comprehensive income and are never reclassified to profit or loss.

The difference between the fair value of the plan assets and the present value of the defined benefit obligation at the end of the reporting period is recognized as assets and liabilities in the consolidated statement of financial position. When this calculation for each plan results in a benefit to the SMFG Group, the recognized asset is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. An economic benefit is available to the SMFG Group, if it is realizable during the life of the plan or on settlement of the plan obligation. The net total of assets and liabilities

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in the consolidated statement of financial position amounted to net assets of ¥332,674 million and ¥122,118 million at March 31, 2015 and 2014, respectively. For additional information, refer to Note 23 “Retirement Benefits.”

Deferred Tax Assets

Deferred tax assets relating to tax losses carried forward and deductible temporary differences are recognized, only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the deductible temporary differences can be utilized. This assessment requires significant management estimates and judgments. Future taxable profit is estimated based on, among other relevant factors, forecasted results of operations, which are based on historical financial performance and the business plans that management believes to be prudent and feasible. While the SMFG Group carefully assesses the realization of tax losses carried forward and deductible temporary differences, the actual taxable profit in the future may be less than the forecast. The deferred tax assets amounted to ¥117,500 million and ¥147,241 million at March 31, 2015 and 2014, respectively, while the net total of deferred tax assets and liabilities amounted to net liabilities of ¥446,305 million and ¥2,010 million in the consolidated statement of financial position at March 31, 2015 and 2014, respectively. For additional information, refer to Note 22 “Deferred Income Tax.”

4 SEGMENT ANALYSIS

Business Segments

The SMFG Group’s business segment information is prepared based on the internal reporting system utilized by management to assess the performance of its business segments.

The SMFG Group has four main business segments: Commercial Banking, Leasing, Securities, and Consumer Finance, with the remaining operations recorded in Others. The business segment information covers SMBC, which accounts for the major portion of the SMFG Group’s total assets and revenue, in Commercial Banking, Sumitomo Mitsui Finance and Leasing Company, Limited (“SMFL”) in Leasing, SMBC Nikko Securities Inc. (“SMBC Nikko Securities”) and SMBC Friend Securities Co., Ltd. (“SMBC Friend Securities”) in Securities, and Sumitomo Mitsui Card Company, Limited (“Sumitomo Mitsui Card”), Cedyna Financial Corporation (“Cedyna”) and SMBC Consumer Finance Co., Ltd. (“SMBC Consumer Finance”) in Consumer Finance.

Commercial Banking

SMBC represents the majority of the Commercial Banking segment, and the remainder includes domestic banking subsidiaries, such as Kansai Urban Banking Corporation (“KUBC”), THE MINATO BANK, LTD. (“The Minato Bank”) and SMBC Trust Bank Ltd. (“SMBC Trust Bank”), as well as foreign subsidiaries, such as Sumitomo Mitsui Banking Corporation Europe Limited (“SMBC Europe”), Sumitomo Mitsui Banking Corporation (China) Limited (“SMBC (China)”) and Manufacturers Bank. Since SMBC has a significant impact on the overall performance of the SMFG Group, its performance is reported to management in more detail by each business unit based on customer market.

Until March 31, 2014, SMBC conducted its primary banking business through five business units: the Consumer Banking Unit, the Middle Market Banking Unit, the Corporate Banking Unit, the International Banking Unit and the Treasury Unit. On April 1, 2014, SMBC restructured its domestic business operations and reorganized its domestic business units, in order to further enhance its capability to meet the needs of the SMFG Group’s clients and deliver higher value-added products and services. Under the new structure, the Consumer Banking Unit, the Middle Market Banking Unit and the Corporate Banking Unit were reorganized into two business units: the Wholesale Banking Unit and the Retail Banking Unit. Accordingly, SMBC operates its primary banking business through four business units. Comparative information has been restated to reflect this change. In addition to the four business units, SMBC also has several cross-sectional units and divisions,

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including the Investment Banking Unit, the Corporate Advisory Division, the Private Advisory Division and the Transaction Business Division. The revenues and expenses of these units and divisions are generally allocated to each business unit.

SMBC’s Wholesale Banking Unit

SMBC’s Wholesale Banking Unit aims to offer business solutions for the increasingly complex and diverse management issues that are faced by large Japanese corporations, including listed companies and mid-sized companies, and, together with certain of our Group companies, provides a wide range of financial products and services targeting those corporations and companies, through its sales channels. The financial products and services that this business unit provides include deposits, loans including syndicated loans, commitment lines, structured finance and nonrecourse loans, settlement services, cash management, leasing, factoring, management information systems consulting, collection and investment banking services.

SMBC’s Retail Banking Unit

SMBC’s Retail Banking Unit provides financial services to both consumers residing in Japan and domestic small-sized companies. For consumers, this business unit offers a wide range of financial services including personal bank accounts, housing loans, investment trusts, pension-type insurance products and life insurance products. For small-sized companies, this business unit provides a wide array of financial products and services to comprehensively address in the same place business owners’ needs as both corporate managers and individuals such as business and asset succession.

SMBC’s International Banking Unit

SMBC’s International Banking Unit mainly supports companies, financial institutions, sovereign/quasi-sovereign entities outside Japan, and multinational companies operating in Japan. This business unit has branches in the Americas, Europe and Middle East, and Asia and Oceania regions, forming a global network. This business unit provides a variety of tailored products and services including loans, deposits, clearing services, trade finance, project finance, loan syndication and global cash management services.

SMBC’s Treasury Unit

SMBC’s Treasury Unit operates in the domestic and international money, foreign exchange, securities and derivatives markets to serve customer needs and SMBC’s own asset liability management requirements. To further expand SMBC’s customer base, this business unit also seeks to provide specialized solutions and enhance customer service capabilities in market transactions through providing a variety of products from traditional money and foreign exchange transactions to derivative transactions.

SMBC’s Others

SMBC’s Others represents the difference between the aggregate of SMBC’s four business units and SMBC as a whole. SMBC’s Others includes the profit and loss amounts related to the Corporate Staff Unit, the Corporate Services Unit, the Compliance Unit, the Risk Management Unit and the Internal Audit Unit, which do not belong to any of the four business units. Those amounts mainly consist of administrative expenses related to the headquarters operations and profit or loss on the activities related to capital management.

Leasing

Leasing mainly consists of SMFL, SMBC Leasing and Finance, Inc., a U.S. subsidiary, and Sumitomo Mitsui Auto Service Company Limited, an associate of the SMFG Group. SMFL is one of the major leasing companies in Japan and provides a variety of leasing services such as equipment leases, operating leases, leveraged leases and aircraft operating leases. The aircraft leasing business commenced in June 2012 as SMBC Aviation Capital is included in SMFL.

F-33

Securities

Securities mainly consists of SMBC Nikko Securities and SMBC Friend Securities. SMBC Nikko Securities is one of the major Japanese securities brokers and offers a wide range of financial products, investment consultation and administration services to its individual and corporate customers in Japan. For individual customers, SMBC Nikko Securities provides consulting services to meet diversified asset management needs, and an online trading tool. For corporate customers, it offers trading capabilities and financial products, debt and equity underwriting, and M&A advisory services, mainly in Japan. SMBC Friend Securities is a full-line securities company focusing on retail business in Japan.

Consumer Finance

Consumer Finance mainly consists of Sumitomo Mitsui Card, Cedyna and SMBC Consumer Finance. Sumitomo Mitsui Card is a leading company in the domestic credit card industry, having introduced the Visa brand into the Japanese market. Sumitomo Mitsui Card conducts a comprehensive credit card business and offers a variety of settlement and financing services. Cedyna conducts credit card, installment (such as shopping credit and automobile loan), and solution (such as collection and factoring) businesses. SMBC Consumer Finance, which became the SMFG Group’s wholly owned subsidiary in April 2012, provides consumer loans that consist mainly of unsecured loans to individuals, and engages in other business including a loan guarantee business. It changed its company name from Promise Co., Ltd. (“Promise”) in July 2012.

SMFG’s Others

SMFG’s Others represents the difference between the aggregate of Commercial Banking, Leasing, Securities, and Consumer Finance segments, and the SMFG Group as a whole. It mainly consists of profit or loss from SMFG on a stand-alone basis, other subsidiaries and equity-method associates, including The Japan Research Institute, Limited. It also includes internal transactions between the SMFG Group companies, which are eliminated in the consolidated financial statements.

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 is calculated by deducting general and administrative expenses (i.e., the total of personnel expense, non-personnel expense and tax, excluding nonrecurring factors) from 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). While the SMFG 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 accounting principles generally accepted in Japan (“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 Operation to Consolidated Income Statement.”

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-34

Segmental Results of Operation

For the fiscal year ended March 31, 2015:

	Commercial Banking
	SMBC																		Others(2)			Total
	Wholesale Banking  Unit			Retail Banking Unit			International Banking  Unit			Treasury Unit			Others			SMBC Total
	(In billions)
Gross profit	¥	555.4		¥	386.8		¥	345.3		¥	354.0		¥	(7.2	)	¥	1,634.3		¥	289.4		¥	1,923.7
Net interest income		315.8			313.2			227.8			212.4			52.2			1,121.4			171.3			1,292.7
Net non-interest income		239.6			73.6			117.5			141.6			(59.4	)		512.9			118.1			631.0
General and administrative expenses and others		(206.8	)		(350.1	)		(106.6	)		(25.9	)		(101.8	)		(791.2	)		(203.0	)		(994.2	)
Consolidated net business profit(1)(7)	¥	348.6		¥	36.7		¥	238.7		¥	328.1		¥	(109.0	)	¥	843.1		¥	86.4		¥	929.5

	Leasing						Securities									Consumer Finance												Others			Total
	SMFL(3)			Total(4)			SMBC Nikko Securities(5)			SMBC Friend Securities			Total(4)			Sumitomo Mitsui Card			Cedyna(6)			SMBC Consumer Finance(3)			Total(4)
	(In billions)
Gross profit	¥	137.0		¥	149.3		¥	346.3		¥	50.4		¥	393.9		¥	196.4		¥	164.2		¥	215.5		¥	576.9		¥	(63.4	)	¥	2,980.4
Net interest income		19.3			24.4			1.5			1.2			3.8			13.6			25.9			149.0			178.7			5.6			1,505.2
Net non-interest income		117.7			124.9			344.8			49.2			390.1			182.8			138.3			66.5			398.2			(69.0	)		1,475.2
General and administrative expenses and others		(56.5	)		(60.8	)		(248.7	)		(40.0	)		(301.9	)		(146.0	)		(121.7	)		(96.1	)		(381.9	)		68.9			(1,669.9	)
Consolidated net business profit(1)(7)	¥	80.5		¥	88.5		¥	97.6		¥	10.4		¥	92.0		¥	50.4		¥	42.5		¥	119.4		¥	195.0		¥	5.5		¥	1,310.5

F-35

For the fiscal year ended March 31, 2014:

	Commercial Banking
	SMBC																		Others(2)			Total
	Wholesale Banking  Unit			Retail Banking Unit			International Banking  Unit			Treasury Unit			Others			SMBC Total
	(In billions)
Gross profit	¥	558.5		¥	405.4		¥	296.0		¥	325.5		¥	(27.3	)	¥	1,558.1		¥	249.1		¥	1,807.2
Net interest income		323.4			321.3			174.6			225.2			20.4			1,064.9			171.1			1,236.0
Net non-interest income		235.1			84.1			121.4			100.3			(47.7	)		493.2			78.0			571.2
General and administrative expenses and others		(200.7	)		(336.4	)		(89.1	)		(22.9	)		(96.6	)		(745.7	)		(195.6	)		(941.3	)
Consolidated net business profit(1)(7)	¥	357.8		¥	69.0		¥	206.9		¥	302.6		¥	(123.9	)	¥	812.4		¥	53.5		¥	865.9

	Leasing						Securities									Consumer Finance												Others			Total
	SMFL(3)			Total(4)			SMBC Nikko Securities(5)			SMBC Friend Securities			Total(4)			Sumitomo Mitsui Card			Cedyna(6)			SMBC Consumer Finance(3)			Total(4)
	(In billions)
Gross profit	¥	127.9		¥	138.4		¥	339.3		¥	58.2		¥	397.8		¥	189.9		¥	167.6		¥	181.8		¥	540.1		¥	14.7		¥	2,898.2
Net interest income		29.1			35.2			0.2			1.4			2.7			13.9			28.3			124.4			156.6			53.7			1,484.2
Net non-interest income		98.8			103.2			339.1			56.8			395.1			176.0			139.3			57.4			383.5			(39.0	)		1,414.0
General and administrative expenses and others		(52.9	)		(54.4	)		(235.3	)		(42.5	)		(292.0	)		(139.6	)		(123.6	)		(73.0	)		(352.8	)		80.8			(1,559.7	)
Consolidated net business profit(1)(7)	¥	75.0		¥	84.0		¥	104.0		¥	15.7		¥	105.8		¥	50.3		¥	44.0		¥	108.8		¥	187.3		¥	95.5		¥	1,338.5

F-36

For the fiscal year ended March 31, 2013:

	Commercial Banking
	SMBC																		Others(2)			Total
	Wholesale Banking  Unit			Retail Banking Unit			International Banking  Unit			Treasury Unit			Others			SMBC Total
	(In billions)
Gross profit	¥	549.3		¥	445.8		¥	240.5		¥	295.3		¥	9.2		¥	1,540.1		¥	258.7		¥	1,798.8
Net interest income		320.3			351.8			142.0			125.5			31.6			971.2			156.0			1,127.2
Net non-interest income		229.0			94.0			98.5			169.8			(22.4	)		568.9			102.7			671.6
General and administrative expenses and others		(198.3	)		(335.5	)		(72.7	)		(20.9	)		(100.3	)		(727.7	)		(180.6	)		(908.3	)
Consolidated net business profit(1)(7)	¥	351.0		¥	110.3		¥	167.8		¥	274.4		¥	(91.1	)	¥	812.4		¥	78.1		¥	890.5

	Leasing						Securities									Consumer Finance												Others			Total
	SMFL(3)			Total(4)			SMBC Nikko Securities(5)			SMBC Friend Securities			Total(4)			Sumitomo Mitsui Card			Cedyna(6)			SMBC Consumer Finance(3)			Total(4)
	(In billions)
Gross profit	¥	114.8		¥	120.4		¥	278.7		¥	59.4		¥	341.5		¥	183.1		¥	166.2		¥	165.8		¥	520.0		¥	12.2		¥	2,792.9
Net interest income		40.8			46.2			(1.6	)		0.4			—			15.5			30.8			117.6			157.5			61.7			1,392.6
Net non-interest income		74.0			74.2			280.3			59.0			341.5			167.6			135.4			48.2			362.5			(49.5	)		1,400.3
General and administrative expenses and others		(50.0	)		(47.7	)		(204.0	)		(41.4	)		(260.7	)		(132.6	)		(125.1	)		(64.3	)		(336.5	)		62.2			(1,491.0	)
Consolidated net business profit(1)(7)	¥	64.8		¥	72.7		¥	74.7		¥	18.0		¥	80.8		¥	50.5		¥	41.1		¥	101.5		¥	183.5		¥	74.4		¥	1,301.9

(1) The calculation method of consolidated net business profit was changed on April 1, 2014 in order to improve the group management. Under the new method, consolidated net business profit is calculated based on consolidated income statement under Japanese GAAP. Consolidated net business profit = Gross profit (*) - General and administrative expenses + share of profit or loss of equity-method associates. Comparative information has been restated accordingly.

(*)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 in Commercial Banking consist of SMFG’s banking subsidiaries except SMBC, such as KUBC, The Minato Bank, SMBC Europe, and SMBC (China).

(3) The figures represent consolidated figures of respective companies.

(4) Total under each business segment, except Commercial Banking, includes the aggregation of the results from the operating units that were not separately identified.

(5) The figures are the sum of SMBC Nikko Securities (nonconsolidated basis) and its overseas securities subsidiaries.

(6) The figures represent Cedyna’s consolidated figures excluding insignificant subsidiaries.

(7) The SMFG Group’s total credit cost (reversal) for the fiscal years ended March 31, 2015, 2014 and 2013 were ¥7.8 billion, ¥(49.1) billion and ¥173.1 billion, respectively, of which ¥(68.3) billion, ¥(116.5) billion and ¥63.7 billion were for Commercial Banking, ¥(6.1) billion, ¥(0.9) billion and ¥5.3 billion were for Leasing, ¥(0.2) billion, nil and ¥0.3 billion were for Securities and ¥78.8 billion, ¥66.8 billion and ¥69.3 billion were for Consumer Finance. Total credit costs include gains on recoveries of written-off claims. The SMFG Group’s total credit costs (reversal) are not included in the consolidated net business profit.

F-37

Reconciliation of Segmental Results of Operation to Consolidated Income Statement

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 fiscal year ended March 31,
	2015			2014			2013
	(In billions)
Consolidated net business profit	¥	1,310.5		¥	1,338.5		¥	1,301.9
Differences between management reporting and Japanese GAAP(1):
Total credit costs(2)		(7.8	)		49.1			(173.1	)
Gains (losses) on equity instruments		66.7			89.2			(21.0	)
Others		(60.0	)		(54.1	)		(43.7	)
Profit before tax under Japanese GAAP		1,309.4			1,422.7			1,064.1
Differences between IFRS and Japanese GAAP:
Scope of consolidation		(3.9	)		(10.8	)		(5.7	)
Derivative financial instruments		(84.5	)		(70.8	)		(53.3	)
Investment securities		10.2			6.2			(123.7	)
Loans and advances		(116.3	)		(36.7	)		44.2
Investments in associates and joint ventures		23.6			4.9			22.4
Property, plant and equipment		(1.0	)		3.1			0.4
Lease accounting		(2.0	)		(3.1	)		(7.7	)
Defined benefit plans		3.1			19.8			15.4
Foreign currency translation		(23.1	)		(45.9	)		(56.9	)
Others		17.4			16.9			9.9
Profit before tax under IFRS	¥	1,132.9		¥	1,306.3		¥	909.1

(1) Reconciling items for differences between management reporting and Japanese GAAP have been changed following the change in the calculation method of the consolidated net business profit. Comparative information has been restated accordingly.

(2) A positive figure indicates net reversal of credit costs.

F-38

Information about Geographical Areas

The following table shows the total operating income in accordance with IFRS by the main geographical areas. The SMFG Group’s services are provided to domestic and foreign clients on a worldwide basis. These include transactions where SMBC’s branches in Japan may deal with customers located in foreign countries and where SMBC’s overseas branches may provide services to Japanese companies.

To identify income attributed to each geographical area for the purposes of this disclosure, they are aggregated based on the geographical location of the booking entity, with the assumption that transactions booked in booking entities are deemed to have occurred in their respective geographical areas.

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Domestic(1):
Japan	¥	2,536,539	¥	2,525,836	¥	2,376,515
Total domestic		2,536,539		2,525,836		2,376,515
Foreign(1)(2) :
Americas		172,050		187,435		131,830
Europe and Middle East		350,105		280,187		194,887
Asia and Oceania		273,739		230,895		191,455
Total foreign		795,894		698,517		518,172
Total operating income(3)	¥	3,332,433	¥	3,224,353	¥	2,894,687

(1) The geographical segmentation is determined based on the degrees of the following factors: geographic proximity, similarity of economic activities and relationship of business activities among regions.

(2) Americas includes the United States, Brazil, Canada and others; Europe and Middle East include the United Kingdom, Germany, France and others; Asia and Oceania include China, Singapore, Australia and others except Japan.

(3) Total operating income comprises net interest income, net fee and commission income, net trading income, net income from financial assets at fair value through profit or loss, net investment income and other income.

5 CASH AND DEPOSITS WITH BANKS

Cash and deposits with banks at March 31, 2015 and 2014 consisted of the following:

	At March 31,
	2015		2014
	(In millions)
Cash	¥	1,173,880	¥	1,238,416
Deposits with banks		38,938,903		31,970,308
Total cash and deposits with banks	¥	40,112,783	¥	33,208,724

The reconciliation of cash and cash equivalents used for the purposes of the consolidated statement of cash flows at March 31, 2015, 2014 and 2013 is shown as follows:

	At March 31,
	2015			2014			2013
	(In millions)
Cash and deposits with banks	¥	40,112,783		¥	33,208,724		¥	11,804,786
Less: term deposits with original maturities over three months		(581,743	)		(609,503	)		(711,081	)
Less: cash segregated as deposits and others		(422,283	)		(400,976	)		(372,119	)
Cash and cash equivalents	¥	39,108,757		¥	32,198,245		¥	10,721,586

F-39

Private depository institutions in Japan are required to maintain certain minimum reserve funds with the Bank of Japan, based on average deposit balances and certain other factors. There are similar reserve deposit requirements for the SMFG Group’s foreign offices engaged in banking businesses in foreign countries. At March 31, 2015, 2014 and 2013, the reserves at the central banks, including those minimum reserve funds, which were included in cash and cash equivalents, amounted to ¥31,593,178 million, ¥25,737,152 million and ¥5,400,547 million, respectively.

6 TRADING ASSETS

Trading assets at March 31, 2015 and 2014 consisted of the following:

	At March 31,
	2015		2014
	(In millions)
Debt instruments	¥	2,618,593	¥	3,263,085
Equity instruments		624,592		294,460
Total trading assets	¥	3,243,185	¥	3,557,545

Trading debt instruments mainly consist of Japanese government bonds. Trading equity instruments mainly consist of publicly traded Japanese stocks and investment funds.

7 DERIVATIVE FINANCIAL INSTRUMENTS

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 SMFG Group enters into a variety of derivatives for trading and risk management purposes. The SMFG Group uses derivatives for trading activities, which include facilitating customer transactions, market-making and arbitrage activities. The SMFG Group also uses derivatives to reduce its exposures to market and credit risks as part of its asset and liability management, but does not apply hedge accounting.

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 SMFG Group’s derivative financial instruments mainly consist of interest rate derivatives and currency derivatives. Interest rate derivatives include interest rate swaps, interest rate futures and interest rate swaptions. Currency derivatives include foreign exchange forward transactions, currency swaps and currency options.

F-40

The tables below represent the derivative financial instruments by type and purpose of derivatives at March 31, 2015 and 2014.

	At March 31, 2015
	Trading						Risk Management(1)
	Notional amounts		Assets		Liabilities		Notional amounts		Assets		Liabilities
	(In millions)
Interest rate derivatives	¥	687,138,214	¥	3,619,256	¥	3,692,925	¥	58,945,067	¥	758,978	¥	722,234
Futures		149,155,836		79,448		91,667		10,731,918		—		5,071
Listed Options		36,729,312		7,097		151		—		—		—
Forwards		13,617,468		3		139		—		—		—
Swaps		448,821,964		3,446,290		3,490,754		48,070,491		758,745		717,017
OTC Options		38,813,634		86,418		110,214		142,658		233		146
Currency derivatives		95,450,773		1,840,958		1,739,303		7,661,419		173,920		491,857
Futures		81,429		181		—		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		62,599,181		1,266,650		1,399,095		822,103		12,714		8,327
Swaps		26,890,783		444,330		150,459		6,839,316		161,206		483,530
OTC Options		5,879,380		129,797		189,749		—		—		—
Equity derivatives		2,139,981		44,862		53,864		184,354		1,687		15,010
Futures		1,274,309		7,649		12,272		118,376		1,687		—
Listed Options		323,588		11,546		16,412		—		—		—
Forwards		50,198		908		281		—		—		—
Swaps		32,130		67		1,341		65,978		—		15,010
OTC Options		459,756		24,692		23,558		—		—		—
Commodity derivatives		247,769		19,580		19,465		—		—		—
Futures		29,706		1,829		2,466		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		—		—		—		—		—		—
Swaps		193,438		17,481		16,128		—		—		—
OTC Options		24,625		270		871		—		—		—
Credit derivatives		1,271,457		11,962		5,129		—		—		—
Total derivative financial instruments	¥	786,248,194	¥	5,536,618	¥	5,510,686	¥	66,790,840	¥	934,585	¥	1,229,101

F-41

	At March 31, 2014
	Trading						Risk Management(1)
	Notional amounts		Assets		Liabilities		Notional amounts		Assets		Liabilities
	(In millions)
Interest rate derivatives	¥	556,364,929	¥	3,321,845	¥	3,351,307	¥	46,375,105	¥	523,564	¥	510,239
Futures		60,037,460		20,280		21,092		823,040		38		13
Listed Options		27,637,310		4,257		86		—		—		—
Forwards		9,867,210		4		45		—		—		—
Swaps		429,433,691		3,224,168		3,246,043		45,493,987		522,927		509,779
OTC Options		29,389,258		73,136		84,041		58,078		599		447
Currency derivatives		78,485,136		922,695		869,140		5,371,395		54,923		188,911
Futures		70,453		32		—		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		50,921,507		479,577		535,702		333,924		1,119		—
Swaps		21,998,144		318,491		166,867		5,037,471		53,804		188,911
OTC Options		5,495,032		124,595		166,571		—		—		—
Equity derivatives		1,315,207		31,536		35,521		115,245		4,174		708
Futures		693,031		1,987		3,886		—		—		—
Listed Options		149,355		3,108		4,733		—		—		—
Forwards		14,996		—		262		—		—		—
Swaps		10,304		—		983		115,245		4,174		708
OTC Options		447,521		26,441		25,657		—		—		—
Commodity derivatives		203,071		26,816		17,810		—		—		—
Futures		13,766		122		121		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		—		—		—		—		—		—
Swaps		178,251		26,300		17,146		—		—		—
OTC Options		11,054		394		543		—		—		—
Credit derivatives		1,834,065		5,829		7,355		—		—		—
Total derivative financial instruments	¥	638,202,408	¥	4,308,721	¥	4,281,133	¥	51,861,745	¥	582,661	¥	699,858

(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 hedges under Japanese GAAP, but the SMFG Group does not apply hedge accounting under IFRS.

Credit derivatives

The SMFG Group enters into credit derivatives to manage the risk of its commercial banking credit portfolio containing loans by hedging, as well as diversifying the credit exposure in the portfolio, and to undertake credit loss protection transactions based on the needs from customers as financial intermediation. The tables below provide information regarding the notional amounts and the fair value of credit derivatives by purpose at March 31, 2015 and 2014.

	At March 31, 2015
	Protection purchased						Protection sold
	Notional amounts		Assets		Liabilities		Notional amounts		Assets		Liabilities
	(In millions)
Managing the SMFG Group’s credit risk portfolio	¥	414,093	¥	60	¥	3,387	¥	519,772	¥	7,732	¥	62
Facilitating client transactions		115,759		117		1,508		221,833		4,053		172
Total	¥	529,852	¥	177	¥	4,895	¥	741,605	¥	11,785	¥	234

F-42

	At March 31, 2014
	Protection purchased						Protection sold
	Notional amounts		Assets		Liabilities		Notional amounts		Assets		Liabilities
	(In millions)
Managing the SMFG Group’s credit risk portfolio	¥	322,423	¥	82	¥	2,258	¥	426,751	¥	1,200	¥	2,500
Facilitating client transactions		487,096		738		1,326		597,795		3,809		1,271
Total	¥	809,519	¥	820	¥	3,584	¥	1,024,546	¥	5,009	¥	3,771

The following table summarizes the notional amounts of the SMFG Group’s credit derivative portfolio by type of counterparty at March 31, 2015 and 2014.

	At March 31, 2015				At March 31, 2014
	Protection purchased		Protection sold		Protection purchased		Protection sold
	(In millions)
Banks and broker-dealers	¥	499,569	¥	741,605	¥	616,350	¥	1,024,546
Insurance and other financial guaranty firms		30,283		—		193,169		—
Total	¥	529,852	¥	741,605	¥	809,519	¥	1,024,546

8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at fair value through profit or loss at March 31, 2015 and 2014 consisted of the following:

	At March 31,
	2015		2014
	(In millions)
Debt instruments	¥	1,654,259	¥	1,697,872
Equity instruments		131,425		142,383
Total financial assets at fair value through profit or loss	¥	1,785,684	¥	1,840,255

The SMFG Group classifies the entire hybrid instrument as financial assets at fair value through profit or loss when the SMFG Group is required to separate an embedded derivative from its host contract, but is unable to measure the embedded derivative separately either at acquisition or at the end of a subsequent reporting period.

