6-K - SMFG - Equibles

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

For the month of December 2022

Commission file number 001-34919

SUMITOMO MITSUI FINANCIAL GROUP, INC.

(Translation of registrant’s name into English)

1-2, Marunouchi 1-chome,

Chiyoda-ku, Tokyo 100-0005, Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form

20-F ☒ or Form

40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ☐ No ☒

*	If “Yes” is marked, indicate below the file number assigned to the registrant in connection with <br>Rule 12g3-2(b): 82-

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE INTO THE PROSPECTUS FORMING A PART OF SUMITOMO MITSUI FINANCIAL GROUP, INC.’S REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-261754) AND TO BE A PART OF SUCH PROSPECTUS FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

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EXHIBITS

Exhibit number
101. INS	Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101. SCH	Inline XBRL Taxonomy Extension Schema
101. CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101. DEF	Inline XBRL Taxonomy Extension Definition Linkbase
101. LAB	Inline XBRL Taxonomy Extension Label Linkbase
101. PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	The cover page for the Company’s Interim Report on Form 6-K for the six months ended September 30, 2022, has been formatted in Inline XBRL

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SIGNATURES

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

Sumitomo Mitsui Financial Group, Inc.
By:	/s/ Toru Nakashima
	Name: Toru Nakashima
	Title: Senior Managing Corporate Executive Officer<br> <br>Group Chief Financial Officer

Date: December 20, 2022

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This document contains a review of our financial condition and results of operations for the six months ended September 30, 2022.

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	Page
Cautionary Statement Regarding Forward-Looking Statements		1
Financial Review		2
Recent Developments		2
Operating Environment		2
Developments Related to Our Business		4
Accounting Changes		6
Operating Results and Financial Condition		7
Executive Summary		7
Operating Results		8
Business Segment Analysis		16
Financial Condition		20
Liquidity		33
Capital Management		36
Financial Risk Management		40
Risk Management System		40
Credit Risk		40
Market Risk		40

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” (as defined in the U.S. Private Securities Litigation Reform Act of 1995), regarding the intent, belief or current expectations of Sumitomo Mitsui Financial Group, Inc. (the “Company”) and its management with respect to the Company’s future financial condition and results of operations. In many cases but not all, these statements contain words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “probability,” “risk,” “project,” “should,” “seek,” “target,” “will,” and similar expressions. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those expressed in or implied by such forward-looking statements contained or deemed to be contained herein. The risks and uncertainties which may affect future performance include: deterioration of Japanese and global economic conditions and financial markets; declines in the value of the Company’s securities portfolio; incurrence of significant credit-related costs; the Company’s ability to successfully implement its business strategy through its subsidiaries, affiliates and alliance partners; and exposure to new risks as the Company expands the scope of its business. Given these and other risks and uncertainties, you should not place undue reliance on forward-looking statements, which speak only as of the date of this document. The Company undertakes no obligation to update or revise any forward-looking statements. Please refer to the Company’s most recent disclosure documents such as its annual report on Form 20-F and other documents submitted to the U.S. Securities and Exchange Commission, as well as its earnings press releases, for a more detailed description of the risks and uncertainties that may affect its financial conditions, its operating results, and investors’ decisions.

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FINANCIAL REVIEW

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

RECENT DEVELOPMENTS

Operating Environment

Economic Environment

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

The Japanese economy, as a whole, showed signs of recovery in the six months ended September 30, 2022. This was primarily due to a gradual increase in economic activity reflecting the easing of the restrictions related to COVID-19. However, the pace of its recovery slowed in the latter half of the period, primarily due to the spread of the Omicron variant of COVID-19 in Japan and sustained high commodity prices largely caused by Russia’s aggression against Ukraine.

The following table presents the quarter-on-quarter growth rates of Japanese gross domestic product (“GDP”) from the third quarter ended December 31, 2020 for the fiscal year ended March 31, 2021 through the second quarter ended September 30, 2022 for the fiscal year ending March 31, 2023, based on data published in December 2022 by the Cabinet Office of the Government of Japan.

	For the fiscal year ended/ending March 31,
	2021				2022								2023
	3Q		4Q		1Q		2Q		3Q		4Q		1Q		2Q
Japanese GDP		1.9%		(0.1%)		0.3%		(0.5%)		1.2%		(0.5%)		1.1%		(0.2%)

Japanese GDP increased by 1.1% on a quarter-on-quarter basis for the first quarter ended June 30, 2022, primarily due to an increase in private consumption reflecting the easing of the restrictions related to COVID-19. However, it decreased by 0.2% for the second quarter ended September 30, 2022. This was primarily due to increases in imports of services, the declining growth in private consumption reflecting the spread of the Omicron variant of COVID-19 in Japan and sustained high commodity prices.

The employment situation was relatively weak. The active job openings-to-applicants ratio published by the Ministry of Health, Labour and Welfare of Japan slightly increased for the six months ended September 30, 2022. The unemployment rate in September 2022 was 2.6%, the same as in

March 2022, based on the data published in October 2022 by the Statistics Bureau of Japan. Further, for the first quarter ended June 30, 2022 and the second quarter ended September 30, 2022, the compensation of employees decreased, on a quarter-on-quarter basis, by 0.3% and 0.2%, respectively.

According to Teikoku Databank, a research institution in Japan, there were approximately 3,100 corporate bankruptcies in Japan for the six months ended September 30, 2022, an increase of 6.3% from the same period in the previous year, involving approximately ¥1.8 trillion in total liabilities, an increase of 205.3% from the same period in the previous year.

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Interest rates in Japanese financial and capital markets are affected by the monetary policy measures of the Bank of Japan (“BOJ”). In January 2016, in addition to the existing provision of ample funds, the BOJ announced the introduction of “quantitative and qualitative monetary easing with a negative interest rate.” Thereafter, the BOJ announced the introduction of a new policy framework, “quantitative and qualitative monetary easing with yield curve control” in September 2016. Under this policy framework, the BOJ would keep short-term interest rates down by maintaining its policy of applying a negative interest rate of minus 0.1% to certain excess reserves of financial institutions held at the BOJ. Moreover, the BOJ indicated it would purchase Japanese government bonds so that the yield of the 10-year Japanese government bonds would be close to around 0% to control long-term interest rates. In July 2018, the BOJ decided to introduce forward guidance for policy rates with a view to persistently continuing with powerful monetary easing. Further, in October 2019, the BOJ amended its forward guidance to indicate that it expects short- and long-term interest rates to remain at or below their present levels so long as the BOJ believes it is necessary to pay close attention to the possibility of a loss in momentum toward achieving its 2% price stability target. In March 2020, the BOJ announced “enhancement of monetary easing in light of the impact of the outbreak of COVID-19.” Thereafter, in April and May 2020, the BOJ decided to further enhance monetary easing and introduce measures to support corporate financing. Moreover, in March 2021, the BOJ announced the establishment of a scheme to apply interest rates, which would be linked to the short-term policy interest rate, as an incentive to a certain amount of financial institutions’ current account balances, based on the recognition of the importance of continuing with monetary easing in a sustainable manner and making nimble and effective responses to counter changes in developments in economic activity and prices, as well as in financial conditions. In addition, the BOJ made clear that the range of the 10-year Japanese government bonds yield fluctuations would be between around plus and minus 0.25% from the target level. Under such circumstances, the uncollateralized overnight call rate, which is the benchmark for short-term interest rates, remained negative for the six months ended September 30, 2022. The yield on newly issued Japanese government bonds with a maturity of 10 years, which is the benchmark for long-term interest rates, was around 0.2% for the same period, and was 0.24% at September 30, 2022. This is close to the BOJ’s upper limit target of yield fluctuations.

The yen depreciated against the U.S. dollar from ¥121.64 at March 31, 2022 to ¥144.32 at September 30, 2022, according to the statistical data published by the BOJ.

The Nikkei Stock Average, which is a price-weighted average of 225 stocks listed on the Tokyo Stock Exchange, fell from ¥27,821.43 at March 31, 2022 to ¥25,937.21 at September 30, 2022.

According to a report published by the Ministry of Land, Infrastructure, Transport and Tourism of Japan, the average residential land price and the average commercial land price in Japan increased by 0.1% and 0.5%, respectively, from July 1, 2021 to July 1, 2022.

For the six months ended September 30, 2022, the global economy, as a whole, recovered gradually, primarily due to an increase in private consumption reflecting the easing of restrictions related to COVID-19. However, the pace of its recovery was slow primarily due to downward pressure on the global economy affected by higher commodity prices and the continuous global monetary tightening. The U.S. economy slightly shrank in the first half of the six months ended September 30, 2022, primarily due to a decrease in private residential investments and changes in private inventories. Although increasing inflation and the subsequent monetary tightening put downward pressure on the U.S. economy, it recovered gradually in the latter half of the period, primarily due to an increase in private consumption supported by the good employment situation. The European economy recovered gradually in the first half of the six months ended September 30, 2022, primarily due to an increase in private consumption reflecting the easing of restrictions related to COVID-19. However, the pace of its recovery was relatively weak in the latter half of the period, primarily due to downward pressure on the European economy, which has experienced higher energy prices caused by Russia’s aggression against Ukraine. In Asia, the Chinese economy slowed down in the first half of the six months ended September 30, 2022, due to the zero-COVID policy, which includes restrictions such as the restraint on movement. However, it showed signs of picking up in the latter half of the six months ended September 30, 2022, primarily due to an increase in

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private consumption reflecting the easing of restrictions related to COVID-19. Asian economies other than China, as a whole, recovered gradually, primarily due to the resumption of economic activity reflecting the easing of restrictions related to COVID-19 for the six months ended September 30, 2022.

On December 8, 2022, Fitch Ratings Japan Limited (“Fitch”) downgraded the long-term issuer default ratings of SMFG and SMBC to “A-” from “A,” primarily due to our weakened capitalization. For more information about our credit ratings, see “Operating Results and Financial Condition—Liquidity.”

Regulatory Environment

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

Capital Adequacy Requirements

Each year, the Financial Stability Board (“FSB”) publishes a list of global financial institutions that it has identified as Global Systemically Important Banks (“G-SIBs”) based on the methodology issued by the Basel Committee on Banking Supervision (“BCBS”). G-SIBs included on the list are required to maintain an amount of Common Equity Tier 1 (“CET1”) capital above the Basel III minimum requirement and applicable capital conservation buffer to discourage such financial institutions from becoming even more systemically important. This is commonly known as the G-SIB capital surcharge.

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

We have been included in the list of G-SIBs each year since the initial list was published in November 2011 and were included on the list published in November 2022. Based on that list, the additional CET1 capital as a percentage of risk-weighted assets we are currently required to maintain is 1%.

On July 15, 2022 and November 11, 2022, the Financial Services Agency of Japan (“FSA”) published amendments to its guidelines for the leverage ratio. For further details, see “—Operating Results and Financial Condition—Capital Management.”

Developments Related to Our Business

Regulatory and Legal Developments

On October 7, 2022, the FSA announced administrative actions against SMBC Nikko Securities, SMBC and SMFG in relation to findings by the Securities and Exchange Surveillance Commission of Japan (“SESC”) of multiple violations of the Financial Instruments and Exchange Act (“FIEA”). The violations identified by the SESC included, among others, improper stabilization activity and related deficiencies in transaction monitoring and business practices by SMBC Nikko Securities in connection with a series of “block offer” transactions in publicly listed securities (collectively, the “market manipulation conduct”). Separately from the market manipulation conduct, the SESC found that SMBC Nikko Securities committed violations of the so-called “firewall regulations” of the FIEA, in connection with impermissible sharing of customer information between SMBC Nikko Securities and SMBC.

The FSA’s administrative actions consist of:

•	SMBC Nikko business suspension order<br>. The FSA issued a business suspension order to SMBC Nikko Securities generally prohibiting it from engaging in new business relating to block offer transactions for the period from October 7, 2022 to January 6, 2023.

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•	SMBC Nikko business improvement order<br>. The FSA issued business improvement orders to SMBC Nikko Securities in connection with the market manipulation conduct and the firewall regulation violations. Among others, the orders require SMBC Nikko Securities to perform root cause analyses of the causes of the respective violations and to formulate and implement business improvement plans to strengthen management oversight and internal controls and foster improvements in the compliance culture of the organization.
•	SMFG improvement measures order<br>. The FSA issued an improvement measures order to SMFG in connection with the market manipulation conduct. The order requires SMFG to implement certain oversight measures that are aimed at securing the appropriate and sound business operations of SMBC Nikko Securities.
---	---
•	SMFG and SMBC reporting orders<br>. In connection with the firewall regulations violations, the FSA issued requests for reports to SMFG, in its capacity as a designated major shareholder of SMBC and a bank holding company, and to SMBC. Among other items, the reports must present an analysis of the facts and causes of the violations and proposed measures to prevent reoccurrence of the violations.
---	---

Refer to our reports on Form 6-K dated October 7, 2022 for more information about the FSA’s administrative actions.

The SMBC Group takes these administrative actions seriously and has been cooperating with the FSA to formulate, submit and implement business improvement plans within the required timeframes. Specifically, on November 4, 2022, SMFG, SMBC and SMBC Nikko Securities timely submitted plans and/or reports to the FSA as required by the respective orders. Each is further required to provide periodic status reports to the FSA on the implementation of the measures detailed therein. In addition, SMFG, SMBC and SMBC Nikko Securities announced reductions in the remuneration of certain executives, among other internal disciplinary actions. Refer to our reports on Form 6-K dated November 4, 2022 for more information about the SMBC Group’s submissions to the FSA. With regard to the business suspension order issued to SMBC Nikko Securities, SMBC Nikko Securities intends to continue its full compliance with the three-month suspension of any new block offer business. Although we, SMBC and SMBC Nikko Securities are striving to implement remediation measures that address the concerns identified in the FSA orders, there is no guarantee that the FSA will consider the proposed measures and our implementation progress to be satisfactory, or that additional deficiencies will not be uncovered in the process, and it is possible that additional sanctions may be imposed on us or our group companies in the future.

As previously disclosed, a criminal proceeding is ongoing before the Tokyo District Court, in which SMBC Nikko Securities and several of its former and current officers and employees have been prosecuted for alleged FIEA violations arising out of the market manipulation conduct referred to in the FSA’s administrative actions mentioned above. The first hearing in the trial was conducted on October 28, 2022, at which SMBC Nikko Securities admitted culpability with respect to the charges. The final outcome of the ongoing criminal proceeding, including any penalties that may be imposed by the Tokyo District Court, remains uncertain. We and our group companies have experienced and may continue to experience reputational harm as a result of this criminal proceeding and the administrative actions of the FSA, which have resulted and may continue to result in reduced business opportunities with current and prospective clients.

See “Item 3.D. Risk Factors—Risks Related to Our Business—Adverse regulatory developments or changes in government policies could have a negative impact on our results of operations,” “—Fraud, misconduct or other unlawful behavior by directors, officers and employees or third parties could subject us to losses and regulatory sanctions,” “—Our business could be adversely affected by litigation and regulatory proceedings globally,” “—Damage to our reputation may have an adverse effect on our business and results of operations” and “Item 4.B. Business Overview—Regulations in Japan—Other Regulations Related to Our Business—Financial Instruments and Exchange Act of Japan” in our most recent annual report on Form 20-F for a description of the potential impact of such developments on our business, results of operations and financial condition.

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Repurchase and Cancellation of Own Shares

On November 14, 2022, we announced the progress of the repurchase of our own shares pursuant to the resolution of our board of directors held on November 12, 2021. The resolution authorized the repurchase of up to the lesser of (i) an aggregate of 33,000,000 shares of our common stock and (ii) an aggregate of ¥100 billion between November 15, 2021 and November 11, 2022. However, our share repurchases were suspended during periods in which we may have been deemed to hold material non-public information. As a result, the repurchase period beginning November 15, 2021 ended without any repurchase of shares.

Simultaneously, we announced that our board of directors resolved to repurchase shares of our common stock and cancel all the repurchased shares. The resolution authorized the repurchase of up to the lesser of (i) an aggregate of 61,000,000 shares of our common stock and (ii) an aggregate of ¥200 billion between November 15, 2022 and May 31, 2023. The cancellation of the repurchased shares is scheduled on June 20, 2023. During November 2022, we entered into contracts to repurchase 4,593,700 shares of common stock for ¥21 billion in aggregate.

Accounting Changes

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

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OPERATING RESULTS AND FINANCIAL CONDITION

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

Executive Summary

Under the economic and financial circumstances described in “Recent Developments—Operating Environment,” we made a profit through our business activities including commercial banking and other financial services businesses. Our total operating income increased by ¥656,455 million from ¥1,506,179 million for the six months ended September 30, 2021 to ¥2,162,634 million for the six months ended September 30, 2022, primarily due to increases in net interest income and net trading income. Our net profit increased by ¥408,800 million from ¥368,594 million for the six months ended September 30, 2021 to ¥777,394 million for the six months ended September 30, 2022, primarily due to the increase in total operating income described above, which was partially offset by increases in operating expenses and income tax expense.

Our total assets increased by ¥12,104,205 million from ¥248,160,847 million at March 31, 2022 to ¥260,265,052 million at September 30, 2022, primarily due to an increase in loans and advances.

Our total liabilities increased by ¥11,256,363 million from ¥235,379,155 million at March 31, 2022 to ¥246,635,518 million at September 30, 2022, primarily due to increases in deposits and derivative financial instruments, which was partially offset by a decrease in borrowings.

Our total equity increased by ¥847,842 million from ¥12,781,692 million at March 31, 2022 to ¥13,629,534 million at September 30, 2022, primarily due to an increase in retained earnings.

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Operating Results

The following table presents information as to our income, expenses and net profit for the six months ended September 30, 2022 and 2021.

	For the six months ended<br>September 30,
	2022			2021
	(In millions, except per share data)
Interest income	¥	1,424,087		¥	843,712
Interest expense		573,910			139,973
Net interest income		850,177			703,739
Fee and commission income		607,546			608,157
Fee and commission expense		112,737			113,484
Net fee and commission income		494,809			494,673
Net trading income		565,037			94,980
Net income from financial assets and liabilities at fair value through profit or loss		171,708			97,643
Net investment income (loss)		(4,915	)		62,549
Other income		85,818			52,595
Total operating income		2,162,634			1,506,179
Impairment charges on financial assets		88,025			18,770
Net operating income		2,074,609			1,487,409
General and administrative expenses		948,612			879,731
Other expenses		162,686			126,224
Operating expenses		1,111,298			1,005,955
Share of <br>post-tax<br> profit of associates and joint ventures		61,241			27,899
Profit before tax		1,024,552			509,353
Income tax expense		247,158			140,759
Net profit	¥	777,394		¥	368,594
Profit attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.	¥	762,185		¥	361,393
Non-controlling<br> interests		9,603			1,836
Other equity instruments holders		5,606			5,365
Earnings per share:
Basic	¥	555.91		¥	263.66
Diluted		555.72			263.55

Total operating income increased by ¥656,455 million, or 44%, from ¥1,506,179 million for the six months ended September 30, 2021 to ¥2,162,634 million for the six months ended September 30, 2022, primarily due to increases in net interest income and net trading income. Although impairment charges on financial assets increased, net operating income also increased by ¥587,200 million from ¥1,487,409 million for the six months ended September 30, 2021, to ¥2,074,609 million for the six months ended September 30, 2022.

Net profit increased by ¥408,800 million from ¥368,594 million for the six months ended September 30, 2021 to ¥777,394 million for the six months ended September 30, 2022, as a result of the increase in net operating income described above, which was partially offset by increases in general and administrative expenses and income tax expense.

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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 annualized interest rates for the six months ended September 30, 2022 and 2021.

	For the six months ended September 30,
	2022						2021
	Average<br>balance<br>(3)		Interest<br>income		Average<br>rate		Average<br>balance<br>(3)		Interest<br>income			Average<br>rate
	(In millions, except percentages)
Interest-earning assets:
Interest-earning deposits with other banks:
Domestic offices	¥	844,795	¥	2,371		0.56%	¥	913,488	¥	1,093			0.24%
Foreign offices		11,158,056		86,580		1.55%		6,550,680		7,026			0.21%
Total		12,002,851		88,951		1.48%		7,464,168		8,119			0.22%
Call loans and bills bought, reverse repurchase agreements and cash collateral on securities borrowed:
Domestic offices		9,949,229		3,817		0.08%		10,293,325		(2,110	)		(0.04%	)
Foreign offices		4,569,739		25,855		1.13%		3,739,481		10,637			0.57%
Total		14,518,968		29,672		0.41%		14,032,806		8,527			0.12%
Investment securities<br>(1)<br>:
Domestic offices		21,184,849		37,279		0.35%		19,729,366		21,161			0.21%
Foreign offices		6,147,879		55,133		1.79%		5,335,167		37,595			1.41%
Total		27,332,728		92,412		0.68%		25,064,533		58,756			0.47%
Loans and advances<br>(2)<br>:
Domestic offices		65,974,666		465,097		1.41%		62,891,663		414,167			1.32%
Foreign offices		45,378,263		747,955		3.30%		33,980,939		354,143			2.08%
Total		111,352,929		1,213,052		2.18%		96,872,602		768,310			1.59%
Total interest-earning assets:
Domestic offices		97,953,539		508,564		1.04%		93,827,842		434,311			0.93%
Foreign offices		67,253,937		915,523		2.72%		49,606,267		409,401			1.65%
Total	¥	165,207,476	¥	1,424,087		1.72%	¥	143,434,109	¥	843,712			1.18%

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	For the six months ended September 30,
	2022						2021
	Average<br>balance<br>(3)		Interest<br>expense		Average<br>rate		Average<br>balance<br>(3)		Interest<br>expense			Average<br>rate
	(In millions, except percentages)
Interest-bearing liabilities:
Deposits:
Domestic offices	¥	100,678,351	¥	25,551		0.05%	¥	96,524,376	¥	4,483			0.01%
Foreign offices		35,785,345		261,739		1.46%		30,240,244		44,367			0.29%
Total		136,463,696		287,290		0.42%		126,764,620		48,850			0.08%
Call money and bills sold, repurchase agreements and cash collateral on securities lent:
Domestic offices		10,968,681		34,093		0.62%		10,955,227		(975	)		(0.02%	)
Foreign offices		8,290,399		53,582		1.29%		6,088,101		1,941			0.06%
Total		19,259,080		87,675		0.91%		17,043,328		966			0.01%
Borrowings and other interest-bearing liabilities:
Domestic offices		19,392,604		27,754		0.29%		19,111,918		15,091			0.16%
Foreign offices		818,075		31,299		7.65%		831,375		8,182			1.97%
Total		20,210,679		59,053		0.58%		19,943,293		23,273			0.23%
Debt securities in issue:
Domestic offices		8,160,989		112,072		2.75%		9,161,443		45,983			1.00%
Foreign offices		2,278,082		16,667		1.46%		2,113,310		2,034			0.19%
Total		10,439,071		128,739		2.47%		11,274,753		48,017			0.85%
Premiums for deposit insurance:
Domestic offices		—		10,074		—		—		18,020			—
Foreign offices		—		1,079		—		—		847			—
Total		—		11,153		—		—		18,867			—
Total interest-bearing liabilities:
Domestic offices		139,200,625		209,544		0.30%		135,752,964		82,602			0.12%
Foreign offices		47,171,901		364,366		1.54%		39,273,030		57,371			0.29%
Total	¥	186,372,526	¥	573,910		0.62%	¥	175,025,994	¥	139,973			0.16%
Net interest income and interest rate spread			¥	850,177		1.10%			¥	703,739			1.02%
(1)	Taxable investment securities and <br>non-taxable<br> 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 <br>tax-exempt<br> 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.
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(3)	Average balances are generally based on a daily average. Weekly, <br>month-end<br> or <br>quarter-end<br> 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 six months ended September 30, 2022 compared to the six months ended September 30, 2021.

	Six months ended September 30, 2022 compared to<br>six months ended September 30, 2021<br>Increase / (decrease)
	Volume			Rate		Net change
	(In millions)
Interest income:
Interest-earning deposits with other banks:
Domestic offices	¥	(88	)	¥	1,366	¥	1,278
Foreign offices		7,903			71,651		79,554
Total		7,815			73,017		80,832
Call loans and bills bought, reverse repurchase agreements and cash collateral on securities borrowed:
Domestic offices		67			5,860		5,927
Foreign offices		2,795			12,423		15,218
Total		2,862			18,283		21,145
Investment securities:
Domestic offices		1,630			14,488		16,118
Foreign offices		6,287			11,251		17,538
Total		7,917			25,739		33,656
Loans and advances:
Domestic offices		20,928			30,002		50,930
Foreign offices		143,825			249,987		393,812
Total		164,753			279,989		444,742
Total interest income:
Domestic offices		22,537			51,716		74,253
Foreign offices		160,810			345,312		506,122
Total	¥	183,347		¥	397,028	¥	580,375

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	Six months ended September 30, 2022 compared to<br>six months ended September 30, 2021<br>Increase / (decrease)
	Volume			Rate			Net change
	(In millions)
Interest expense:
Deposits:
Domestic offices	¥	217		¥	20,851		¥	21,068
Foreign offices		9,451			207,921			217,372
Total		9,668			228,772			238,440
Call money and bills sold, repurchase agreements and cash collateral on securities lent:
Domestic offices		(1	)		35,069			35,068
Foreign offices		896			50,745			51,641
Total		895			85,814			86,709
Borrowings and other interest-bearing liabilities:
Domestic offices		228			12,435			12,663
Foreign offices		(133	)		23,250			23,117
Total		95			35,685			35,780
Debt securities in issue:
Domestic offices		(5,649	)		71,738			66,089
Foreign offices		5,011			9,622			14,633
Total		(638	)		81,360			80,722
Premiums for deposit insurance:
Domestic offices		(7,946	)		—			(7,946	)
Foreign offices		232			—			232
Total		(7,714	)		—			(7,714	)
Total interest expense:
Domestic offices		(13,151	)		140,093			126,942
Foreign offices		15,457			291,538			306,995
Total	¥	2,306		¥	431,631		¥	433,937
Net interest income:
Domestic offices	¥	35,688		¥	(88,377	)	¥	(52,689	)
Foreign offices		145,353			53,774			199,127
Total	¥	181,041		¥	(34,603	)	¥	146,438

Interest Income

Our interest income increased by ¥580,375 million, or 69%, from ¥843,712 million for the six months ended September 30, 2021 to ¥1,424,087 million for the six months ended September 30, 2022. This increase was primarily due to an increase in interest income on loans and advances of ¥444,742 million, or 58%. Interest income on loans and advances increased by ¥50,930 million, or 12% at domestic offices and by ¥393,812 million, or 111% at foreign offices. The increases were primarily due to an increase in the average rate of loans at foreign offices, reflecting an increase in the market interest rate, and partially due to an increase in the average balance of loans to domestic corporate customers as a result of our responses to their financing needs arising from higher commodity prices.

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Interest Expense

Our interest expense increased by ¥433,937 million, or 310%, from ¥139,973 million for the six months ended September 30, 2021 to ¥573,910 million for the six months ended September 30, 2022, primarily due to an increase in interest expense on deposits. Our interest expense on deposits increased by ¥238,440 million, or 488%, from ¥48,850 million for the six months ended September 30, 2021 to ¥287,290 million for the six months ended September 30, 2022, primarily due to an increase in the average rate of deposit, reflecting an increase in the market interest rate.

Net Interest Income

Our net interest income increased by ¥146,438 million, or 21%, from ¥703,739 million for the six months ended September 30, 2021 to ¥850,177 million for the six months ended September 30, 2022. This was primarily due to an increase in the average rate of interest-earning assets, primarily loans and advances.

From the six months ended September 30, 2021 to the six months ended September 30, 2022, the average rate on loans and advances at domestic offices increased by 0.09 percentage points from 1.32% to 1.41%. The average rate on loans and advances at foreign offices increased by 1.22 percentage points from 2.08% to 3.30%, resulting in the total for loans and advances increasing by 0.59 percentage points from 1.59% to 2.18%. On the other hand, the average rate on deposits increased by 0.34 percentage points from 0.08% to 0.42%, primarily due to an increase in the average rate on deposits at foreign offices of 1.17 percentage points from 0.29% to 1.46%.

Net Fee and Commission Income

The following table sets forth our net fee and commission income for the six months ended September 30, 2022 and 2021.

	For the six months ended<br>September 30,
	2022		2021
	(In millions)
Fee and commission income from:
Loans	¥	68,340	¥	60,585
Credit card business		181,965		160,119
Guarantees		35,386		32,579
Securities-related business		55,537		84,673
Deposits		8,560		8,300
Remittances and transfers		73,526		72,036
Safe deposits		2,051		2,021
Trust fees		3,044		2,631
Investment trusts		74,220		93,860
Agency		4,630		4,574
Others		100,287		86,779
Total fee and commission income		607,546		608,157
Fee and commission expense from:
Remittances and transfers		14,309		20,988
Others		98,428		92,496
Total fee and commission expense		112,737		113,484
Net fee and commission income	¥	494,809	¥	494,673

Fee and commission income decreased by ¥611 million from ¥608,157 million for the six months ended September 30, 2021 to ¥607,546 million for the six months ended September 30, 2022. Primary sources of fee

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and commission income are fees obtained through our credit card business, fees and commissions obtained through investment trusts, remittance and transfer fees, loan transaction fees, and fees and commissions obtained through securities-related business. The decrease in fee and commission income was primarily due to decreases in fees and commissions obtained through securities-related business and fees and commissions obtained through investment trusts reflecting the lower investment appetite in the wealth management businesses, which were partially offset by an increase in income from the credit card business reflecting the increase in cashless payments.

Fee and commission expense decreased by ¥747 million, or 1%, from ¥113,484 million for the six months ended September 30, 2021 to ¥112,737 million for the six months ended September 30, 2022.

As a result, net fee and commission income increased by ¥136 million from ¥494,673 million for the six months ended September 30, 2021 to ¥494,809 million for the six months ended September 30, 2022.

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

The following table sets forth our net income from trading, financial assets and liabilities at fair value through profit or loss, and investment securities for the six months ended September 30, 2022 and 2021.

	For the six months ended<br>September 30,
	2022			2021
	(In millions)
Net trading income:
Interest rate	¥	284,254		¥	77,974
Foreign exchange		335,488			(19,312	)
Equity		(56,203	)		37,542
Credit		830			(1,119	)
Others		668			(105	)
Total net trading income	¥	565,037		¥	94,980
Net income from financial assets and liabilities at fair value through profit or loss:
Net income from financial assets at fair value through profit or loss:
Net income from debt instruments	¥	102,831		¥	99,650
Net income from equity instruments		464			1,355
Net income (loss) from financial liabilities designated at fair value through profit or loss		68,413			(3,362	)
Total net income from financial assets and liabilities at fair value through profit or loss	¥	171,708		¥	97,643
Net investment income (loss):
Net gain (loss) from disposal of debt instruments	¥	(54,143	)	¥	21,134
Dividend income		49,228			41,415
Total net investment income (loss)	¥	(4,915	)	¥	62,549

Net trading income, which includes income and losses from trading assets and liabilities and derivative financial instruments, increased by ¥470,057 million from ¥94,980 million for the six months ended September 30, 2021 to ¥565,037 million for the six months ended September 30, 2022. The increase was primarily due to an increase in net trading income from foreign exchange transactions and interest rate related transactions, which was partially offset by a decrease in net trading income from equity related transactions.