The SMFG Group also classifies certain financial assets held by a venture capital investment subsidiary as financial assets at fair value through profit or loss. These financial assets are managed and their performance is evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

F-43

9 INVESTMENT SECURITIES

Investment securities at March 31, 2015 and 2014 consisted of the following:

	At March 31,
	2015		2014
	(In millions)
Held-to-maturity investments:
Domestic:
Japanese government bonds	¥	3,282,787	¥	4,330,877
Japanese municipal bonds		67,843		102,580
Japanese corporate bonds		46,265		94,797
Total domestic		3,396,895		4,528,254
Total held-to-maturity investments	¥	3,396,895	¥	4,528,254
Available-for-sale financial assets:
Domestic:
Japanese government bonds	¥	9,389,959	¥	8,261,809
Japanese municipal bonds		52,150		125,804
Japanese corporate bonds		231,591		515,280
Total domestic debt instruments		9,673,700		8,902,893
Equity instruments		5,676,371		4,470,247
Total domestic		15,350,071		13,373,140
Foreign:
U.S. Treasury and other U.S. government agency bonds		2,062,043		1,871,757
Bonds issued by other governments and official institutions		2,205,662		1,216,197
Mortgage-backed securities		257,100		241,649
Other debt instruments		214,943		241,800
Total foreign debt instruments		4,739,748		3,571,403
Equity instruments		752,942		580,201
Total foreign		5,492,690		4,151,604
Total available-for-sale financial assets	¥	20,842,761	¥	17,524,744
Total investment securities	¥	24,239,656	¥	22,052,998

F-44

10 LOANS AND ADVANCES

The following are the principal components of loans and advances at March 31, 2015 and 2014 by industry classification.

	At March 31,
	2015			2014
	(In millions)
Domestic:
Manufacturing	¥	8,061,654		¥	8,018,568
Agriculture, forestry, fisheries and mining		171,855			177,012
Construction		1,150,616			1,152,388
Transportation, communications and public enterprises		5,175,949			5,086,361
Wholesale and retail		5,664,385			5,505,570
Finance and insurance		2,869,967			2,537,347
Real estate and goods rental and leasing		8,766,724			8,117,000
Services		4,776,706			4,855,536
Municipalities		1,353,949			1,279,010
Lease financing		2,211,773			2,133,760
Consumer(1)		18,817,259			19,086,241
Others		3,211,240			3,159,438
Total domestic		62,232,077			61,108,231
Foreign:
Public sector		164,495			163,685
Financial institutions		3,880,655			3,450,482
Commerce and industry		20,010,729			16,435,047
Lease financing		308,128			267,394
Others		1,375,624			947,826
Total foreign		25,739,631			21,264,434
Gross loans and advances		87,971,708			82,372,665
Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net		(206,440	)		(177,018	)
Less: Allowance for loan losses		(793,552	)		(950,665	)
Net loans and advances	¥	86,971,716		¥	81,244,982

(1) The balance in Consumer mainly consists of housing loans. The housing loan balances amounted to ¥14,087,453 million and ¥14,420,225 million at March 31, 2015 and 2014, respectively.

F-45

Reconciliation of allowance for loan losses is as follows:

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions, except percentages)
Allowance for loan losses at beginning of period	¥	950,665		¥	1,262,478		¥	1,381,164
Provision (credit) for loan losses		79,552			(25,806	)		138,375
Charge-offs:
Domestic		240,663			283,034			241,137
Foreign		9,233			19,647			23,061
Total		249,896			302,681			264,198
Recoveries:
Domestic		9,517			9,293			10,103
Foreign		380			362			333
Total		9,897			9,655			10,436
Net charge-offs		239,999			293,026			253,762
Others(1)		3,334			7,019			(3,299	)
Allowance for loan losses at end of period	¥	793,552		¥	950,665		¥	1,262,478
Allowance for loan losses applicable to foreign activities:
Balance at beginning of period	¥	73,030		¥	74,868		¥	87,344
Balance at end of period	¥	100,783		¥	73,030		¥	74,868
Provision for loan losses	¥	32,712		¥	10,462		¥	1,692
Ratio of net charge-offs to average loans outstanding during the period		0.28	%		0.36	%		0.34	%

(1) Others mainly include foreign exchange translations for the fiscal years ended March 31, 2015 and 2014, whereas the amount for the fiscal year ended March 31, 2013 mainly includes foreign exchange translations as well as the exclusion of the allowance for loan losses related to ORIX Credit Corporation, as SMBC transferred all of its shares of ORIX Credit Corporation to ORIX Corporation in June 2012.

F-46

11 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

The following table presents the SMFG Group’s principal associates and joint venture at March 31, 2015. Investments in associates and joint ventures of the SMFG Group are accounted for using the equity method unless they are held for sale.

Company Name	Country of Incorporation	Proportion of  Ownership Interest(1)		Proportion of Voting Rights(1)		Main Business
		(%)		(%)
Principal Associates
The Japan Net Bank, Limited	Japan		41.1		41.1	Internet banking
PT Bank Tabungan Pensiunan Nasional Tbk	Indonesia		40.0		40.0	Commercial banking
The Bank of East Asia, Limited	China		17.4		17.4	Commercial banking
Vietnam Export Import Commercial Joint Stock Bank	Vietnam		15.0		15.0	Commercial banking
Sumitomo Mitsui Auto Service Company, Limited	Japan		33.9		33.9	Leasing
NEC Capital Solutions Limited	Japan		25.0		25.0	Leasing
POCKET CARD CO., LTD.	Japan		35.5		35.5	Credit card
JSOL Corporation	Japan		50.0		50.0	System development and data processing
Sakura Information Systems Co., Ltd.	Japan		49.0		49.0	System engineering and data processing
Daiwa SB Investments Ltd.	Japan		43.9		43.9	Investment advisory and investment trust management
Sumitomo Mitsui Asset Management Company, Limited	Japan		40.0		40.0	Investment advisory and investment trust management
China Post & Capital Fund Management Co., Ltd.	China		24.0		24.0	Investment advisory and investment trust management
Principal Joint Venture
Daiwa Securities SMBC Principal Investments Co., Ltd.	Japan		40.0		40.0	Investments, fund management

(1) Percentages of proportion of ownership interest and proportion of voting rights have been truncated.

The SMFG Group accounts for certain investees, including Vietnam Export Import Commercial Joint Stock Bank and The Bank of East Asia, Limited, as associates regardless of its below 20% holdings of the voting rights to these investees, since the SMFG Group has the ability to exercise significant influence over these investees through participation in the policy making process at the meeting of the board of directors, the provision of essential technical information, or other relevant agreements or relationships.

On the other hand, the SMFG Group accounts for certain investees as available-for-sale financial assets regardless of its 20% or more holdings of the voting rights to these investees because the SMFG Group has contracts or arrangements with other investors by which the SMFG Group loses the power to exert significant influence over such investees.

F-47

The SMFG Group has interests in a number of associates and joint ventures, none of which are regarded as individually material. The following table summarizes, in aggregate, the financial information of all individually immaterial associates and joint ventures that are accounted for using the equity method:

	At and for the fiscal year ended March 31,
	2015		2014
	(In millions)
Carrying amount of investments in associates and joint ventures	¥	619,814	¥	383,590
Share of:
Profit from continuing operations		18,124		19,454
Other comprehensive income (loss)		5,754		(5,291	)
Total comprehensive income		23,878		14,163

There are no significant restrictions on the ability of associates or joint ventures to transfer funds to the SMFG Group in the form of cash dividends, repayment of loans and advances.

12 PROPERTY, PLANT AND EQUIPMENT

The table below shows the changes in property, plant and equipment for the fiscal years ended March 31, 2015 and 2014.

	Assets for rent			Land			Buildings			Leased assets			Others			Total
	(In millions)
Cost	¥	1,003,315		¥	484,186		¥	628,293		¥	16,114		¥	383,819		¥	2,515,727
Accumulated depreciation and impairment losses		(137,490	)		(6,259	)		(340,845	)		(7,049	)		(266,090	)		(757,733	)
Net carrying amount at April 1, 2013		865,825			477,927			287,448			9,065			117,729			1,757,994
Additions		271,427			685			20,966			1,510			82,078			376,666
Acquisition of subsidiaries		103,187			—			135			—			425			103,747
Disposals		(104,944	)		(11,572	)		(2,894	)		(31	)		(1,615	)		(121,056	)
Depreciation		(53,679	)		—			(20,802	)		(2,000	)		(28,585	)		(105,066	)
Impairment losses		—			(659	)		(2,409	)		—			(89	)		(3,157	)
Exchange differences		74,434			6			575			4			1,186			76,205
Others		2,168			1,419			7,455			(18	)		(17,430	)		(6,406	)
Net carrying amount		1,158,418			467,806			290,474			8,530			153,699			2,078,927
Cost		1,338,742			473,454			644,824			16,205			421,569			2,894,794
Accumulated depreciation and impairment losses		(180,324	)		(5,648	)		(354,350	)		(7,675	)		(267,870	)		(815,867	)
Net carrying amount at March 31, 2014		1,158,418			467,806			290,474			8,530			153,699			2,078,927
Additions		357,920			27,162			34,459			1,809			71,179			492,529
Acquisition of subsidiaries		—			—			—			—			—			—
Disposals		(106,934	)		(2,021	)		(1,618	)		(48	)		(1,260	)		(111,881	)
Depreciation		(64,380	)		—			(21,879	)		(1,940	)		(30,939	)		(119,138	)
Impairment losses		—			(228	)		(4,867	)		—			(13	)		(5,108	)
Exchange differences		173,251			13			909			11			2,032			176,216
Others		(11,566	)		—			5,163			6			(8,651	)		(15,048	)
Net carrying amount		1,506,709			492,732			302,641			8,368			186,047			2,496,497
Cost		1,747,839			497,772			679,567			16,693			466,584			3,408,455
Accumulated depreciation and impairment losses		(241,130	)		(5,040	)		(376,926	)		(8,325	)		(280,537	)		(911,958	)
Net carrying amount at March 31, 2015	¥	1,506,709		¥	492,732		¥	302,641		¥	8,368		¥	186,047		¥	2,496,497

The impairment losses on property, plant and equipment are included in “Other expenses” in the consolidated income statement.

F-48

The SMFG Group had ¥2,801,802 million and ¥204,293 million of contractual commitments to acquire property, plant and equipment at March 31, 2015 and 2014, respectively.

The carrying amount of items of property, plant and equipment on which there was a restriction on sale was ¥9,299 million and ¥9,466 million at March 31, 2015 and 2014, respectively.

The carrying amount of items of property, plant and equipment pledged as security for liabilities was ¥9,970 million and ¥10,411 million at March 31, 2015 and 2014, respectively.

13 LEASES

As Lessee

The SMFG Group leases land and buildings, office equipment, and other tangible and intangible assets from third parties under finance leases or operating leases.

Carrying amount of assets held under finance leases

The carrying amount of assets held under finance leases at March 31, 2015 and 2014 consisted of the following:

	At March 31,
	2015		2014
	(In millions)
Tangible assets:
Land and buildings	¥	4,082	¥	4,476
Other tangible assets(1)		4,286		4,054
Total(2)		8,368		8,530
Intangible assets:
Software		307		81
Total(3)	¥	8,675	¥	8,611

(1) Other tangible assets include mainly equipment, machinery and vehicles.

(2) Cross-reference to Leased assets in Note 12 “Property, Plant and Equipment.”

(3) The SMFG Group has sublet leased assets classified as finance leases (the carrying amount of those assets is not included in table above). Future minimum sublease payments related to sublet leased assets are included in finance lease commitments.

Finance lease commitments

The total of future minimum lease payments and their present value under finance leases at March 31, 2015 and 2014 were as follows:

	At March 31,
	2015			2014
	(In millions)
Not later than one year	¥	21,905		¥	20,065
Later than one year and not later than five years		64,747			53,376
Later than five years		19,389			24,843
Total		106,041			98,284
Less: Future interest charges		(4,201	)		(4,661	)
Present value of finance lease commitments(1)	¥	101,840		¥	93,623

(1) Present value of finance lease commitments is included in “Borrowings” in the consolidated statement of financial position. See Note 18 “Borrowings.”

F-49

At March 31, 2015 and 2014, the total amounts of future minimum sublease payments to be received under non-cancellable subleases were ¥66,400 million and ¥53,965 million, respectively.

Operating lease commitments

The total amounts of future minimum lease payments under non-cancellable operating leases at March 31, 2015 and 2014 were as follows:

	At March 31,
	2015		2014
	(In millions)
Not later than one year	¥	44,637	¥	43,499
Later than one year and not later than five years		113,256		117,461
Later than five years		126,404		147,721
Total future minimum lease payments under non-cancellable operating leases	¥	284,297	¥	308,681

For the fiscal years ended March 31, 2015, 2014 and 2013, ¥46,591 million, ¥45,572 million and ¥41,709 million were recognized as expenses in respect of operating lease and sublease agreements, of which ¥46,328 million, ¥45,508 million and ¥41,660 million related to minimum lease payments, and ¥263 million, ¥64 million and ¥49 million related to sublease payments, respectively. Lease expenses recognized in respect of lease and sublease agreements are included in “General and administrative expenses” in the consolidated income statement.

As Lessor

The SMFG Group leases assets to third parties under finance leases or operating leases, including machinery, equipment, aircraft, vessel and property.

Finance lease receivable

The gross investment in the lease, unearned finance income, present value of the minimum lease payments receivable and unguaranteed residual values under finance leases at March 31, 2015 and 2014 were as follows:

	At March 31, 2015
	Gross investment in the lease		Unearned finance income		Present value of the minimum lease payments receivable(1)		Unguaranteed residual values(1)
	(In millions)
Not later than one year	¥	846,429	¥	76,587	¥	769,842	¥	39,597
Later than one year and not later than five years		1,402,363		112,891		1,289,472		88,810
Later than five years		295,901		34,213		261,688		70,492
Total	¥	2,544,693	¥	223,691	¥	2,321,002	¥	198,899

	At March 31, 2014
	Gross investment in the lease		Unearned finance income		Present value of the minimum lease payments receivable(1)		Unguaranteed residual values(1)
	(In millions)
Not later than one year	¥	766,062	¥	72,739	¥	693,323	¥	30,393
Later than one year and not later than five years		1,359,686		106,924		1,252,762		89,493
Later than five years		299,862		35,143		264,719		70,464
Total	¥	2,425,610	¥	214,806	¥	2,210,804	¥	190,350

(1) Present value of the minimum lease payments receivable and unguaranteed residual values are included in “Loans and advances” in the consolidated statement of financial position.

F-50

Accumulated allowance for uncollectible minimum lease payments receivable was ¥18,254 million and ¥17,772 million at March 31, 2015 and 2014, respectively.

Operating lease receivable

The total amounts of the future minimum lease payments receivable under non-cancellable operating leases at March 31, 2015 and 2014 were as follows:

	At March 31,
	2015		2014
	(In millions)
Not later than one year	¥	165,897	¥	140,569
Later than one year and not later than five years		548,945		424,867
Later than five years		478,063		365,371
Total	¥	1,192,905	¥	930,807

14 INTANGIBLE ASSETS

Goodwill

The table below shows the changes in goodwill by business segment for the fiscal years ended March 31, 2015 and 2014.

	Commercial Banking		Leasing		Securities			Consumer Finance		Others			Total
	(In millions)
Gross amount of goodwill	¥	11,197	¥	109,936	¥	256,936		¥	63,418	¥	1,958		¥	443,445
Accumulated impairment losses		—		—		(10,067	)		—		(1,958	)		(12,025	)
Net carrying amount at April 1, 2013		11,197		109,936		246,869			63,418		—			431,420
Acquisitions(1)		16,040		4,373		—			—		—			20,413
Exchange differences		—		682		—			—		—			682
Net carrying amount		27,237		114,991		246,869			63,418		—			452,515
Gross amount of goodwill		27,237		114,991		256,936			63,418		1,958			464,540
Accumulated impairment losses		—		—		(10,067	)		—		(1,958	)		(12,025	)
Net carrying amount at March 31, 2014		27,237		114,991		246,869			63,418		—			452,515
Acquisitions		—		—		—			—		—			—
Exchange differences		—		1,534		—			—		—			1,534
Net carrying amount		27,237		116,525		246,869			63,418		—			454,049
Gross amount of goodwill		27,237		116,525		256,936			63,418		1,958			466,074
Accumulated impairment losses		—		—		(10,067	)		—		(1,958	)		(12,025	)
Net carrying amount at March 31, 2015	¥	27,237	¥	116,525	¥	246,869		¥	63,418	¥	—		¥	454,049

(1) The SMFG Group recognized goodwill of ¥16,040 million in Commercial Banking resulting from the acquisition of SMBC Trust Bank, formerly known as Societe Generale Private Banking Japan Ltd.

Impairment testing of goodwill

Allocating goodwill to cash-generating units

For the purpose of impairment testing, goodwill is allocated to cash-generating units or group of cash-generating units, which represent the lowest level within the entity at which goodwill is monitored for internal purposes.

F-51

At March 31, 2015 and 2014, the SMFG Group allocated goodwill to KUBC and SMBC Trust Bank within Commercial Banking amounting to ¥11,197 million and ¥16,040 million, respectively, to SMFL within Leasing amounting to ¥102,710 million, to SMBC Nikko Securities and SMBC Friend Securities within Securities amounting to ¥172,253 million and ¥74,616 million, respectively, and to SMBC Consumer Finance within Consumer Finance amounting to ¥56,692 million.

The aggregate amounts of other goodwill were ¥20,541 million and ¥19,007 million at March 31, 2015 and 2014, respectively, and they were not considered individually significant.

Timing of impairment tests

The SMFG Group performs impairment tests at least annually and whenever there is an indication that the cash-generating unit may be impaired.

Recoverable amount of cash-generating units

To determine whether an impairment loss shall be recognized, the carrying amount of a cash-generating unit is compared to its recoverable amount. The recoverable amount of a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

Fair value less costs to sell: The fair value less costs to sell is determined using an observable market price for the cash-generating unit in the active market at the date of the impairment test.

Value in use: The value in use is determined based on discounted future cash flows, which are based on the financial plans which have been approved by management and which are valid when the impairment test is performed. The financial plans are prepared taking into account the current economic and regulatory environment, direction of the regulation and business forecasts of the individual cash-generating units.

The SMFG Group determined the recoverable amounts of the primary cash-generating units based on the value in use.

The financial plans, which are used to estimate the cash flow projections of the cash-generating units, cover three to five years. The cash flow projections beyond the period covered by the financial plans are extrapolated by applying the appropriate growth rates in perpetuity.

Key assumptions used in impairment testing

The key assumptions used for the value in use calculations for the fiscal years ended March 31, 2015 and 2014 were as follows:

	KUBC			SMBC Trust Bank			SMFL			SMBC Nikko Securities			SMBC Friend Securities			SMBC Consumer Finance
For the fiscal year ended March 31, 2015:
Pre-tax discount rate		6.62	%		8.48	%		7.53	%		9.73	%		8.36	%		11.01	%
Growth rate		1.00	%		1.00	%		1.00	%		1.00	%		1.00	%		1.00	%
For the fiscal year ended March 31, 2014:
Pre-tax discount rate		7.54	%		8.94	%		7.68	%		11.16	%		9.84	%		9.55	%
Growth rate		1.00	%		1.00	%		1.00	%		1.00	%		1.00	%		1.00	%

Management considers that the pre-tax discount rates and the growth rates are the most sensitive key assumptions to determine the value in use of the cash-generating units.

F-52

Pre-tax discount rate: The pre-tax discount rates used to estimate the discounted cash flow of the primary cash-generating units are determined based on the Capital Asset Pricing Model (“CAPM”). The risk-free interest rate, the market risk premium and the beta factor that are used in the CAPM are determined based on market data and other external sources of information. The beta factor is determined based on a respective group of peer companies of the cash-generating units.

Growth rate: The growth rates used to estimate the cash flow projections beyond the period covered by the financial plans, which shall cover a maximum period of five years, are determined based on the expected long-term inflation rate and long-term average growth rates for the industries. The growth rate does not exceed the long-term growth rate for the industry in which the cash-generating unit operates.

Management believes that there were no reasonably possible changes in any of the key assumptions that would lead to the recoverable amounts of the cash-generating units being below these carrying amounts for the fiscal years ended March 31, 2015 and 2014.

Other intangible assets

The table below shows the changes in other intangible assets for the fiscal years ended March 31, 2015 and 2014.

	Internally generated software			Purchased software			Contractual customer relationships			Trademarks			Other intangibles			Total
	(In millions)
Cost	¥	519,174		¥	186,470		¥	155,162		¥	41,156		¥	22,263		¥	924,225
Accumulated amortization and impairment losses		(342,024	)		(66,850	)		(26,299	)		(13,520	)		(3,688	)		(452,381	)
Net carrying amount at April 1, 2013		177,150			119,620			128,863			27,636			18,575			471,844
Additions		78,558			46,503			—			—			2,543			127,604
Acquisition of subsidiaries		82			3,057			8,468			672			6,912			19,191
Disposals		(253	)		(4,156	)		—			—			(1,172	)		(5,581	)
Amortization		(56,818	)		(38,559	)		(10,175	)		(4,121	)		(1,399	)		(111,072	)
Impairment losses		(108	)		(23	)		—			—			(62	)		(193	)
Exchange differences		44			636			—			—			476			1,156
Others		490			2,028			—			—			(2,236	)		282
Net carrying amount		199,145			129,106			127,156			24,187			23,637			503,231
Cost		589,779			206,158			163,630			41,828			28,318			1,029,713
Accumulated amortization and impairment losses		(390,634	)		(77,052	)		(36,474	)		(17,641	)		(4,681	)		(526,482	)
Net carrying amount at March 31, 2014		199,145			129,106			127,156			24,187			23,637			503,231
Additions		92,210			47,242			—			—			8,487			147,939
Acquisition of subsidiaries		—			—			—			—			—			—
Disposals		(277	)		(3,941	)		—			—			(5,237	)		(9,455	)
Amortization		(62,027	)		(38,072	)		(10,826	)		(4,183	)		(2,770	)		(117,878	)
Impairment losses		—			—			—			—			(4	)		(4	)
Exchange differences		968			270			—			—			966			2,204
Others		3,704			(9,112	)		—			—			1,317			(4,091	)
Net carrying amount		233,723			125,493			116,330			20,004			26,396			521,946
Cost		638,644			212,731			163,630			41,828			33,678			1,090,511
Accumulated amortization and impairment losses		(404,921	)		(87,238	)		(47,300	)		(21,824	)		(7,282	)		(568,565	)
Net carrying amount at March 31, 2015	¥	233,723		¥	125,493		¥	116,330		¥	20,004		¥	26,396		¥	521,946

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The impairment losses on other intangible assets are included in “Other expenses” and the amortization expenses of other intangible assets are included in “General and administrative expenses” in the consolidated income statement.

The SMFG Group had ¥2,770 million and ¥1,867 million of contractual commitments to acquire intangible assets at March 31, 2015 and 2014, respectively.

The amounts of research and development expenditure recognized as expenses for the fiscal years ended March 31, 2015, 2014 and 2013 were ¥171 million, ¥160 million and ¥141 million, respectively, and they were included in “General and administrative expenses” in the consolidated income statement.

Other intangibles at March 31, 2015 and 2014 include leasehold rights, amounting to ¥7,434 million and ¥7,449 million, respectively, which are rights to use land for the purpose of owning the buildings. Since the SMFG Group has a long history of renewal, these contracts are not expected to be terminated in the foreseeable future. Leasehold rights are expected to generate cash flows for an indefinite period of time. They are not amortized but are tested for impairment annually, irrespective of whether there is any indication of impairment.

15 OTHER ASSETS

Other assets at March 31, 2015 and 2014 consisted of the following:

	At March 31,
	2015		2014
	(In millions)
Prepaid expenses	¥	54,519	¥	48,966
Accrued income		370,625		319,957
Receivables from brokers, dealers and customers for securities transactions		1,367,720		1,191,736
Retirement benefit assets		379,188		171,966
Security deposits		120,303		121,194
Investment properties(1)		293,554		288,925
Others		899,214		512,768
Total other assets	¥	3,485,123	¥	2,655,512

(1) Investment properties are carried at cost less accumulated depreciation and accumulated impairment losses. The fair values of investment properties were ¥306,720 million and ¥297,042 million at March 31, 2015 and 2014, respectively. The fair values were mainly determined based on market values provided by independent valuation appraisers having the appropriate recognized professional qualifications and recent experience in the locations and categories of properties being valued. Rental income from investment properties was ¥19,076 million, ¥15,195 million and ¥11,198 million for the fiscal years ended March 31, 2015, 2014 and 2013, respectively.

16 DEPOSITS

Deposits at March 31, 2015 and 2014 consisted of the following:

	At March 31,
	2015		2014
	(In millions)
Non-interest-bearing demand deposits	¥	16,250,493	¥	15,073,311
Interest-bearing demand deposits		42,041,777		39,782,147
Deposits at notice		8,790,017		7,370,775
Time deposits		29,084,465		27,337,325
Negotiable certificates of deposit		13,825,898		13,713,540
Others(1)		5,841,330		5,093,396
Total deposits	¥	115,833,980	¥	108,370,494

(1) Others include, among other items, foreign currency deposits in domestic offices and Japanese yen accounts held by foreign depositors in domestic offices.

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17 TRADING LIABILITIES

Trading liabilities at March 31, 2015 and 2014 consisted of the following:

	At March 31,
	2015		2014
	(In millions)
Debt instruments “short position”	¥	2,175,313	¥	1,859,146
Equity instruments “short position”		18,087		6,097
Total trading liabilities	¥	2,193,400	¥	1,865,243

Trading liabilities include the instruments classified as held for trading. Trading debt instruments mainly consist of Japanese government bonds. Trading equity instruments mainly consist of publicly traded Japanese stocks.

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18 BORROWINGS

Short-term borrowings and long-term borrowings (with original maturities of more than one year) at March 31, 2015 and 2014 consisted of the following:

			At March 31,
	Interest rate		2015		2014
			(In millions)
SMFG:
Long-term borrowings:
Subordinated
Fixed rate borrowing, payable in Japanese yen, due 2024-2030		0.56%-1.27%	¥	31,000	¥	—
SMBC:
Short-term borrowings		0.10%-0.38%		5,652,752		1,888,339
Long-term borrowings:
Unsubordinated
Fixed rate borrowing, payable in Japanese yen, due 2014-2028		0.10%-6.10%		15,893		1,220,310
Fixed rate borrowing, payable in United States dollars, due 2019-2024		2.36%-3.30%		36,045		—
Floating rate borrowing, payable in Japanese yen, due 2014-2035		0.06%-0.22%		158,403		152,494
Floating rate borrowing, payable in United States dollars, due 2014-2032		0.33%-1.54%		683,049		660,761
Other fixed or floating rate borrowing, due 2014-2035		0.01%-3.50%		89,053		94,859
Subordinated
Fixed rate borrowing, payable in Japanese yen, due 2014-2027		1.28%-4.50%		261,000		266,000
Total SMBC				6,896,195		4,282,763
Other subsidiaries:
Short-term borrowings		0.15%-8.80%		1,093,497		1,204,553
Long-term borrowings:
Unsubordinated
Fixed rate borrowing, payable in Japanese yen, due 2014-2035		0.10%-2.67%		477,201		438,325
Fixed rate borrowing, payable in United States dollars, due 2014-2023		0.06%-7.72%		136,380		145,972
Fixed rate borrowing, payable in Thai baht, due 2014-2021		2.72%-4.45%		24,173		19,263
Fixed rate borrowing, payable in Chinese yuan, due 2014-2019		2.40%-6.15%		21,852		16,725
Floating rate borrowing, payable in Japanese yen, due 2014-2040		0.10%-2.57%		712,734		627,690
Floating rate borrowing, payable in United States dollars, due 2014-2027		0.25%-3.15%		519,842		436,995
Floating rate borrowing, payable in euros, due 2015-2018		1.00%		28,252		36,904
Floating rate borrowing, payable in Chinese yuan, due 2014-2019		2.50%-6.77%		26,585		27,823
Other fixed or floating rate borrowing, due 2014-2043		0.47%-11.20%		18,111		7,557
Subordinated
Fixed rate borrowing, payable in Japanese yen, due 2021		1.35%		5,200		5,200
Fixed rate borrowing, payable in United States dollars, due 2018		7.62%-7.72%		9,011		—
Floating rate borrowing, payable in Japanese yen, due 2015-2025		2.04%-2.70%		11,250		11,250
Total other subsidiaries				3,084,088		2,978,257
Liabilities associated with securitization transactions:
Fixed rate borrowing, payable in Japanese yen, due 2016-2049		0.14%-2.70%		1,006,806		1,013,846
Floating rate borrowing, payable in Japanese yen, due 2014-2033		0.30%-1.81%		86,647		94,874
Floating rate borrowing, payable in United States dollars, due 2019-2020		0.99%-1.05%		10,476		—
Total liabilities associated with securitization transactions				1,103,929		1,108,720
Lease obligations		—		101,840		93,623
Total borrowings			¥	11,217,052	¥	8,463,363

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The interest rates shown in the above table are the contractual rates in effect at March 31, 2015 and 2014, and thus do not represent the actual effective interest rates. Maturity information for certain subordinated borrowings is based on the date of callable options.