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

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

Net income from financial assets and liabilities at fair value through profit or loss increased by ¥74,065 million from ¥97,643 million for the six months ended September 30, 2021 to ¥171,708 million for the six months ended September 30, 2022. This was primarily due to an increase in net gains from changes in the fair value of debt securities in issue designated at fair value through profit or loss.

Net investment income (loss) decreased by ¥67,464 million from a net income of ¥62,549 million for the six months ended September 30, 2021 to a net loss of ¥4,915 million for the six months ended September 30, 2022. This was primarily due to an increase in losses from sales of foreign bonds.

Impairment Charges on Financial Assets

The following table sets forth our impairment charges (reversals) on financial assets for the six months ended September 30, 2022 and 2021.

	For the six months ended<br>September 30,
	2022			2021
	(In millions)
Loans and advances	¥	86,989		¥	13,855
Loan commitments		(7,429	)		7,694
Financial guarantees		8,465			(2,779	)
Total impairment charges on financial assets	¥	88,025		¥	18,770

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

Impairment charges on financial assets increased by ¥69,255 million from ¥18,770 million for the six months ended September 30, 2021 to ¥88,025 million for the six months ended September 30, 2022, primarily due to an increase in impairment charges on loans and advances. The increase was primarily due to an increase in the provision for loan losses related to some large borrowers. For detailed information on provision for loan losses, see “—Financial Condition—Allowance for Loan Losses.”

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General and Administrative Expenses

The following table sets forth our general and administrative expenses for the six months ended September 30, 2022 and 2021.

	For the six months ended<br>September 30,
	2022		2021
	(In millions)
Personnel expenses	¥	449,445	¥	409,435
Depreciation and amortization		129,388		131,234
Building and maintenance expenses		3,460		4,502
Supplies expenses		7,002		7,766
Communication expenses		15,101		15,972
Publicity and advertising expenses		64,179		58,117
Taxes and dues		43,988		42,861
Outsourcing expenses		59,456		54,021
Office equipment expenses		34,737		30,258
Others		141,856		125,565
Total general and administrative expenses	¥	948,612	¥	879,731

General and administrative expenses increased by ¥68,881 million, or 8%, from ¥879,731 million for the six months ended September 30, 2021 to ¥948,612 million for the six months ended September 30, 2022. The increase was primarily due to the combined general and administrative expenses of Fullerton India, which became our subsidiary in November 2021, the higher marketing costs in our credit card business which is successfully increasing new customers, and the effects of changes in foreign exchange rates resulting from the depreciation of the yen.

Share of Post-tax Profit of Associates and Joint Ventures

Share of post-tax profit of associates and joint ventures increased by ¥33,342 million from ¥27,899 million for the six months ended September 30, 2021 to ¥61,241 million for the six months ended September 30, 2022, primarily due to an increase in share of the profit of associates and joint ventures engaged in leasing business.

Income Tax Expense

Income tax expense increased by ¥106,399 million from ¥140,759 million for the six months ended September 30, 2021 to ¥247,158 million for the six months ended September 30, 2022. The increase was primarily due to an increase in deferred tax expense resulting from an increase in taxable temporary differences attributable to derivative financial instruments.

Business Segment Analysis

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

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

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

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Description of Business Segments

Wholesale Business Unit

Retail Business Unit

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

Global Business Unit

The Global Business Unit supports the global businesses of a diverse range of clients, such as Japanese companies operating overseas, non-Japanese companies, financial institutions and government agencies and public corporations of various countries. This business unit provides a variety of tailored products and services to meet customer and market requirements, including loans, deposits, clearing services, trade finance, project finance, loan syndication, derivatives, global cash management services, leasing services, underwriting activities, Japanese stock brokerage and M&A advisory services. This business unit mainly consists of the global businesses of SMBC, SMBC Trust Bank, SMFL, SMBC Nikko Securities and their foreign subsidiaries.

Global Markets Business Unit

The Global Markets Business Unit offers solutions through foreign exchange products, derivatives, bonds, stocks and other marketable financial products, and also undertakes asset liability management operations, which help comprehensively control balance sheet liquidity risks and interest rate risks. This business unit consists of the Treasury Unit of SMBC and the global markets businesses of SMBC Nikko Securities.

Head office account and others

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

Segmental Results of Operations

The following tables show our results of operations by business segment for the six months ended September 30, 2022 and 2021.

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For the six months ended September 30, 2022:

	Wholesale<br><br><br>Business<br><br><br>Unit			Retail<br><br><br>Business<br><br><br>Unit			Global<br><br><br>Business<br><br><br>Unit			Global Markets<br><br><br>Business<br><br><br>Unit			Head office<br><br><br>account and<br><br><br>others			Total
	(In billions)
Consolidated gross profit<br>(1)	¥	367.4		¥	553.8		¥	601.1		¥	266.0		¥	(155.9	)	¥	1,632.4
General and administrative expenses		(145.5	)		(456.2	)		(314.7	)		(56.7	)		10.5			(962.6	)
Others<br>(2)		37.3			2.1			46.0			15.4			(48.7	)		52.1
Consolidated net business profit	¥	259.2		¥	99.7		¥	332.4		¥	224.7		¥	(194.1	)	¥	721.9

For the six months ended September 30, 2021:

	Wholesale<br><br><br>Business<br><br><br>Unit			Retail<br><br><br>Business<br><br><br>Unit			Global<br><br><br>Business<br><br><br>Unit			Global Markets<br><br><br>Business<br><br><br>Unit			Head office<br><br><br>account and<br><br><br>others			Total
	(In billions)
Consolidated gross profit<br>(1)	¥	329.5		¥	568.1		¥	394.5		¥	250.9		¥	(111.7	)	¥	1,431.3
General and administrative expenses		(148.9	)		(464.9	)		(213.9	)		(43.0	)		(5.2	)		(875.9	)
Others<br>(2)		30.3			0.8			25.1			17.6			(43.1	)		30.7
Consolidated net business profit	¥	210.9		¥	104.0		¥	205.7		¥	225.5		¥	(160.0	)	¥	586.1
(1)	Consolidated gross profit = (Interest income – Interest expenses) + Trust fees + (Fee and commission income – Fee and commission expenses) + (Trading income – Trading losses) + (Other operating income – Other operating expenses).
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(2)	“Others” includes share of profit or loss of equity-method associates and joint ventures and cooperated profit and loss, that is, profit and loss double counted within our business segments in the managerial accounting.
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The following are explanations of our results of operations by business segment for the six months ended September 30, 2022. It also includes the changes from the same period in the previous year, which are adjusted by eliminating the impact of factors such as changes in interest rates and exchange rates that may distort the comparison.

Wholesale Business Unit

Consolidated gross profit for the six months ended September 30, 2022 was ¥367.4 billion and increased by ¥18.6 billion on an adjusted basis compared to the six months ended September 30, 2021. This was primarily due to increases in interest income on loans and foreign exchange fees of SMBC.

General and administrative expenses for the six months ended September 30, 2022 was ¥145.5 billion and decreased by ¥4.5 billion on an adjusted basis compared to the six months ended September 30, 2021.

Others for the six months ended September 30, 2022 was ¥37.3 billion.

As a result, consolidated net business profit for the six months ended September 30, 2022 was ¥259.2 billion and increased by ¥30.3 billion on an adjusted basis compared to the six months ended September 30, 2021.

Retail Business Unit

Consolidated gross profit for the six months ended September 30, 2022 was ¥553.8 billion and decreased by ¥18.3 billion on an adjusted basis compared to the six months ended September 30, 2021. This was primarily due to a decrease in income from the wealth management businesses reflecting lower investment appetite, which was partially offset by an increase in income from the payment businesses.

General and administrative expenses for the six months ended September 30, 2022 was ¥456.2 billion and decreased by ¥5.2 billion on an adjusted basis compared to the six months ended September 30, 2021.

Others for the six months ended September 30, 2022 was ¥2.1 billion.

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As a result, consolidated net business profit for the six months ended September 30, 2022 was ¥99.7 billion and decreased by ¥11.8 billion on an adjusted basis compared to the six months ended September 30, 2021.

Global Business Unit

Consolidated gross profit for the six months ended September 30, 2022 was ¥601.1 billion and increased by ¥77.5 billion on an adjusted basis compared to the six months ended September 30, 2021. This was primarily due to an increase in income from the lending businesses of SMBC and its foreign subsidiaries.

General and administrative expenses for the six months ended September 30, 2022 was ¥314.7 billion and increased by ¥33.1 billion on an adjusted basis compared to the six months ended September 30, 2021. This was primarily due to increases in expenses related to overseas business development as well as enhancement of the governance system.

Others for the six months ended September 30, 2022 was ¥46.0 billion and increased by ¥27.1 billion on an adjusted basis compared to the six months ended September 30, 2021. This was primarily due to an increase in gains on change in equity of The Bank of East Asia, Limited.

As a result, consolidated net business profit for the six months ended September 30, 2022 was ¥332.4 billion and increased by ¥71.5 billion on an adjusted basis compared to the six months ended September 30, 2021.

Global Markets Business Unit

Consolidated gross profit for the six months ended September 30, 2022 was ¥266.0 billion and increased by ¥8.6 billion on an adjusted basis compared to the six months ended September 30, 2021. This was primarily due to nimble portfolio management in the volatile market environment.

General and administrative expenses for the six months ended September 30, 2022 was ¥56.7 billion and increased by ¥4.4 billion on an adjusted basis compared to the six months ended September 30, 2021.

Others for the six months ended September 30, 2022 was ¥15.4 billion.

As a result, consolidated net business profit for the six months ended September 30, 2022 was ¥224.7 billion and increased by ¥6.5 billion on an adjusted basis compared to the six months ended September 30, 2021.

Revenues by Region

The following table sets forth the percentage of our total operating income under IFRS for each indicated period, based on the total operating income of our offices in the indicated regions. For each of the periods presented, we earned more than half 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 six months ended<br>September 30,
	2022			2021
Region:
Japan		51	%		66	%
Foreign:
Americas		21	%		13	%
Europe and Middle East		9	%		8	%
Asia and Oceania (excluding Japan)		19	%		13	%
Total		100	%		100	%

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Financial Condition

Assets

Our total assets increased by ¥12,104,205 million from ¥248,160,847 million at March 31, 2022 to ¥260,265,052 million at September 30, 2022. The increase was primarily due to an increase in loans and advances.

Our assets at September 30, 2022 and March 31, 2022 were as follows:

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Cash and deposits with banks	¥	71,496,806	¥	75,697,521
Call loans and bills bought		6,968,074		1,965,135
Reverse repurchase agreements and cash collateral on securities borrowed		10,325,747		11,303,930
Trading assets		4,006,350		3,736,296
Derivative financial instruments		13,268,003		6,443,748
Financial assets at fair value through profit or loss		1,015,046		1,695,585
Investment securities		26,995,630		32,749,405
Loans and advances		115,535,519		104,635,815
Investments in associates and joint ventures		1,123,339		1,009,738
Property, plant and equipment		1,840,944		1,762,996
Intangible assets		1,033,020		992,849
Other assets		6,521,290		6,063,907
Current tax assets		44,671		44,941
Deferred tax assets		90,613		58,981
Total assets	¥	260,265,052	¥	248,160,847

Loans and Advances

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

At September 30, 2022, our loans and advances were ¥115,535,519 million, or 44% of total assets, representing an increase of ¥10,899,704 million, or 10%, from ¥104,635,815 million at March 31, 2022. The increase in loans and advances was primarily due to an increase in those to foreign customers, reflecting the increase in demand for corporate loans, project financing and subscription financing in the United States and European countries, and the effects of changes in foreign exchange rates resulting from the depreciation of the yen.

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Domestic

Through SMBC and other banking and non-bank subsidiaries, we make loans to a broad range of industrial, commercial and individual customers in Japan. The following table shows our outstanding loans and advances to customers whose domiciles are in Japan, classified by industry, before deducting the allowance for loan losses, and adjusting unearned income, unamortized premiums-net and deferred loan fees-net at the dates indicated.

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Manufacturing	¥	10,174,746	¥	10,105,370
Agriculture, forestry, fisheries and mining		479,358		378,366
Construction		913,580		847,805
Transportation, communications and public enterprises		6,488,241		6,210,330
Wholesale and retail		6,120,993		5,903,439
Finance and insurance		3,738,244		3,549,762
Real estate and goods rental and leasing		14,620,611		14,314,582
Services		4,856,856		4,860,235
Municipalities		588,166		600,759
Lease financing		15,594		18,476
Consumer<br>(1)		15,649,775		15,506,486
Others<br>(2)		1,973,131		1,893,474
Total domestic	¥	65,619,295	¥	64,189,084
(1)	The balance in Consumer mainly consists of housing loans. The housing loan balances amounted to ¥10,641,047 million and ¥10,676,967 million at September 30, 2022 and March 31, 2022, respectively.
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(2)	The balance in Others includes loans and advances to the Government of Japan.
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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 September 30,<br>2022		At March 31,<br>2022
	(In millions)
Public sector	¥	501,074	¥	440,236
Financial institutions		10,421,340		8,311,518
Commerce and industry		33,965,086		28,838,245
Lease financing		303,674		290,097
Others		6,106,399		3,884,519
Total foreign	¥	51,297,573	¥	41,764,615

Allowance for Loan Losses

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

Although we understand that there is significant uncertainty in predicting the severity and duration of Russia’s aggression against Ukraine, the timing of the economic recovery from the COVID-19 pandemic and its

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future impact on the Japanese and global economy, we assumed that the Japanese and global economy will recover moderately from the COVID-19 pandemic during the fiscal year ending March 31, 2023 and continue to recover during the fiscal year ending March 31, 2024, which will be to some extent affected by rising commodity prices and downward pressure on the global economy from the continuous global monetary tightening. This assumption was considered in determining the base scenario. The following table shows the growth rates of Japanese and global GDP, which are the key factors of the macroeconomic scenarios, under the base scenario.

	For the fiscal year ending<br><br><br>March 31,
	2023		2024
	(%)
Japanese GDP		2.0		2.0
Global GDP		2.9		2.9

In determining the need for making additional ECL adjustments, we considered whether there is an increase in the credit risk for some portfolios which had a material adverse impact resulting from the sanctions imposed in connection with Russia’s aggression against Ukraine or from the COVID-19 pandemic and whether the increased risk, if any, was not fully incorporated in the ECL model. For the Russian exposure, we evaluated the forward-looking impact on credit risks and losses based on factors such as the possibility that payment of principal or interest would be delayed or the request for loan restructuring would be made due to the prolonged impact of sanctions targeting Russia imposed by the Japanese government and authorities in several other jurisdictions, Russia’s measures to defend its economy and mitigate the effect of sanctions, and a deterioration of credit condition of Russia. At September 30, 2022, our credit risk exposure to Russian borrowers was approximately ¥352 billion and the ECL for that exposure was ¥65 billion. For the COVID-19 pandemic, additional ECL adjustments included the consideration of the temporary impact on probability of default of various measures taken by governments. We evaluated the forward-looking impact on credit risks and losses of certain industry-related portfolios selected based on changes in factors such as the market conditions and bankruptcy trends as a result of the reduction in economic activity by requests for voluntary restraint on movement and business closure requests to commercial facilities. As a consequence, we decided to maintain ECL adjustments for the above portfolios affected by the situation in Russia and Ukraine and the COVID-19 pandemic.

For the six months ended September 30, 2022, the allowance for loan losses slightly decreased by ¥2,886 million from ¥993,054 million at the beginning of the period to ¥990,168 million at end of period. The balance of the allowance for loan losses increases when a provision for loan losses is recognized, and decreases when charge-offs are recognized through the sales of loans and write-offs. As we recorded a provision for loan losses of ¥86,989 million and charge-offs of ¥142,198 million for the six months ended September 30, 2022, the charge-offs exceeded provision for loan losses and the overall allowance for loan losses decreased.

The provision for loan losses increased by ¥73,134 million from ¥13,855 million for the six months ended September 30, 2021 to ¥86,989 million for the six months ended September 30, 2022, primarily due to an increase in the provision for loan losses related to some large borrowers. Charge-offs increased by ¥69,249 million from ¥72,949 million to ¥142,198 million for the six months ended September 30, 2022, primarily due to those related to some other large borrowers.

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The following tables show the analysis of our allowance for loan losses for the six months ended September 30, 2022 and 2021.

	At September 30, 2022
	12-month<br> ECL			Lifetime ECL<br>not credit-<br>impaired			Lifetime ECL<br>credit-impaired		Total
	(In millions)
Allowance for loan losses:
Balance at April 1, 2022	¥	162,919		¥	247,020		¥	583,115	¥	993,054
Net transfers between stages		(7,616	)		(8,529	)		16,145		—
Provision for loan losses		12,104			5,737			69,148		86,989
Charge-offs<br>(1)		—			—			142,198		142,198
Recoveries		—			—			10,467		10,467
Net charge-offs		—			—			131,731		131,731
Others<br>(2)		7,882			14,052			19,922		41,856
Balance at September 30, 2022	¥	175,289		¥	258,280		¥	556,599	¥	990,168
	At September 30, 2021
	12-month<br> ECL			Lifetime ECL<br>not credit-<br>impaired			Lifetime ECL<br>credit-impaired		Total
	(In millions)
Allowance for loan losses:
Balance at April 1, 2021	¥	170,156		¥	255,909		¥	423,222	¥	849,287
Net transfers between stages		(8,713	)		(1,465	)		10,178		—
Provision (credit) for loan losses		(2,382	)		(14,193	)		30,430		13,855
Charge-offs<br>(1)		—			—			72,949		72,949
Recoveries		—			—			7,032		7,032
Net charge-offs		—			—			65,917		65,917
Others<br>(2)		828			1,131			824		2,783
Balance at September 30, 2021	¥	159,889		¥	241,382		¥	398,737	¥	800,008
(1)	Charge-offs consist of the reduction of the allowance through the sales of loans and write-offs.
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(2)	Others mainly include foreign exchange translations for the six months ended September 30, 2022 and 2021.
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Impaired Loans and Advances

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

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

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

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

“Other impaired (loans and advances)” represent impaired loans and advances, which are not included in “potentially bankrupt, virtually bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” or “restructured (loans),” but for which information about credit problems causes 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, virtually bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” “restructured (loans)” and “other impaired (loans and advances)” at September 30, 2022 and March 31, 2022 by domicile and type of industry of the borrowers. At September 30, 2022, gross impaired loans and advances were ¥1,391,224 million, a decrease of ¥14,870 million from ¥1,406,094 million at March 31, 2022. 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 1.2% at September 30, 2022, a decrease of 0.1 percentage points from 1.3% at March 31, 2022.

	At September 30,<br>2022			At March 31,<br>2022
	(In millions)
Potentially bankrupt, virtually bankrupt and bankrupt (loans and advances):
Domestic:
Manufacturing	¥	229,261		¥	223,198
Agriculture, forestry, fisheries and mining		2,002			2,503
Construction		7,324			7,366
Transportation, communications and public enterprises		60,170			48,614
Wholesale and retail		65,854			72,999
Finance and insurance		2,557			2,784
Real estate and goods rental and leasing		31,560			36,628
Services		87,289			83,384
Consumer		133,137			131,220
Others		5,988			8,172
Total domestic		625,142			616,868
Foreign:
Financial institutions		14,505			10,647
Commerce and industry		310,489			239,659
Others		31,076			26,547
Total foreign		356,070			276,853
Total		981,212			893,721
Past due three months or more (loans):
Domestic		30,420			36,593
Foreign		2			—
Total		30,422			36,593
Restructured (loans):
Domestic		175,476			238,824
Foreign		144,028			113,166
Total		319,504			351,990
Other impaired (loans and advances):
Domestic		52,269			32,534
Foreign		7,817			91,256
Total		60,086			123,790
Gross impaired loans and advances		1,391,224			1,406,094
Less: Allowance for loan losses for impaired loans and advances		(556,599	)		(583,115	)
Net impaired loans and advances	¥	834,625		¥	822,979

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Investment Securities

Our investment securities, consisting of debt instruments at amortized cost, debt instruments at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income, totaled ¥26,995,630 million at September 30, 2022, a decrease of ¥5,753,775 million, or 18%, from ¥32,749,405 million at March 31, 2022. The decrease in our investment securities was primarily due to a decrease in our holdings of Japanese government bonds.

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

Our debt instruments at amortized cost amounted to ¥178,466 million at September 30, 2022, an increase of ¥94,512 million, or 113%, from ¥83,954 million at March 31, 2022, primarily due to increases in our holdings of Japanese government bonds and Japanese municipal bonds.

Domestic debt instruments at fair value through other comprehensive income amounted to ¥12,151,336 million at September 30, 2022, a decrease of ¥5,717,660 million, or 32%, from ¥17,868,996 million at March 31, 2022. The decrease was primarily due to a decrease in our holdings of Japanese government bonds. As for our foreign debt instruments at fair value through other comprehensive income, we had ¥10,323,256 million of foreign debt instruments at September 30, 2022, which was an increase of ¥125,286 million, or 1%, from ¥10,197,970 million at March 31, 2022. Most of our foreign debt instruments, including mortgage-backed securities, are issued or guaranteed by foreign governments, government agencies or official institutions. The increase was primarily due to an increase in our holdings of mortgage-backed securities.

We had ¥3,453,106 million of domestic equity instruments and ¥889,466 million of foreign equity instruments at September 30, 2022, for which we made an irrevocable election at initial recognition to present subsequent changes in fair value in other comprehensive income under IFRS 9 “Financial Instruments.” Our domestic equity instruments, which consisted principally of publicly traded Japanese stocks and included common and preferred stocks issued by our customers, decreased by ¥205,485 million, or 6%, from ¥3,658,591 million at March 31, 2022. Net unrealized gains on our domestic equity instruments decreased by ¥254,452 million, or 11%, from ¥2,341,267 million at March 31, 2022 to ¥2,086,815 million at September 30, 2022. The decrease was primarily due to a decrease in the fair value of publicly traded Japanese stocks. Net unrealized gains on our foreign equity instruments decreased by ¥50,450 million, or 7%, from ¥675,390 million at March 31, 2022 to ¥624,940 million at September 30, 2022, mainly reflecting unfavorable conditions in overseas stock markets.

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

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The following tables show the amortized cost, gross unrealized gains and losses, and fair value of our investment securities, which were classified as debt instruments at amortized cost, debt instruments at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income at September 30, 2022 and March 31, 2022.

	At September 30, 2022
	Amortized<br>cost<br>(1)		Gross<br>unrealized<br>gains		Gross<br>unrealized<br>losses		Fair value
	(In millions)
Debt instruments at amortized cost:
Domestic:
Japanese government bonds	¥	72,543	¥	—	¥	118	¥	72,425
Japanese municipal bonds		43,706		—		441		43,265
Total domestic		116,249		—		559		115,690
Foreign:
Bonds issued by other governments and official institutions<br>(2)		60,802		351		36		61,117
Other debt instruments		1,415		29		—		1,444
Total foreign		62,217		380		36		62,561
Total	¥	178,466	¥	380	¥	595	¥	178,251
Debt instruments at fair value through other comprehensive income:
Domestic:
Japanese government bonds	¥	10,035,719	¥	837	¥	48,456	¥	9,988,100
Japanese municipal bonds		1,101,395		8		15,685		1,085,718
Japanese corporate bonds		1,090,683		227		13,703		1,077,207
Other debt instruments		311		—		—		311
Total domestic		12,228,108		1,072		77,844		12,151,336
Foreign:
U.S. Treasury and other U.S. government agency bonds		6,362,793		221		725,560		5,637,454
Bonds issued by other governments and official institutions<br>(2)		3,117,453		744		130,884		2,987,313
Mortgage-backed securities		1,345,135		206		184,294		1,161,047
Other debt instruments		540,120		1,175		3,853		537,442
Total foreign		11,365,501		2,346		1,044,591		10,323,256
Total	¥	23,593,609	¥	3,418	¥	1,122,435	¥	22,474,592
Equity instruments at fair value through other comprehensive income:
Domestic	¥	1,366,291	¥	2,160,784	¥	73,969	¥	3,453,106
Foreign		264,526		634,472		9,532		889,466
Total	¥	1,630,817	¥	2,795,256	¥	83,501	¥	4,342,572

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	At March 31, 2022
	Amortized<br>cost<br>(1)		Gross<br><br><br>unrealized<br>gains		Gross<br><br><br>unrealized<br>losses		Fair value
	(In millions)
Debt instruments at amortized cost:
Domestic:
Japanese municipal bonds	¥	25,741	¥	—	¥	219	¥	25,522
Total domestic		25,741		—		219		25,522
Foreign:
Bonds issued by other governments and official institutions<br>(2)		56,400		221		26		56,595
Other debt instruments		1,813		35		—		1,848
Total foreign		58,213		256		26		58,443
Total	¥	83,954	¥	256	¥	245	¥	83,965
Debt instruments at fair value through other comprehensive income:
Domestic:
Japanese government bonds	¥	15,819,486	¥	271	¥	45,560	¥	15,774,197
Japanese municipal bonds		1,154,542		71		9,117		1,145,496
Japanese corporate bonds		956,320		498		7,826		948,992
Other debt instruments		311		—		—		311
Total domestic		17,930,659		840		62,503		17,868,996
Foreign:
U.S. Treasury and other U.S. government agency bonds		6,027,640		4,719		350,570		5,681,789
Bonds issued by other governments and official institutions<br>(2)		3,056,974		2,363		61,749		2,997,588
Mortgage-backed securities		1,058,908		893		53,750		1,006,051
Other debt instruments		513,186		808		1,452		512,542
Total foreign		10,656,708		8,783		467,521		10,197,970
Total	¥	28,587,367	¥	9,623	¥	530,024	¥	28,066,966
Equity instruments at fair value through other comprehensive income:
Domestic	¥	1,317,324	¥	2,401,838	¥	60,571	¥	3,658,591
Foreign		264,504		683,463		8,073		939,894
Total	¥	1,581,828	¥	3,085,301	¥	68,644	¥	4,598,485
(1)	Amortized cost for equity instruments at fair value through other comprehensive income represents the difference between the fair value and gross unrealized gains or losses.
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(2)	Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agencies.
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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 September 30, 2022 and March 31, 2022.

	At September 30, 2022
	Less than twelve months				Twelve months or more				Total
	Fair value		Gross<br>unrealized<br>losses		Fair value		Gross<br>unrealized<br>losses		Fair value		Gross<br>unrealized<br>losses
	(In millions)
Debt instruments at amortized cost:
Domestic:
Japanese government bonds	¥	72,425	¥	118	¥	—	¥	—	¥	72,425	¥	118
Japanese municipal bonds		27,837		169		15,428		272		43,265		441
Total domestic		100,262		287		15,428		272		115,690		559
Foreign:
Bonds issued by other governments and official institutions<br>(1)		5,880		36		—		—		5,880		36
Other debt instruments		—		—		—		—		—		—
Total foreign		5,880		36		—		—		5,880		36
Total	¥	106,142	¥	323	¥	15,428	¥	272	¥	121,570	¥	595
Debt instruments at fair value through other comprehensive income:
Domestic:
Japanese government bonds	¥	1,603,723	¥	10,435	¥	2,088,446	¥	38,021	¥	3,692,169	¥	48,456
Japanese municipal bonds		662,019		10,084		406,211		5,601		1,068,230		15,685
Japanese corporate bonds		476,730		6,994		316,604		6,709		793,334		13,703
Other debt instruments		—		—		—		—		—		—
Total domestic		2,742,472		27,513		2,811,261		50,331		5,553,733		77,844
Foreign:
U.S. Treasury and other U.S. government agency bonds		3,381,150		307,911		2,214,087		417,649		5,595,237		725,560
Bonds issued by other governments and official institutions<br>(1)		2,251,768		13,411		452,058		117,473		2,703,826		130,884
Mortgage-backed securities		538,562		72,487		476,945		111,807		1,015,507		184,294
Other debt instruments		259,104		3,851		628		2		259,732		3,853
Total foreign		6,430,584		397,660		3,143,718		646,931		9,574,302		1,044,591
Total	¥	9,173,056	¥	425,173	¥	5,954,979	¥	697,262	¥	15,128,035	¥	1,122,435
Equity instruments at fair value through other comprehensive income:
Domestic	¥	172,782	¥	22,735	¥	107,440	¥	51,234	¥	280,222	¥	73,969
Foreign		47,083		6,024		7,510		3,508		54,593		9,532
Total	¥	219,865	¥	28,759	¥	114,950	¥	54,742	¥	334,815	¥	83,501

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	At March 31, 2022
	Less than twelve months				Twelve months or more				Total
	Fair value		Gross<br>unrealized<br>losses		Fair value		Gross<br>unrealized<br>losses		Fair value		Gross<br>unrealized<br>losses
	(In millions)
Debt instruments at amortized cost:
Domestic:
Japanese municipal bonds	¥	9,987	¥	55	¥	15,535	¥	164	¥	25,522	¥	219
Total domestic		9,987		55		15,535		164		25,522		219
Foreign:
Bonds issued by other governments and official institutions<br>(1)		4,437		26		—		—		4,437		26
Other debt instruments		—		—		—		—		—		—
Total foreign		4,437		26		—		—		4,437		26
Total	¥	14,424	¥	81	¥	15,535	¥	164	¥	29,959	¥	245
Debt instruments at fair value through other comprehensive income:
Domestic:
Japanese government bonds	¥	8,580,932	¥	26,384	¥	4,867,170	¥	19,176	¥	13,448,102	¥	45,560
Japanese municipal bonds		832,211		7,429		267,449		1,688		1,099,660		9,117
Japanese corporate bonds		497,623		3,965		269,460		3,861		767,083		7,826
Other debt instruments		—		—		—		—		—		—
Total domestic		9,910,766		37,778		5,404,079		24,725		15,314,845		62,503
Foreign:
U.S. Treasury and other U.S. government agency bonds		3,372,465		197,844		1,468,597		152,726		4,841,062		350,570
Bonds issued by other governments and official institutions<br>(1)		1,783,823		5,865		587,846		55,884		2,371,669		61,749
Mortgage-backed securities		631,780		27,826		293,412		25,924		925,192		53,750
Other debt instruments		223,464		1,450		1,071		2		224,535		1,452
Total foreign		6,011,532		232,985		2,350,926		234,536		8,362,458		467,521
Total	¥	15,922,298	¥	270,763	¥	7,755,005	¥	259,261	¥	23,677,303	¥	530,024
Equity instruments at fair value through other comprehensive income:
Domestic	¥	82,040	¥	8,396	¥	128,728	¥	52,175	¥	210,768	¥	60,571
Foreign		42,261		4,519		10,268		3,554		52,529		8,073
Total	¥	124,301	¥	12,915	¥	138,996	¥	55,729	¥	263,297	¥	68,644
(1)	Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agencies.
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Trading Assets

The following table shows our trading assets at September 30, 2022 and March 31, 2022. Our trading assets were ¥4,006,350 million at September 30, 2022, an increase of ¥270,054 million from ¥3,736,296 million at March 31, 2022. The increase was primarily due to an increase in our holdings of U.S. Treasury and other U.S. government agency bonds.