19 DEBT SECURITIES IN ISSUE

Debt securities in issue at March 31, 2015 and 2014 consisted of the following:

		At March 31,
	Interest rate	2015		2014
		(In millions)
SMFG:
Subordinated bonds:
Subordinated bonds, payable in Japanese yen,
due 2024	0.61%-0.85%	¥	134,200	¥	—
Subordinated bonds, payable in United States dollars,
due 2024	4.44%		209,789		—
Total SMFG			343,989		—
SMBC:
Commercial paper	0.00%-0.75%		2,575,587		1,831,866
Bonds:
Bonds, payable in Japanese yen,
due 2014-2037	0.01%-3.40%		766,307		941,784
Bonds, payable in United States dollars,
due 2014-2030	0.57%-4.13%		2,558,292		1,614,470
Bonds, payable in euros,
due 2020-2023	1.00%-2.75%		258,533		175,291
Bonds, payable in Australian dollars,
due 2014-2025	2.97%-4.28%		137,981		139,961
Bonds, payable in British pounds sterling,
due 2016	1.07%-1.11%		44,503		42,805
Bonds, payable in Hong Kong dollars,
due 2022	2.55%		13,392		—
Subordinated bonds:
Subordinated bonds, payable in Japanese yen,
due 2014-2035	0.81%-2.97%		949,438		1,224,867
Subordinated bonds, payable in United States dollars,
due 2022-Perpetual	4.85%-5.63%		217,208		186,667
Subordinated bonds, payable in euros,
due 2020-Perpetual	4.00%-4.38%		139,269		151,776
Total SMBC			7,660,510		6,309,487
Other subsidiaries:
Commercial paper	0.09%-0.33%		2,238,315		1,838,046
Bonds:
Bonds, payable in Japanese yen,
due 2014-2045	0.01%-17.00%		650,056		470,430
Bonds, payable in United States dollars,
due 2015-2020	0.01%-3.80%		1,458		—
Bonds, payable in Chinese yuan,
due 2014-2016	3.00%-5.80%		30,903		14,931
Subordinated bonds:
Subordinated bonds, payable in Japanese yen,
due 2016-Perpetual	2.19%-4.50%		126,200		136,200
Total other subsidiaries			3,046,932		2,459,607
Total debt securities in issue		¥	11,051,431	¥	8,769,094

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Interest rates represent the contractual interest rates that were applied at March 31, 2015 and 2014, and thus do not represent the actual effective interest rates.

20 PROVISIONS

The following table presents movements by class of provisions for the fiscal years ended March 31, 2015 and 2014.

	Provision for interest repayment			Other provisions			Total
	(In millions)
Balance at April 1, 2013	¥	245,129		¥	34,002		¥	279,131
Additional provisions		50,201			12,390			62,591
Amounts used		(104,900	)		(9,680	)		(114,580	)
Unused amounts reversed		(543	)		(1,486	)		(2,029	)
Amortization of discount and effect of change in discount rate		106			214			320
Others		—			40			40
Balance at March 31, 2014		189,993			35,480			225,473
Additional provisions		64,837			17,121			81,958
Amounts used		(87,473	)		(11,310	)		(98,783	)
Unused amounts reversed		(752	)		(514	)		(1,266	)
Amortization of discount and effect of change in discount rate		110			246			356
Others		—			(114	)		(114	)
Balance at March 31, 2015	¥	166,715		¥	40,909		¥	207,624

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. Of these historical experiences, the number of customer claims for the refund has a significant effect on the amount of the provision, and the historical number of customer claims to the SMFG Group was 139 thousand, 132 thousand and 139 thousand for the fiscal years ended March 31, 2015, 2014 and 2013, respectively. The timing of the settlement of these claims is uncertain.

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The decrease in the provision for interest repayment for the fiscal year ended March 31, 2015 was primarily due to the use of the provision during the year, which was partially offset by additional provisions as a result of the estimation of the future claims for the refund.

Other Provisions

Other provisions include asset retirement obligations and provisions for reimbursement of deposits, loan commitments, product warranties and litigation claims. Most of these provisions occurred in the normal course of business and none of them were individually significant at March 31, 2015 and 2014.

21 OTHER LIABILITIES

Other liabilities at March 31, 2015 and 2014 consisted of the following:

	At March 31,
	2015		2014
	(In millions)
Accrued expenses	¥	252,420	¥	239,664
Unearned income		161,355		165,825
Financial guarantees and other credit-related contingent liabilities		149,609		107,561
Due to trust account		718,134		699,330
Payables to brokers, dealers and customers for securities transactions		1,605,743		1,672,819
Payables related to credit card services		503,811		543,624
Obligations from factoring transactions		411,146		265,848
Retirement benefit liabilities		46,514		49,848
Guarantee deposits received		240,765		214,223
Others		1,459,468		1,185,111
Total other liabilities	¥	5,548,965	¥	5,143,853

22 DEFERRED INCOME TAX

The changes of net deferred tax assets and liabilities for the fiscal years ended March 31, 2015 and 2014 were as follows:

	For the fiscal year ended March 31,
	2015			2014
	(In millions)
At beginning of period	¥	(2,010	)	¥	375,460
Deferred tax expense		(87,109	)		(125,807	)
Deferred tax relating to other comprehensive income:
Remeasurements of defined benefit plans reserve		(58,081	)		(76,596	)
Available-for-sale financial assets reserve		(298,884	)		(134,272	)
Exchange differences on translating foreign operations reserve		(2,245	)		(17,171	)
Acquisition and disposal of subsidiaries		(216	)		(6,492	)
Exchange differences and others		2,240			(17,132	)
At end of period	¥	(446,305	)	¥	(2,010	)

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The deferred tax assets and liabilities at March 31, 2015 and 2014 were attributable to the following items:

	At March 31,
	2015			2014
	(In millions)
Deferred tax assets:
Loans and advances	¥	270,981		¥	318,557
Derivative financial instruments		38,252			58,211
Tax losses carried forward		28,755			44,742
Retirement benefits		14,228			42,992
Investment securities		849			2,205
Other deductible temporary differences		199,394			158,827
Total deferred tax assets		552,459			625,534
Deferred tax liabilities:
Investment securities		747,533			409,690
Goodwill and intangible assets		90,012			95,035
Property, plant and equipment		52,919			49,903
Retirement benefits		38,012			—
Lease transactions		23,000			21,790
Other taxable temporary differences		47,288			51,126
Total deferred tax liabilities		998,764			627,544
Net deferred tax liabilities(1)	¥	(446,305	)	¥	(2,010	)

(1) Deferred tax assets and deferred tax liabilities are offset in the consolidated statement of financial position if the entity has a legally enforceable right to set off current tax assets against current tax liabilities, and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

On March 31, 2014, the Government of Japan promulgated to repeal the Act on Special Measures Concerning Securing Necessary Financial Resources for Funding the Restoration from the Great East Japan Earthquake, which initially imposed a 10% of corporation surtax, one year earlier than its initial plan. In addition, on March 31, 2014, the Government of Japan promulgated (i) an amendment to the Local Tax Act and (ii) the Local Corporate Tax Law. Those laws (i) reduce local inhabitant tax by 4.4%, but adversely (ii) impose newly enacted 4.4% local corporation tax. As a result, the effective statutory tax rate (including local taxes) of SMFG was reduced to 35.6% for the fiscal year beginning April 1, 2014.

On March 31, 2015, the Government of Japan promulgated (i) an amendment to the Corporation Tax Act and (ii) the Local Tax Act. Those laws (i) reduce the Japanese national corporation tax rate by 1.6 percentage points from the fiscal year beginning April 1, 2015 and (ii) reduce the enterprise tax rate by 1.2 percentage points from the fiscal year beginning April 1, 2015 and additionally reduce it by 1.2 percentage points from the fiscal year beginning April 1, 2016. As a result, the effective statutory tax rate of SMFG is 33.1% during the fiscal year beginning April 1, 2015 and will be 32.3% for the fiscal years beginning April 1, 2016. The SMFG Group measured deferred tax assets and liabilities at the rates that were expected to apply to the period when the assets are realized or the liabilities are settled, based on the tax rate that had been enacted or substantively enacted at March 31, 2015. Accordingly, the tax rate changes in Japan increased deferred tax expense by ¥75 billion for the fiscal year ended March 31, 2015.

The deferred tax assets of the SMFG Group consist mainly of the deferred tax assets of SMBC. The deferred tax assets of SMBC mainly consisted of deferred tax assets for loans and advances or derivative financial instruments, which were generally related to the accumulated losses from the fair value change or the impairment of these assets which would be deductible for tax purposes in future periods. SMBC considers that it will be able to use most of the deductible temporary differences based mainly on future taxable profit estimated based on,

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among other relevant factors, forecasted results of operations, which are based on historical financial performance and the business plans that management believes to be prudent and feasible. In SMFG’s other subsidiaries, deferred tax assets relating to tax losses carried forward and deductible temporary differences are recognized only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the deductible temporary differences can be utilized. No deferred tax assets were recognized in SMFG and certain SMFG subsidiaries for the tax losses carried forward projected to expire, or for the deductible temporary differences estimated not to be realized due to the uncertainty of sufficient future taxable profit.

The following table shows the amounts of deductible temporary differences and tax losses carried forward by expiration date at March 31, 2015 and 2014 for which no deferred tax assets were recognized.

	At March 31,
	2015		2014
	(In millions)
Deductible temporary differences	¥	576,614	¥	617,492
Tax losses carried forward which will expire in 1 year		—		71,711
2 years		5,588		—
3 years		115,155		2,257
4 years		200,938		115,603
5 years		154,326		217,470
6 years		251,319		161,468
7 years		70,870		251,883
8 years		60,710		70,201
9 years and thereafter		40,823		52,100
Total deductible temporary differences and tax losses carried forward	¥	1,476,343	¥	1,560,185

In addition to the above table, the SMFG Group does not recognize deferred tax assets for deductible temporary differences related to investments in subsidiaries, associates and joint ventures where SMFG has no intention to reverse these differences in the foreseeable future. The amount of those deductible temporary differences was approximately ¥894 billion and ¥1,732 billion at March 31, 2015 and 2014, respectively. At March 31, 2014, most of the deductible temporary differences were associated with investments in SMBC, which resulted from a statutory share transfer made at the establishment of SMFG in December 2002. Since the carrying amount of the investments in SMBC exceeded the tax base, resulting from an increase in SMBC’s net assets, there were no deductible temporary differences associated with the investments in SMBC at March 31, 2015.

At March 31, 2015 and 2014, the amount of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures for which deferred tax liabilities had not been recognized was approximately ¥1,583 billion and ¥906 billion, respectively. SMFG can control the timing of reversal of the temporary differences and it is probable that they will not be reversed in the foreseeable future.

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Deferred tax expense for the fiscal years ended March 31, 2015 and 2014 was attributable to the following temporary differences and tax losses carried forward:

	For the fiscal year ended March 31,
	2015			2014
	(In millions)
Loans and advances	¥	(50,374	)	¥	(122,094	)
Investment securities		(41,035	)		(52,621	)
Derivative financial instruments		(21,193	)		5,649
Tax losses carried forward		(16,282	)		17,522
Retirement benefits		(8,653	)		(10,950	)
Goodwill and intangible assets		5,023			(13,228	)
Property, plant and equipment		(3,638	)		(19,514	)
Lease transactions		1,537			3,326
Deposits		—			14,243
Other temporary differences—net		47,506			51,860
Total deferred tax expense	¥	(87,109	)	¥	(125,807	)

23 RETIREMENT BENEFITS

Defined Benefit Plans

SMBC and some of SMFG’s other subsidiaries have various defined benefit plans such as defined benefit pension plans and lump-sum severance indemnity plans, which define the amount of benefits that an employee will receive on or after retirement, usually based on one or more factors, such as age, years of service, compensation, classes and earned points based on service.

SMBC’s defined benefit plans account for the vast majority of the defined benefit obligations and plan assets in the SMFG Group. SMBC has a corporate defined benefit pension plan and a lump-sum severance indemnity plan.

Defined benefit pension plans

SMBC’s corporate defined benefit pension plan is a funded defined benefit pension plan, which is regulated by the Corporate Defined Benefit Pension Plan Law, one of the Japanese pension laws. Benefits are paid in exchange for services rendered by employees who worked for more than a specified period considering their years of service and the degree of their contribution to SMBC.

SMBC’s pension fund is a special entity established in accordance with the pension laws, and SMBC has an obligation to make contributions to it. It has a board of directors which consists of an equal number of members elected from both the management and employees of SMBC. These board members have a fiduciary duty to administer and manage the pension fund.

The objective of SMBC’s pension fund is to earn a return which is sufficient to pay future benefits to participants of the corporate defined benefit pension plan, including pension benefit plans, lump-sum indemnity plans for bereaved families, and other lump sum indemnity plans. To achieve this, SMBC’s pension fund sets investment guidelines to target a mix of assets which can generate a return over the medium and long term, and investment decisions for its assets are made in accordance with these guidelines.

The Corporate Defined Benefit Pension Plan Law requires a pension fund to review the assumptions and remeasure the required contribution at least every fifth fiscal year, in order to ensure that it maintains sufficient

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assets for future benefit payments. On the other hand, the present value of the defined benefit obligation is calculated annually based on actuarial valuations that are dependent upon a number of assumptions, including discount rates, mortality rates and future salary (benefit) increases, in accordance with IAS 19. Other types of defined benefit pension plans operated by the SMFG Group are generally established and operated in the same manner as described above.

Lump-sum severance indemnity plans

SMBC and some of SMFG’s other subsidiaries have lump-sum severance indemnity plans under which their employees are provided with lump-sum cash payments upon leaving the company. While funding of these plans is not required under Japanese pension laws, some of these plans are funded with assets held by retirement benefit trusts.

SMBC and a number of SMFG’s other subsidiaries in Japan established retirement benefit trusts and contributed some of their marketable securities to these trusts in order to isolate these assets for retirement benefits by entering into contracts with trust banks. Retirement benefit trusts are voluntary funds that are used either to contribute assets to the pension funds or to directly settle retirement benefits. Among the SMFG Group, retirement benefit trusts are set up for the defined benefit pension plans, as well as for the lump-sum severance indemnity plans.

The assets belonging to the retirement benefit trusts are available to be used only to pay or fund retirement benefits, and practically held by an entity that is legally separated from the SMFG Group. Therefore, they are not available to the SMFG Group’s creditors even in bankruptcy and cannot be returned to the SMFG Group, unless either the remaining assets are sufficient to meet all the related obligations or the entities (funds) reimburse to the SMFG Group the retirement benefits which are already paid by the SMFG Group. Therefore, these assets are accounted for as plan assets.

The following tables provide detailed information for the defined benefit plans.

The amounts of the retirement benefit liabilities and the retirement benefit assets recognized in the consolidated statement of financial position at March 31, 2015 and 2014 were determined as follows:

	At March 31,
	2015			2014
	(In millions)
Present value of unfunded obligations	¥	(42,004	)	¥	(40,886	)
Present value of funded obligations		(1,043,532	)		(997,729	)
Fair value of plan assets		1,418,210			1,160,733
Net retirement benefit assets (liabilities)	¥	332,674		¥	122,118
Of which retirement benefit liabilities included in “Other liabilities”	¥	(46,514	)	¥	(49,848	)
Of which retirement benefit assets included in “Other assets”	¥	379,188		¥	171,966

F-63

The movements in the defined benefit obligations for the fiscal years ended March 31, 2015 and 2014 were as follows:

	For the fiscal year ended March 31,
	2015			2014
	(In millions)
At beginning of period	¥	1,038,615		¥	1,155,477
Current service cost		31,921			32,150
Interest cost		14,067			15,348
Actuarial losses (gains)—demographic assumptions		8,893			(335	)
Actuarial losses (gains)—financial assumptions		33,154			(115,380	)
Actuarial losses—experience		9,083			8,187
Benefits paid		(40,949	)		(40,851	)
Lump-sum payments		(10,250	)		(15,118	)
Past service cost		60			(345	)
Acquisition and disposal of subsidiaries		(157	)		524
Settlements		—			(3,332	)
Others		1,099			2,290
At end of period	¥	1,085,536		¥	1,038,615

The movements in the fair value of plan assets for the fiscal years ended March 31, 2015 and 2014 were as follows:

	For the fiscal year ended March 31,
	2015			2014
	(In millions)
At beginning of period	¥	1,160,733		¥	1,033,030
Interest income		15,816			14,022
Return on plan assets excluding interest income		232,768			106,714
Contributions by employer		48,963			47,983
Benefits paid		(40,949	)		(40,851	)
Acquisition and disposal of subsidiaries		—			493
Settlements		—			(3,063	)
Others		879			2,405
At end of period	¥	1,418,210		¥	1,160,733

The amounts recognized in “General and administrative expenses” in the consolidated income statement for the fiscal years ended March 31, 2015, 2014 and 2013 were as follows:

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions)
Current service cost	¥	31,921		¥	32,150		¥	28,655
Net interest cost		(1,749	)		1,326			3,101
Past service cost		60			(345	)		—
Total	¥	30,232		¥	33,131		¥	31,756

F-64

The plan assets at March 31, 2015 and 2014 were composed as follows:

	At March 31,
	2015						2014
	Quoted in active markets		Other		Total		Quoted in active markets		Other		Total
	(In millions)
Plan assets retained in the pension funds:
Equity instruments	¥	277,152	¥	147,366	¥	424,518	¥	201,480	¥	158,316	¥	359,796
Debt instruments		148,895		154,955		303,850		143,815		121,557		265,372
General account of life insurance companies		—		58,357		58,357		—		55,185		55,185
Other short-term assets		3,635		89,177		92,812		3,680		79,369		83,049
Plan assets retained in the retirement benefit trusts:
Japanese equity instruments		466,875		577		467,452		330,993		572		331,565
Other short-term assets		374		70,847		71,221		296		65,470		65,766
Total	¥	896,931	¥	521,279	¥	1,418,210	¥	680,264	¥	480,469	¥	1,160,733

The assets in the pension funds included common stocks issued by the SMFG Group at March 31, 2015 and 2014. The amounts of these stocks were not significant.

The assets in retirement benefit trusts were primarily composed of Japanese equity instruments. Most of the plan assets held by the SMFG Group are invested in Japanese equity and debt instruments. Accordingly, the SMFG Group may be exposed to market risk arising from the domestic markets.

The SMFG Group retained the voting rights of some of these equity instruments with fair values of ¥422,619 million and ¥301,738 million (29.8% and 26.0% of the total fair values of plan assets) at March 31, 2015 and 2014, respectively. The assets in retirement benefit trusts included common stocks issued by SMFG’s subsidiary (The Minato Bank) with a fair value of ¥46,009 million and ¥29,790 million (3.2% and 2.6% of the total fair values of plan assets) at March 31, 2015 and 2014, respectively. The SMFG Group retained the voting rights of these stocks (40.4% of the voting rights of The Minato Bank, for all periods presented). Refer to Note 47 “Principal Subsidiaries” for further information.

The principal actuarial assumptions used at March 31, 2015, 2014 and 2013 were as follows:

	At March 31,
	2015			2014			2013
Discount rates		1.1	%		1.4	%		1.3	%
Expected rates of salary (benefit) increases		6.0	%		6.4	%		6.1	%

All assumptions are weighted on the basis of the defined benefit obligations.

The assumptions for future mortality are based on the official mortality table generally used for actuarial assumptions in Japan. Under the mortality table used at March 31, 2015, 2014 and 2013, the average remaining life expectancy of an individual retiring at age 60 was 23 years, 23 years, and 23 years for males, respectively, and 28 years, 28 years and 28 years for females, respectively.

F-65

The sensitivity analyses of the effect of changes in key assumptions on the defined benefit obligations at March 31, 2015 and 2014 were as follows:

	At March 31,
	2015			2014
	Increase/(decrease)			Increase/(decrease)
	(In millions)
Discount rates:
Increase by 50 bps	¥	(57,955	)	¥	(53,526	)
Decrease by 50 bps		65,095			59,886
Expected rates of salary (benefit) increases:
Increase by 50 bps	¥	82		¥	76
Decrease by 50 bps		(80	)		(74	)

Each increase and decrease in the table above assumes that only one assumption is changed, with all other assumptions remaining unchanged. In practice, however, changes in multiple assumptions may occur in a mutually interrelated manner.

The weighted average durations of defined benefit plans for the fiscal years ended March 31, 2015, 2014 and 2013 were as follows:

	At March 31,
	2015		2014		2013
	(Years)
Lump-sum severance indemnity plans		12.0		12.1		15.1
Defined benefit pension plans		17.2		16.6		15.7

Funding Policy for Plan Assets

The pension funds review the funding status of plan assets every year. If any funding deficit is identified, a measure to cover such deficit will be implemented, for example, by increasing the amount of contributions by the employer.

Expected contribution

Expected contributions to the defined benefit plans for the fiscal year ending March 31, 2016 are ¥45,356 million.

Defined Contribution Plans

Some of SMFG’s subsidiaries provide defined contribution plans. The amounts recognized as expenses for the defined contribution plans were ¥6,463 million, ¥5,936 million and ¥5,071 million for the fiscal years ended March 31, 2015, 2014 and 2013, respectively, which were included in “General and administrative expenses” in the consolidated income statement.

Employees’ Pension Insurance Plan

In Japan, the Government of Japan operates the Employees’ Pension Insurance Plan which covers most of the private entities’ employees. The amounts of contributions charged to expense for the Employees’ Pension Insurance Plan were ¥37,574 million, ¥33,849 million and ¥30,922 million for the fiscal years ended March 31, 2015, 2014 and 2013, respectively, which were included in “General and administrative expenses” in the consolidated income statement.

F-66

24 SHAREHOLDERS’ EQUITY

Common Stock

The changes in the number of issued shares of common stock and common stock held by SMFG or its subsidiaries during the fiscal years ended March 31, 2015, 2014 and 2013 were as follows:

	For the fiscal year ended March 31,
	2015				2014					2013
	Outstanding		In treasury		Outstanding		In treasury			Outstanding		In treasury
At beginning of period		1,414,055,625		46,781,669		1,414,055,625		60,179,376			1,414,055,625		62,939,559
Net change		—		32,532		—		(13,397,707	)(1)		—		(2,760,183	)(2)
At end of period		1,414,055,625		46,814,201		1,414,055,625		46,781,669			1,414,055,625		60,179,376

(1) Includes a decrease of 13,498,040 shares through the sale of SMFG shares held by SMBC and other subsidiary.

(2) Includes a decrease of 2,840,076 shares delivered to shareholders of SMBC Consumer Finance, formerly known as Promise in April 2012.

The total number of authorized shares of common stock was 3,000 million at March 31, 2015 and 2014 with no stated value. All issued shares are fully paid. The details of the stock options outstanding to subscribe for shares of SMFG common stock are described in Note 39 “Share-Based Payment.”

Preferred Stock

The following table shows the number of shares of preferred stock at March 31, 2015 and 2014.

	At March 31, 2015				At March 31, 2014
	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		—

All the preferred stocks have no stated value. There was no movement in preferred stock during the fiscal years ended March 31, 2015, 2014 and 2013.

Capital stock, Capital surplus and Treasury stock

“Capital stock” represents share capital under the Companies Act adjusted by the amount corresponding to the preferred stock which is accounted for as a liability under IFRS. Purchases of treasury stock are recognized at cost in “Treasury stock.” Any additional paid-in capital, net gains or losses on the sale of treasury stock, and other changes in equity resulting from transactions with shareholders except for dividends are included in “Capital surplus.”

In April 2012, the SMFG Group entered into the share exchange transaction with shareholders of SMBC Consumer Finance, formerly known as Promise, to make it a wholly owned subsidiary of SMFG. Through this share exchange transaction, the SMFG Group exchanged its treasury stocks for common stocks of SMBC Consumer Finance amounting ¥8 billion.

F-67

Restriction on the Payment of Dividends

The amount of the capital surplus and retained earnings of SMFG that can be paid out as dividends is subject to restrictions under the Companies Act. These amounts are calculated based on SMFG’s nonconsolidated statement of financial position prepared in accordance with Japanese GAAP. Therefore, the adjustments made to prepare the IFRS consolidated financial statements have no impact on the calculation. The total amount that SMFG can pay out as a dividend was ¥1,064 billion at March 31, 2015.

Other than the restriction by the Companies Act, SMFG is required to maintain a risk-weighted capital ratio as per the Banking Act of Japan (“Banking Act”). The detail of the restriction is described in Note 45 “Financial Risk Management.” Therefore, SMFG would not be able to pay a dividend if the ratio were to fall below the minimum amount as a result of the payment of the dividends.

Since SMFG is a holding company, its earnings rely mostly on dividend income from SMBC, and SMFG’s other subsidiaries and associates. SMBC is subject to some restrictions on its dividend payment by the Companies Act and the Banking Act, similar to those applied to SMFG.

Other Reserves

Remeasurements of defined benefit plans reserve

Remeasurements of the defined benefit plans reserve includes the accumulated actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, and return on plan assets excluding interest income.

The movements of remeasurements of the defined benefit plans reserve for the fiscal years ended March 31, 2015, 2014 and 2013 were as follows:

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions)
At beginning of period	¥	(1,982	)	¥	(138,013	)	¥	(156,804	)
Gains (losses) arising during the period, before tax		181,638			214,242			31,086
Income tax (expense) benefit for changes arising during the period		(58,081	)		(76,596	)		(12,613	)
Amount attributable to non-controlling interests		(1,451	)		(1,034	)		318
Share of other comprehensive income (loss) of associates and joint ventures		192			(581	)		—
At end of period	¥	120,316		¥	(1,982	)	¥	(138,013	)

Available-for-sale financial assets reserve

The available-for-sale financial assets reserve includes the accumulated gains and losses of available-for-sale financial assets excluding the amount reclassified to profit or loss when the assets are derecognized or impaired.

F-68

The movements of the available-for-sale financial assets reserve for the fiscal years ended March 31, 2015, 2014 and 2013 were as follows:

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions)
At beginning of period	¥	1,397,450		¥	1,159,215		¥	652,718
Gains (losses) arising during the period, before tax		1,392,139			589,766			816,721
Income tax (expense) benefit for changes arising during the period		(381,512	)		(214,636	)		(290,344	)
Reclassification adjustments for (gains) losses included in net profit, before tax		(232,281	)		(212,001	)		(3,633	)
Income tax benefit for reclassification adjustments		82,628			80,364			1,491
Amount attributable to non-controlling interests		(25,297	)		(5,507	)		(17,564	)
Share of other comprehensive income (loss) of associates and joint ventures		1,509			249			(174	)
At end of period	¥	2,234,636		¥	1,397,450		¥	1,159,215

Exchange differences on translating foreign operations reserve

Exchange differences on translating the foreign operations reserve includes foreign exchange differences arising from the translation of the net assets of foreign operations from their functional currencies to the SMFG Group’s presentation currency, Japanese yen.

The movements of exchange differences on translating the foreign operations reserve for the fiscal years ended March 31, 2015, 2014 and 2013 were as follows:

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions)
At beginning of period	¥	151,358		¥	(50,032	)	¥	(209,996	)
Gains (losses) arising during the period, before tax		301,796			271,619			230,764
Income tax (expense) benefit for changes arising during the period		(3,015	)		(17,967	)		(20,338	)
Reclassification adjustments for (gains) losses included in net profit, before tax		(2,164	)		(1,311	)		4,579
Income tax (expense) benefit for reclassification adjustments		770			796			(1,737	)
Amount attributable to non-controlling interests		(48,666	)		(46,788	)		(56,832	)
Share of other comprehensive income (loss) of associates and joint ventures		4,053			(4,959	)		3,528
At end of period	¥	404,132		¥	151,358		¥	(50,032	)

F-69

25 NON-CONTROLLING INTERESTS

Non-controlling interests at March 31, 2015 and 2014 consisted of the following:

	At March 31,
	2015		2014
	(In millions)
Preferred securities issued by subsidiaries	¥	1,124,297	¥	1,212,074
Others		557,175		518,420
Total non-controlling interests	¥	1,681,472	¥	1,730,494

Preferred securities issued by subsidiaries

Preferred securities issued by subsidiaries consisted of the following:

	Redemption at the option of Issuer(1)	At March 31,
		2015		2014
		(In millions)
SMFG Preferred Capital USD 1 Limited (non-cumulative step-up perpetual preferred securities)	January 2017	¥	77,994	¥	66,784
SMFG Preferred Capital GBP 1 Limited (non-cumulative step-up perpetual preferred securities)	January 2017		13,097		12,598
SMFG Preferred Capital JPY 1 Limited (non-cumulative perpetual preferred securities)	January 2018		135,000		135,000
SMFG Preferred Capital USD 3 Limited (non-cumulative step-up perpetual preferred securities)	July 2018		162,203		138,887
SMFG Preferred Capital GBP 2 Limited (non-cumulative step-up perpetual preferred securities)	January 2029		44,503		42,805
SMFG Preferred Capital JPY 2 Limited
Series A (non-cumulative step-up perpetual preferred securities)	January 2019		113,000		113,000
Series B (non-cumulative perpetual preferred securities)	July 2019		140,000		140,000
Series C (non-cumulative perpetual preferred securities)	January 2016		140,000		140,000
Series E (non-cumulative perpetual preferred securities)	July 2019		33,000		33,000
Series F (non-cumulative perpetual preferred securities)	January 2016		2,000		2,000
SMFG Preferred Capital JPY 3 Limited
Series A (non-cumulative step-up perpetual preferred securities)	January 2020		99,000		99,000
Series B (non-cumulative perpetual preferred securities)	January 2020		164,500		164,500
Series C (non-cumulative perpetual preferred securities)	January 2015		—		79,500
Series D (non-cumulative perpetual preferred securities)	January 2015		—		45,000
Preferred securities issued by subsidiaries		¥	1,124,297	¥	1,212,074

(1) Subject to the prior approval of the Financial Services Agency (“FSA”), preferred securities are redeemable at any dividend payment date on and after a specific month and the month shown in this column is such a specific month of each preferred security.