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Debt instruments	¥	3,916,236	¥	3,489,258
Equity instruments		90,114		247,038
Total trading assets	¥	4,006,350	¥	3,736,296

Financial Assets at Fair Value Through Profit or Loss

The following table shows the fair value of our financial assets at fair value through profit or loss at September 30, 2022 and March 31, 2022. The fair value was ¥1,015,046 million at September 30, 2022, a decrease of ¥680,539 million from ¥1,695,585 million at March 31, 2022. The decrease was primarily due to a decrease in our holdings of investment funds.

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Debt instruments	¥	973,394	¥	1,657,206
Equity instruments		41,652		38,379
Total financial assets at fair value through profit or loss	¥	1,015,046	¥	1,695,585

Liabilities

The following table shows our liabilities at September 30, 2022 and March 31, 2022.

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Deposits	¥	172,728,298	¥	162,593,492
Call money and bills sold		1,157,519		1,130,000
Repurchase agreements and cash collateral on securities lent		17,962,121		20,113,162
Trading liabilities		2,980,561		3,181,992
Derivative financial instruments		15,366,589		6,966,336
Financial liabilities designated at fair value through profit or loss		422,729		455,734
Borrowings		13,806,074		20,584,651
Debt securities in issue		11,948,252		11,428,437
Provisions		203,791		227,784
Other liabilities		9,796,648		8,386,774
Current tax liabilities		87,737		51,513
Deferred tax liabilities		175,199		259,280
Total liabilities	¥	246,635,518	¥	235,379,155

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Deposits

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

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

Our deposit balances at September 30, 2022 were ¥172,728,298 million, an increase of ¥10,134,806 million from ¥162,593,492 million at March 31, 2022. The increase was primarily due to an increase in deposits at foreign offices, reflecting our efforts to expand our stable foreign currency funding sources and the effects of changes in foreign exchange rates resulting from the depreciation of the yen.

The following table shows a breakdown of our domestic and foreign offices’ deposits at September 30, 2022 and March 31, 2022.

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Domestic offices:
Non-interest-bearing<br> demand deposits	¥	29,612,064	¥	28,633,073
Interest-bearing demand deposits		67,902,316		67,287,154
Deposits at notice		665,899		691,249
Time deposits		17,455,023		17,624,597
Negotiable certificates of deposit		4,192,019		5,059,074
Others		10,417,073		9,625,768
Total domestic offices		130,244,394		128,920,915
Foreign offices:
Non-interest-bearing<br> demand deposits		2,803,143		2,334,805
Interest-bearing demand deposits		4,956,330		4,221,047
Deposits at notice		14,021,985		11,345,294
Time deposits		10,104,866		7,513,141
Negotiable certificates of deposit		10,321,048		8,010,723
Others		276,532		247,567
Total foreign offices		42,483,904		33,672,577
Total deposits	¥	172,728,298	¥	162,593,492

Borrowings

Borrowings include unsubordinated borrowings, subordinated borrowings, liabilities associated with securitization transactions of our own assets, and lease liabilities. At September 30, 2022, our borrowings were ¥13,806,074 million, a decrease of ¥6,778,577 million, or 33%, from ¥20,584,651 million at March 31, 2022, primarily due to a decrease in unsubordinated borrowings.

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The following table shows the balances with respect to our borrowings at September 30, 2022 and March 31, 2022.

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Unsubordinated borrowings	¥	12,029,633	¥	18,766,117
Subordinated borrowings		219,210		234,680
Liabilities associated with securitization transactions		1,178,378		1,200,147
Lease liabilities		378,853		383,707
Total borrowings	¥	13,806,074	¥	20,584,651

Debt Securities in Issue

Debt securities in issue at September 30, 2022 were ¥11,948,252 million, an increase of ¥519,815 million, or 5%, from ¥11,428,437 million at March 31, 2022, primarily due to an increase in unsubordinated bonds.

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Commercial paper	¥	2,588,279	¥	2,424,579
Unsubordinated bonds		8,316,555		8,000,837
Subordinated bonds		1,043,418		1,003,021
Total debt securities in issue	¥	11,948,252	¥	11,428,437

Total Equity

Our total equity increased by ¥847,842 million from ¥12,781,692 million at March 31, 2022 to ¥13,629,534 million at September 30, 2022, primarily due to an increase in retained earnings. The increase in retained earnings mainly reflected our net profit.

	At September 30,<br>2022			At March 31,<br>2022
	(In millions)
Capital stock	¥	2,342,537		¥	2,341,878
Capital surplus		645,584			645,382
Retained earnings		7,143,778			6,434,605
Treasury stock		(13,117	)		(13,403	)
Equity excluding other reserves		10,118,782			9,408,462
Other reserves		2,669,330			2,546,294
Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc.		12,788,112			11,954,756
Non-controlling<br> interests		106,809			93,325
Equity attributable to other equity instruments holders		734,613			733,611
Total equity	¥	13,629,534		¥	12,781,692

Liquidity

We derive funding for our operations both from domestic and international sources. Our domestic funding is derived primarily from deposits placed with SMBC by its corporate and individual customers, and also from call money (inter-bank), bills sold (inter-bank promissory notes), repurchase agreements, borrowings, and negotiable

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certificates of deposit issued by SMBC to domestic and international customers. Our international sources of funds are principally from deposits from corporate customers and foreign central banks, negotiable certificates of deposit, bonds, commercial paper, and also from repurchase agreements and cash collateral on securities lent. We closely monitor maturity gaps and foreign exchange exposure in order to manage our liquidity profile.

As shown in the following table, total deposits increased by ¥10,134,806 million from ¥162,593,492 million at March 31, 2022 to ¥172,728,298 million at September 30, 2022. The balance of deposits at September 30, 2022 exceeded the balance of loans and advances by ¥57,192,779 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 67%, which contributed greatly to the reduction of our liquidity risk. Our balances of large-denomination domestic yen time deposits are stable due to the historically high rollover rate of our corporate customers and individual depositors.

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Loans and advances	¥	115,535,519	¥	104,635,815
Deposits		172,728,298		162,593,492

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

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

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

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

We believe we are able to access such sources of liquidity on a stable and flexible basis by keeping credit ratings at a high level. The following table shows credit ratings assigned to the Company by Moody’s Japan K.K., (“Moody’s”), S&P Global Ratings Japan Inc. (“S&P”) and Fitch at December 9, 2022.

At December 9, 2022
Moody’s			S&P			Fitch
Long-term	Outlook	Short-term	Long-term	Outlook	Short-term	Long-term	Outlook	Short-term
A1	S	P-1	A-	S	—	A-	S	F1

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The following table shows credit ratings assigned to SMBC by Moody’s, S&P and Fitch at December 9, 2022.

At December 9, 2022
Moody’s			S&P			Fitch
Long-term	Outlook	Short-term	Long-term	Outlook	Short-term	Long-term	Outlook	Short-term
A1	S	P-1	A	S	A-1	A-	S	F1

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

The guidelines published by the Financial Services Agency of Japan (“FSA”) for liquidity coverage ratio (“LCR”) and net stable funding ratio (“NSFR”) applicable to banks and bank holding companies with international operations are based on the full text of the LCR and NSFR standard issued by the Basel Committee on Banking Supervision (“BCBS”) in January 2013 and October 2014, respectively. Under these guidelines, banks and bank holding companies with international operations must maintain LCRs and NSFRs of at least 100% on both a consolidated basis and a nonconsolidated basis. The following tables show the Company’s and SMBC’s LCRs for the three months ended September 30, 2022 and NSFRs at September 30, 2022. Each figure is calculated based on our financial statements prepared in accordance with Japanese GAAP, as required by the FSA’s LCR and NSFR guidelines.

Liquidity coverage ratio:

	For the three months ended<br>September 30, 2022<br>(1)
SMFG (consolidated)		130.2	%
SMBC (consolidated)		133.7	%
SMBC (nonconsolidated)		135.1	%
(1)	Under the FSA’s LCR guidelines, the LCR for the three months ended September 30, 2022 is set as the three-month average of daily LCRs for the same three months, which is calculated by dividing the balance of high-quality liquid assets by the total net cash outflows on a daily basis for the same three months.
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Net stable funding ratio:

	At September 30, 2022<br>(1)
SMFG (consolidated)		120.4	%
SMBC (consolidated)		127.7	%
SMBC (nonconsolidated)		124.9	%
(1)	Under the FSA’s NSFR guidelines, the NSFR is calculated by dividing the available amount of stable funding by the required amount of stable funding.
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For further information, see “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity—Liquidity Requirement” of our annual report on Form 20-F for the fiscal year ended March 31, 2022.

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Capital Management

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

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

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

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

In December 2010, the BCBS published the new Basel III rules text to implement the Basel III framework, which sets out higher and better-quality capital, better risk coverage, the introduction of a leverage ratio as a backstop to the risk-based requirement, measures to promote the build-up of capital that can be drawn down in periods of stress, and the introduction of two global liquidity standards. The main measures of the minimum capital requirements in the Basel III framework began in January 2013 and have been fully applied from January 2019. The minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 4.5%, 6% and 8%, respectively, since January 2015. Moreover, banks have been required to hold a capital conservation buffer of 2.5% to withstand future periods of stress since January 2019. As a result, taking the capital conservation buffer into account, the minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 7%, 8.5% and 10.5%, respectively, since January 2019. Furthermore, a countercyclical buffer within a range of 0% to 2.5% of common equity or other fully loss-absorbing capital has been implemented according to national circumstances.

In addition to the above-mentioned minimum capital requirements and capital buffer requirements under Basel III, organizations identified by the FSB as G-SIBs, which includes us, are required to maintain an additional 1% to 2.5% of Common Equity Tier 1 capital as a percentage of risk-weighted assets based on the organization’s size, interconnectedness, substitutability, complexity and cross-jurisdictional activity as determined by the FSB. The amount of G-SIB capital surcharge that applies to us based on the FSB’s determination is 1%. The FSB updates its list of G-SIBs on an annual basis.

To reflect the Basel III framework, the FSA changed its capital adequacy guidelines. The minimum Common Equity Tier 1 capital requirement, Tier 1 capital requirement and total capital requirement have been 4.5%, 6% and 8%, respectively, since March 2015. The capital conservation buffer, countercyclical buffer and the G-SIB capital surcharge started to be phased in from March 2016 and have been fully applied from March 2019 under the FSA capital adequacy guidelines.

In December 2017, the Group of Central Bank Governors and Heads of Supervision endorsed the outstanding Basel III regulatory reforms. For further details regarding the finalized Basel III reforms, see “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity—Capital Adequacy Requirement” of our annual report on Form 20-F for the fiscal year ended March 31, 2022.

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In March 2015, the FSA published its leverage ratio guidelines, which have been applied from March 2015, to help ensure broad and adequate capture of both on- and off-balance sheet sources of leverage for internationally active banks. The FSA’s leverage ratio guidelines are based on the text of the leverage ratio framework and disclosure requirements issued by the BCBS in January 2014.

In December 2017, the definition and requirements of the leverage ratio were revised as part of the finalized Basel III reforms, under which the leverage ratio is based on a Tier 1 definition of capital and with the minimum leverage ratio of 3%. Under the finalized Basel III reforms, G-SIBs are required to meet a leverage ratio buffer, which will take the form of a Tier 1 capital buffer set at 50% of the applicable G-SIB capital surcharge. Various refinements were also made to the definition of the leverage ratio exposure measure. The leverage ratio requirements under the definition based on the framework issued by the BCBS in January 2014 were implemented as a Pillar 1 measurement from January 2018, and those under the revised definition and the leverage ratio buffer requirement for G-SIBs will be implemented as a Pillar 1 measurement from January 1, 2023.

In March 2019, the FSA published its guidelines for the leverage ratio applicable to banks and bank holding companies with international operations, which have been applied from March 2019. Under the FSA’s guidelines for the leverage ratio, banks and bank holding companies with international operations must maintain a leverage ratio of at least 3% on both a consolidated basis and a nonconsolidated basis. In June 2020, in light of the increasing impact of the COVID-19 pandemic, the FSA published amendments to its guidelines for the leverage ratio, which mainly exclude deposits with the BOJ from the denominator for the calculation of the leverage ratio in order to maintain harmonization with the monetary policy implemented by the BOJ and the prudential regulations for banks and other financial institutions. These amendments came into effect in June 2020 and were scheduled to expire in March 2021, but the expiry date of these amendments was extended to March 2022, and extended again until March 31, 2024. On July 15, 2022, the FSA published amendments to its guidelines for the leverage ratio. According to the amendments, the leverage ratio buffer requirement for G-SIBs in Japan will take effect from March 31, 2023, while the finalized definition of the leverage ratio exposure measure will take effect from March 31, 2024, except for banks that have notified the FSA that they wish to apply amended requirements earlier. Furthermore, on November 11, 2022, the FSA published amendments to its guidelines for the leverage ratio, which provide that from April 1, 2024 onward the minimum leverage ratio will be increased from 3% to 3.15%, the minimum leverage-based Total Loss-Absorbing Capacity ratio will be increased from 6.75% to 7.10% and the leverage buffer applicable to G-SIBs will be increased by 0.05%, while excluding amounts of deposits to the BOJ from the total exposure, taking into account exceptional macroeconomic conditions and other circumstances.

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The table below presents our risk-weighted capital ratios, total capital, risk-weighted assets and leverage ratio under Japanese GAAP at September 30, 2022 and March 31, 2022, based on the Basel III rules.

	At September 30,<br>2022			At March 31,<br>2022
	(In billions, except percentages)
SMFG Consolidated:
Total risk-weighted capital ratio		15.63	%		16.56	%
Tier 1 risk-weighted capital ratio		14.64	%		15.46	%
Common Equity Tier 1 risk-weighted capital ratio		13.69	%		14.45	%
Total capital<br>(Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)	¥	12,193.5		¥	11,983.8
Tier 1 capital<br>(Common Equity Tier 1 capital + Additional Tier 1 capital)		11,415.4			11,186.2
Common Equity Tier 1 capital		10,681.8			10,458.4
Risk-weighted assets		77,971.4			72,350.1
The amount of minimum total capital requirements<br>(1)		6,237.7			5,788.0
Leverage ratio		4.83	%		5.17	%
(1)	The amount of minimum total capital requirements is calculated by multiplying risk-weighted assets by 8%.
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Common Equity Tier 1 capital consists primarily of capital stock, capital surplus and retained earnings relating to common shares, and non-controlling interests that meet the criteria set forth in the FSA capital adequacy guidelines for inclusion in Common Equity Tier 1 capital.

Non-controlling interests arising from the issue of common shares by a fully consolidated subsidiary of a bank may receive recognition in Common Equity Tier 1 capital only if: (1) the instrument giving rise to the non-controlling interest would, if issued by the bank, meet all of the criteria set forth in the FSA capital adequacy guidelines for classification as common shares for regulatory capital purposes; and (2) the subsidiary that issued the instrument is itself a bank or other financial institution subject to similar capital adequacy guidelines.

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

Additional Tier 1 capital consists primarily of perpetual subordinated bonds.

Tier 2 capital consists primarily of subordinated debt securities.

Capital instruments such as subordinated debt issued on or after March 31, 2013 must meet the new requirements to be included in regulatory capital. Capital instruments issued prior to March 31, 2013 that do not meet the requirements set forth in the FSA capital adequacy guidelines no longer qualify as Additional Tier 1 or Tier 2 capital. 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 were reduced in annual 10% increments and were fully phased out in March 2022.