Others

Others represent the equity in the SMFG Group’s subsidiaries not attributable, directly or indirectly, to the SMFG Group. They were not considered individually material to the SMFG Group at March 31, 2015 and 2014.

F-70

26 NET INTEREST INCOME

Net interest income for the fiscal years ended March 31, 2015, 2014 and 2013 consisted of the following:

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Interest income from:
Deposits with banks	¥	41,896	¥	37,328	¥	29,470
Call loans and bills bought		18,606		18,142		12,866
Reverse repurchase agreements and cash collateral on securities borrowed		17,021		14,970		13,000
Investment securities		82,494		85,798		127,172
Loans and advances		1,622,604		1,557,806		1,543,215
Total interest income		1,782,621		1,714,044		1,725,723
Interest expense from:
Deposits		165,567		140,390		123,378
Call money and bills sold		4,014		3,483		4,137
Repurchase agreements and cash collateral on securities lent		9,920		7,547		12,009
Borrowings		71,037		68,266		85,219
Debt securities in issue		119,789		100,117		96,112
Others		780		708		715
Total interest expense		371,107		320,511		321,570
Net interest income	¥	1,411,514	¥	1,393,533	¥	1,404,153

Interest income recorded on impaired financial assets was ¥23,478 million, ¥32,638 million and ¥38,465 million for the fiscal years ended March 31, 2015, 2014 and 2013, respectively.

F-71

27 NET FEE AND COMMISSION INCOME

Net fee and commission income for the fiscal years ended March 31, 2015, 2014 and 2013 consisted of the following:

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Fee and commission income from:
Loans	¥	103,486	¥	109,788	¥	111,153
Credit card business		245,133		234,060		225,071
Guarantees		51,794		45,229		54,067
Securities-related business		130,164		137,184		80,076
Deposits		14,976		18,234		17,622
Remittances and transfers		129,465		130,864		128,647
Safe deposits		5,748		5,832		5,989
Trust fees		2,833		2,421		1,488
Investment trusts		147,021		159,424		162,950
Agency		16,854		17,966		18,146
Others		155,292		142,167		143,476
Total fee and commission income		1,002,766		1,003,169		948,685
Fee and commission expense from:
Remittances and transfers		36,669		36,413		42,192
Guarantees		3,012		1,607		1,843
Others		89,572		89,939		83,019
Total fee and commission expense		129,253		127,959		127,054
Net fee and commission income	¥	873,513	¥	875,210	¥	821,631

28 NET TRADING INCOME

Net trading income for the fiscal years ended March 31, 2015, 2014 and 2013 consisted of the following:

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions)
Interest rate	¥	248,372		¥	184,859		¥	269,030
Foreign exchange		(136,708	)		(81,154	)		(141,025	)
Equity		499			10,496			(32,987	)
Credit		16,970			20,983			9,955
Others		(1,374	)		34			329
Total net trading income	¥	127,759		¥	135,218		¥	105,302

Net trading income includes income and losses from trading assets and liabilities, and derivative financial instruments.

F-72

29 NET INCOME FROM FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Net income from financial assets at fair value through profit or loss for the fiscal years ended March 31, 2015, 2014 and 2013 consisted of the following:

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Net income from debt instruments	¥	13,123	¥	53,142	¥	10,265
Net income from equity instruments		9,555		5,444		5,529
Total net income from financial assets at fair value through profit or loss	¥	22,678	¥	58,586	¥	15,794

30 NET INVESTMENT INCOME

Net investment income for the fiscal years ended March 31, 2015, 2014 and 2013 consisted of the following:

	For the fiscal year ended March 31,
	2015		2014			2013
	(In millions)
Net gain (loss) from disposal of debt instruments	¥	45,193	¥	(1,753	)	¥	99,855
Net gain from disposal of equity instruments		190,570		225,185			41,140
Dividend income		135,301		108,833			82,409
Total net investment income	¥	371,064	¥	332,265		¥	223,404

31 OTHER INCOME

Other income for the fiscal years ended March 31, 2015, 2014 and 2013 consisted of the following:

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Income from operating leases	¥	179,632	¥	148,211	¥	110,906
Income related to disposal of assets leased		183,590		149,448		84,631
Income related to IT solution services		35,506		41,043		30,709
Gains on disposal of property, plant and equipment, and other intangible assets		538		2,634		240
Reversal of impairment losses of investments in associates and joint ventures		—		—		14,970
Gains on step acquisition of subsidiaries		—		1,565		141
Gains on step acquisition of associates and joint ventures		37,997		—		—
Others		88,642		86,640		82,806
Total other income	¥	525,905	¥	429,541	¥	324,403

F-73

32 IMPAIRMENT CHARGES ON FINANCIAL ASSETS

Impairment charges on financial assets for the fiscal years ended March 31, 2015, 2014 and 2013 consisted of the following:

	For the fiscal year ended March 31,
	2015		2014			2013
	(In millions)
Loans and advances(1)	¥	79,552	¥	(25,806	)	¥	138,375
Available-for-sale financial assets		10,586		11,531			131,770
Total impairment charges (reversals) on financial assets	¥	90,138	¥	(14,275	)	¥	270,145

(1) Cross-reference to provision (credit) for loan losses in the table of reconciliation of allowance for loan losses in Note 10 “Loans and Advances.”

33 GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the fiscal years ended March 31, 2015, 2014 and 2013 consisted of the following:

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Personnel expenses	¥	749,480	¥	706,376	¥	666,073
Depreciation and amortization		146,233		137,742		130,382
Rent and lease expenses		116,745		113,314		111,327
Building and maintenance expenses		10,068		8,886		7,926
Supplies expenses		14,865		15,482		14,267
Communication expenses		35,126		35,017		33,099
Publicity and advertising expenses		68,481		56,791		48,979
Taxes and dues		67,913		57,782		57,617
Outsourcing expenses		91,189		88,072		87,583
Premiums for deposit insurance		56,789		54,532		53,687
Office equipment expenses		47,318		40,388		35,749
Others		217,690		208,608		200,427
Total general and administrative expenses	¥	1,621,897	¥	1,522,990	¥	1,447,116

34 OTHER EXPENSES

Other expenses for the fiscal years ended March 31, 2015, 2014 and 2013 consisted of the following:

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Cost of operating leases	¥	87,206	¥	72,268	¥	58,252
Cost related to disposal of assets leased		171,707		146,196		81,083
Cost related to IT solution services and IT systems		84,300		75,173		69,636
Provision for interest repayment		64,195		49,764		416
Losses on disposal of property, plant and equipment, and other intangible assets		6,703		6,763		5,432
Impairment losses of property, plant and equipment		5,108		3,157		4,333
Impairment losses of intangible assets		4		193		35
Losses on sale of investments in subsidiaries and associates		2,221		—		8
Impairment losses of investments in associates and joint ventures		4,631		4,686		7,347
Others		79,539		70,580		61,354
Total other expenses	¥	505,614	¥	428,780	¥	287,896

F-74

35 INCOME TAX EXPENSE

The detail of income tax expense for the fiscal years ended March 31, 2015, 2014 and 2013 was as follows:

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions)
Current tax:
Charge for period	¥	322,838		¥	288,269		¥	271,936
Deferred tax:
Origination and reversal of temporary differences		19,378			134,121			6,386
Change in the write-down of deferred tax assets on the current fiscal year income tax expense		(7,240	)		(21,246	)		(23,022	)
Changes in Japanese corporation tax rates(1)		74,971			12,932			—
Total deferred tax expense (benefit)		87,109			125,807			(16,636	)
Total income tax expense	¥	409,947		¥	414,076		¥	255,300

(1) See Note 22 “Deferred Income Tax” for further information on changes in Japanese corporation tax rates.

The following table shows the reconciliations of the effective income tax rates for the fiscal years ended March 31, 2015, 2014 and 2013.

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions, except percentages)
Profit before tax	¥	1,132,908		¥	1,306,312		¥	909,123
Income tax expense		409,947			414,076			255,300
Effective income tax rate		36.2	%		31.7	%		28.1	%
Statutory tax rate in Japan(1)		35.6	%		38.0	%		38.0	%
Changes in Japanese corporation tax rates		6.6	%		1.0	%		—
Non-Japanese earnings		(3.8	%)		(3.6	%)		(4.8	%)
Nontaxable dividends received		(2.4	%)		(1.6	%)		(1.2	%)
Effect of the change in the write-down of deferred tax assets on the current fiscal year income tax expense		(0.6	%)		(1.6	%)		(2.5	%)
Tax impact of share of post-tax (profit) loss in associates and joint ventures		(0.5	%)		(0.6	%)		(0.8	%)
Tax impact of impairment losses and reversal of impairment losses for investments in associates and joint ventures—net		0.2	%		0.1	%		(0.3	%)
Gains on step acquisition of subsidiaries which were not taxable		(0.1	%)		—			—
Others—net		1.2	%		—			(0.3	%)
Effective income tax rate		36.2	%		31.7	%		28.1	%

(1) The statutory tax rate in Japan for the fiscal year ended March 31, 2015 is the aggregate of the effective corporation tax rate of 23.7%, the effective inhabitant tax rate of 4.9% and the effective enterprise tax rate of 7.0%, which is payable by corporate entities on taxable profits under the tax laws in Japan. The effective corporation tax rate was changed from 26.1% which was applied to the fiscal years ended March 31, 2014 and 2013. The statutory tax rate in Japan has been changed from the fiscal year beginning April 1, 2015 reflecting the changes in Japanese corporation tax rates as mentioned in Note 22 “Deferred Income Tax.”

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36 EARNINGS PER SHARE

The following table shows the income and share data used in the basic and diluted earnings per share calculations for the fiscal years ended March 31, 2015, 2014 and 2013.

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions, except number of shares and per share data)
Basic:
Profit attributable to shareholders of SMFG	¥	614,070		¥	766,388		¥	535,976
Weighted average number of common stock in issue (in thousands of shares)		1,367,258			1,366,186			1,353,926
Basic earnings per share	¥	449.13		¥	560.97		¥	395.87
Diluted:
Profit attributable to the common shareholders of SMFG	¥	614,070		¥	766,388		¥	535,976
Impact of dilutive potential ordinary shares issued by subsidiaries		(1	)		(1	)		(531	)
Net profit used to determine diluted earnings per share	¥	614,069		¥	766,387		¥	535,445
Weighted average number of common stock in issue (in thousands of shares)		1,367,258			1,366,186			1,353,926
Adjustments for stock options (in thousands of shares)		816			699			519
Weighted average number of common stock for diluted earnings per share (in thousands of shares)		1,368,074			1,366,885			1,354,445
Diluted earnings per share	¥	448.86		¥	560.68		¥	395.32

37 TRANSFERS OF FINANCIAL ASSETS

In the normal course of business, the SMFG Group transfers financial assets mainly through repurchase agreements, securities lending transactions and securitizations. Depending on the nature of the transactions, the transfers may either result in financial assets being derecognized or continuing to be recognized on the consolidated statement of financial position.

Full derecognition occurs when the SMFG Group transfers its contractual rights to receive cash flows from financial assets, or retains the contractual rights to receive the cash flows, but assumes a contractual obligation to pay the cash flows to another party, and transfers substantially all the risks and rewards of ownership, including credit risk, prepayment risk and interest rate risk. Derecognition does not occur when the SMFG Group retains substantially all the risks and rewards of ownership of the financial assets, where the contractual rights to receive cash flows from the financial assets are transferred, or the rights are retained but obligations to pay the cash flows are assumed.

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The following tables show the carrying amounts and fair values of transferred financial assets that did not qualify for derecognition and their associated financial liabilities at March 31, 2015 and 2014:

	At March 31, 2015
	Repurchase agreements and securities lending transactions		Loans and advances
			Residential mortgages		Corporate loans		Others
	(In millions)
Carrying amount of assets	¥	5,692,247	¥	1,277,623	¥	967,408	¥	59,776
Carrying amount of associated liabilities		4,525,235		1,038,648		964,022		47,105
For those liabilities that have recourse only to the transferred assets:
Fair value of assets	¥	—	¥	1,465,851	¥	971,374	¥	60,323
Fair value of associated liabilities		—		1,116,452		964,989		47,364
Net position	¥	—	¥	349,399	¥	6,385	¥	12,959
	At March 31, 2014
	Repurchase agreements and securities lending transactions		Loans and advances
			Residential mortgages		Corporate loans		Others
	(In millions)
Carrying amount of assets	¥	5,950,034	¥	1,259,549	¥	791,286	¥	66,890
Carrying amount of associated liabilities		6,981,796		1,035,451		787,087		55,879
For those liabilities that have recourse only to the transferred assets:
Fair value of assets	¥	—	¥	1,399,594	¥	795,081	¥	67,155
Fair value of associated liabilities		—		1,099,013		788,102		56,088
Net position	¥	—	¥	300,581	¥	6,979	¥	11,067

Repurchase Agreements and Securities Lending Transactions

The SMFG Group lends or sells securities under agreements to repurchase them at a predetermined price on a future date. Since substantially all the risks and rewards of the securities are retained by the SMFG Group, the securities remain on the consolidated statement of financial position and their associated financial liabilities are recorded. The recourse of the counterparties to their associated financial liabilities is not limited to the underlying securities.

Loans and Advances

The SMFG Group transfers its loans and advances, including residential mortgages and corporate loans, mainly to bankruptcy-remote structured entities for securitizations whereby the structured entities issue debt securities to the SMFG Group for subordinated tranches and to investors for senior tranches. The investors have only recourse to the underlying financial assets due to their bankruptcy-remoteness. Since the SMFG Group retains substantially all the risks and rewards of ownership, the transferred financial assets do not qualify for derecognition. The SMFG Group therefore continues to recognize these transferred financial assets as loans and advances, and recognizes their associated financial liabilities arising from issuing debt securities to investors on the consolidated statement of financial position.

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38 ASSETS PLEDGED AND RECEIVED AS COLLATERAL

Assets Pledged

The carrying amounts of assets pledged as collateral at March 31, 2015 and 2014 were as follows:

	At March 31,
	2015		2014
	(In millions)
Cash and deposits with banks	¥	75,678	¥	113,573
Call loans and bills bought		478,457		347,681
Trading assets		1,715,157		2,267,466
Financial assets at fair value through profit or loss		1,615,640		1,648,262
Held-to-maturity investments		3,359,911		4,393,057
Available-for-sale financial assets		11,307,019		9,248,443
Loans and advances		3,088,983		2,547,250
Property, plant and equipment		9,970		10,411
Other assets		622,583		299,243
Total	¥	22,273,398	¥	20,875,386

The SMFG Group pledges assets as collateral to secure payables under repurchase agreements, securities lending transactions and securitizations, borrowings or for cash settlements, margins on derivative transactions and certain other purposes. These transactions are conducted under terms that are usual and customary to standard contracts.

Unsecured loaned securities for which the borrowers have the right to sell or repledge were ¥5,921,103 million and ¥6,037,722 million at March 31, 2015 and 2014, respectively.

For the reserve funds with the Bank of Japan and other reserve deposits for foreign offices maintained by the SMFG Group, refer to Note 5 “Cash and Deposits with Banks.”

Assets Received as Collateral

Under certain transactions, including reverse repurchase agreements, securities borrowing, and discounting of bills, the SMFG Group is permitted to resell or repledge the collateral held in the absence of default by the owner of the collateral. These transactions are conducted under terms that are usual and customary for standard contracts. The fair values of securities and bills accepted as collateral were ¥10,152,888 million and ¥6,990,025 million at March 31, 2015 and 2014, respectively. As to the securities received in the reverse repurchase agreements and securities borrowing transactions, the SMFG Group has the obligation to return equivalent securities upon completion of the transactions. The fair value of securities sold or repledged to others was ¥5,084,579 million and ¥2,987,613 million at March 31, 2015 and 2014, respectively.

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39 SHARE-BASED PAYMENT

SMFG has introduced compensation-type stock options to directors, corporate auditors, and executive officers of SMFG and SMBC (“SMFG Stock Acquisition Rights”). This serves as an incentive for them to further contribute to the equity appreciation and achieve better corporate performance through sharing the benefits and risks of the share price performance with the shareholders. The following table provides an overview of the significant terms and conditions of the stock option plan.

	Title of grantees	Exercise period	Requisite service period	Method of settlement
SMFG Stock Acquisition Rights	Directors, corporate auditors and executive officers of SMFG and SMBC	Not exceeding 30 years from the date of allocation of stock acquisition rights(1)	One year from the date of the ordinary general meeting of shareholders of SMFG to the closing of the next ordinary general meeting of shareholders of SMFG	Common stock of SMFG

(1) A stock acquisition rights holder can exercise the rights from the day they are relieved of their positions either as a director, a corporate auditor or an executive officer (“Start of Exercise Date”) to 20 years from the Start of Exercise Date.

The number and the weighted average exercise prices of stock options for the fiscal years ended on March 31, 2015 and 2014 were as follows:

	For the fiscal year ended March 31,
	2015					2014
	Number  of options(1)			Weighted average exercise price		Number  of options(1)			Weighted average exercise price
Outstanding at beginning of period		752,800		¥	1		641,100		¥	1
Granted		121,900			1		115,700			1
Exercised		(1,200	)		1		(1,500	)		1
Forfeited or expired		(300	)		1		(2,500	)		1
Outstanding at end of period		873,200		¥	1		752,800		¥	1
Exercisable at end of period		217,800		¥	1		154,200		¥	1

(1) Number of options is the number of SMFG’s common stock granted by the exercise of stock options.

The weighted average stock price at the date of exercise was ¥4,084 and ¥5,050 for the fiscal years ended March 31, 2015 and 2014, respectively.

Summarized information about stock options outstanding at March 31, 2015 and 2014 was as follows:

			At March 31,
			2015				2014
	Exercise price		Number of options		Remaining contractual lives in years		Number of options		Remaining contractual lives in years
SMFG Stock Acquisition Rights	¥	1		873,200		27.3		752,800		27.9

The amounts of stock options recognized as expenses were measured based on the fair value of stock options granted, which were ¥451 million and ¥494 million for the fiscal years ended March 31, 2015 and 2014, respectively, and included in “General and administrative expenses” in the consolidated income statement. The fair value of stock options was measured using Black-Scholes option-pricing model.

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The following table represents the fair value of stock options and the assumptions used to measure the fair value.

	For the fiscal year ended March 31,
	2015			2014
Fair value at measurement date	¥	3,661		¥	4,159
Stock price	¥	4,115		¥	4,580
Exercise price	¥	1		¥	1
Expected volatility(1)		28.16	%		31.24	%
Expected remaining lives (in years)(2)		4			4
Expected dividends per share(3)	¥	120		¥	110
Risk free interest rate(4)		0.11	%		0.23	%

(1) Calculated based on the actual stock prices during the 4 years from August 16, 2010 to August 15, 2014 and August 15, 2009 to August 14, 2013 for the fiscal years ended March 31, 2015 and 2014, respectively.

(2) The average expected remaining life could not be estimated rationally due to insufficient amount of data. Therefore, it was estimated based on average remaining service life of directors of SMFG and its subsidiaries.

(3) Expected dividends are based on the estimated dividends to be paid in next twelve months from the date of grant.

(4) Japanese government bond yield corresponding to the average expected remaining life.

40 DIVIDENDS PER SHARE

The dividends recognized by the SMFG Group for the fiscal years ended March 31, 2015, 2014 and 2013 were as follows:

	Dividends per share		Aggregate amount
	(In yen)		(In millions)
For the fiscal year ended March 31, 2015:
Common stock	¥	125	¥	170,908
For the fiscal year ended March 31, 2014:
Common stock	¥	125	¥	169,973
For the fiscal year ended March 31, 2013:
Common stock	¥	100	¥	135,253

On June 26, 2015, the general meeting of shareholders approved a dividend of ¥80 per share of common stock totaling ¥112,805 million in respect of the fiscal year ended March 31, 2015. The amount included ¥3,426 million of dividends distributed to SMFG’s subsidiary. The consolidated financial statements for the fiscal year ended March 31, 2015 do not include this dividend payable.

41 CONTINGENCY AND CAPITAL COMMITMENTS

Legal Proceedings

The SMFG 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 SMFG Group does not expect that the outcome of these proceedings will have a significant adverse effect on the consolidated financial statements of the SMFG Group. The SMFG Group has recorded adequate provisions with respect to litigation arising out of normal business operations. The SMFG Group has not disclosed any contingent liability associated with these legal actions because it cannot reliably be estimated.

Capital Commitments

At March 31, 2015 and 2014, the SMFG Group had ¥2,801,802 million and ¥204,293 million of contractual commitments to acquire property, plant and equipment including aircraft for leasing business. The contractual

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commitments to purchase aircraft are based upon fixed price agreements with the manufacturers, an element of which are adjusted for inflation and include price escalation formulas, but are also subject to agreed price concessions where applicable. In addition, the SMFG Group had ¥2,770 million and ¥1,867 million of contractual commitments to acquire intangible assets, such as software at March 31, 2015 and 2014, respectively. The SMFG Group’s management is confident that future net revenues and funding will be sufficient to cover these commitments.

Loan Commitments

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. 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 SMFG Group can reject an application from customers or reduce the contract amounts in cases where economic conditions change, the SMFG Group needs to secure claims, or some other significant event occurs.

Financial Guarantees and Other Credit-related Contingent Liabilities

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.

The table below shows the nominal amounts of undrawn loan commitments, and financial guarantees and other credit-related contingent liabilities at March 31, 2015 and 2014.

	At March 31,
	2015		2014
	(In millions)
Loan commitments	¥	53,665,583	¥	49,285,032
Financial guarantees and other credit-related contingent liabilities		7,076,536		6,396,144
Total	¥	60,742,119	¥	55,681,176

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42 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES BY MEASUREMENT BASIS

After initial recognition, financial assets and liabilities are measured either at fair value or amortized cost, within the measurement categories as defined in IAS 39. The summary of significant accounting policies in Note 2 describes how these categories of financial assets and liabilities are measured, and how income and expenses are recognized either in profit or loss, or in other comprehensive income. The following tables present the carrying amounts of the financial assets and liabilities, by category and by line item, of the consolidated statement of financial position.

	At March 31, 2015
	Financial assets and liabilities at fair value through profit or loss		Held-to-maturity investments		Loans and receivables		Available-for-sale financial assets		Financial liabilities measured at amortized cost		Total
	(In millions)
Financial assets:
Cash and deposits with banks	¥	—	¥	—	¥	40,112,783	¥	—	¥	—	¥	40,112,783
Call loans and bills bought		—		—		1,326,965		—		—		1,326,965
Reverse repurchase agreements and cash collateral on securities borrowed		—		—		7,218,498		—		—		7,218,498
Trading assets		3,243,185		—		—		—		—		3,243,185
Derivative financial instruments		6,471,203		—		—		—		—		6,471,203
Financial assets at fair value through profit or loss		1,785,684		—		—		—		—		1,785,684
Investment securities		—		3,396,895		—		20,842,761		—		24,239,656
Loans and advances(1)		3,422		—		86,968,294		—		—		86,971,716
Other financial assets(2)		—		—		2,565,725		—		—		2,565,725
Total	¥	11,503,494	¥	3,396,895	¥	138,192,265	¥	20,842,761	¥	—	¥	173,935,415
Financial liabilities:
Deposits(1)	¥	19,043	¥	—	¥	—	¥	—	¥	115,814,937	¥	115,833,980
Call money and bills sold		—		—		—		—		5,873,124		5,873,124
Repurchase agreements and cash collateral on securities lent		—		—		—		—		8,820,083		8,820,083
Trading liabilities		2,193,400		—		—		—		—		2,193,400
Derivative financial instruments		6,739,787		—		—		—		—		6,739,787
Borrowings(1)		900		—		—		—		11,216,152		11,217,052
Debt securities in issue(1)		21,206		—		—		—		11,030,225		11,051,431
Other financial liabilities(2)		—		—		—		—		5,020,005		5,020,005
Total	¥	8,974,336	¥	—	¥	—	¥	—	¥	157,774,526	¥	166,748,862

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	At March 31, 2014
	Financial assets and liabilities at fair value through profit or loss		Held-to-maturity investments		Loans and receivables		Available-for-sale financial assets		Financial liabilities measured at amortized cost		Total
	(In millions)
Financial assets:
Cash and deposits with banks	¥	—	¥	—	¥	33,208,724	¥	—	¥	—	¥	33,208,724
Call loans and bills bought		—		—		1,248,235		—		—		1,248,235
Reverse repurchase agreements and cash collateral on securities borrowed		—		—		4,303,121		—		—		4,303,121
Trading assets		3,557,545		—		—		—		—		3,557,545
Derivative financial instruments		4,891,382		—		—		—		—		4,891,382
Financial assets at fair value through profit or loss		1,840,255		—		—		—		—		1,840,255
Investment securities		—		4,528,254		—		17,524,744		—		22,052,998
Loans and advances(1)		5,653		—		81,239,329		—		—		81,244,982
Other financial assets(2)		—		—		1,995,524		—		—		1,995,524
Total	¥	10,294,835	¥	4,528,254	¥	121,994,933	¥	17,524,744	¥	—	¥	154,342,766
Financial liabilities:
Deposits(1)	¥	12,686	¥	—	¥	—	¥	—	¥	108,357,808	¥	108,370,494
Call money and bills sold		—		—		—		—		4,112,429		4,112,429
Repurchase agreements and cash collateral on securities lent		—		—		—		—		7,041,075		7,041,075
Trading liabilities		1,865,243		—		—		—		—		1,865,243
Derivative financial instruments		4,980,991		—		—		—		—		4,980,991
Borrowings(1)		1,221		—		—		—		8,462,142		8,463,363
Debt securities in issue(1)		14,303		—		—		—		8,754,791		8,769,094
Other financial liabilities(2)		—		—		—		—		4,703,784		4,703,784
Total	¥	6,874,444	¥	—	¥	—	¥	—	¥	141,432,029	¥	148,306,473

(1) Embedded derivatives, which are separately accounted for, but presented together with the host contract in the consolidated statement of financial position, are disclosed in this table within the category of “Financial assets and liabilities at fair value through profit or loss.” Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in this table as assets or liabilities to be consistent with the line of the host contract.

(2) Other financial assets and liabilities comprise of those included in other assets and liabilities, which meet the definition of a financial asset and liability.

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43 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values stated below represent the best estimates based on a range of methods and assumptions. In determining the fair value of financial assets and liabilities, the SMFG Group gives the highest priority to a quoted market price in an active market. If such prices are not available, it establishes fair value using valuation techniques. The valuation techniques, if used, make maximum use of observable inputs, and rely as little as possible on unobservable inputs.

Financial Assets and Liabilities Carried at Fair Value

Valuation Process

The SMFG Group undertakes a valuation process based on its valuation control framework, which governs internal control standards, methodologies and procedures to ensure that the fair values are determined or validated independently of the front office.

The SMFG Group uses valuation techniques commonly used by market participants to price the financial instruments and that have been demonstrated to provide reliable estimates of prices obtained in actual market transactions. The valuation techniques include the DCF method, option pricing models and reference to the current fair value of another instrument that is substantially the same. Key adjustments, such as liquidity risk and credit risk adjustments are also taken into account to derive fair values.

Where valuation techniques are used to determine fair values, they are validated and reviewed. In principal subsidiaries, their risk management departments, which are independent from the business units, review significant valuation methodologies at least once a year, and recalibrate model parameters and inputs by comparing fair values derived from the valuation techniques to the external market data such as broker quotes. Where the data obtained from third party sources such as brokers and pricing service providers are utilized in determining fair values, those departments also examine those data, taking into account the consistency among the different sources, the aging of the data and other factors. In addition, accounting departments in those principal subsidiaries are responsible for ensuring that the accounting policies and procedures to determine fair values are in compliance with relevant accounting standards.

Fair Value Hierarchy

Financial assets and liabilities measured at fair value are classified into one of three levels within a fair value hierarchy based on the inputs used in the fair value measurement. 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).

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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 March 31, 2015 and 2014.

	At March 31, 2015
	Level 1(2)		Level 2(2)		Level 3		Total
	(In millions)
Financial assets:
Trading assets:
Debt instruments	¥	1,701,872	¥	916,721	¥	—	¥	2,618,593
Equity instruments		624,300		292		—		624,592
Total trading assets		2,326,172		917,013		—		3,243,185
Derivative financial instruments:
Interest rate derivatives		86,545		4,291,689		—		4,378,234
Currency derivatives		181		2,014,697		—		2,014,878
Equity derivatives		20,882		25,494		173		46,549
Commodity derivatives		1,829		17,751		—		19,580
Credit derivatives		—		5,606		6,356		11,962
Total derivative financial instruments		109,437		6,355,237		6,529		6,471,203
Financial assets at fair value through profit or loss:
Debt instruments		—		1,615,741		38,518		1,654,259
Equity instruments		3,455		1,056		126,914		131,425
Total financial assets at fair value through profit or loss		3,455		1,616,797		165,432		1,785,684
Available-for-sale financial assets:
Japanese government bonds		9,389,959		—		—		9,389,959
U.S. Treasury and other U.S. government agency bonds		2,062,043		—		—		2,062,043
Other debt instruments		1,088,733		1,865,627		7,086		2,961,446
Equity instruments		4,365,355		1,149,156		914,802		6,429,313
Total available-for-sale financial assets		16,906,090		3,014,783		921,888		20,842,761
Others(1)		—		3,422		—		3,422
Total	¥	19,345,154	¥	11,907,252	¥	1,093,849	¥	32,346,255
Financial liabilities:
Trading liabilities:
Debt instruments	¥	2,124,548	¥	50,765	¥	—	¥	2,175,313
Equity instruments		18,087		—		—		18,087
Total trading liabilities		2,142,635		50,765		—		2,193,400
Derivative financial instruments:
Interest rate derivatives		96,889		4,318,270		—		4,415,159
Currency derivatives		—		2,231,160		—		2,231,160
Equity derivatives		28,684		40,190		—		68,874
Commodity derivatives		2,466		16,999		—		19,465
Credit derivatives		—		5,129		—		5,129
Total derivative financial instruments		128,039		6,611,748		—		6,739,787
Others(1)		—		39,937		1,212		41,149
Total	¥	2,270,674	¥	6,702,450	¥	1,212	¥	8,974,336

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	At March 31, 2014
	Level 1(2)		Level 2(2)		Level 3		Total
	(In millions)
Financial assets:
Trading assets:
Debt instruments	¥	2,549,647	¥	713,438	¥	—	¥	3,263,085
Equity instruments		207,782		205		86,473		294,460
Total trading assets		2,757,429		713,643		86,473		3,557,545
Derivative financial instruments:
Interest rate derivatives		24,575		3,820,205		629		3,845,409
Currency derivatives		32		977,586		—		977,618
Equity derivatives		5,095		30,497		118		35,710
Commodity derivatives		122		26,694		—		26,816
Credit derivatives		—		5,829		—		5,829
Total derivative financial instruments		29,824		4,860,811		747		4,891,382
Financial assets at fair value through profit or loss:
Debt instruments		—		1,648,261		49,611		1,697,872
Equity instruments		2,029		283		140,071		142,383
Total financial assets at fair value through profit or loss		2,029		1,648,544		189,682		1,840,255
Available-for-sale financial assets:
Japanese government bonds		8,261,809		—		—		8,261,809
U.S. Treasury and other U.S. government agency bonds		1,871,757		—		—		1,871,757
Other debt instruments		634,925		1,696,360		9,445		2,340,730
Equity instruments		3,500,457		831,367		718,624		5,050,448
Total available-for-sale financial assets		14,268,948		2,527,727		728,069		17,524,744
Others(1)		—		5,653		—		5,653
Total	¥	17,058,230	¥	9,756,378	¥	1,004,971	¥	27,819,579
Financial liabilities:
Trading liabilities:
Debt instruments	¥	1,826,969	¥	32,177	¥	—	¥	1,859,146
Equity instruments		6,097		—		—		6,097
Total trading liabilities		1,833,066		32,177		—		1,865,243
Derivative financial instruments:
Interest rate derivatives		21,191		3,840,355		—		3,861,546
Currency derivatives		—		1,058,051		—		1,058,051
Equity derivatives		8,619		27,610		—		36,229
Commodity derivatives		121		17,689		—		17,810
Credit derivatives		—		4,949		2,406		7,355
Total derivative financial instruments		29,931		4,948,654		2,406		4,980,991
Others(1)		—		28,210		—		28,210
Total	¥	1,862,997	¥	5,009,041	¥	2,406	¥	6,874,444

(1) Embedded derivatives, which are separately accounted for, but presented together with the host contract in the consolidated statement of financial position, are disclosed in this table within Others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in this table as assets or 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” below.

(2) 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 fiscal years ended March 31, 2015 and 2014.

F-86

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 fiscal years ended March 31, 2015 and 2014.

	At April 1, 2014			Total gains (losses)						Purchases(1)		Sales			Settlements(1)			Transfers into Level 3(2)		Transfers out of Level 3(2)			At March 31, 2015			Changes in unrealized gains (losses) included in profit  or loss related to assets and liabilities held at March 31, 2015
				Included in profit or loss			Included in other comprehensive income
	(In millions)
Trading assets:
Equity instruments	¥	86,473		¥	18,504		¥	—		¥	866	¥	(4,309	)	¥	(101,534	)	¥	—	¥	—		¥	—		¥	—
Total trading assets		86,473			18,504			—			866		(4,309	)		(101,534	)		—		—			—			—
Derivative financial instruments—net:
Interest rate derivatives—net		629			—			—			—		—			(629	)		—		—			—			—
Equity derivatives—net		118			47			—			25		—			—			—		(17	)		173			61
Credit derivatives—net		(2,406	)		17,082			226			—		—			(8,546	)		—		—			6,356			17,082
Total derivative financial instruments—net		(1,659	)		17,129			226			25		—			(9,175	)		—		(17	)		6,529			17,143
Financial assets at fair value through profit or loss:
Debt instruments		49,611			7,777			—			50		—			(18,912	)		—		(8	)		38,518			7,777
Equity instruments		140,071			(1,471	)		—			2,519		(442	)		(7,537	)		3		(6,229	)		126,914			(1,603	)
Total financial assets at fair value through profit or loss		189,682			6,306			—			2,569		(442	)		(26,449	)		3		(6,237	)		165,432			6,174
Available-for-sale financial assets:
Debt instruments		9,445			(643	)		60			—		—			(1,776	)		—		—			7,086			(465	)
Equity instruments		718,624			3,792			62,031			206,887		(12,663	)		(45,908	)		9		(17,970	)		914,802			(7,269	)
Total available-for-sale financial assets		728,069			3,149			62,091			206,887		(12,663	)		(47,684	)		9		(17,970	)		921,888			(7,734	)
Others(3)—liabilities:		—			(1,212	)		—			—		—			—			—		—			(1,212	)		(1,212	)
Total	¥	1,002,565		¥	43,876		¥	62,317		¥	210,347	¥	(17,414	)	¥	(184,842	)	¥	12	¥	(24,224	)	¥	1,092,637		¥	14,371
	At April 1, 2013			Total gains (losses)						Purchases		Sales			Settlements			Transfers into Level 3(2)		Transfers out of Level 3(2)			At March 31, 2014			Changes in unrealized gains (losses) included in profit or loss related to assets and liabilities held at March 31, 2014
				Included in profit or loss			Included in other comprehensive income
	(In millions)
Trading assets:
Equity instruments	¥	61,263		¥	5,361		¥	6,292		¥	15,849	¥	(2,292	)	¥	—		¥	—	¥	—		¥	86,473		¥	(1,328	)
Total trading assets		61,263			5,361			6,292			15,849		(2,292	)		—			—		—			86,473			(1,328	)
Derivative financial instruments—net:
Interest rate derivatives—net		—			629			—			—		—			—			—		—			629			629
Equity derivatives—net		389			(295	)		—			30		—			(6	)		—		—			118			(256	)
Credit derivatives—net		(14,646	)		20,813			(1,095	)		—		—			(7,478	)		—		—			(2,406	)		20,813
Total derivative financial instruments—net		(14,257	)		21,147			(1,095	)		30		—			(7,484	)		—		—			(1,659	)		21,186
Financial assets at fair value through profit or loss:
Debt instruments		37,949			23,362			—			—		(1,170	)		(10,530	)		—		—			49,611			24,118
Equity instruments		128,911			991			—			24,950		(10,730	)		(3,047	)		53		(1,057	)		140,071			965
Total financial assets at fair value through profit or loss		166,860			24,353			—			24,950		(11,900	)		(13,577	)		53		(1,057	)		189,682			25,083
Available-for-sale financial assets:
Debt instruments		14,908			412			(515	)		583		(5,787	)		(156	)		—		—			9,445			(296	)
Equity instruments		698,932			(1,868	)		38,989			53,072		(7,831	)		(56,616	)		163		(6,217	)		718,624			(6,320	)
Total available-for-sale financial assets		713,840			(1,456	)		38,474			53,655		(13,618	)		(56,772	)		163		(6,217	)		728,069			(6,616	)
Total	¥	927,706		¥	49,405		¥	43,671		¥	94,484	¥	(27,810	)	¥	(77,833	)	¥	216	¥	(7,274	)	¥	1,002,565		¥	38,325

F-87

(1) Financial instruments held by certain consolidated investment funds had been classified as trading assets and categorized within Level 3 until March 31, 2015. These funds were deconsolidated at March 31, 2015 and investments in the funds are classified as available-for-sale equity instruments categorized within Level 3. The effects of these events are included in settlements of trading assets and purchases of available-for-sale equity instruments.

(2) Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the period. For the fiscal year ended March 31, 2015, transfers out of Level 3 amounted to ¥24,224 million, primarily due to an increase in observability of certain private equity investments.

(3) Embedded derivatives, which are separately accounted for, but presented together with the host contract in the consolidated statement of financial position, are disclosed in this table within Others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in this table as assets or liabilities to be consistent with the host contract.

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 March 31, 2015 and 2014 by line item of the consolidated income statement.

	Total gains (losses) included in profit or loss for the fiscal year ended March 31,						Changes in unrealized gains (losses) included in profit or loss related to assets and liabilities held at March 31,
	2015			2014			2015			2014
	(In millions)
Net interest income	¥	78		¥	—		¥	—		¥	—
Net trading income		33,878			26,212			15,466			19,562
Net income from financial assets at fair value through profit or loss		6,306			24,353			6,174			25,083
Net investment income		11,201			5,375			—			—
Impairment charges on financial assets		(7,587	)		(6,535	)		(7,269	)		(6,320	)
Total	¥	43,876		¥	49,405		¥	14,371		¥	38,325

Valuation Techniques

Financial instruments which are classified as trading assets and liabilities, derivative financial instruments, financial assets at fair value through profit or loss, and available-for-sale financial assets are measured at fair value in the consolidated statement of financial position. These instruments are measured at fair value using a quoted market price, if they are traded in an active market, or, for others, using the fair value measurement techniques as discussed below.

Trading assets and trading liabilities

Debt and equity instruments traded in an active market are measured at fair value using a quoted market price in such a market and they are categorized within Level 1. If a quoted market price is not available, they are measured by using a price quoted by a third party, such as a pricing service or broker, or by reference to the current fair value of another instrument that is substantially the same, based on inputs such as prices obtained from brokers, observable interest rates and spreads. These financial instruments are categorized within Level 2.

Commercial paper is measured at fair value using the DCF method, where primary inputs are observable interest rates and credit spreads, inferred from the prevailing market rates. Therefore, commercial paper is categorized within Level 2.

Until March 31, 2015, financial instruments held by certain consolidated investment funds classified as trading assets had been measured at fair value determined based on net asset value per share, which included significant unobservable inputs, and categorized within Level 3. These funds were deconsolidated at March 31, 2015 and investments in the funds are classified as available-for-sale equity instruments categorized within Level 3.

F-88

Derivative financial instruments (including embedded derivatives)

Listed derivatives (including interest rates, bonds, currencies, stocks and commodities) are measured at fair value using the settlement price announced by the major exchange on which transactions are traded because the settlement price in the exchange reflects the most current transaction price, and is readily and regularly available from the exchange. Listed derivatives are categorized within Level 1.

OTC derivatives (non-exchange-traded derivatives), including embedded derivatives that are separately accounted for from the host contracts, are measured at fair value using valuation techniques such as the present value of estimated future cash flows and option pricing models, generally based on observable interest rates, foreign exchange, commodities, stock prices and other factors as inputs. The valuation models for some transactions, such as yield curve spread options and equity options, use inputs which are not directly observable in the market, including historical correlation coefficients and historical volatilities. However, as the impact of these unobservable inputs is insignificant to the fair value for most of the transactions, the SMFG Group categorizes the majority of those transactions within Level 2.

The credit loss protection scheme which the SMFG Group offers to Goldman Sachs (“GS”) is considered to be a credit derivative, where the underlying reference entities are the American and European corporate entities covered in the commitment line portfolio of the GS group. The fair value of this derivative is determined using an ordinary collateralized debt obligation (“CDO”) pricing model, commonly used in the financial markets. The SMFG Group takes some portions of the positions in subordinated and mezzanine tranches, which covers the first and second credit losses from the portfolio. The major inputs for this derivative are credit default swap (“CDS”) spread rates, correlation ratios of CDS indices for similar portfolios, and the expected additional commitment withdrawal ratio. Although CDS spread rates and correlation ratios are observable in an active market or available from brokers, this whole scheme is categorized within Level 3 as the expected additional withdrawal ratio, which is considered to be a significant input, is not observable in the market.

In addition, the fair value of OTC derivatives incorporates both counterparty credit risk in relation to OTC derivative assets and own credit risk in relation to OTC derivative liabilities. The SMFG Group calculates the credit risk adjustments by applying the probability of default that reflects the counterparty’s or its own credit risk to the OTC derivative exposures and multiplying the result by the loss expected in the event of default. For the probability of default, the SMFG Group uses observable market data, where possible. The OTC derivative exposures used are determined taking into consideration the effect of master netting agreements and collateral. As the SMFG Group manages the OTC derivatives on the basis of its net credit risk exposure, the credit risk adjustments of those OTC derivatives are measured on a portfolio basis in accordance with the exception set forth in IFRS 13.

Financial assets at fair value through profit or loss

The majority of instruments in this category are debt instruments measured at fair value, using a valuation technique based on the observable prices in the market and they are categorized within Level 2.

Some equity and debt instruments in this category are hybrid instruments which have both equity and debt features. These include preferred stocks which are measured at fair value using various valuation models, such as the Monte Carlo Simulation, if they are indexed to the market prices in a stock exchange. These valuation models use the historical volatility of the listed stocks as an input, which are not observable in the market, resulting in these instruments being categorized within Level 3. Other types of preferred stocks and other non-hybrid equity instruments are evaluated using valuation techniques for unlisted stocks, which are normally used for private equity investments. The SMFG Group calculates the fair values of these instruments based on the income approach, market approach using market multiples or others, which are not usually observable in the market. These instruments are categorized within Level 3.

F-89

Available-for-sale financial assets

(a) Debt instruments

Debt instruments are measured at fair value using a quoted market price and categorized within Level 1 if they are traded in an active market. Debt instruments are categorized within Level 2 if they are measured at fair value using a price quoted by a third party, such as a pricing service or broker, or by reference to the current fair value of another bond that is substantially the same based on inputs such as prices obtained from brokers, observable interest rates and spreads. Some debt instruments are measured at fair value using the DCF method in which significant unobservable inputs are used, and categorized within Level 3.

(b) Equity instruments

Listed stocks are measured at fair value based on the market price at a stock exchange and categorized within Level 1.

Unlisted common and preferred stocks in this category are measured at fair value using valuation techniques, similar to those described in “Financial assets at fair value through profit or loss” above.

Publicly offered investment trusts and funds are measured at fair value using a unit price or the market price on which such instruments are listed, and they are categorized within Level 1. Instruments whose prices are not available in the market, such as privately offered investment trusts, are measured at fair value based on the unit price, which is usually regarded as an exit price, obtained from the fund administrator or investment management firm. In such a case, these investment trusts and funds are categorized within Level 2. Other investment funds, such as private equity and real estate investment funds, are generally measured at fair value based on net asset value, which includes significant unobservable inputs. These funds are categorized within Level 3.

F-90

Significant Unobservable Inputs

The following tables present quantitative information about significant unobservable inputs used in fair value measurement for Level 3 financial assets and liabilities at March 31, 2015 and 2014.

	At March 31, 2015
	Fair value		Valuation technique(s)(1)	Significant unobservable inputs(1)	Range of  inputs(1)
	(In millions)
Financial assets:
Derivative financial instruments:
Equity derivatives	¥	173	Option model	Equity volatility		13%-45%
Credit derivatives		6,356	CDO pricing model	Additional withdrawal ratio		50%
Financial assets at fair value through profit or loss:
Debt instruments		38,518	Monte Carlo Simulation	Equity volatility		25%-26%
			Market multiples	Price/Embedded value multiple		0.5x
				Liquidity discount		10%
Equity instruments		126,914	Market multiples	Price/Earnings multiple		8.4x-17.7x
				EV/EBITDA multiple		6.6x
				Liquidity discount		0%-20%
			See note (2) below	—		—
Available-for-sale financial assets:
Debt instruments		7,086	DCF method	Discount margin		1%
Equity instruments(4)		914,802	Market multiples	Price/Book value multiple		0.8x-2.2x
				Price/Earnings multiple		10.9x-35.2x
				EV/EBITDA multiple		6.0x-18.6x
				Price/Embedded value multiple		0.5x
				Liquidity discount		10%-20%
			Monte Carlo Simulation	Equity volatility		28%-55%
			Net asset value(3)	—		—
			See note (2) below	—		—
Financial liabilities:
Others(5)	¥	1,212	Option model	Interest rate to interest rate correlation		42%-100%

F-91

	At March 31, 2014
	Fair value		Valuation technique(s)(1)	Significant unobservable inputs(1)	Range of  inputs(1)
	(In millions)
Financial assets:
Trading assets:
Equity instruments(4)	¥	86,473	Net asset value(3)	—		—
Derivative financial instruments:
Interest rate derivatives		629	Option model	Interest rate to interest rate correlation		27%-100%
Equity derivatives		118	Option model	Equity volatility		20%-54%
Financial assets at fair value through profit or loss:
Debt instruments		49,611	Monte Carlo Simulation	Equity volatility		25%-68%
			Market multiples	Price/Embedded value multiple		0.5x
				Liquidity discount		10%
Equity instruments		140,071	Market multiples	Price/Earnings multiple		10.4x-17.7x
				EV/EBITDA multiple		7.4x
				Liquidity discount		20%
			See note (2) below	—		—
Available-for-sale financial assets:
Debt instruments		9,445	DCF method	Discount margin		0%-3%
Equity instruments		718,624	Market multiples	Price/Book value multiple		0.7x-1.9x
				Price/Earnings multiple		11.5x-75.8x
				EV/EBITDA multiple		5.5x-20.2x
				Price/Embedded value multiple		0.5x
				Liquidity discount		10%-20%
			Monte Carlo Simulation	Equity volatility		58%-60%
			Net asset value(3)	—		—
			See note (2) below	—		—
Financial liabilities:
Derivative financial instruments:
Credit derivatives	¥	2,406	CDO pricing model	Additional withdrawal ratio		75%

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

(2) 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 the table as it is not practical to do so given the nature of such valuation techniques.

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

(4) Financial instruments held by certain consolidated investment funds had been classified as trading assets and categorized within Level 3 until March 31, 2015. These funds were deconsolidated at March 31, 2015 and investments in the funds are classified as available-for-sale equity instruments categorized within Level 3.

(5) Embedded derivatives, which are separately accounted for, but presented together with the host contract in the consolidated statement of financial position, are disclosed in this table within Others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in this table as assets or liabilities to be consistent with the host contract.

Volatility

Volatility represents a measure of how much a particular instrument, parameter or index will change in value over time. In the valuation of preferred stocks and equity derivative instruments containing optionality, historical volatility of the related listed stocks is used as a key input because current implied volatility is generally not observable in the market. In general, a significant increase in the volatility in isolation would result in a significantly higher fair value measurement.

Additional withdrawal ratio

Additional withdrawal ratio represents the expected additional withdrawal ratio of unfunded commitment lines in the reference portfolio (mainly revolving credit facilities for commercial paper backup) concerning the credit loss protection scheme offered to GS. The expected additional withdrawal ratio is estimated based on historical data of actual funded amounts at default for similar portfolios. In general, a significant increase in the additional withdrawal ratio in isolation would result in a significantly lower fair value measurement.

F-92

Price/Earnings, price/book value and price/embedded value multiples

Price/Earnings (“P/E”) multiple represents the ratio of the equity value to the net income, while price/book value (“P/B”) multiple represents the ratio of the equity value to the book value. Embedded value, which takes into account the future cash flows in addition to the net asset value, is applied instead of the book value for a certain unlisted company. These multiples are estimated based on comparable listed companies. In general, a significant increase in the P/E multiple, P/B multiple or price/embedded value multiple in isolation would result in a significantly higher fair value measurement.

EV/EBITDA multiple

EV/EBITDA multiple represents the ratio of the enterprise value (“EV”) to earnings before interest, taxes, depreciation and amortization (“EBITDA”), where the EV is the aggregate value of equity and debt minus cash and cash equivalents. The multiple is estimated based on comparable listed companies. In general, a significant increase in the EV/EBITDA multiple in isolation would result in a significantly higher fair value measurement.

Liquidity discount

A liquidity discount is primarily applied in the valuation techniques for unlisted stocks to reflect the fact that these stocks are not actively traded. In general, a significant increase in the liquidity discount in isolation would result in a significantly lower fair value measurement.

Discount margin

Discount margin represents a spread used in estimating future cash flows in a DCF method to reflect the uncertainty of the cash flows that market participants would consider. In general, a significant increase in the discount margin in isolation would result in a significantly lower fair value measurement.

Correlation

Correlation represents a measure of the relationship between the movements of two variables, which is expressed as a number between plus and minus one. A positive correlation indicates that two variables move in the same direction while a negative correlation indicates that they move in opposite directions. Interest rate correlation used in the valuation techniques of complex interest rate derivatives, which refers to the correlation between two interest rates of different tenors, is estimated based on historical data. In general, a significant increase in the correlation in isolation would result in either a significantly higher or lower fair value measurement, depending on the terms of the instruments.

F-93

Sensitivity Analysis

The fair value of certain financial assets and liabilities are 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.

	At March 31, 2015
	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 assets:
Derivative financial instruments:
Equity derivatives	¥	173	¥	147	¥	42	¥	—	¥	—
Credit derivatives		6,356		2,971		14,594		—		—
Financial assets at fair value through profit or loss:
Debt instruments		38,518		2,877		2,877		—		—
Equity instruments		126,914		171		171		—		—
Available-for-sale financial assets:
Debt instruments		7,086		—		—		148		122
Equity instruments(1)		914,802		—		—		30,461		30,143
Financial liabilities:
Others(2)	¥	1,212	¥	370	¥	1,651	¥	—	¥	—
	At March 31, 2014
	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 assets:
Trading assets:
Equity instruments(1)	¥	86,473	¥	895	¥	895	¥	—	¥	—
Derivative financial instruments:
Interest rate derivatives		629		230		989		—		—
Equity derivatives		118		208		82		—		—
Financial assets at fair value through profit or loss:
Debt instruments		49,611		2,784		2,179		—		—
Equity instruments		140,071		593		589		—		—
Available-for-sale financial assets:
Debt instruments		9,445		—		—		251		385
Equity instruments		718,624		—		—		24,026		22,801
Financial liabilities:
Derivative financial instruments:
Credit derivatives	¥	2,406	¥	6,874	¥	5,754	¥	—	¥	—

(1) Financial instruments held by certain consolidated investment funds had been classified as trading assets and categorized within Level 3 until March 31, 2015. These funds were deconsolidated at March 31, 2015 and investments in the funds are classified as available-for-sale equity instruments categorized within Level 3.

(2) Embedded derivatives, which are separately accounted for, but presented together with the host contract in the consolidated statement of financial position, are disclosed in this table within Others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in this table as assets or liabilities to be consistent with the host contract.

F-94

Trading assets

Financial instruments held by certain consolidated investment funds and classified as trading assets had been measured at fair value determined based on net asset value per share, which included significant unobservable inputs. Since those financial instruments were managed by value at risk (“VaR”) based on historical gain or loss data, the impact of the valuation sensitivity was estimated using a one-day VaR of the portfolio.

Derivative financial instruments (including embedded derivatives)

With respect to the credit loss protection scheme offered to GS, the anticipated losses will vary significantly depending on the expected additional withdrawal ratio of unfunded commitment lines in the reference portfolio. The tables above present the estimates of the impact of changing the expected additional withdrawal ratio from an optimistic (favorable) scenario to a pessimistic (unfavorable) scenario. For the other derivative instruments, including embedded derivatives that are separately accounted for from host contracts, that use interest rate correlation or historical volatilities in the valuation techniques, the impact resulting from using a reasonable range of those inputs is estimated where it is expected to be significant.

Financial assets at fair value through profit or loss / Available-for-sale financial assets

With respect to preferred stocks convertible into listed stocks, for which historical volatilities of related listed stocks are used in the valuation techniques, the impact resulting from using a reasonable range for the volatility is statistically estimated where it is expected to be significant. With respect to unlisted stocks which are measured at fair value based on a market approach, the impact of changing the market multiples within a reasonable range (±10%) is estimated. Certain investment funds classified as available-for-sale equity instruments are measured at fair value determined based on net asset value per share, which includes significant unobservable inputs. Since those funds are managed by VaR based on historical gain or loss data, the impact of the valuation sensitivity is estimated using a one-day VaR of the portfolio.

F-95

Financial Assets and Liabilities Not Carried at Fair Value

The tables below present the carrying amounts and fair values by level within the fair value hierarchy, as described in “Financial Assets and Liabilities Carried at Fair Value—Fair Value Hierarchy,” of financial assets and liabilities not carried at fair value on the SMFG Group’s consolidated statement of financial position at March 31, 2015 and 2014.