Our capital position and SMBC’s capital position depend in part on the fair market value of our investment securities portfolio, since unrealized gains and losses are included in the amount of regulatory capital. In March 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 2014 by increments of 20% and have been fully counted as Common Equity Tier 1 capital since March 2018. Since our other securities (including money held in trust) with a readily ascertainable market value included unrealized gains and losses, substantial fluctuations in the Japanese stock markets may affect our capital position and the capital position of SMBC.

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Set forth below is a table of risk-weighted capital ratios, total capital, risk-weighted assets and leverage ratio of SMBC at September 30, 2022 and March 31, 2022 on a consolidated and nonconsolidated basis.

	At September 30,<br>2022			At March 31,<br>2022
	(In billions, except percentages)
SMBC Consolidated:
Total risk-weighted capital ratio		14.36	%		15.78	%
Tier 1 risk-weighted capital ratio		13.31	%		14.53	%
Common Equity Tier 1 risk-weighted capital ratio		11.61	%		12.67	%
Total capital<br>(Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)	¥	10,385.0		¥	10,437.1
Tier 1 capital<br>(Common Equity Tier 1 capital + Additional Tier 1 capital)		9,621.4			9,612.8
Common Equity Tier 1 capital		8,393.0			8,382.7
Risk-weighted assets		72,286.5			66,120.5
The amount of minimum total capital requirements<br>(1)		5,782.9			5,289.6
Leverage ratio		4.34	%		4.82	%
SMBC Nonconsolidated:
Total risk-weighted capital ratio		12.73	%		14.77	%
Tier 1 risk-weighted capital ratio		11.53	%		13.49	%
Common Equity Tier 1 risk-weighted capital ratio		9.73	%		11.53	%
Total capital<br>(Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital)	¥	8,544.5		¥	9,143.5
Tier 1 capital<br>(Common Equity Tier 1 capital + Additional Tier 1 capital)		7,741.0			8,351.0
Common Equity Tier 1 capital		6,531.5			7,141.6
Risk-weighted assets		67,080.5			61,895.3
The amount of minimum total capital requirements<br>(1)		5,366.4			4,951.6
(1)	The amount of minimum total capital requirements is calculated by multiplying risk-weighted assets by 8%.
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Our securities subsidiary in Japan, SMBC Nikko Securities is also subject to capital adequacy requirements under the Financial Instruments and Exchange Act of Japan. At September 30, 2022, the capital adequacy ratio was 345.4% for SMBC Nikko Securities, and sufficiently above 140%, below which level it would be required to file daily reports with the Commissioner of the FSA.

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FINANCIAL RISK MANAGEMENT

Risk Management System

Our risk management system is described in the “Quantitative and Qualitative Information about Risk Management” section within Item 11, “Quantitative and Qualitative Disclosures about Credit, Market and Other Risk,” of our annual report on Form 20-F for the fiscal year ended March 31, 2022. There were no material changes in our risk management system for the six months ended September 30, 2022.

Credit Risk

Our credit risk management system is described in the “Credit Risk” section within Item 11 of our annual report on Form 20-F for the fiscal year ended March 31, 2022. There were no material changes in our credit risk management system for the six months ended September 30, 2022.

Market Risk

Our market risk management system is described in the “Market Risk and Liquidity Risk” section within Item 11 of our annual report on Form 20-F for the fiscal year ended March 31, 2022.

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

VaR is the largest predicted loss that is possible given a fixed confidence interval. For example, our VaR indicates the largest loss that is possible for a holding period of one day and a confidence interval of 99.0%. BPV is the amount of change in assessed value as a result of a one-basis-point (0.01%) movement in interest rates.

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

•	the historical simulation method;
•	a <br>one-sided<br> confidence interval of 99.0%;
---	---
•	a <br>one-day<br> holding period (a <br>one-year<br> holding period for the strategic shareholding investment portfolio); and
---	---
•	an observation period of four years (ten years for the strategic shareholding investment portfolio).
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This method is reviewed periodically and refined, if necessary.

VaR Summary

The following tables set forth our VaR for trading activities and non-trading activities by risk categories for the six months ended September 30, 2022.

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VaR for Trading Activities

	Interest rate <br>risk		Foreign<br>exchange risk		Equities and<br>commodities<br>risk		Others		Total<br>(1)
	(In billions)
For the six months ended September 30, 2022:
SMBC Consolidated
Maximum	¥	75.3	¥	73.7	¥	1.2	¥	9.5	¥	15.3
Minimum		44.9		40.9		0.3		6.9		10.5
Daily average		55.6		51.3		0.6		8.0		12.5
At September 30, 2022		54.5		55.0		0.4		7.0		12.9
At March 31, 2022		49.1		41.9		0.2		6.9		10.2
SMFG Consolidated
Maximum	¥	84.4	¥	75.1	¥	7.1	¥	9.5	¥	31.8
Minimum		54.3		42.0		4.3		6.9		26.2
Daily average		64.9		52.7		6.1		8.0		28.4
At September 30, 2022		63.6		56.5		6.1		7.0		28.8
At March 31, 2022		59.0		42.7		5.5		6.9		25.9
(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 Activities

• Banking

	Interest rate <br>risk		Foreign<br>exchange risk		Equities and<br>commodities<br>risk		Others		Total<br>(1)
	(In billions)
For the six months ended September 30, 2022:
SMBC Consolidated
Maximum	¥	67.3	¥	0.7	¥	18.3	¥	0.0	¥	73.4
Minimum		45.6		0.0		3.9		0.0		50.3
Daily average		55.0		0.3		10.7		0.0		58.9
At September 30, 2022		52.5		0.5		5.1		0.0		55.3
At March 31, 2022		58.7		0.0		17.1		0.0		61.9
SMFG Consolidated
Maximum	¥	68.0	¥	0.7	¥	18.3	¥	0.0	¥	74.0
Minimum		46.6		0.0		3.9		0.0		51.2
Daily average		55.8		0.3		10.7		0.0		59.7
At September 30, 2022		53.2		0.5		5.1		0.0		56.1
At March 31, 2022		59.4		0.0		17.1		0.0		62.6
(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 Shareholding Investment

	Equities risk
	(In billions)
For the six months ended September 30, 2022:
SMBC Consolidated
Maximum	¥	1,047.4
Minimum		886.2
Daily average		968.1
At September 30, 2022		888.8
At March 31, 2022		1,043.5
SMFG Consolidated
Maximum	¥	1,241.1
Minimum		1,067.2
Daily average		1,160.9
At September 30, 2022		1,070.7
At March 31, 2022		1,226.4

Back-testing

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

Stress Tests

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

Interest Rate Risk

To supplement the above limitations of VaR methodologies, the SMBC Group adopts various indices to measure and monitor the sensitivity of interest rates, including delta, gamma and vega risks. The SMBC Group considers BPV as one of the most significant indices to manage interest rate risk. BPV is the amount of change in the value to the banking and trading book as a result of a one-basis-point (0.01%) movement in interest rates. The principal SMBC Group companies use BPV to monitor interest rate risk, not only on a net basis, but also by term to prevent the concentration of interest rate risk in a specific period. In addition, as previously addressed, the SMBC Group enhances the risk management methods of VaR and BPV by using them in combination with back-testing and stress tests.

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

Based on the standards for interest rate risk in the banking book issued by the BCBS in April 2016, the FSA revised the related regulatory guidelines pertaining to monitoring of interest rate risks in the banking book in December 2017. The revised disclosure requirements with respect to the changes in economic value of equity (“ΔEVE”) and changes in net interest income (“ΔNII”) in the banking book as a result of interest rate shocks have been applied from March 31, 2018. The tables below present ΔEVE and ΔNII of SMBC and SMFG on a consolidated basis at September 30, 2022 and March 31, 2022, respectively.

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ΔEVE is defined as a decline in economic value as a result of an interest rate shock. It is calculated by multiplying the interest rate sensitivity (excluding credit spread) and interest rate change. The FSA implements a “materiality test” to identify banks taking excessive interest rate risks. Under the materiality test, the FSA monitors the ratio of ΔEVE to Tier 1 capital based on a set of prescribed interest rate shock scenarios. The threshold applied by the FSA is 15%, and the ratios for SMBC on a consolidated basis at September 30, 2022 and March 31, 2022 were 1.2% and 4.6%, respectively and those for SMFG on a consolidated basis at September 30, 2022 and March 31, 2022 were 1.0% and 4.0%, respectively.

ΔNII is defined as a decline in interest income over a 12-month period as a result of an interest rate shock. It is calculated assuming a constant balance sheet over a forward-looking 12-month period.

	At September 30, 2022				At March 31, 2022
	ΔEVE	Δ<br>NII			ΔEVE	Δ<br>NII
	(In billions)
SMBC Consolidated
Parallel shock up		¥	(346.4	)		¥	(339.4	)
Parallel shock down			544.9				546.6
Steepener shock			—				—
Flattener shock			—				—
Short rate shock up			—				—
Short rate shock down			—				—
Maximum			544.9				546.6
	At September 30, 2022				At March 31, 2022
	(In billions)
Tier 1 Capital			9,621.4				9,612.8
	At September 30, 2022				At March 31, 2022
	ΔEVE	Δ<br>NII			ΔEVE	Δ<br>NII
	(In billions)
SMFG Consolidated
Parallel shock up		¥	(346.4	)		¥	(339.4	)
Parallel shock down			544.9				546.6
Steepener shock			—				—
Flattener shock			—				—
Short rate shock up			—				—
Short rate shock down			—				—
Maximum			544.9				546.6
	At September 30, 2022				At March 31, 2022
	(In billions)
Tier 1 Capital			11,415.4				11,186.2

All values are in Japanese Yen.

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

Table of Contents

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS


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

F-1

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Consolidated Statements of Financial Position (Unaudited)

		At September 30,<br><br><br>2022			At March 31,<br><br><br>2022
		(In millions)
Assets:
Cash and deposits with banks		¥	71,496,806		¥	75,697,521
Call loans and bills bought			6,968,074			1,965,135
Reverse repurchase agreements and cash collateral on securities borrowed			10,325,747			11,303,930
Trading assets			4,006,350			3,736,296
Derivative financial instruments	5		13,268,003			6,443,748
Financial assets at fair value through profit or loss			1,015,046			1,695,585
Investment securities	6		26,995,630			32,749,405
Loans and advances	7		115,535,519			104,635,815
Investments in associates and joint ventures			1,123,339			1,009,738
Property, plant and equipment			1,840,944			1,762,996
Intangible assets			1,033,020			992,849
Other assets			6,521,290			6,063,907
Current tax assets			44,671			44,941
Deferred tax assets			90,613			58,981
Total assets		¥	260,265,052		¥	248,160,847
Liabilities:
Deposits		¥	172,728,298		¥	162,593,492
Call money and bills sold			1,157,519			1,130,000
Repurchase agreements and cash collateral on securities lent			17,962,121			20,113,162
Trading liabilities			2,980,561			3,181,992
Derivative financial instruments	5		15,366,589			6,966,336
Financial liabilities designated at fair value through profit or loss			422,729			455,734
Borrowings	8		13,806,074			20,584,651
Debt securities in issue	9		11,948,252			11,428,437
Provisions	10		203,791			227,784
Other liabilities			9,796,648			8,386,774
Current tax liabilities			87,737			51,513
Deferred tax liabilities			175,199			259,280
Total liabilities			246,635,518			235,379,155
Equity:
Capital stock	11		2,342,537			2,341,878
Capital surplus			645,584			645,382
Retained earnings			7,143,778			6,434,605
Treasury stock	11		(13,117	)		(13,403	)
Equity excluding other reserves			10,118,782			9,408,462
Other reserves			2,669,330			2,546,294
Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc.			12,788,112			11,954,756
Non-controlling<br> interests			106,809			93,325
Equity attributable to other equity instruments holders	12		734,613			733,611
Total equity			13,629,534			12,781,692
Total equity and liabilities		¥	260,265,052		¥	248,160,847

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

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Consolidated Income Statements (Unaudited)

			For the six months ended<br>September 30,
	Note		2022			2021
			(In millions, except per share data)
Interest income			¥	1,424,087		¥	843,712
Interest expense				573,910			139,973
Net interest income				850,177			703,739
Fee and commission income		13		607,546			608,157
Fee and commission expense				112,737			113,484
Net fee and commission income				494,809			494,673
Net trading income				565,037			94,980
Net income from financial assets and liabilities at fair value through profit or loss				171,708			97,643
Net investment income (loss)				(4,915	)		62,549
Other income				85,818			52,595
Total operating income				2,162,634			1,506,179
Impairment charges on financial assets		14		88,025			18,770
Net operating income				2,074,609			1,487,409
General and administrative expenses				948,612			879,731
Other expenses				162,686			126,224
Operating expenses				1,111,298			1,005,955
Share of <br>post-tax<br> profit of associates and joint ventures				61,241			27,899
Profit before tax				1,024,552			509,353
Income tax expense				247,158			140,759
Net profit			¥	777,394		¥	368,594
Profit attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.			¥	762,185		¥	361,393
Non-controlling<br> interests				9,603			1,836
Other equity instruments holders				5,606			5,365
Earnings per share:
Basic		15	¥	555.91		¥	263.66
Diluted		15		555.72			263.55

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

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Consolidated Statements of Comprehensive Income (Unaudited)

	For the six months ended<br>September 30,
	2022			2021
	(In millions)
Net profit	¥	777,394		¥	368,594
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		15,329			75,974
Equity instruments at fair value through other comprehensive income:
Gains (losses) arising during the period, before tax		(219,566	)		271,338
Own credit on financial liabilities designated at fair value through profit or loss:
Gains (losses) arising during the period, before tax		1,035			1,349
Share of other comprehensive income (loss) of associates and joint ventures		12,073			1,335
Income tax relating to items that will not be reclassified		62,244			(106,638	)
Total items that will not be reclassified to profit or loss, net of tax		(128,885	)		243,358
Items that may be reclassified subsequently to profit or loss:
Debt instruments at fair value through other comprehensive income:
Gains (losses) arising during the period, before tax		(652,810	)		10,756
Reclassification adjustments for (gains) losses included in net profit, before tax		157,216			(14,535	)
Exchange differences on translating foreign operations:
Gains (losses) arising during the period, before tax		655,317			70,685
Reclassification adjustments for (gains) losses included in net profit, before tax		193			—
Share of other comprehensive income (loss) of associates and joint ventures		38,125			18,268
Income tax relating to items that may be reclassified		147,427			886
Total items that may be reclassified subsequently to profit or loss, net of tax		345,468			86,060
Other comprehensive income, net of tax		216,583			329,418
Total comprehensive income	¥	993,977		¥	698,012
Total comprehensive income attributable to:
Shareholders of Sumitomo Mitsui Financial Group, Inc.	¥	976,191		¥	690,879
Non-controlling<br> interests		12,180			1,768
Other equity instruments holders		5,606			5,365

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

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Consolidated Statements of Changes in Equity (Unaudited)