		At March 31, 2015
		Carrying amount		Fair value
	Notes			Total		Level 1		Level 2		Level 3
		(In millions)
Financial assets:
Cash and deposits with banks	a	¥	40,112,783	¥	40,112,558	¥	39,108,757	¥	1,003,801	¥	—
Call loans and bills bought:
Call loans	a		1,301,680		1,301,817		—		1,301,817		—
Bills bought	a		25,285		25,263		—		25,263		—
Reverse repurchase agreements and cash collateral on securities borrowed	a		7,218,498		7,220,169		—		7,220,169		—
Investment securities:
Held-to-maturity investments	b		3,396,895		3,417,732		3,417,732		—		—
Loans and advances	a		86,971,716		89,506,551		—		328,670		89,177,881
Other financial assets	a		2,565,725		2,561,487		—		2,391,088		170,399
Financial liabilities:
Deposits:
Non-interest-bearing deposits, demand deposits and deposits at notice	c	¥	67,082,287	¥	67,085,473	¥	—	¥	67,085,473	¥	—
Other deposits	c		48,751,693		48,757,109		—		48,757,109		—
Call money and bills sold:
Call money	c		5,873,124		5,873,118		—		5,873,118		—
Bills sold			—		—		—		—		—
Repurchase agreements and cash collateral on securities lent	c		8,820,083		8,820,083		—		8,820,083		—
Borrowings	c		11,217,052		11,350,636		—		11,345,162		5,474
Debt securities in issue	c		11,051,431		11,272,771		—		11,114,139		158,632
Other financial liabilities	c		5,020,005		5,018,766		—		4,869,157		149,609

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		At March 31, 2014
		Carrying amount		Fair value
	Notes			Total		Level 1		Level 2		Level 3
		(In millions)
Financial assets:
Cash and deposits with banks	a	¥	33,208,724	¥	33,207,328	¥	32,198,245	¥	1,009,083	¥	—
Call loans and bills bought:
Call loans	a		1,208,332		1,208,555		—		1,208,555		—
Bills bought	a		39,903		39,882		—		39,882		—
Reverse repurchase agreements and cash collateral on securities borrowed	a		4,303,121		4,309,294		—		4,309,294		—
Investment securities:
Held-to-maturity investments	b		4,528,254		4,562,348		4,562,348		—		—
Loans and advances	a		81,244,982		83,395,281		—		331,751		83,063,530
Other financial assets	a		1,995,524		1,991,014		—		1,845,539		145,475
Financial liabilities:
Deposits:
Non-interest-bearing deposits, demand deposits and deposits at notice	c	¥	62,226,233	¥	62,226,601	¥	—	¥	62,226,601	¥	—
Other deposits	c		46,144,261		46,149,497		—		46,149,497		—
Call money and bills sold:
Call money	c		4,112,429		4,112,428		—		4,112,428		—
Bills sold			—		—		—		—		—
Repurchase agreements and cash collateral on securities lent	c		7,041,075		7,041,075		—		7,041,075		—
Borrowings	c		8,463,363		8,564,754		—		8,554,264		10,490
Debt securities in issue	c		8,769,094		8,924,529		—		8,764,815		159,714
Other financial liabilities	c		4,703,784		4,702,303		—		4,594,742		107,561

Notes:

a.	(i)	The carrying amounts of deposits with banks without maturity and loans with no specified repayment dates represent a reasonable estimate of fair value, considering the nature of these financial instruments.
	(ii)	Financial assets with a remaining maturity of six months or less: The carrying amounts represent a reasonable estimate of fair value.
	(iii)	Financial assets with a remaining maturity of more than six months: 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.
	Note that some of the financial assets in this category include embedded derivatives, which are separately accounted for, but presented together with the host contract.
b.	The fair values for held-to-maturity investments are determined using quoted prices in active markets.
c.	(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)	Financial liabilities with a remaining maturity of six months or less: The carrying amounts represent a reasonable estimate of fair value.
	(iii)	Financial liabilities with a remaining maturity of more than six months: The fair values are, in principle, based on the present values of future cash flows calculated using the refinancing rate applied to the same type of instruments for similar remaining maturities. The fair values of debt securities in issue are based on the present values of future cash flows calculated using the rate derived from yields of bonds issued by SMBC and publicly offered subordinated bonds published by securities firms.
	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.

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44 OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES

The following tables present the information about the impact of offsetting of financial assets and liabilities in the consolidated statement of financial position in accordance with the criteria described in Note 2 “Summary of Significant Accounting Policies,” as well as the impact of netting of financial instruments that are subject to enforceable master netting arrangements or similar agreements but do not qualify for the offsetting criteria at March 31, 2015 and 2014.

	At March 31, 2015
	Gross amounts of recognized financial assets and liabilities		Gross amounts offset in statement of financial position(1)			Net amounts presented in statement of financial position		Related amounts not offset in statement of financial position(2)						Net amounts
								Financial instruments(3)			Cash collateral
	(In millions)
Financial assets(4):
Reverse repurchase agreements and cash collateral on securities borrowed	¥	7,218,498	¥	—		¥	7,218,498	¥	(7,202,069	)	¥	—		¥	16,429
Derivative financial instruments		6,825,760		(354,557	)		6,471,203		(4,570,657	)		(280,102	)		1,620,444
Total	¥	14,044,258	¥	(354,557	)	¥	13,689,701	¥	(11,772,726	)	¥	(280,102	)	¥	1,636,873
Financial liabilities(4):
Repurchase agreements and cash collateral on securities lent	¥	8,820,083	¥	—		¥	8,820,083	¥	(8,805,131	)	¥	—		¥	14,952
Derivative financial instruments		7,162,759		(422,972	)		6,739,787		(4,685,870	)		(730,600	)		1,323,317
Total	¥	15,982,842	¥	(422,972	)	¥	15,559,870	¥	(13,491,001	)	¥	(730,600	)	¥	1,338,269
	At March 31, 2014
	Gross amounts of recognized financial assets and liabilities		Gross amounts offset in statement of financial position(1)			Net amounts presented in statement of financial position		Related amounts not offset in statement of financial position(2)						Net amounts
								Financial instruments(3)			Cash collateral
	(In millions)
Financial assets(4):
Reverse repurchase agreements and cash collateral on securities borrowed	¥	4,303,121	¥	—		¥	4,303,121	¥	(4,299,791	)	¥	—		¥	3,330
Derivative financial instruments		5,028,061		(136,679	)		4,891,382		(3,791,668	)		(205,248	)		894,466
Total	¥	9,331,182	¥	(136,679	)	¥	9,194,503	¥	(8,091,459	)	¥	(205,248	)	¥	897,796
Financial liabilities(4):
Repurchase agreements and cash collateral on securities lent	¥	7,041,075	¥	—		¥	7,041,075	¥	(7,032,890	)	¥	—		¥	8,185
Derivative financial instruments		5,127,736		(146,745	)		4,980,991		(3,832,031	)		(386,177	)		762,783
Total	¥	12,168,811	¥	(146,745	)	¥	12,022,066	¥	(10,864,921	)	¥	(386,177	)	¥	770,968

(1) Amounts offset for derivative financial instruments include cash collateral.

(2) The amounts of financial instruments and cash collateral have been limited to the net amounts presented in the consolidated statement of financial position so as not to include any over-collateralization.

(3) Financial instruments include non-cash collateral at fair value.

(4) Financial assets and liabilities include amounts that are both subject to and not subject to enforceable master netting arrangements or similar agreements.

The “Gross amounts offset in statement of financial position” column in the above tables represents the impact of offsetting of financial assets and liabilities in the consolidated statement of financial position in accordance with the offsetting criteria. The SMFG Group presents financial assets and liabilities on a net basis in the consolidated statement of financial position only if it currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or realize the asset and settle the liability simultaneously.

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The “Related amounts not offset in statement of financial position” column comprises (1) financial assets and liabilities subject to netting arrangements, such as the International Swaps and Derivatives Association’s (“ISDA”) Master Agreement, master repurchase agreements and master securities lending agreements, which allow all the outstanding transactions with a particular counterparty to be set off only if the event of default or other predetermined events occur, and (2) cash and non-cash collateral related to those transactions.

45 FINANCIAL RISK MANAGEMENT

The SMFG Group classifies risks into the following categories: credit risk, market risk, liquidity risk and operational risk (including processing risk and system risk). This note presents information about the SMFG Group’s exposure to credit risk, market risk, and liquidity risk, and its policies and processes for measuring and managing these risks.

Risk Management System

The SMFG Group has established a basic approach for risk management. This basic approach includes establishing Group-wide basic policies for risk management, providing all necessary implementation guidance to the SMFG Group companies and monitoring the risk management procedures implemented by all Group companies to ensure their practices meet the relevant standards.

The Group-wide basic policies for risk management are determined by the Management Committee, which consists of designated Board Members, and such policies are authorized by the Board of Directors. The policies include the following:

• Risk management on a Group-wide basis. Various risks taken at the SMFG Group companies are managed on a consolidated basis according to the nature of their business and significance in conformity with the relevant laws and regulations.

• Risk management based on quantification. The risks are quantitatively managed according to the relevant risk characteristics after specifying the scope of quantification.

• Ensuring consistency with the business strategy. Risk management is consistent with the business strategy.

• System for check and balance. The risk management framework is developed to ensure effective check and balance function for business operations.

• Measures for emergencies and critical situations. Necessary measures are developed by assuming situations and scenarios as to materialization of risk which would have a significant impact on the business and financial management of the SMFG Group.

• Verification of the actual situation. The actual risk management process is verified by the Internal Audit Unit.

The policies also include fundamental principles for each risk category, which each SMFG Group company has to follow when establishing its own risk management system. The Corporate Risk Management Department, in cooperation with the Corporate Planning Department, performs risk management according to the above policies. In addition, the Internal Audit Department is responsible for the independent review of risk management within the SMFG Group.

Risk management systems are in place at the individual SMFG Group companies, and have been established in accordance with the Group-wide basic policies for risk management and implementation guidance provided by SMFG. Based on these policies and guidance, each SMFG Group company implements guidelines and establishes processes for risk management. On an ongoing basis, these processes and risks are monitored by SMFG.

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For example, at SMBC, specific departments have been appointed to oversee the handling of the four risk categories listed above, in addition to the risks associated with settlement. Each risk category is managed taking into account, the particular characteristics of that category. In addition, the Risk Management Unit has been established—independent of the business units—and the risk management system has been strengthened by consolidating the functions for managing risks—credit, market, liquidity, operational and settlement—into the Risk Management Unit and enhancing SMBC’s across-the-board risk monitoring ability. One board member is assigned to oversee the Risk Management Unit comprising the Corporate Risk Management Department and Credit & Investment Planning Department. The Corporate Risk Management Department—the unit’s planning department—seeks to manage all categories of risk in cooperation with the Corporate Planning Department. Moreover, the Internal Audit Unit—independent of all business units—conducts periodic audits to ensure that the management system is functioning properly.

The decision-making process for addressing the risks at the operating level is also strengthened by the Credit Risk Management Committee and the Market Risk Management Committee, which are subcommittees of the Management Committee of SMBC.

The diagram below represents the risk management system of the SMFG Group and SMBC.

Risk Capital-Based Management

In order to maintain a balance between risk and return, the SMFG Group employs a risk capital-based management method. The SMFG Group measures “risk capital” based on VaR and other specific measures such as uniform basic measures of credit, market and operational risks, taking into account the special characteristics of each type of risk, and the business activities of each SMFG Group company.

The SMFG Group then allocates risk capital to each unit to keep the total exposure to various risks within the scope of the SMFG Group’s resources, i.e., capital. The allocation to each unit is determined by the Management Committee and authorized by the Board of Directors. In this framework, risk capital includes credit concentration risk and interest rate risk in the banking book, which are taken into account under Pillar 2 of the Basel Capital Accord. In addition, the SMFG Group conducts risk capital management activities on a consolidated basis, including each SMFG Group company.

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Credit Risk

Credit risk is the risk of incurring losses from decline or loss of the value of an asset (including off-balance sheet items) that is caused by a credit event including but not limited to the deterioration of financial condition of a borrower. Overseas credits transactions also entail country risk, which is closely related to credit risk. Country risk is the risk of incurring losses caused by changes in political or economic conditions. Credit exposures arise primarily from lending activities such as loans and advances, acquiring investment securities, derivative transactions, and off-balance sheet transactions such as unused portion of loan commitments.

Credit risk management system

Credit risk is the most significant risk to which the SMFG Group is exposed. The purpose of credit risk management is to keep the credit risk exposure to a permissible level relative to capital, to maintain the quality of assets and to ensure returns commensurate with risk.

On the basis of Group-wide basic policies for risk management, the SMFG Group companies follow the fundamental principles established by the SMFG Group to assess and manage credit risk. Each SMFG Group company manages credit risk according to the nature of its business, and assesses and manages the credit risks of individual loans and credit portfolios quantitatively, using consistent standards.

The following chart shows the credit risk management system of SMBC, the SMFG Group’s significant banking subsidiary.

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At SMBC, the Credit & Investment Planning Department within the Risk Management Unit is responsible for the comprehensive management of credit risk. This department drafts and administers credit policies, the internal rating system, credit authority guidelines and credit application guidelines, and manages non-performing loans (“NPLs”), including impaired loans, and other aspects of credit portfolio management. The department also cooperates with the Corporate Risk Management Department in quantifying credit risk (risk capital and risk-weighted assets) and controls SMBC’s entire credit risk. Further, the Credit Portfolio Management Department within the Credit & Investment Planning Department strives to stabilize the credit portfolio and manage the risk through credit derivatives, loan asset sales and other instruments.

The credit departments within each business unit conduct credit risk management for loans handled by their units and manage their units’ portfolios. The credit limits they use are based on the baseline amounts that the Credit & Investment Planning Department establishes for each grading category, with particular attention paid to evaluating and managing customers or loans perceived to have particularly high credit risk. The Corporate Research Department engages in research on industries and analyzes the business and financial conditions of borrower enterprises to detect early signs of problems or growth potential.

The Credit Administration Department is responsible for handling NPLs of borrowers classified as potentially bankrupt or lower, and formulates plans for workouts, including write-offs, and corporate rehabilitation. The department closely liaises with SMBC Servicer Co., Ltd., an SMFG Group company, which engages in related services to efficiently reduce the amount of NPLs, including through the sale of loans.

The Internal Audit Unit, operating independently of the business units, audits asset quality, accuracy of grading and state of credit risk management, and reports the results directly to the board of directors and the Management Committee.

SMBC has established the Credit Risk Committee to undertake control of credit risk and to ensure the overall soundness of the loan operations.

Credit risk management methods

To effectively manage the risk involved in individual loans as well as the credit portfolio as a whole, SMBC first acknowledges that every loan entails credit risk, assesses the credit risk posed by each borrower and loan using an internal rating system, and quantifies that risk for control purposes.

Credit risk evaluation

The Credit & Investment Planning Department manages an internal rating system for each asset control category set according to portfolio characteristics. For example, credits to commercial and industrial (“C&I”) companies, individuals for business purposes (domestic only), sovereigns, public sector entities, and financial institutions are assigned an “obligor grade,” which indicates the borrower’s creditworthiness, and/or “facility grade,” which indicates the collectability of assets taking into account the transaction conditions such as guarantee/collateral, and tenor. The business units determine an obligor grade by first assigning a financial grade using a financial strength grading model and data obtained from the obligor’s financial statements, including net worth and cash flows. The financial grade is then adjusted taking into account the actual state of the obligor’s financial position and qualitative factors to derive the obligor grade. The qualitative factors mainly include the expected future cash flows taking into account factors such as historical loss information, the appropriateness of the borrower’s business plan or operational improvement plan, the status of progress of its plan, and the overall support from financial institutions. In the event that the borrower is domiciled overseas, internal ratings for credit are made after taking into consideration the country rank, which represents an assessment of the credit quality of each country based on its political and economic situation, as well as its current account balance and external debt. Obligor grades and facility grades are reviewed once a year and as otherwise necessary, such as when there are changes in the credit situation. The SMFG Group’s subsidiaries carry out credit risk evaluations in line with SMBC.

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The table below shows the corporate obligor grading system of SMBC.

Obligor Grade		Definition	Borrower Category
Domestic (C&I), etc.	Overseas (C&I), etc.
J1	G1	Very high certainty of debt repayment	Normal Borrowers
J2	G2	High certainty of debt repayment
J3	G3	Satisfactory certainty of debt repayment
J4	G4	Debt repayment is likely, but this could change in cases of significant changes in economic trends or business environment
J5	G5	No problem with debt repayment over the short term, but not satisfactory over the mid to long term, and the situation could change in cases of significant changes in economic trends or business environment
J6	G6	Currently no problem with debt repayment, but there are unstable business and financial factors that could lead to debt repayment problems
J7	G7	Close monitoring is required due to problems in meeting loan terms and conditions, sluggish/unstable business, or financial problems	Borrowers Requiring Caution
J7R	G7R	Obligors with loans that are more than three months past due or with restructured loans within the “Borrowers Requiring Caution” category	Substandard Borrowers
J8	G8	Currently not bankrupt, but experiencing business difficulties, making insufficient progress in restructuring and highly likely to go bankrupt	Potentially Bankrupt Borrowers
J9	G9	Though not yet legally or formally bankrupt, has serious business difficulties and rehabilitation is unlikely; thus, effectively bankrupt	Effectively Bankrupt Borrowers
J10	G10	Legally or formally bankrupt	Bankrupt Borrowers

There are also grading systems for loans to individuals such as housing loans and structured finance including project finance, where the repayment source is limited to the cash flows generated by a particular business or asset. For example, the obligor grade of housing loans is determined taking into account various relevant factors such as proportion of the repayment to revenue, proportion of down payment to the value and past due information.

The Credit & Investment Planning Department centrally manages the internal rating systems, and designs, operates, supervises and validates the grading models. It validates the grading models (including statistical validation) of main assets following the procedure manual once a year to ensure their effectiveness and suitability.

Quantification of credit risk

Credit risk quantification refers to the process of estimating the degree of credit risk of a portfolio or individual loan taking into account not just the obligor’s probability of default (“PD”), but also the concentration of risk in a specific customer or industry, and the loss impact of fluctuations in the value of collateral, such as real estate and securities.

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Specifically, the PD by grade, loss given default (“LGD”), credit quality correlation among obligors, and other parameter values are estimated using the historical data of obligors and facilities stored in a database to calculate the credit risk. Then, based on these parameters, SMBC runs a simulation of simultaneous default using the Monte Carlo Simulation to calculate SMBC’s maximum loss exposure to the estimated amount of the maximum losses/expected shortfall that may be incurred. Based on these quantitative results, SMBC allocates risk capital.

Risk quantification is also executed for purposes such as to determine the portfolio’s risk concentration or to simulate economic movements (stress tests), and the results are used for making optimal decisions across the whole range of business operations, including formulating business plans and providing a standard against which individual credit applications are assessed.

Credit assessment

At SMBC, the credit assessment of corporate loans involves a variety of financial analyses, including cash flows, to predict an enterprise’s capability of loan repayment and its growth prospects. These quantitative measures, when combined with qualitative analyses of industrial trends, the enterprise’s research and development capabilities, the competitiveness of its products or services, and its management caliber, result in a comprehensive credit assessment. The loan application is analyzed in terms of the intended utilization of the funds and the repayment schedule. In the assessment of housing loans for individuals, SMBC employs a credit assessment model based on credit data amassed and analyzed by SMBC over many years, taking into account various relevant factors including proportion of the repayment to revenue, proportion of down payment to the value and past due information.

Credit monitoring

At SMBC, in addition to analyzing loans at the application stage, the Credit Monitoring System is utilized to reassess obligor grades, and review credit policies for each obligor so that problems can be detected at an early stage, and quick and effective action can be taken. The system includes annual monitoring that is carried out each time the financial results of the obligor enterprise are obtained, as well as ad-hoc monitoring that is performed each time credit conditions change.

Credit portfolio management

Risk-taking within the scope of capital

To keep the credit risk exposure to a permissible level relative to capital, SMBC’s Corporate Risk Management Department sets a credit risk capital limit for internal control purposes. Under this limit, sub-limits are set for each business unit. The Corporate Risk Management Department conducts monthly monitoring to make sure that these limits are being followed.

Controlling concentration risk

Once the credit concentration risk is realized, the equity capital of SMBC may be materially impaired. SMBC’s Credit & Investment Planning Department therefore takes measures to manage concentration risks, such as introducing large exposure limits and conducting intensive loan reviews for obligors with large exposures, with an increased focus on industrial sectors with an excessive concentration of credit risk. Further, to manage country risk, the Credit Management Department of the International Banking Unit has credit limit guidelines based on each country’s creditworthiness.

Toward active portfolio management

SMBC’s Credit Portfolio Management Department makes use of credit derivatives, loan asset sales, and other instruments to proactively and flexibly manage its portfolio to stabilize credit risk.

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Maximum exposure to credit risk before collateral held or other credit enhancements

The following table shows the maximum exposure to credit risk before taking into account any collateral held or other credit enhancements at March 31, 2015 and 2014.

	At March 31,
	2015		2014
	(In millions)
Credit risk exposures relating to assets on the consolidated statement of financial position:
Deposits with banks	¥	38,938,903	¥	31,970,308
Call loans and bills bought		1,326,965		1,248,235
Reverse repurchase agreements and cash collateral on securities borrowed		7,218,498		4,303,121
Trading assets		2,618,593		3,263,085
Derivative financial instruments		6,471,203		4,891,382
Financial assets at fair value through profit or loss		1,654,259		1,697,872
Investment securities:
Held-to-maturity investments		3,396,895		4,528,254
Available-for-sale financial assets		14,413,448		12,474,296
Loans and advances		86,971,716		81,244,982
Other financial assets		2,565,725		1,995,524
Credit risk exposures relating to off-balance sheet items(1):
Loan commitments		53,665,583		49,285,032
Financial guarantees and other credit-related contingent liabilities		7,076,536		6,396,144
Total	¥	226,318,324	¥	203,298,235

(1) The off-balance sheet items represent the nominal amounts of undrawn loan commitments, financial guarantees and other credit-related contingent liabilities.

Based on the table above, excluding loan commitments (refer to Note 41 “Contingency and Capital Commitments”), the majority of the total exposure to credit risk is derived from “Loans and advances” and “Available-for-sale financial assets.”

Collateral and other credit enhancements

The SMFG Group considers the acquisition of collateral and guarantees as a secondary repayment source to further enhance loan recovery and minimize credit risk. Based on the assessment of a borrower’s real financial condition and potential future cash flows, the SMFG Group shall analyze the borrower’s repayment ability and require sufficient collateral in the form of an asset or third-party obligation. This serves to mitigate the inherent credit risk in the exposure, by either improving recoveries in the event of a default or transferring the borrower’s obligation to guarantors. Collateral received is mainly segregated into (1) financial collateral such as cash, deposits and securities, (2) real estate collateral such as land and buildings, and (3) guarantees received from sovereigns, municipal corporations, credit guarantee corporations and other public entities, financial institutions, and other companies.

The SMFG Group’s credit risk management is mainly based on an analysis of the repayment ability from the cash flows of the borrower’s business performance, and the collateral and other credit enhancements are considered as secondary repayment sources in the SMFG Group’s business practice. At the time of the primary lending decision, the SMFG Group evaluates the collateral on an individual borrower basis to consider its financial effect for mitigating credit risk. The frequency of subsequent collateral reviews is dependent on the borrower’s creditworthiness. In case there is a significant change in the borrower’s repayment ability due to a

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deterioration in its creditworthiness and/or its cash flows, the SMFG Group may utilize the collateral and other credit enhancements as a source of repayment. In such circumstances the re-evaluation of the collateral and other credit enhancements will be performed regularly.

The following table shows the financial effect of collateral and other credit enhancements on loans and advances for borrowers requiring caution and impaired loans and advances at March 31, 2015 and 2014. The maximum collateral amounts included in the disclosure are limited to the carrying value of loans and advances where the credit exposure is over-collateralized.

	At March 31,
	2015		2014
	(In millions)
Loans and advances for borrowers requiring caution and impaired loans and advances	¥	3,916,948	¥	4,280,684
Financial effect of collateral and other credit enhancements		1,827,023		2,084,482

Concentration of risks of loans and advances with credit risk exposure

An analysis of concentrations of credit risk from loans and advances by geographical sector and industry sector at March 31, 2015 and 2014 is shown below. The concentration by geographical sector is measured based on the domicile of the borrower.

Geographical sector

	At March 31,
	2015			2014
	(In millions)
Domestic	¥	62,232,077		¥	61,108,231
Foreign:
Americas		9,587,777			7,473,507
Europe		4,699,266			4,271,285
Asia		8,549,341			7,125,929
Others		2,903,247			2,393,713
Total foreign		25,739,631			21,264,434
Gross loans and advances		87,971,708			82,372,665
Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net		(206,440	)		(177,018	)
Less: Allowance for loan losses		(793,552	)		(950,665	)
Net loans and advances	¥	86,971,716		¥	81,244,982

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Industry sector

	At March 31,
	2015			2014
	(In millions)
Domestic:
Manufacturing	¥	8,061,654		¥	8,018,568
Agriculture, forestry, fisheries and mining		171,855			177,012
Construction		1,150,616			1,152,388
Transportation, communications and public enterprises		5,175,949			5,086,361
Wholesale and retail		5,664,385			5,505,570
Finance and insurance		2,869,967			2,537,347
Real estate and goods rental and leasing		8,766,724			8,117,000
Services		4,776,706			4,855,536
Municipalities		1,353,949			1,279,010
Lease financing		2,211,773			2,133,760
Consumer(1)		18,817,259			19,086,241
Others		3,211,240			3,159,438
Total domestic		62,232,077			61,108,231
Foreign:
Public sector		164,495			163,685
Financial institutions		3,880,655			3,450,482
Commerce and industry		20,010,729			16,435,047
Lease financing		308,128			267,394
Others		1,375,624			947,826
Total foreign		25,739,631			21,264,434
Gross loans and advances		87,971,708			82,372,665
Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net		(206,440	)		(177,018	)
Less: Allowance for loan losses		(793,552	)		(950,665	)
Net loans and advances	¥	86,971,716		¥	81,244,982

(1) The balance in Consumer mainly consists of housing loans. The housing loan balances amounted to ¥14,087,453 million and ¥14,420,225 million at March 31, 2015 and 2014, respectively.

The following tables show a disaggregation of the structured finance loans and advances balances, where the repayment source is limited to the cash flows generated by a particular business or asset, and the balances of secured or unsecured consumer loans at March 31, 2015 and 2014. These loans and advances are included in the preceding tables.

Structured finance:

	At March 31,
	2015		2014
	(In millions)
Real estate finance	¥	1,896,194	¥	1,671,049
Project finance		2,988,040		2,308,908
Other structured finance		332,132		273,863
Total structured finance	¥	5,216,366	¥	4,253,820

F-107

Consumer:

	At March 31,
	2015		2014
	(In millions)
Secured loans(1)	¥	15,193,732	¥	15,544,637
Unsecured loans		3,623,527		3,541,604
Total consumer	¥	18,817,259	¥	19,086,241

(1) The secured loans and advances mainly represent housing loans. The housing loan balances amounted to ¥14,087,453 million and ¥14,420,225 million at March 31, 2015 and 2014, respectively.

Loans and advances by credit quality category

Loans and advances are summarized as follows:

	At March 31,
	2015			2014
	(In millions)
Neither past due nor impaired	¥	86,206,087		¥	80,255,699
Past due but not impaired		167,519			168,153
Impaired(1)		1,598,102			1,948,813
Gross loans and advances		87,971,708			82,372,665
Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net		(206,440	)		(177,018	)
Less: Allowance for loan losses		(793,552	)		(950,665	)
Net loans and advances	¥	86,971,716		¥	81,244,982

(1) Loans and advances to borrowers who are classified in the borrower categories of substandard borrowers, potentially bankrupt borrowers, effectively bankrupt borrowers, and bankrupt borrowers described in the obligor grading system represent impaired loans and advances.

F-108

Loans and advances neither past due nor impaired

The following tables show the credit quality of the portfolio of loans and advances that were neither past due nor impaired, by geography and by industry based on the corporate obligor grading system of SMBC at March 31, 2015 and 2014. Since the internal rating system of SMBC’s consumer portfolio differs from the corporate obligor grading system, the balances of loans and advances to consumers are included in the grade category of “Other.” Additionally, as the SMFG Group’s subsidiaries are adopting various internal rating systems which differ from SMBC, the grade category of “Other” also includes some balances of loans and advances held by those subsidiaries.

	At March 31, 2015
	Normal								Requiring Caution
	J 1-3		J 4-6		Japanese government and local municipal corporations		Other		J 7		Other		Total
	(In millions)
Domestic:
Manufacturing	¥	3,843,395	¥	2,265,065	¥	—	¥	1,493,017	¥	250,386	¥	40,969	¥	7,892,832
Agriculture, forestry, fisheries and mining		124,546		30,655		1,336		5,509		2,101		529		164,676
Construction		177,536		504,951		—		333,352		71,238		19,556		1,106,633
Transportation, communications and public enterprises		2,560,712		1,981,485		128,491		343,328		80,017		21,401		5,115,434
Wholesale and retail		2,052,654		2,478,098		—		735,796		170,310		38,242		5,475,100
Finance and insurance		1,848,302		414,844		4,317		574,410		1,541		14,368		2,857,782
Real estate and goods rental and leasing		3,660,159		3,293,563		73,853		1,240,569		163,554		106,891		8,538,589
Services		1,101,414		2,135,296		491,781		629,407		184,536		49,106		4,591,540
Municipalities		—		—		1,181,671		155,528		—		16,750		1,353,949
Lease financing		—		—		—		2,172,824		—		19,841		2,192,665
Consumer(1)		—		30		—		18,100,141		3,245		233,405		18,336,821
Others		20,437		2,031,238		506,805		410,493		172,733		3,517		3,145,223
Total domestic		15,389,155		15,135,225		2,388,254		26,194,374		1,099,661		564,575		60,771,244
	G 1-3		G 4-6		—		Other		G 7		Other		Total
Foreign:
Public sector		86,490		42,137		—		34,310		—		1,544		164,481
Financial institutions		2,461,053		210,771		—		1,124,623		5,054		23,504		3,825,005
Commerce and industry		13,364,752		2,369,304		—		3,457,416		455,691		134,666		19,781,829
Lease financing		—		—		—		286,219		—		12,839		299,058
Others		872,088		136,065		—		342,176		394		13,747		1,364,470
Total foreign		16,784,383		2,758,277		—		5,244,744		461,139		186,300		25,434,843
Total	¥	32,173,538	¥	17,893,502	¥	2,388,254	¥	31,439,118	¥	1,560,800	¥	750,875	¥	86,206,087

(1) The balance in the grade category of “Other” in Consumer includes housing loans, which amounted to ¥13,756,579 million and ¥94,374 million for the borrower category of Normal and Requiring Caution, respectively.