	Equity excluding other reserves											Other reserves
	Capital<br><br><br>stock		Capital<br>surplus			Retained<br>earnings			Treasury<br>stock			Remeasure-<br>ments of<br>defined<br>benefit<br>plans<br>reserve			Financial<br>instruments at<br>fair value<br>through other<br>comprehensive<br>income reserve			Own credit<br>on financial<br>liabilities<br>designated<br>at fair value<br>through<br>profit or loss<br>reserve			Exchange<br>differences<br>on<br>translating<br>foreign<br>operations<br>reserve		Equity<br>attributable<br>to SMFG’s<br>shareholders			Non-<br>controlling<br>interests			Equity<br>attributable<br>to other<br>equity<br>instruments<br>holders			Total<br>equity
	(In millions)
Balance at April 1, 2021	¥	2,341,274	¥	722,595		¥	6,078,208		¥	(13,699	)	¥	214,411		¥	2,106,255		¥	(3,455	)	¥	113,646	¥	11,559,235		¥	68,379		¥	648,536		¥	12,276,150
Comprehensive income:
Net profit		—		—			361,393			—			—			—			—			—		361,393			1,836			5,365			368,594
Other comprehensive income		—		—			—			—			52,823			187,649			936			88,078		329,486			(68	)		—			329,418
Total comprehensive income		—		—			361,393			—			52,823			187,649			936			88,078		690,879			1,768			5,365			698,012
Issuance of shares under share-based payment transactions		604		604			—			—			—			—			—			—		1,208			—			—			1,208
Acquisition and disposal of subsidiaries and<br><br>businesses-net		—		—			—			—			—			—			—			—		—			66			—			66
Transaction with <br>non-controlling<br> interest shareholders		—		(195	)		—			—			—			—			—			—		(195	)		240			—			45
Share of changes in capital surplus of associates and joint ventures		—		5,097			—			—			—			—			—			—		5,097			—			—			5,097
Dividends to shareholders		—		—			(130,190	)		—			—			—			—			—		(130,190	)		(727	)		—			(130,917	)
Coupons on other equity instruments		—		—			—			—			—			—			—			—		—			—			(5,365	)		(5,365	)
Purchases of other equity instruments and sales of other equity <br>instruments-net		—		—			—			—			—			—			—			—		—			—			3,338			3,338
Purchases of treasury stock		—		—			—			(37	)		—			—			—			—		(37	)		—			—			(37	)
Sales of treasury stock		—		—			—			327			—			—			—			—		327			—			—			327
Loss on sales of treasury stock		—		—			(31	)		—			—			—			—			—		(31	)		—			—			(31	)
Share-based payment transactions		—		(187	)		—			—			—			—			—			—		(187	)		—			—			(187	)
Transfer from other reserves to retained earnings		—		—			36,453			—			(20,548	)		(15,905	)		—			—		—			—			—			—
Others		—		—			—			—			—			—			—			—		—			248			—			248
Balance at September 30, 2021	¥	2,341,878	¥	727,914		¥	6,345,833		¥	(13,409	)	¥	246,686		¥	2,277,999		¥	(2,519	)	¥	201,724	¥	12,126,106		¥	69,974		¥	651,874		¥	12,847,954
Balance at April 1, 2022	¥	2,341,878	¥	645,382		¥	6,434,605		¥	(13,403	)	¥	197,310		¥	1,808,222		¥	520		¥	540,242	¥	11,954,756		¥	93,325		¥	733,611		¥	12,781,692
Comprehensive income:
Net profit		—		—			762,185			—			—			—			—			—		762,185			9,603			5,606			777,394
Other comprehensive income		—		—			—			—			10,641			(499,964	)		718			702,611		214,006			2,577			—			216,583
Total comprehensive income		—		—			762,185			—			10,641			(499,964	)		718			702,611		976,191			12,180			5,606			993,977
Issuance of shares under share-based payment transactions		659		659			—			—			—			—			—			—		1,318			—			—			1,318
Transaction with <br>non-controlling<br> interest shareholders		—		(395	)		—			—			—			—			—			—		(395	)		1,294			—			899
Dividends to shareholders		—		—			(143,936	)		—			—			—			—			—		(143,936	)		(2,713	)		—			(146,649	)
Coupons on other equity instruments		—		—			—			—			—			—			—			—		—			—			(5,606	)		(5,606	)
Purchases of other equity instruments and sales of other equity <br>instruments-net		—		—			—			—			—			—			—			—		—			—			1,002			1,002
Purchases of treasury stock		—		—			—			(34	)		—			—			—			—		(34	)		—			—			(34	)
Sales of treasury stock		—		—			—			320			—			—			—			—		320			—			—			320
Loss on sales of treasury stock		—		—			(46	)		—			—			—			—			—		(46	)		—			—			(46	)
Share-based payment transactions		—		(62	)		—			—			—			—			—			—		(62	)		—			—			(62	)
Transfer from other reserves to retained earnings		—		—			90,970			—			(21,303	)		(69,667	)		—			—		—			—			—			—
Others		—		—			—			—			—			—			—			—		—			2,723			—			2,723
Balance at September 30, 2022	¥	2,342,537	¥	645,584		¥	7,143,778		¥	(13,117	)	¥	186,648		¥	1,238,591		¥	1,238		¥	1,242,853	¥	12,788,112		¥	106,809		¥	734,613		¥	13,629,534

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

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Consolidated Statements of Cash Flows (Unaudited)

	For the six months ended<br>September 30,
	2022			2021
	(In millions)
Operating Activities:
Profit before tax	¥	1,024,552		¥	509,353
Adjustments for:
Gains on financial assets at fair value through profit or loss and investment securities		(18,600	)		(96,183	)
Foreign exchange (gains) losses		(939,255	)		47,260
Provision for loan losses		86,989			13,855
Depreciation and amortization		157,999			158,232
Share of <br>post-tax<br> profit of associates and joint ventures		(61,241	)		(27,899	)
Net changes in assets and liabilities:
Net (increase) decrease of term deposits with original maturities over three months		1,767,421			(98,456	)
Net increase of call loans and bills bought		(4,914,016	)		(191,334	)
Net decrease of reverse repurchase agreements and cash collateral on securities borrowed		1,388,766			1,224,050
Net increase of loans and advances		(9,941,327	)		(139,094	)
Net change of trading assets and liabilities, derivative financial instruments, and financial liabilities designated at fair value through profit or loss		1,232,767			(500,754	)
Net increase (decrease) of deposits		8,666,708			(1,511,338	)
Net increase of call money and bills sold		4,375			349,768
Net decrease of repurchase agreements and cash collateral on securities lent		(2,458,303	)		(2,364,123	)
Net increase (decrease) of other unsubordinated borrowings and debt securities in issue		(7,388,484	)		1,162,855
Income taxes paid—net		(106,797	)		(91,992	)
Other operating activities—net		(1,312,248	)		425,033
Net cash and cash equivalents used in operating activities		(12,810,694	)		(1,130,767	)
Investing Activities:
Purchases of financial assets at fair value through profit or loss and investment securities		(15,404,357	)		(18,734,409	)
Proceeds from sales of financial assets at fair value through profit or loss and investment securities		11,051,492			11,859,983
Proceeds from maturities of financial assets at fair value through profit or loss and investment securities		11,892,293			7,519,713
Investments in associates and joint ventures		—			(1,700	)
Proceeds from sales of investments in associates and joint ventures		4,512			1,529
Purchases of property, plant and equipment, and investment properties		(30,387	)		(33,217	)
Purchases of intangible assets		(93,017	)		(92,958	)
Proceeds from sales of property, plant and equipment, investment properties and intangible assets		1,864			495
Net cash and cash equivalents provided by investing activities		7,422,400			519,436
Financing Activities:
Redemption of subordinated borrowings		(15,000	)		—
Proceeds from issuance of subordinated bonds		—			93,347
Redemption of subordinated bonds		—			(174,000	)
Payments for the principal portion of lease liabilities		(44,825	)		(47,664	)
Dividends paid to shareholders of Sumitomo Mitsui Financial Group, Inc.		(143,871	)		(130,153	)
Dividends paid to <br>non-controlling<br> interest shareholders		(2,713	)		(727	)
Coupons paid to other equity instruments holders		(5,606	)		(5,365	)
Purchases of treasury stock and proceeds from sales of treasury stock—net		240			259
Purchases of other equity instruments and proceeds from sales of other equity instruments—net		1,002			3,338
Transactions with <br>non-controlling<br> interest shareholders—net		956			111
Net cash and cash equivalents used in financing activities		(209,817	)		(260,854	)
Effect of exchange rate changes on cash and cash equivalents		1,674,253			49,681
Net decrease of cash and cash equivalents		(3,923,858	)		(822,504	)
Cash and cash equivalents at beginning of period		74,343,953			71,548,697
Cash and cash equivalents at end of period	¥	70,420,095		¥	70,726,193
Net cash and cash equivalents provided by operating activities includes:
Interest and dividends received	¥	1,367,994		¥	942,698
Interest paid		510,259			147,489

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

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Notes to Consolidated Financial Statements (Unaudited)

1	GENERAL INFORMATION

Sumitomo Mitsui Financial Group, Inc. (the “Company” or “SMFG”) was established on December 2, 2002, as a holding company for Sumitomo Mitsui Banking Corporation (“SMBC”) and its subsidiaries through a statutory share transfer ( kabushiki-iten ) of all of the outstanding equity securities of SMBC in exchange for the Company’s newly issued securities. The Company is a joint stock corporation with limited liability ( Kabushiki Kaisha ) incorporated under the Companies Act of Japan (“Companies Act”). Upon the formation of the Company and the completion of the statutory share transfer, SMBC became a direct, wholly owned subsidiary of the Company. The Company has a primary listing on the Tokyo Stock Exchange (Prime Market), with further listing on the Nagoya Stock Exchange (Premier Market). The Company’s American Depositary Shares are listed on the New York Stock Exchange.

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

The accompanying consolidated financial statements have been authorized for issue by the Management Committee on December 20, 2022.

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The interim consolidated financial statements, including selected explanatory notes, of the Group have been prepared in accordance with IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”). The interim consolidated financial statements should be read in conjunction with the Group’s consolidated financial statements for the fiscal year ended March 31, 2022, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB.

Significant Accounting Policies

The significant accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group’s consolidated financial statements for the fiscal year ended March 31, 2022.

For the six months ended September 30, 2022, a number of amendments to standards have become effective; however, they have not resulted in any material impact on the Group’s interim consolidated financial statements.

Recent Accounting Pronouncements

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

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

In September 2014, the IASB issued the narrow-scope amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” to address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The effective date of applying the amendments was January 1, 2016 when they were originally issued, however, in December 2015, the IASB issued Effective Date of Amendments to IFRS 10 and IAS 28 to remove the effective date and indicated that a new effective date

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

IFRS 17 “Insurance Contracts”

In May 2017, the IASB published IFRS 17 “Insurance Contracts,” which establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts, replacing IFRS 4 “Insurance Contracts.” IFRS 4 provided entities dispensation to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches. IFRS 17 requires all insurance contracts to be accounted for in a consistent manner. Insurance obligations will be accounted for by using present values instead of historical cost.

In June 2020, the IASB issued amendments to IFRS 17 to help entities implement the standard and make it easier for them to explain their financial performance. The fundamental principles introduced when the IASB first issued IFRS 17 in May 2017 remain unaffected. The mandatory effective date of applying IFRS 17 was January 1, 2021 when it was originally issued but deferred to annual periods beginning on or after January 1, 2023 and are not expected to have a material impact on the Group’s consolidated financial statements.

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

In February 2021, the IASB issued narrow-scope amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 “Making Materiality Judgements” to support entities improve accounting policy disclosures for users of financial statements. The amendments to IAS 1 require entities to disclose their material accounting policy information rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures. The amendments are effective for annual periods beginning on or after January 1, 2023.

Definition of Accounting Estimates (Amendments to IAS 8)

In February 2021, the IASB issued narrow-scope amendments to IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors.” The amendments introduce the definition of accounting estimates and clarify how entities should distinguish changes in accounting policies from changes in accounting estimates. The amendments are effective for annual periods beginning on or after January 1, 2023.

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

In May 2021, the IASB issued narrow-scope amendments to IAS 12 “Income Taxes” to specify how entities should account for deferred tax on transactions such as leases and decommissioning obligations. The aim of the amendments is to reduce diversity in the reporting of deferred tax on such transactions. The amendments are effective for annual periods beginning on or after January 1, 2023 and are not expected to have a material impact on the Group’s consolidated financial statements.

Initial Application of IFRS 17 and IFRS 9—Comparative Information (Amendment to IFRS 17)

In December 2021, the IASB issued a narrow-scope amendment to the transition requirements in IFRS 17 to help entities avoid temporary accounting mismatches between financial assets and insurance contract liabilities caused by the

different transition requirements between IFRS 17 and IFRS 9 “Financial Instruments.” The amendments are effective for annual periods beginning on or after January 1, 2023 and are not expected to have a material impact on the Group’s consolidated financial statements.

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Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

In January 2020, the IASB issued narrow-scope amendments to IAS 1 to clarify how to classify debt and other liabilities as current or non-current. The amendments make it easier for entities to determine whether, in the statements of financial position, debt and other liabilities with an uncertain settlement date should be classified as current or non-current. The effective date of applying the amendments was January 1, 2022 when they were originally issued, however, in July 2020, the IASB issued an amendment which defers the effective date to annual periods beginning on or after January 1, 2023. Subsequently, in October 2022, the IASB issued an amendment which defers the effective date to annual periods beginning on or after January 1, 2024. The Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

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

In September 2022, the IASB issued narrow-scope amendments to IFRS 16 “Leases,” which add to subsequent measurement requirements for the lease liability arising from a sale and leaseback transaction. The amendments specify how to measure the lease liability when reporting after the date of the transaction. The amendments are effective for annual reporting periods beginning on or after January 1, 2024. The Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

Non-current Liabilities with Covenants (Amendments to IAS 1)

In October 2022, the IASB issued amendments to IAS 1 to improve the information entities provide about long-term debt with covenants. The amendments to IAS 1 specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Instead, the amendments require an entity to disclose information about these covenants in the notes to the financial statements and enable investors to understand the risk that such debt could become repayable early. The amendments are effective for annual reporting periods beginning on or after January 1, 2024. The Group is currently evaluating the potential impact that the adoption of the amendments will have on its consolidated financial statements.

3	CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The consolidated financial statements are influenced by estimates and management judgments, which necessarily have to be made in the course of preparation of the consolidated financial statements. Estimates and judgments are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, and which are continually evaluated. For information on the estimation of the allowance for loan losses which reflects the current and forward-looking impact of the situation in Russia and Ukraine and the COVID-19 pandemic, refer to Note 7 “Loans and Advances.” The critical accounting estimates and judgments are described in Note 3 “Critical Accounting Estimates and Judgments” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2022.

4	SEGMENT ANALYSIS

Business Segments

The Group’s business segment information is prepared based on the internal reporting system utilized by its management to assess the performance of its business segments.

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

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Wholesale Business Unit

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

Retail Business Unit

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

Global Business Unit

Global Markets Business Unit

Head office account and others

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

Measurement of Segment Profit or Loss

The business segment information is prepared under the management approach. Consolidated net business profit is used as a profit indicator of banks in Japan. Consolidated net business profit of each segment is calculated by deducting general and administrative expenses (i.e., the total of personnel expense, non-personnel expense and tax), and by adding or deducting others (i.e., share of profit or loss of equity-method associates and joint ventures and cooperated profit and loss based on internal managerial accounting) to or from consolidated gross profits (i.e., the total of net interest income, trust fees, net fee and commission income, net trading income and net other operating income). The consolidated gross profits and general and administrative expenses of each segment are prepared for management accounting purposes and not generated solely by aggregating figures

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prepared under financial accounting. While the Group’s disclosure complies with the requirements on segment information in accordance with IFRS, the figures reported to management and disclosed herein are prepared under 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 Operations to Consolidated Income Statements.”

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

Segmental Results of Operations

The following tables show the Group’s results of operations by business segment for the six months ended September 30, 2022 and 2021.