F-109

	At March 31, 2014
	Normal								Requiring Caution
	J 1-3		J 4-6		Japanese government and local municipal corporations		Other		J 7		Other		Total
	(In millions)
Domestic:
Manufacturing	¥	3,723,591	¥	2,188,551	¥	—	¥	1,566,722	¥	233,866	¥	87,221	¥	7,799,951
Agriculture, forestry, fisheries and mining		87,592		34,813		3,045		7,065		40,257		960		173,732
Construction		185,049		308,505		—		493,417		37,400		46,539		1,070,910
Transportation, communications and public enterprises		2,397,303		1,921,990		111,672		485,042		46,149		56,860		5,019,016
Wholesale and retail		1,860,641		2,139,905		—		1,034,905		134,094		91,861		5,261,406
Finance and insurance		1,606,729		326,398		5,005		563,726		2,981		15,098		2,519,937
Real estate and goods rental and leasing		3,272,649		2,839,783		89,650		1,237,810		162,963		126,737		7,729,592
Services		1,013,361		1,868,702		635,642		862,864		155,969		96,042		4,632,580
Municipalities		—		—		1,132,713		130,356		—		15,941		1,279,010
Lease financing		—		—		—		2,090,725		—		20,786		2,111,511
Consumer(1)		—		295		—		18,307,660		3,693		257,583		18,569,231
Others		18,184		2,172,201		164,974		428,406		279,419		7,355		3,070,539
Total domestic		14,165,099		13,801,143		2,142,701		27,208,698		1,096,791		822,983		59,237,415
	G 1-3		G 4-6		—		Other		G 7		Other		Total
Foreign:
Public sector		99,933		11,657		—		50,475		—		1,572		163,637
Financial institutions		2,356,086		138,722		—		905,457		2,901		21,262		3,424,428
Commerce and industry		11,366,457		1,885,847		—		2,625,543		252,163		101,470		16,231,480
Lease financing		—		—		—		247,002		—		11,669		258,671
Others		623,492		92,168		—		215,036		210		9,162		940,068
Total foreign		14,445,968		2,128,394		—		4,043,513		255,274		145,135		21,018,284
Total	¥	28,611,067	¥	15,929,537	¥	2,142,701	¥	31,252,211	¥	1,352,065	¥	968,118	¥	80,255,699

(1) The balance in the grade category of “Other” in Consumer includes housing loans, which amounted to ¥14,060,554 million and ¥99,978 million for the borrower category of Normal and Requiring Caution, respectively.

F-110

Loans and advances past due but not impaired

The SMFG Group assesses the credit quality of loans and advances taking into account past due information on a borrower basis, and does not comprehensively collate the data related to the age analysis of loans and advances that were past due but not impaired on an individual basis. The aggregate balances of loans and advances of borrowers with one or more facilities, where any of the facilities are past due for less than three months but not impaired as at March 31, 2015 and 2014 were ¥196,804 million and ¥201,904 million, respectively. Those aggregate balances therefore include individual loans and advances which are not past due. Thus, in the tables below, the SMFG Group provides the amount of loans and advances where the final payment at contractual maturity is past due, by geography and by industry, at March 31, 2015 and 2014. For reference, since all the loans and advances that are past due over three months are treated as impaired, those loans and advances are not included in the tables below.

	At March 31, 2015
	Past due up to 1 month		Past due 1-2 months		Past due 2-3 months		Total
	(In millions)
Domestic:
Manufacturing	¥	1,617	¥	41	¥	56	¥	1,714
Agriculture, forestry, fisheries and mining		13		—		20		33
Construction		630		118		74		822
Transportation, communications and public enterprises		480		42		9		531
Wholesale and retail		4,262		351		138		4,751
Finance and insurance		597		73		1,957		2,627
Real estate and goods rental and leasing		679		49		248		976
Services		1,771		234		140		2,145
Lease financing		359		19		92		470
Consumer		43,124		19,926		16,890		79,940
Others		4		13		1		18
Total domestic		53,536		20,866		19,625		94,027
Foreign:
Public sector		—		—		—		—
Financial institutions		1,266		1,058		32,911		35,235
Commerce and industry		7,428		4,538		21,289		33,255
Others		3,620		1,112		270		5,002
Total foreign		12,314		6,708		54,470		73,492
Total	¥	65,850	¥	27,574	¥	74,095	¥	167,519

F-111

	At March 31, 2014
	Past due up to 1 month		Past due 1-2 months		Past due 2-3 months		Total
	(In millions)
Domestic:
Manufacturing	¥	2,150	¥	221	¥	87	¥	2,458
Agriculture, forestry, fisheries and mining		—		—		22		22
Construction		1,077		212		112		1,401
Transportation, communications and public enterprises		599		112		98		809
Wholesale and retail		9,957		366		252		10,575
Finance and insurance		3,447		34		543		4,024
Real estate and goods rental and leasing		1,239		642		135		2,016
Services		2,357		448		118		2,923
Lease financing		794		35		29		858
Consumer		54,827		16,348		10,629		81,804
Others		127		2		1		130
Total domestic		76,574		18,420		12,026		107,020
Foreign:
Public sector		—		—		34		34
Financial institutions		13,180		119		10,108		23,407
Commerce and industry		22,504		8,028		3,969		34,501
Others		2,298		632		261		3,191
Total foreign		37,982		8,779		14,372		61,133
Total	¥	114,556	¥	27,199	¥	26,398	¥	168,153

F-112

Impaired loans and advances

The following table shows the impaired loans and advances, by geography and by industry, at March 31, 2015 and 2014.

	At March 31,
	2015			2014
	(In millions)
Domestic:
Manufacturing	¥	167,108		¥	216,159
Agriculture, forestry, fisheries and mining		7,146			3,258
Construction		43,161			80,077
Transportation, communications and public enterprises		59,984			66,536
Wholesale and retail		184,534			233,589
Finance and insurance		9,558			13,386
Real estate and goods rental and leasing		227,159			385,392
Services		183,021			220,033
Lease financing		18,638			21,391
Consumer		400,498			435,206
Others		65,999			88,769
Total domestic		1,366,806			1,763,796
Foreign:
Public sector		14			14
Financial institutions		20,415			2,647
Commerce and industry		195,645			169,066
Lease financing		9,070			8,723
Others		6,152			4,567
Total foreign		231,296			185,017
Total impaired loans and advances before allowance for loan losses		1,598,102			1,948,813
Less: Allowance for loan losses for impaired loans and advances		(699,207	)		(857,095	)
Net impaired loans and advances	¥	898,895		¥	1,091,718

Renegotiated loans and advances

The following table shows loans and advances at March 31, 2015 and 2014 that would otherwise be past due or impaired, but whose terms have been renegotiated without providing any financial concessions. These loans and advances are mainly classified as requiring caution in the table of “Loans and advances neither past due nor impaired” in the section “Loans and advances by credit quality category.”

The SMFG Group continually assesses the creditworthiness of a borrower for whom terms of the loans and advances have been renegotiated, taking into account the actual state of the borrower’s financial position and qualitative factors. Further details are described in “Credit risk evaluation” in the section “Credit risk management methods.” Loans and advances whose terms have been renegotiated and financial concessions have been provided are reported as impaired and included in the table of “Impaired loans and advances” in the section “Loans and advances by credit quality category.”

	At March 31,
	2015		2014
	(In millions)
Renegotiated loans and advances	¥	664,973	¥	793,165

F-113

Trading assets and investment securities

The following table shows an analysis of trading assets, financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets based on the external rating system at March 31, 2015 and 2014, excluding equity instruments. Collateral is generally not obtained directly from the issuers.

	At March 31, 2015
	Trading assets		Financial assets at fair value through profit or loss		Held-to-maturity investments		Available-for-sale financial assets		Total
	(In millions)
AAA	¥	460,501	¥	—	¥	—	¥	3,009,194	¥	3,469,695
AA- to AA+		1,865,555		1,615,640		3,396,895		10,729,868		17,607,958
A- to A+		275,434		—		—		216,447		491,881
Lower than A-		15,612		—		—		436,979		452,591
Unrated		1,491		38,619		—		20,960		61,070
Total	¥	2,618,593	¥	1,654,259	¥	3,396,895	¥	14,413,448	¥	22,083,195

	At March 31, 2014
	Trading assets		Financial assets at fair value through profit or loss		Held-to-maturity investments		Available-for-sale financial assets		Total
	(In millions)
AAA	¥	376,755	¥	—	¥	—	¥	2,410,421	¥	2,787,176
AA- to AA+		2,625,926		1,648,261		4,515,636		9,415,540		18,205,363
A- to A+		236,544		—		12,618		258,991		508,153
Lower than A-		17,269		—		—		349,463		366,732
Unrated		6,591		49,611		—		39,881		96,083
Total	¥	3,263,085	¥	1,697,872	¥	4,528,254	¥	12,474,296	¥	21,963,507

There are no impaired available-for-sale financial assets at March 31, 2015 and 2014 in the tables above.

Credit risk from derivative financial instruments

The SMFG Group maintains control limits on derivative positions, by both amount and term. At any one time, the amount subject to credit risk is limited to the fair value of derivative financial instruments that are favorable to the SMFG Group (i.e., assets where their fair value is positive).

The SMFG Group’s credit risk from derivatives is mitigated where possible through netting agreements whereby derivative assets and liabilities with the same counterparty can be offset. Netting agreements, such as the ISDA master agreement, allow the netting of obligations arising under all of the derivative transactions that the agreement covers upon the counterparty’s default, regardless of maturity and currency, resulting in a single net claim against the counterparty. The SMFG Group’s credit risk is also mitigated by collateral arrangements through the credit support annex, resulting in collateral delivered or received regularly based on the replacement costs of derivatives.

F-114

Market Risk and Liquidity Risk

Market risk is the possibility that fluctuations in interest rates, foreign exchange rates, stock prices or other market prices will change the market value of financial products, leading to a loss. The purpose of market risk management is to keep the market risk exposure to a permissible level relative to capital.

Liquidity risk is defined as the uncertainty around the ability to meet debt obligations without incurring unacceptably large losses. An example of such risk is the possible inability to meet current and future cash flow/collateral needs, both expected and unexpected. In such cases, the SMFG Group may be required to raise funds at less than favorable rates or be unable to raise sufficient funds for settlement. The purpose of liquidity risk management is to ensure that the SMFG Group is in a position to address its liquidity obligations through monitoring the liquidity gap between assets and liabilities, and maintaining highly liquid supplementary funding resources.

On the basis of the Group-wide basic policies for risk management, the SMFG Group has a quantitative management process to control market and liquidity risks on a Group-wide basis by setting allowable risk limits by company. The SMFG Group at least annually reviews and identifies which companies primarily carry the market and liquidity risks within the Group. The SMFG Group sets permissible levels and upper limits of risk for each identified company in consideration of those companies’ business plans. The SMFG Group ensures that each identified company establishes a risk management system that is appropriate to the risks it faces, and has built-in transparent risk management processes, clearly separating front office, middle office and back office operations, and establishing a control system of mutual checks and balances.

Framework for market and liquidity risk management

The Board of Directors authorizes important matters relating to the management of market and liquidity risks, such as the basic policies and risk limits, which are decided by the Management Committee.

Additionally, at SMBC, the Corporate Risk Management Department manages market and liquidity risks in an integrated manner. The Corporate Risk Management Department is the planning department of the Risk Management Unit, which is independent of the business units that directly handle market transactions, and not only monitors the current risk situations but also reports regularly to the Management Committee and the Board of Directors. Furthermore, SMBC’s Asset Liability Management (“ALM”) Committee meets on a monthly basis to examine reports on the state of observance of SMBC’s limits on market and liquidity risks, and to review and discuss SMBC’s ALM operations.

To prevent unforeseen processing errors as well as fraudulent transactions, it is important to establish a system of checks on the business units (front office). At SMBC, both the processing departments (back office) and the administrative departments (middle office) conduct the checks. In addition, the Internal Audit Unit of SMBC periodically performs internal audits to verify that the risk management framework is functioning properly.

F-115

The following chart shows the market and liquidity risk management system of SMBC.

Market risk management methods

The SMFG Group manages market risk from trading activities and non-trading activities, including strategic equity investment and other transactions within the risk capital limit which is determined taking into account SMFG’s shareholders’ equity and other principal indicators of the financial position. The SMFG Group also establishes an upper limit on VaR and losses within the risk capital limits.

The SMFG Group’s market risk can be divided into various factors: interest rates, foreign exchange rates, equity prices and option risks. The SMFG Group manages each of these risks by employing the 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, the SMFG Group’s 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.

Value at risk

The principal SMFG 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 the SMFG Group employs 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 strategic equity investment portfolio); and

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

F-116

The relationship between the VaR calculated with the model and the actual profit and loss data is back-tested periodically. There were no significant excess losses in the back-testing results including the trading accounts. The back-testing results are reviewed by management, which also monitors the ongoing suitability of the VaR model.

The following tables show the SMFG Group’s VaR by risk category and these figures are prepared based on the internal reporting provided to management. The SMFG Group’s material market risk exposure categories consist of interest rate risk, foreign exchange risk, equities and commodities risk and others. The section headed “VaR for Trading Activity” shows VaR for instruments entered into for trading purposes and the VaR model for the trading book includes principal consolidated subsidiaries. The section headed “VaR for Non-Trading Activity” shows VaR for instruments entered into for purposes other than trading purposes. “Strategic Equity Investment” in the “VaR for Non-Trading Activity” section is a portfolio that consists principally of publicly traded Japanese equities. This portfolio, like that of other financial institutions in Japan, has historically included shares of the SMFG Group’s customers.

(a) VaR for Trading Activity

The aggregate VaR for the SMFG Group’s total trading activities at March 31, 2015 was ¥14.5 billion, an increase from ¥9.5 billion at March 31, 2014 primarily due to an increase in the net risk exposure of equities.

	Interest rate risk		Foreign exchange risk		Equities and commodities risk		Others		Total(1)
	(In billions)
For the fiscal year ended March 31, 2015:
SMBC Consolidated
Maximum	¥	11.9	¥	3.6	¥	9.6	¥	1.1	¥	19.0
Minimum		4.6		0.7		3.1		0.6		8.9
Daily average		6.7		1.7		5.9		0.8		13.9
At March 31, 2015		6.5		1.3		5.9		1.0		13.8
SMFG Consolidated
Maximum	¥	12.5	¥	3.6	¥	9.9	¥	1.1	¥	20.2
Minimum		5.4		0.7		3.2		0.6		9.9
Daily average		7.4		1.7		6.2		0.8		14.8
At March 31, 2015		7.2		1.3		6.0		1.0		14.5
	Interest rate risk		Foreign exchange risk		Equities and commodities risk		Others		Total(1)
	(In billions)
For the fiscal year ended March 31, 2014:
SMBC Consolidated
Maximum	¥	7.7	¥	4.6	¥	19.0	¥	1.1	¥	27.9
Minimum		3.6		0.5		2.8		0.2		7.6
Daily average		5.0		2.0		7.3		0.6		13.7
At March 31, 2014		4.3		0.6		3.2		0.9		8.5
SMFG Consolidated
Maximum	¥	8.3	¥	4.6	¥	19.3	¥	1.1	¥	28.8
Minimum		4.2		0.5		3.0		0.2		8.2
Daily average		5.7		2.0		7.5		0.6		14.6
At March 31, 2014		5.2		0.6		3.3		0.9		9.5

(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, the SMFG Group employs the standardized method and/or the historical simulation method for the VaR calculation method.

F-117

(b) VaR for Non-Trading Activity

(i) Banking

The aggregate VaR for the SMFG Group’s total banking activities at March 31, 2015 was ¥39.0 billion, a decrease from ¥41.5 billion at March 31, 2014 primarily due to a decrease in the net risk exposure of equities.

	Interest rate risk		Foreign exchange risk		Equities and commodities risk		Others		Total(1)
	(In billions)
For the fiscal year ended March 31, 2015:
SMBC Consolidated
Maximum	¥	23.7	¥	0.0	¥	40.3	¥	0.0	¥	45.1
Minimum		13.6		0.0		28.4		0.0		35.6
Daily average		18.2		0.0		33.7		0.0		40.7
At March 31, 2015		16.8		0.0		31.0		0.0		37.8
SMFG Consolidated
Maximum	¥	24.6	¥	0.0	¥	40.4	¥	0.0	¥	46.1
Minimum		14.4		0.0		28.5		0.0		36.6
Daily average		19.2		0.0		33.8		0.0		41.7
At March 31, 2015		18.0		0.0		31.1		0.0		39.0

	Interest rate risk		Foreign exchange risk		Equities and commodities risk		Others		Total(1)
	(In billions)
For the fiscal year ended March 31, 2014:
SMBC Consolidated
Maximum	¥	27.9	¥	0.0	¥	39.9	¥	0.0	¥	48.0
Minimum		13.3		0.0		21.0		0.0		29.3
Daily average		18.9		0.0		30.6		0.0		39.1
At March 31, 2014		17.6		0.0		32.7		0.0		40.3
SMFG Consolidated
Maximum	¥	29.0	¥	0.0	¥	40.0	¥	0.0	¥	49.2
Minimum		13.9		0.0		21.0		0.0		29.9
Daily average		20.0		0.0		30.6		0.0		40.2
At March 31, 2014		18.6		0.0		32.8		0.0		41.5

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

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(ii) Strategic Equity Investment

The aggregate VaR for the SMFG Group’s strategic equity investment at March 31, 2015 was ¥1,447.7 billion, an increase from ¥1,142.2 billion at March 31, 2014 primarily due to an increase in the fair value of the strategic equity investment portfolio.

	Equities risk
	(In billions)
For the fiscal year ended March 31, 2015:
SMBC Consolidated
Maximum	¥	1,500.4
Minimum		1,067.9
Daily average		1,261.9
At March 31, 2015		1,400.5
SMFG Consolidated
Maximum	¥	1,549.1
Minimum		1,105.3
Daily average		1,304.3
At March 31, 2015		1,447.7

	Equities risk
	(In billions)
For the fiscal year ended March 31, 2014:
SMBC Consolidated
Maximum	¥	1,201.1
Minimum		906.7
Daily average		1,075.3
At March 31, 2014		1,103.0
SMFG Consolidated
Maximum	¥	1,247.0
Minimum		939.5
Daily average		1,114.9
At March 31, 2014		1,142.2

Stress tests

The market occasionally undergoes extreme fluctuations that exceed projections. Therefore, to manage market risk, it is important to run simulations of situations that may occur only once in many years, or so-called stress tests. To prepare for unexpected market swings, SMBC performs stress tests on a monthly basis based on various scenarios.

The limitations of the VaR methodology include the following:

• The use of historical data as a proxy for estimating future events may underestimate the probability of extreme market movements. Past market movement is not necessarily a good indicator of future events;

• The use of a holding period assumes that all positions can be liquidated or hedged in that period of time. This assumption does not fully capture the market risk arising during periods of illiquidity, when liquidation or hedging in that period of time may not be possible;

• The use of a confidence level neither takes account of, nor makes any statement about, any losses that might occur beyond this level of confidence; and

• VaR does not capture all of the complex effects of the risk factors on the value of positions and portfolios and could underestimate potential losses.

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Additional information for the certain risks

(a) Interest rate risk

To supplement the above limitations of VaR methodologies, the SMFG Group adopts various indices to measure and monitor the sensitivity of interest rates, including delta, gamma and vega risks. The SMFG 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 SMFG 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. The table “Outlier ratio” presented below is one of the sensitivity analyses for interest rate risk concerning the banking book using the BPV approach. In addition, as previously addressed, the SMFG 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 the bank 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.

• Outlier ratio

In the event the economic value of a bank declines by more than 20% of total capital as a result of interest rate shocks, that bank would fall into the category of “outlier bank,” as stipulated under Pillar 2 of the Basel Capital Accord. This ratio, known as the outlier ratio, was 1.3% for SMBC on a consolidated basis at March 31, 2015, substantially below the 20% criterion. The decline in economic value based on outlier framework of SMBC on a consolidated basis is shown in the following table.

	At March 31,
	2015			2014
	(In billions, except percentages)
SMBC Consolidated
Total	¥	132.6		¥	83.0
Impact of yen interest rates		21.2			31.1
Impact of U.S. dollar interest rates		57.4			25.7
Impact of euro interest rates		25.5			18.6
Percentage of total capital		1.3	%		0.9	%

Note: Decline in economic value is the decline of the present value of a banking portfolio after interest rate shocks (1st and 99th percentile of observed interest rate changes using a one-year holding period and an observation period of five years).

(b) Foreign exchange risk

The principal SMFG Group companies set risk limits for each currency to manage the concentration of the foreign currency position. The foreign exchange risk is immaterial as shown above in VaR by risk category.

(c) Strategic equity investment risk

The SMFG Group establishes limits on allowable risk for strategic equity investments and monitors the observance of those limits to keep stock price fluctuation risk within acceptable parameters. The SMFG Group has been reducing its strategic equity investments, and the balance is within a permitted level, which is less than 100% of the SMFG Group’s Tier 1 Capital.

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Liquidity risk management methods

The SMFG Group and SMBC regard liquidity risk as one of the major risks, and the SMFG Group identifies group companies which have significant liquidity risk. Each of the identified group companies, including SMBC, establishes a fundamental risk management framework. For example, SMBC manages liquidity risk based on a framework consisting of setting upper limits for “funding gaps,” maintaining highly liquid supplementary funding sources and establishing contingency plans.

A funding gap is defined as a maturity mismatch between a source of funds and the use of funds. SMBC actively manages this funding gap by setting limits on the size of gaps over a given time horizon and limiting reliance on short-term funding. These limits are established on both a SMBC-wide basis and individual branch basis, taking into account cash management planning, systemic factors, and funding status, among other factors. Additionally, funding gap limits are set for individual currencies if necessary. SMBC actively monitors funding gaps on a daily basis. Further, stress tests are regularly carried out by simulating the impact triggered, for example, by the outflow of deposits or having difficulties in funding from money markets, in order to thoroughly comprehend the amount required to fund when the liquidity risk is realized. Additionally, funding liquidity is maintained by holding assets, such as U.S. government bonds, which can be immediately converted to cash, or establishing borrowing facilities to be used as supplementary funding sources in an emergency, in order to smoothly raise the required funds even during market disruption.

Furthermore, contingency plans are developed to respond to the liquidity risk when being realized, by creating detailed action plans such as lowering the upper limit for the funding gap, depending on the existing situation (i.e. normal, concerned, or critical) and the respective circumstances.

Maturity analysis of financial liabilities at March 31, 2015 and 2014

The following tables show a maturity analysis of the contractual undiscounted cash flows for financial liabilities at March 31, 2015 and 2014. The amount of interest on debt instruments is not included in the maturity tables below due to its insignificance.

	At March 31, 2015
	On demand		Not later than three months		Later than three months and not later than one year		Later than one year and not later than three years		Later than three years and not later than five years		Later than five years		Total
	(In millions)
Non-derivative financial instruments:
Deposits	¥	62,276,711	¥	32,080,713	¥	15,994,708	¥	3,961,005	¥	653,803	¥	847,997	¥	115,814,937
Call money and bills sold		19,926		5,843,087		10,111		—		—		—		5,873,124
Repurchase agreements and cash collateral on securities lent		1,458		8,818,625		—		—		—		—		8,820,083
Trading liabilities		2,193,400		—		—		—		—		—		2,193,400
Borrowings		87,714		3,577,107		3,691,319		665,327		926,245		2,166,598		11,114,310
Debt securities in issue		—		4,434,310		1,402,856		1,799,923		942,988		2,461,070		11,041,147
Lease payable		—		5,614		16,291		35,407		29,340		19,389		106,041
Other financial liabilities		1,370,975		3,315,104		203,328		20,163		15,119		95,316		5,020,005
Off balance sheet items:
Loan commitments		53,665,583		—		—		—		—		—		53,665,583
Financial guarantee contracts		7,076,536		—		—		—		—		—		7,076,536
Total non-derivative financial instruments	¥	126,692,303	¥	58,074,560	¥	21,318,613	¥	6,481,825	¥	2,567,495	¥	5,590,370	¥	220,725,166
Derivative financial instruments	¥	6,739,787	¥	—	¥	—	¥	—	¥	—	¥	—	¥	6,739,787

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	At March 31, 2014
	On demand		Not later than three months		Later than three months and not later than one year		Later than one year and not later than three years		Later than three years and not later than five years		Later than five years		Total
	(In millions)
Non-derivative financial instruments:
Deposits	¥	58,635,610	¥	27,677,012	¥	16,359,547	¥	4,264,294	¥	644,332	¥	777,013	¥	108,357,808
Call money and bills sold		2,536		4,109,688		205		—		—		—		4,112,429
Repurchase agreements and cash collateral on securities lent		723		7,040,352		—		—		—		—		7,041,075
Trading liabilities		1,865,243		—		—		—		—		—		1,865,243
Borrowings		80,352		1,415,383		3,521,522		909,808		446,887		1,994,568		8,368,520
Debt securities in issue		—		3,152,557		1,034,959		1,736,751		737,363		2,102,788		8,764,418
Lease payable		—		5,002		15,063		31,109		22,267		24,843		98,284
Other financial liabilities		1,477,708		3,113,458		15,268		25,233		18,605		53,512		4,703,784
Off balance sheet items:
Loan commitments		49,285,032		—		—		—		—		—		49,285,032
Financial guarantee contracts		6,396,144		—		—		—		—		—		6,396,144
Total non-derivative financial instruments	¥	117,743,348	¥	46,513,452	¥	20,946,564	¥	6,967,195	¥	1,869,454	¥	4,952,724	¥	198,992,737
Derivative financial instruments	¥	4,980,991	¥	—	¥	—	¥	—	¥	—	¥	—	¥	4,980,991

Notes:

1. Embedded derivatives which are separately accounted for, but presented together with the host contract in the consolidated statement of financial position are not included in the contractual tables above as they relate to the interest cash flow of the host contract, which are also not included in the tables above.

2. Derivative financial instruments are recorded at fair value and included in the column “On demand.” These instruments are not used for hedging under IAS 39 and the fair value represents the cash flow on demand.

Balance of loans and advances, and deposits at March 31, 2015 and 2014

The following table presents the balance of loans and advances, and deposits at March 31, 2015 and 2014. The balance of deposits, which was mainly composed of individual customer deposits at March 31, 2015 and 2014, exceeded the balance of loans and advances at the same time due to the stable deposit base in Japan.

	At March 31,
	2015		2014
	(In millions)
Loans and advances	¥	86,971,716	¥	81,244,982
Deposits		115,833,980		108,370,494

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The following table presents a breakdown of deposits by domestic and foreign offices. Domestic inter-bank money was classified as “Call money and bills sold” and not included in “Deposits” in the consolidated statement of financial position. Over half of domestic deposits was composed of individual customer deposits.

	At March 31,
	2015		2014
	(In millions)
Domestic offices:
Non-interest-bearing demand deposits	¥	15,387,795	¥	14,465,654
Interest-bearing demand deposits		40,593,134		38,652,993
Deposits at notice		821,717		871,081
Time deposits		24,186,585		24,136,904
Negotiable certificates of deposit		5,705,862		5,458,722
Others		5,736,495		4,977,829
Total domestic offices		92,431,588		88,563,183
Foreign offices:
Non-interest-bearing demand deposits		862,698		607,657
Interest-bearing demand deposits		1,448,643		1,129,154
Deposits at notice		7,968,300		6,499,694
Time deposits		4,897,880		3,200,421
Negotiable certificates of deposit		8,120,036		8,254,818
Others		104,835		115,567
Total foreign offices		23,402,392		19,807,311
Total deposits	¥	115,833,980	¥	108,370,494

Capital Management

The SMFG Group manages its capital by taking into consideration regulatory compliance and business development.

The SMFG Group’s capital management objectives are to maintain sufficient capital resources to meet the capital adequacy requirements and to maintain a strong capital base to support the development of its business.

External regulatory capital requirement

The SMFG Group, SMFG and its principal banking subsidiaries in Japan rigidly abide by the capital adequacy guidelines set by the FSA in managing its capital. Japan’s capital adequacy guidelines are based on the Basel Capital Accord, which was proposed by the Basel Committee on Banking Supervision (“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 the FSA designed them to suit the Japanese banking environment. The SMFG Group’s banking subsidiaries outside of Japan are also subject to the local capital ratio requirements.

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 on January 1, 2013 and will be fully applied from January 1, 2019.

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These capital reforms increase the minimum common equity requirement from 2% to 4.5% and require banks to hold a capital conservation buffer of 2.5% to withstand future periods of stress, bringing the total common equity requirement to 7%. The Tier 1 capital requirement will also be increased from 4% to 6%, resulting in a total requirement of 8.5% when combined with the above-mentioned conservation buffer. The total capital requirement remains at the existing level of 8% but also increases to 10.5% due to the capital conservation buffer. In addition, a countercyclical buffer within a range of 0% to 2.5% of common equity or other fully loss-absorbing capital will be implemented according to national circumstances. The Group of Central Bank Governors and Heads of Supervision also agreed on transitional arrangements for implementing the new requirements.

To reflect the Basel III framework the FSA changed its capital adequacy guidelines. Under the FSA capital adequacy guidelines, the new capital requirements are being phased in from March 31, 2013 through March 31, 2019. On March 31, 2013, the minimum Common Equity Tier 1 capital requirement and Tier 1 capital requirement were raised to 3.5% and 4.5%, respectively. The minimum Common Equity Tier 1 capital requirement and Tier 1 capital requirement rose to 4% and 5.5%, respectively on March 31, 2014, and rose to 4.5% and 6%, respectively on March 31, 2015. Meanwhile the capital conservation buffer and countercyclical buffer, which will be phased in from January 1, 2016 under the Basel III accord, have not yet been incorporated into the FSA capital adequacy guidelines.

In accordance with the changes of the FSA capital adequacy guidelines, the SMFG Group changed its classification of capital into three tiers, referred to as Common Equity Tier 1 capital, Additional Tier 1 capital and Tier 2 capital as follows:

Common Equity Tier 1 capital consists primarily of capital stock, capital surplus and retained earnings relating to common shares, and minority interests that meet the criteria for inclusion in Common Equity Tier 1 capital.

Additional Tier 1 capital consists primarily of preferred securities.

Tier 2 capital consists primarily of subordinated debt securities.

The capital adequacy guidelines permit Japanese banks to choose from the standardized approach (“SA”), the foundation Internal Ratings-Based (“IRB”) approach and the advanced IRB approach for credit risk, and the basic indicator approach (“BIA”), 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 TSA or AMA for operational risk, a Japanese bank must establish advanced risk management systems and receive prior approval from the FSA.

Adopting these approved approaches, the SMFG Group sets a target minimum total capital ratio of 8.0% on the SMFG Group’s consolidated basis, and both SMBC consolidated and nonconsolidated basis, and has complied with all externally imposed capital requirements throughout the period.

Failure of a Japanese bank, bank holding company or other financial institution to maintain the required risk-weighted capital ratios, may result in administrative actions or sanctions imposed by the FSA.

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Regulatory capital

The table below presents the SMFG Group’s total capital ratio, total capital and risk-weighted assets under Japanese GAAP at March 31, 2015 and 2014 based on the Basel III rules.

	At March 31,
	2015			2014
	(In billions, except percentages)
Total risk-weighted capital ratio (consolidated)		16.58	%		15.51	%
Tier 1 risk-weighted capital ratio (consolidated)		12.89	%		12.19	%
Common Equity Tier 1 risk-weighted capital ratio (consolidated)		11.30	%		10.63	%
Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)	¥	10,965.9		¥	9,561.4
Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital)		8,528.6			7,514.3
Common Equity Tier 1 capital		7,476.5			6,550.8
Risk-weighted assets		66,136.8			61,623.3
The amount of minimum capital requirements		5,290.9			4,929.9

46 RELATED-PARTY TRANSACTIONS

Transactions with Related Parties

The SMFG Group considers that its related parties include subsidiaries, associates, joint ventures, key management personnel and close family members of key management personnel. Any transactions between the SMFG Group and its subsidiaries meet the definition of related-party transactions. However, because these transactions are eliminated on consolidation, they are not disclosed as related-party transactions. Transactions between the SMFG Group and its associates and joint ventures qualify as related-party transactions, and all of these transactions are conducted on substantially the same terms as third-party transactions.

The transaction amounts included in the accounts, in aggregate, by category of related party were as follows:

Transactions with associates and joint ventures

	At March 31,
	2015		2014
	(In millions)
Assets:
Loans and advances	¥	244,620	¥	192,460
Others		12,954		1,855
Liabilities:
Deposits	¥	161,595	¥	147,181
Others		30,036		4,972

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Income statement:
Income (interest income, and fee and commission income)	¥	23,952	¥	19,608	¥	21,016
Expense (interest expense and other expenses)		20,322		19,124		18,415

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Financial guarantees issued by the SMFG Group for its associates at March 31, 2015 and 2014 were ¥42,361 million and nil, respectively.

Loan commitments to associates and joint ventures at March 31, 2015 and 2014 were ¥148,494 million and ¥200,165 million, respectively.

Transactions with key management personnel and their close family members

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the SMFG Group, directly or indirectly. The SMFG Group considers the members of the Board of Directors of SMFG and SMBC to constitute key management personnel for the purpose of this disclosure required under IAS 24 “Related Party Disclosures.”

	At March 31,
	2015		2014
	(In millions)
Assets:
Loans and advances	¥	1	¥	—
Liabilities:
Deposits	¥	2,195	¥	1,782
Others		73		73

Compensation of Key Management Personnel

The following table presents the compensation expenses of key management personnel.

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Short-term employee benefits	¥	1,463	¥	1,232	¥	1,296
Share-based compensation		251		206		229

The details of the share-based compensation plan are described in Note 39 “Share-Based Payment.”

There were no post-employment benefits, other long-term benefits and termination benefits for the fiscal years ended March 31, 2015, 2014 and 2013.

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47 PRINCIPAL SUBSIDIARIES

Principal Subsidiaries

The SMFG Group’s principal subsidiaries at March 31, 2015 are shown in the list below. The SMFG Group consolidates all entities that the SMFG Group controls. The SMFG Group controls an entity when the SMFG Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Principal domestic subsidiaries

Company Name	Proportion of Ownership Interest(1)		Proportion of Voting Rights(1)			Main Business
	(%)		(%)
Sumitomo Mitsui Banking Corporation		100.0		100.0		Commercial banking
THE MINATO BANK, LTD.		6.0		46.4	(2)	Commercial banking
Kansai Urban Banking Corporation		59.8		60.1		Commercial banking
SMBC Trust Bank Ltd.		100.0		100.0		Trust banking
SMBC Guarantee Co., Ltd.		100.0		100.0		Credit guarantee
Sumitomo Mitsui Finance and Leasing Company, Limited		60.0		60.0		Leasing
SMBC Nikko Securities Inc.		100.0		100.0		Securities
SMBC Friend Securities Co., Ltd.		100.0		100.0		Securities
Sumitomo Mitsui Card Company, Limited		65.9		65.9		Credit card
Cedyna Financial Corporation		100.0		100.0		Credit card and consumer credit
SMBC Consumer Finance Co., Ltd.		100.0		100.0		Consumer lending
SAKURA CARD CO., LTD.		100.0		100.0		Credit card
Mobit Co., LTD.		100.0		100.0		Consumer lending
SMM Auto Finance, Inc.		51.0		51.0		Automobile sales financing
SMBC Finance Service Co., Ltd.		100.0		100.0		Collecting agent and factoring
The Japan Research Institute, Limited		100.0		100.0		System development, data processing, management consulting and economic research
SAKURA KCS Corporation		50.2		50.2		System engineering and data processing
Financial Link Co., Ltd.		100.0		100.0		Data processing service and consulting
SMBC Venture Capital Co., Ltd.		40.0		40.0		Venture capital
SMBC Consulting Co., Ltd.		100.0		100.0		Management consulting and information services
Japan Pension Navigator Co., Ltd.		69.7		69.7		Operational management of defined contribution pension plans

(1) Percentages of proportion of ownership interest and proportion of voting rights have been truncated.

(2) The SMFG Group has a 6.0% direct holding in THE MINATO BANK, LTD., and can control a further 40.4% of the voting rights held by SMBC’s retirement benefit trust under contractual agreements between SMBC and the retirement benefit trust.

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Principal foreign subsidiaries

Company Name	Country of Incorporation	Proportion of Ownership Interest(1)		Proportion of Voting Rights(1)		Main Business
		(%)		(%)
Sumitomo Mitsui Banking Corporation Europe Limited	U.K.		100.0		100.0	Commercial banking
Sumitomo Mitsui Banking Corporation (China) Limited	China		100.0		100.0	Commercial banking
Manufacturers Bank	U.S.A.		100.0		100.0	Commercial banking
Sumitomo Mitsui Banking Corporation of Canada	Canada		100.0		100.0	Commercial banking
Banco Sumitomo Mitsui Brasileiro S.A.	Brazil		100.0		100.0	Commercial banking
JSC Sumitomo Mitsui Rus Bank	Russia		100.0		100.0	Commercial banking
PT Bank Sumitomo Mitsui Indonesia	Indonesia		98.4		98.4	Commercial banking
Sumitomo Mitsui Banking Corporation Malaysia Berhad	Malaysia		100.0		100.0	Commercial banking
SMBC Leasing and Finance, Inc.	U.S.A.		100.0		100.0	Leasing
SMBC Aviation Capital Limited	Ireland		90.0		90.0	Leasing
SMBC Nikko Securities America, Inc.	U.S.A.		100.0		100.0	Securities
SMBC Nikko Capital Markets Limited	U.K.		100.0		100.0	Securities
SMBC Capital Markets, Inc.	U.S.A.		100.0		100.0	Derivatives

(1) Percentages of proportion of ownership interest and proportion of voting rights have been truncated.

THE MINATO BANK, LTD. and SMBC Venture Capital Co., Ltd. are accounted for as subsidiaries, despite the SMFG Group’s holdings of less than 50% of the voting rights, because the SMFG Group is able to govern the financial and operating policies of these companies under a statute or an agreement, or by delegating the majority of the members of the board of directors.

The SMFG Group does not control some entities despite the fact that the SMFG Group holds more than 50% of their share capital, because the SMFG Group has entered into agreements with other investors to share or give those investors the power to govern the entities’ financial and operating policies over these investees.

Some of the SMFG Group’s subsidiaries may be subject to restrictions on the ability to transfer funds to SMFG in the form of cash dividends or to repay loans or advances, which include capital adequacy requirements imposed by the governments and central banks, and the Companies Act restrictions relating to dividends. In addition, the SMFG Group pledges assets as collateral to secure payables under repurchase agreements, securities lending transactions and securitizations, borrowings or for cash settlements, margins on derivative transactions and certain other purposes. The details of assets pledged are described in Note 38 “Assets Pledged and Received as Collateral.”

48 STRUCTURED ENTITIES

A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. It often has some or all of the following features or attributes:

• restricted activities;

• a narrow and well-defined objective;

• insufficient equity to permit the structured entity to finance its activities without subordinated financial support; or

• financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).

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During the normal course of business, the SMFG Group engages in numerous transactions involving structured entities. These structured entities are primarily used to provide the SMFG Group and its clients with efficient access to funds or investment opportunities, mainly through securitizations, investment funds and structured finance.

Consolidated Structured Entities

Structured entities are consolidated if they are controlled by the SMFG Group in accordance with the accounting policy as described in Note 2 “Summary of Significant Accounting Policies.”

The consolidated structured entities include asset backed commercial paper (“ABCP”) conduits which purchase financial assets such as trade accounts receivable and lease receivables by issuing commercial paper to third party investors. The SMFG Group has contractual agreements to provide liquidity and credit enhancement facilities which can be utilized by those structured entities upon their request.

At March 31, 2015 and 2014, the consolidated ABCP conduits had total assets of ¥910,023 million and ¥721,996 million, respectively. The total notional amounts of the liquidity and credit enhancement facilities provided by the SMFG Group to the consolidated ABCP conduits at March 31, 2015 and 2014 were ¥1,101,988 million and ¥846,298 million, respectively, all of which were undrawn.

The SMFG Group did not provide any financial or other support, without having a contractual obligation to do so, to consolidated structured entities during the fiscal years ended March 31, 2015 and 2014.

Unconsolidated Structured Entities

The following tables represent the carrying amounts of the SMFG Group’s interests in unconsolidated structured entities recognized in its consolidated statement of financial position by line item and the maximum exposure to loss from its interests at March 31, 2015 and 2014.

	At March 31, 2015
	Securitizations		Investment funds		Structured finance		Others		Total
	(In millions)
Interests in unconsolidated structured entities recognized in:
Trading assets	¥	—	¥	192,057	¥	—	¥	—	¥	192,057
Financial assets at fair value through profit or loss		—		—		—		100,000		100,000
Investment securities		5,996		1,457,674		59,190		5,485		1,528,345
Loans and advances		1,351,933		—		4,078,942		367,706		5,798,581
Total	¥	1,357,929	¥	1,649,731	¥	4,138,132	¥	473,191	¥	7,618,983
Maximum exposure to loss from interests in unconsolidated structured entities	¥	1,586,349	¥	1,649,731	¥	4,831,148	¥	604,315	¥	8,671,543

F-129

	At March 31, 2014
	Securitizations		Investment funds		Structured finance		Others		Total
	(In millions)
Interests in unconsolidated structured entities recognized in:
Trading assets	¥	—	¥	103,105	¥	—	¥	—	¥	103,105
Financial assets at fair value through profit or loss		—		—		—		101,030		101,030
Investment securities		3,421		1,053,715		60,984		5,610		1,123,730
Loans and advances		779,586		—		3,643,803		294,237		4,717,626
Total	¥	783,007	¥	1,156,820	¥	3,704,787	¥	400,877	¥	6,045,491
Maximum exposure to loss from interests in unconsolidated structured entities	¥	1,010,451	¥	1,158,027	¥	4,111,431	¥	432,236	¥	6,712,145

An interest in a structured entity refers to contractual and non-contractual involvement that exposes the SMFG Group to variability of returns from the performance of the structured entity. Such interests include the holding of equity or debt instruments as well as the provision of loans, loan commitments and guarantees. Interest rate and currency derivatives that expose the SMFG Group mainly to market risk, or CDS that are designed to transfer risk from the SMFG Group to a structured entity are not regarded as an interest in a structured entity since they do not expose the SMFG Group to variability of returns from the performance of the structured entity. These derivatives are therefore not included in the tables above.

The maximum exposure to loss from the SMFG Group’s interests in unconsolidated structured entities represents the maximum amount of potential loss to which the SMFG Group is exposed through its involvement with unconsolidated structured entities. It is determined by the SMFG Group’s carrying amounts and the notional amounts of loan commitments and guarantees, without considering the probability of loss being incurred, or effects of collateral or other credit protection.

The SMFG Group did not provide any financial or other support, without having a contractual obligation to do so, to unconsolidated structured entities during the fiscal years ended March 31, 2015 and 2014.

Securitizations

Securitization entities are established to securitize third parties’ assets which mainly consist of auto loan receivables, residential and commercial mortgage loans and trade accounts receivable. These entities purchase those assets through loans or notes issued with multiple tranches. The SMFG Group provides loans and loan commitments to these entities or holds senior notes issued by them, in some cases with credit loss protection through guarantees or other credit enhancements provided by the sellers.

Investment Funds

Investment funds are established for providing investment opportunities to investors by pooling money from them and investing mainly in equity and debt instruments based on a predetermined investment policy. The SMFG Group has invested in a number of these funds.

Structured Finance

Project finance

In project finance, structured entities are established to raise funds for projects such as the development of electric power plants and transportation infrastructure and the production of natural resources. The SMFG Group provides loans and loan commitments, which are secured by the cash flows generated by the projects, to these entities as part of a syndication of lenders.

F-130

Real estate finance

Real estate financing entities are established to raise funds in connection with the development and acquisition of real estate properties such as office buildings and logistics facilities. The SMFG Group provides financing to these structured entities mainly in the form of senior loans and loan commitments or notes, which are secured by the entities’ assets.

Lease finance

Lease financing entities are established to purchase or build certain equipment such as a vessel or an aircraft which is subsequently leased to lessees to be used in their core business. The SMFG Group provides loans to these entities, which are secured by lease receivables from the lessees and in some cases guaranteed by the equity holders.

Acquisition finance

In acquisition finance, structured entities are established by either third party companies or management of target companies to acquire the equity shares of the target companies. The purchase of the target companies’ shares is financed by debt provided mainly by financial institutions and equity raised by the acquirer. The SMFG Group provides loans to these entities, which are secured by the cash flows from the target companies.

Others

The SMFG Group provides financing to other types of structured entities such as third party structured entities and repackaging vehicles to facilitate its clients’ funding requirements. The SMFG Group’s interests in such entities consist of loans and loan commitments as well as notes issued by these entities.

Sponsored Unconsolidated Structured Entities

In addition to the unconsolidated structured entities in which the SMFG Group has an interest, the SMFG Group also sponsors certain structured entities in which it has no interest. The SMFG Group is deemed to be a sponsor of a structured entity when the SMFG Group takes a leading role in determining its purpose and design and has been providing operational support to ensure its continued operation.

The carrying amount of assets transferred to and income received from sponsored unconsolidated structured entities, where the SMFG Group did not have an interest at the end of the reporting periods, were not significant for the fiscal years ended March 31, 2015 and 2014.

49 ACQUISITIONS

Fiscal Years Ended March 31, 2015 and 2014

There were no material acquisitions that were accounted for as business combinations during the fiscal years ended March 31, 2015 and 2014.

Fiscal Year Ended March 31, 2013

SMBC Aviation Capital

On June 1, 2012, the SMFG Group acquired the aircraft leasing business of The Royal Bank of Scotland Group plc, and commenced its operation as SMBC Aviation Capital, in order to further expand and develop the business in Asia and other emerging markets together with the existing aircraft leasing unit which was intended to be integrated into the acquired business.

F-131

As a result of the acquisition of this business, which comprises companies including SMBC Aviation Capital Limited (former RBS Aerospace Limited), SMBC Aviation Capital (UK) Limited (former RBS Aerospace (UK) Limited), and SMBC Aviation Capital Australia Leasing Pty Limited (former RBS Australia Leasing Pty Limited), the SMFG Group obtained 90%, 90%, and 100% of the voting rights of these respective companies. With regard to SMBC Aviation Capital Australia Leasing Pty Limited, the SMFG Group obtained the voting rights through the newly established subsidiaries of which the SMFG Group has 90% voting rights.

The fair values of assets and liabilities of SMBC Aviation Capital at the date of acquisition and the consideration paid were as follows:

	At June 1, 2012
	(In millions)
Assets:
Property, plant and equipment	¥	568,480
All other assets		99,611
Total assets	¥	668,091
Liabilities:
Borrowings	¥	535,272
All other liabilities		36,105
Total liabilities	¥	571,377
Net assets	¥	96,714
Non-controlling interests measured at their proportionate share of the identifiable net assets		(9,453	)
Net assets acquired		87,261
Goodwill		6,064
Consideration	¥	93,325
Consideration:
Cash	¥	93,325
Total	¥	93,325
Acquisition related costs recognized as an expense in “General and administrative expenses” in the consolidated income statement	¥	1,420

The goodwill was attributable to the profitability of the acquired business and the synergies expected to arise after the acquisition. None of the goodwill recognized is expected to be deductible for income tax purposes.

Net profit of SMBC Aviation Capital since the acquisition date to March 31, 2013 was ¥3,172 million.

Pro forma financial information

It is estimated that the SMFG Group would have reported total operating income of ¥2,904,052 million and net profit of ¥655,715 million for the fiscal year ended March 31, 2013 if the acquisition of SMBC Aviation Capital had occurred on April 1, 2012.

F-132

Cash consideration paid and cash acquired by obtaining control of the subsidiaries

The total amount of cash consideration paid and cash acquired by obtaining control of subsidiaries during the fiscal year ended March 31, 2013 were as follows:

	For the fiscal year ended March 31, 2013
	(In millions)
Cash consideration paid	¥	(94,852	)
Cash and cash equivalents transferred as a result of the acquisitions		93,903
Cash consideration paid, net of cash and cash equivalents acquired by obtaining control of the subsidiaries	¥	(949	)

The amounts of assets and liabilities other than cash or cash equivalents in these subsidiaries were ¥605,510 million and ¥597,838 million, respectively.

50 CURRENT AND NON-CURRENT DISTINCTION

The following tables present an analysis of financial assets and liabilities, excluding cash and deposits with banks, trading assets and liabilities, and derivative financial instruments, by amounts recovered or settled, not more than twelve months or more than twelve months, at March 31, 2015 and 2014.

	At March 31, 2015
	Amounts recovered or settled
	Not more than twelve months		More than twelve months		Total
	(In millions)
Assets:
Call loans and bills bought	¥	1,272,267	¥	54,698	¥	1,326,965
Reverse repurchase agreements and cash collateral on securities borrowed		7,096,618		121,880		7,218,498
Financial assets at fair value through profit or loss		—		1,785,684		1,785,684
Investment securities:
Held-to-maturity investments		1,393,712		2,003,183		3,396,895
Available-for-sale financial assets		3,759,843		17,082,918		20,842,761
Loans and advances		29,400,474		57,571,242		86,971,716
Other financial assets		2,434,897		130,828		2,565,725
Liabilities:
Deposits	¥	110,352,284	¥	5,481,696	¥	115,833,980
Call money and bills sold		5,873,124		—		5,873,124
Repurchase agreements and cash collateral on securities lent		8,820,083		—		8,820,083
Borrowings		7,377,283		3,839,769		11,217,052
Debt securities in issue		5,837,235		5,214,196		11,051,431
Other financial liabilities		4,889,407		130,598		5,020,005

F-133

	At March 31, 2014
	Amounts recovered or settled
	Not more than twelve months		More than twelve months		Total
	(In millions)
Assets:
Call loans and bills bought	¥	1,189,457	¥	58,778	¥	1,248,235
Reverse repurchase agreements and cash collateral on securities borrowed		4,087,075		216,046		4,303,121
Financial assets at fair value through profit or loss		—		1,840,255		1,840,255
Investment securities:
Held-to-maturity investments		1,105,160		3,423,094		4,528,254
Available-for-sale financial assets		5,146,067		12,378,677		17,524,744
Loans and advances		26,922,999		54,321,983		81,244,982
Other financial assets		1,862,837		132,687		1,995,524
Liabilities:
Deposits	¥	102,672,615	¥	5,697,879	¥	108,370,494
Call money and bills sold		4,112,429		—		4,112,429
Repurchase agreements and cash collateral on securities lent		7,041,075		—		7,041,075
Borrowings		5,036,607		3,426,756		8,463,363
Debt securities in issue		4,187,806		4,581,288		8,769,094
Other financial liabilities		4,606,434		97,350		4,703,784

51 CONDENSED FINANCIAL INFORMATION OF REGISTRANT (SMFG)

Condensed Statement of Financial Position

	At March 31,
	2015		2014
	(In millions)
Assets:
Deposits with SMBC	¥	201,862	¥	79,901
Investments in SMBC		5,175,789		5,175,789
Loans to SMBC		376,263		—
Investments in other subsidiaries and associates		985,374		985,374
Other assets		7,418		2,165
Current tax assets		102,967		42,245
Total assets	¥	6,849,673	¥	6,285,474
Liabilities and equity:
Short-term borrowings from SMBC	¥	1,228,030	¥	1,228,030
Long-term borrowings		31,000		—
Debt securities in issue due to other subsidiaries		267,974		392,900
Debt securities in issue		343,989		—
Other liabilities		9,223		5,104
Total liabilities		1,880,216		1,626,034
Shareholders’ equity		4,969,457		4,659,440
Total liabilities and shareholders’ equity	¥	6,849,673	¥	6,285,474

F-134

Condensed Income Statement

	For the fiscal year ended March 31,
	2015		2014		2013
	(In millions)
Income:
Interest income from SMBC(1)	¥	9,641	¥	46	¥	63
Dividends from SMBC		485,449		190,397		152,148
Dividends from other subsidiaries and associates		18,649		16,436		13,294
Fees and commission income from subsidiaries		13,800		13,476		14,120
Other income(1)		98		96		4,473
Total income		527,637		220,451		184,098
Expense:
Interest expense to SMBC		5,895		6,171		7,362
Interest expense to other subsidiaries		16,170		16,468		16,468
Interest expense		8,886		—		—
Operating and other expense		10,712		8,790		7,889
Total expense		41,663		31,429		31,719
Profit before tax		485,974		189,022		152,379
Income tax expense		4		4		4
Net profit	¥	485,970	¥	189,018	¥	152,375

(1) Prior period amounts have been reclassified to conform to the current presentation.

Condensed Statement of Cash Flows

	For the fiscal year ended March 31,
	2015			2014			2013
	(In millions)
Operating Activities:
Profit before tax	¥	485,974		¥	189,022		¥	152,379
Income taxes refund (paid)—net		(60,722	)		(9,146	)		160
Other operating activities—net		(641	)		286			(4,160	)
Net cash and cash equivalents provided by operating activities		424,611			180,162			148,379
Investing Activities:
Loans provided to SMBC		(346,268	)		—			—
Other investing activities—net		(35	)		(191	)		(76	)
Net cash and cash equivalents used in investing activities		(346,303	)		(191	)		(76	)
Financing Activities:
Proceeds from issuance of Long-term borrowings		31,000			—			—
Proceeds from issuance of debt securities		315,268			—			—
Redemption of debt securities		(126,200	)		—			—
Dividends paid		(176,271	)		(176,281	)		(138,694	)
Purchases of treasury stock and proceeds from sale of treasury stock—net		(144	)		(481	)		(240	)
Net cash and cash equivalents provided by (used in) financing activities		43,653			(176,762	)		(138,934	)
Net increase of cash and cash equivalents		121,961			3,209			9,369
Cash and cash equivalents at beginning of period		79,901			76,692			67,323
Cash and cash equivalents at end of period	¥	201,862		¥	79,901		¥	76,692

F-135

Investments in subsidiaries and associates

Investments in subsidiaries and associates are stated at cost. SMFG recognizes dividend income from subsidiaries and associates when its right to receive payment is established.

Investments in other subsidiaries and associates include equity investments in SMFL, SMBC Friend Securities, SMFG Card & Credit, Inc., SMBC Consumer Finance and others at March 31, 2015 and 2014. These companies are incorporated in Japan, and the proportion of ownership interest of SMFG in these companies was the same as described in Note 11 “Investments in Associates and Joint Ventures,” and Note 47 “Principal Subsidiaries.”

Long-term obligations

SMFG had perpetual subordinated bonds of ¥267 billion outstanding to its subsidiary, SMFG Preferred Capital JPY 3 Limited, at March 31, 2015. The interest rates of these bonds are fixed until January 2020, which range from 4.0% to 4.5% per annum, and will be floating thereafter. SMFG Preferred Capital JPY 3 Limited issued preferred securities to purchase these bonds.

During the fiscal year ended March 31, 2015, SMFG issued subordinated long-term borrowings amounting to ¥31 billion and subordinated bonds amounting to ¥345 billion including ¥1 billion outstanding to its subsidiary. For additional information, refer to Note 18 “Borrowings” and Note 19 “Debt Securities in Issue.”

Guarantees

SMFG provided guarantee of ¥259 billion and ¥230 billion at March 31, 2015 and 2014, respectively, to the Deposit Protection Fund of the Association of German Banks with regard to the deposits of the SMBC Dusseldorf branch.

F-136

EXHIBIT INDEX

Exhibit number	Description of Exhibit
Exhibit 1.1	Articles of Incorporation of Sumitomo Mitsui Financial Group, Inc., as amended on June 26, 2015 (English translation)
Exhibit 1.2	Regulations of Board of Directors of Sumitomo Mitsui Financial Group, Inc., as amended on May 1, 2015 (English translation)
Exhibit 1.3	Share Handling Regulations of Sumitomo Mitsui Financial Group, Inc., as amended on April 1, 2012 (English translation)*
Exhibit 2.1	Form of Deposit Agreement among the registrant, Citibank, N.A., as Depositary, and all owners and holders from time to time of American Depositary Shares issued thereunder**
Exhibit 8	List of subsidiaries of Sumitomo Mitsui Financial Group, Inc., at March 31, 2015
Exhibit 11	Code of Ethics of Sumitomo Mitsui Financial Group, Inc.***
Exhibit 12.1	CEO Certification Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
Exhibit 12.2	CFO Certification Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
Exhibit 13.1	Certification Required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
Exhibit 13.2	Certification Required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)

* Incorporated by reference to our annual report on Form 20-F (File No. 001-34919) filed on July 23, 2012.

** Incorporated by reference to our registration statement on Form 20-F (File No. 001-34919) filed on October 20, 2010.

*** Incorporated by reference to our annual report on Form 20-F (File No. 001-34919) filed on July 29, 2011.