For the six months ended September 30, 2022:

	Wholesale<br><br><br>Business<br><br><br>Unit			Retail<br><br><br>Business<br><br><br>Unit			Global<br><br><br>Business<br><br><br>Unit			Global Markets<br><br><br>Business<br><br><br>Unit			Head office<br><br><br>account and<br><br><br>others			Total
	(In billions)
Consolidated gross profit<br>(1)	¥	367.4		¥	553.8		¥	601.1		¥	266.0		¥	(155.9	)	¥	1,632.4
General and administrative expenses		(145.5	)		(456.2	)		(314.7	)		(56.7	)		10.5			(962.6	)
Others<br>(2)		37.3			2.1			46.0			15.4			(48.7	)		52.1
Consolidated net business profit	¥	259.2		¥	99.7		¥	332.4		¥	224.7		¥	(194.1	)	¥	721.9
For the six months ended September 30, 2021:
	Wholesale<br><br> <br>Business<br><br> <br>Unit			Retail<br><br> <br>Business<br><br> <br>Unit			Global<br><br> <br>Business<br><br> <br>Unit			Global Markets<br><br> <br>Business<br><br> <br>Unit			Head office<br><br> <br>account and<br><br> <br>others			Total
	(In billions)
Consolidated gross profit<br>(1)	¥	329.5		¥	568.1		¥	394.5		¥	250.9		¥	(111.7	)	¥	1,431.3
General and administrative expenses		(148.9	)		(464.9	)		(213.9	)		(43.0	)		(5.2	)		(875.9	)
Others<br>(2)		30.3			0.8			25.1			17.6			(43.1	)		30.7
Consolidated net business profit	¥	210.9		¥	104.0		¥	205.7		¥	225.5		¥	(160.0	)	¥	586.1
(1)	Consolidated gross profit = (Interest income – Interest expenses) + Trust fees + (Fee and commission income – Fee and commission expenses) + (Trading income – Trading losses) + (Other operating income – Other operating expenses).
---	---
(2)	“Others” includes share of profit or loss of equity-method associates and joint ventures and cooperated profit and loss, that is, profit and loss double counted within the Group’s business segments in the managerial accounting.
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Reconciliation of Segmental Results of Operations to Consolidated Income Statements

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

	For the six months ended<br>September 30,
	2022			2021
	(In billions)
Consolidated net business profit	¥	721.9		¥	586.1
Differences between management reporting and Japanese GAAP:
Total credit costs		(83.1	)		(26.7	)
Gains on equity instruments		92.1			81.2
Extraordinary gains or losses and others		(6.2	)		(13.8	)
Profit before tax under Japanese GAAP		724.7			626.8
Differences between Japanese GAAP and IFRS:
Scope of consolidation		3.2			1.9
Derivative financial instruments		464.5			(10.4	)
Investment securities		(105.6	)		(49.5	)
Loans and advances		(33.2	)		0.8
Investments in associates and joint ventures		(28.7	)		(36.6	)
Property, plant and equipment		(0.6	)		0.7
Lease accounting		—			(0.3	)
Defined benefit plans		(28.1	)		(30.3	)
Foreign currency translation		(22.5	)		(2.9	)
Classification of equity and liability		5.7			5.4
Others		45.2			3.8
Profit before tax under IFRS	¥	1,024.6		¥	509.4
5	DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
---	---

Derivative financial instruments include futures, forwards, swaps, options and other types of derivative contracts, which are transactions listed on exchanges or over-the-counter (“OTC”) transactions. In the normal course of business, the Group enters into a variety of derivatives for trading and risk management purposes. The Group uses derivatives for trading activities, which include facilitating customer transactions, market-making and arbitrage activities. The Group also uses derivatives to reduce its exposures to market and credit risks as part of its asset and liability management.

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

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The tables below represent the derivative financial instruments by type and purpose of derivatives at September 30, 2022 and March 31, 2022.

	At September 30, 2022
	Trading						Risk Management<br>(1)
	Notional<br>amounts		Assets		Liabilities		Notional<br>amounts		Assets		Liabilities
	(In millions)
Interest rate derivatives	¥	2,061,120,066	¥	6,212,947	¥	7,768,002	¥	72,040,221	¥	1,198,010	¥	1,332,739
Futures		223,142,537		102,812		91,516		6,247,101		12,001		1,289
Listed Options		522,958,253		599,055		168,442		—		—		—
Forwards		17,421,037		69,019		62,512		—		—		—
Swaps		1,081,676,525		4,567,833		4,742,377		65,591,834		1,186,009		1,303,834
OTC Options		215,921,714		874,228		2,703,155		201,286		—		27,616
Currency derivatives		224,730,244		5,433,716		3,656,993		20,343,998		275,513		2,444,014
Futures		13,767		—		1,387		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		122,497,469		3,161,352		2,683,600		3,177,503		40,728		535,946
Swaps		91,213,820		2,064,043		686,410		17,166,495		234,785		1,908,068
OTC Options		11,005,188		208,321		285,596		—		—		—
Equity derivatives		2,832,186		110,350		124,518		—		—		—
Futures		1,433,209		49,993		44,600		—		—		—
Listed Options		1,093,200		27,854		64,714		—		—		—
Forwards		108		—		8		—		—		—
Swaps		41,810		581		6,518		—		—		—
OTC Options		263,859		31,922		8,678		—		—		—
Commodity derivatives		230,568		15,417		14,023		—		—		—
Futures		81,998		1,444		2,005		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		—		—		—		—		—		—
Swaps		99,706		13,270		11,048		—		—		—
OTC Options		48,864		703		970		—		—		—
Credit derivatives		3,118,501		22,050		26,300		—		—		—
Total derivative financial instruments	¥	2,292,031,565	¥	11,794,480	¥	11,589,836	¥	92,384,219	¥	1,473,523	¥	3,776,753

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	At March 31, 2022
	Trading						Risk Management<br>(1)
	Notional<br> amounts		Assets		Liabilities		Notional<br> amounts		Assets		Liabilities
	(In millions)
Interest rate derivatives	¥	1,429,411,628	¥	3,016,258	¥	3,189,943	¥	56,750,246	¥	577,685	¥	582,721
Futures		150,781,509		118,492		119,133		774,857		321		2
Listed Options		450,609,244		493,433		99,058		—		—		—
Forwards		12,650,288		1,447		84		—		—		—
Swaps		659,925,813		2,062,478		2,096,930		55,805,239		577,364		579,505
OTC Options		155,444,774		340,408		874,738		170,150		—		3,214
Currency derivatives		180,733,207		2,637,955		2,000,625		13,999,978		66,030		986,906
Futures		10,759		101		204		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		84,081,833		1,259,714		1,132,187		2,836,806		29,947		267,923
Swaps		86,177,897		1,258,400		727,106		11,163,172		36,083		718,983
OTC Options		10,462,718		119,740		141,128		—		—		—
Equity derivatives		2,801,005		102,313		157,086		19,720		—		2,031
Futures		1,231,058		39,764		62,024		—		—		—
Listed Options		1,252,615		35,056		82,997		—		—		—
Forwards		—		—		—		—		—		—
Swaps		56,448		542		4,859		19,720		—		2,031
OTC Options		260,884		26,951		7,206		—		—		—
Commodity derivatives		153,247		21,540		19,544		—		—		—
Futures		11,186		1,413		202		—		—		—
Listed Options		—		—		—		—		—		—
Forwards		—		—		—		—		—		—
Swaps		138,270		20,033		18,815		—		—		—
OTC Options		3,791		94		527		—		—		—
Credit derivatives		2,839,549		21,967		27,480		—		—		—
Total derivative financial instruments	¥	1,615,938,636	¥	5,800,033	¥	5,394,678	¥	70,769,944	¥	643,715	¥	1,571,658
(1)	Derivative financial instruments categorized as “Risk Management” are used for economic hedging, such as managing the exposure to changes in fair value of the loan portfolio, and are identified as hedging instruments under Japanese GAAP. Under IFRS, the Group applies hedge accounting for certain fixed rate debt securities in issue, borrowings and debt instruments at fair value through other comprehensive income (“FVOCI”), certain equity instruments elected to be measured at FVOCI and net investments in foreign operations. Derivative financial instruments designated as hedging instruments are also categorized as “Risk Management.”
---	---

Hedge accounting

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

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Fair value hedges

The Group applies fair value hedge accounting to mitigate the risk of changes in the fair value of certain fixed rate financial assets and liabilities, and the risk of changes in the fair value of certain equity instruments elected to be measured at FVOCI. The table below represents the amounts related to items designated as hedging instruments at September 30, 2022 and March 31, 2022.

	At September 30, 2022								At March 31, 2022
	Notional<br>amounts			Carrying amounts					Notional<br>amounts		Carrying amounts
			Assets			Liabilities				Assets			Liabilities
	(In millions)
Interest rate risk
Interest rate swaps	¥	8,780,358		¥	176,724		¥	714,204	¥	8,117,678	¥	110,604		¥	246,482
Interest rate options		201,286			—			27,616		170,150		—			3,214
Stock price risk
Equity swaps		—			—			—		19,720		—			2,031

Hedges of net investments in foreign operations

The Group applies hedge accounting of net investments in foreign operations to mitigate the foreign currency risk of exchange differences arising from the translation of net investments in foreign operations. The table below represents the amounts related to items designated as hedging instruments at September 30, 2022 and March 31, 2022.

	At September 30, 2022								At March 31, 2022
	Nominal<br>amounts			Carrying amounts					Nominal<br>amounts		Carrying amounts
			Assets			Liabilities				Assets			Liabilities
	(In millions)
Foreign exchange forward contracts	¥	3,140,082		¥	40,728		¥	530,025	¥	2,783,215	¥	29,947		¥	266,699
Foreign currency denominated financial liabilities		179,099			—			179,099		129,090		—			129,090

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6	INVESTMENT SECURITIES

The following table shows the amount of investment securities, which consist of debt instruments at amortized cost, debt instruments at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income at September 30, 2022 and March 31, 2022.

	At September 30,<br> 2022		At March 31,<br> 2022
	(In millions)
Debt instruments at amortized cost:
Domestic:
Japanese <br>government<br> bonds	¥	72,543	¥	—
Japanese municipal bonds		43,706		25,741
Total domestic		116,249		25,741
Foreign:
Bonds issued by other governments and official institutions<br>(1)		60,802		56,400
Other debt instruments		1,415		1,813
Total foreign		62,217		58,213
Total debt instruments at amortized cost	¥	178,466	¥	83,954
Debt instruments at fair value through other comprehensive income:
Domestic:
Japanese government bonds	¥	9,988,100	¥	15,774,197
Japanese municipal bonds		1,085,718		1,145,496
Japanese corporate bonds		1,077,207		948,992
Other debt instruments		311		311
Total domestic		12,151,336		17,868,996
Foreign:
U.S. Treasury and other U.S. government agency bonds		5,637,454		5,681,789
Bonds issued by other governments and official institutions<br>(1)		2,987,313		2,997,588
Mortgage-backed securities		1,161,047		1,006,051
Other debt instruments		537,442		512,542
Total foreign		10,323,256		10,197,970
Total debt instruments at fair value through other comprehensive income	¥	22,474,592	¥	28,066,966
Equity instruments at fair value through other comprehensive income:
Domestic equity instruments	¥	3,453,106	¥	3,658,591
Foreign equity instruments		889,466		939,894
Total equity instruments at fair value through other comprehensive income	¥	4,342,572	¥	4,598,485
Total investment securities	¥	26,995,630	¥	32,749,405
(1)	Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agencies.
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7	LOANS AND ADVANCES

The following tables present loans and advances at September 30, 2022 and March 31, 2022.

	At September 30, 2022
	12-month<br> ECL			Lifetime ECL<br> not credit-<br> impaired			Lifetime ECL<br> <br>credit-impaired			Total
	(In millions)
Loans and advances at amortized cost:
Gross loans and advances	¥	111,730,401		¥	3,795,243		¥	1,391,224		¥	116,916,868
Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net											(391,181	)
Less: Allowance for loan losses		(175,289	)		(258,280	)		(556,599	)		(990,168	)
Carrying amount										¥	115,535,519
	At March 31, 2022
	12-month<br> ECL			Lifetime ECL<br> not credit-<br> impaired			Lifetime ECL<br> <br>credit-impaired			Total
	(In millions)
Loans and advances at amortized cost:
Gross loans and advances	¥	100,846,789		¥	3,700,816		¥	1,406,094		¥	105,953,699
Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net											(324,830	)
Less: Allowance for loan losses		(162,919	)		(247,020	)		(583,115	)		(993,054	)
Carrying amount										¥	104,635,815

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Reconciliation of allowance for loan losses is as follows:

	At September 30, 2022
	12-month<br> ECL			Lifetime ECL<br>not credit-<br>impaired			Lifetime ECL<br>credit-impaired		Total
	(In millions)
Allowance for loan losses:
Balance at April 1, 2022	¥	162,919		¥	247,020		¥	583,115	¥	993,054
Net transfers between stages		(7,616	)		(8,529	)		16,145		—
Provision for loan losses		12,104			5,737			69,148		86,989
Charge-offs<br>(1)		—			—			142,198		142,198
Recoveries		—			—			10,467		10,467
Net charge-offs		—			—			131,731		131,731
Others<br>(2)		7,882			14,052			19,922		41,856
Balance at September 30, 2022	¥	175,289		¥	258,280		¥	556,599	¥	990,168
	At September 30, 2021
	12-month<br> ECL			Lifetime ECL<br> not credit-<br> impaired			Lifetime ECL<br>credit-impaired		Total
	(In millions)
Allowance for loan losses:
Balance at April 1, 2021	¥	170,156		¥	255,909		¥	423,222	¥	849,287
Net transfers between stages		(8,713	)		(1,465	)		10,178		—
Provision (credit) for loan losses		(2,382	)		(14,193	)		30,430		13,855
Charge-offs<br>(1)		—			—			72,949		72,949
Recoveries		—			—			7,032		7,032
Net charge-offs		—			—			65,917		65,917
Others<br>(2)		828			1,131			824		2,783
Balance at September 30, 2021	¥	159,889		¥	241,382		¥	398,737	¥	800,008
(1)	Charge-offs consist of the reduction of the allowance through the sales of loans and write-offs.
---	---
(2)	Others mainly include foreign exchange translations for the six months ended September 30, 2022 and 2021.
---	---

The allowance for loan losses is measured under the expected credit losses (“ECL”) model which requires the use of complex models and significant assumptions about future economic conditions and credit behavior. For the six months ended September 30, 2022, the obligor grading, macroeconomic factors and additional ECL adjustments used to determine the final ECL reflected the current and forward-looking impact of the situation in Russia and Ukraine and the COVID-19 pandemic.

Although the Group understands that there is significant uncertainty in predicting the severity and duration of Russia’s aggression against Ukraine, the timing of the economic recovery from the COVID-19 pandemic and its future impact on the Japanese and global economy, the Group assumed that the Japanese and global economy will recover moderately from the COVID-19 pandemic during the fiscal year ending March 31, 2023 and continue to recover during the fiscal year ending March 31, 2024, which will be to some extent affected by rising commodity prices and downward pressure on the global economy from the continuous global monetary tightening. This assumption was considered in determining the base scenario. The following table shows the growth rates of the Japanese and global GDP, which are the key factors of the macroeconomic scenarios, under the base scenario.

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	For the fiscal year ending<br><br><br>March 31,
	2023		2024
	(%)
Japanese GDP		2.0		2.0
Global GDP		2.9		2.9

In determining the need for making additional ECL adjustments, the Group considered whether there is an increase in the credit risk for some portfolios which had a material adverse impact resulting from the sanctions imposed in connection with Russia’s aggression against Ukraine or from the COVID-19 pandemic and whether the increased risk, if any, was not fully incorporated in the ECL model. For the Russian exposure, the Group evaluated the forward-looking impact on credit risks and losses based on factors such as the possibility that payment of principal or interest would be delayed or the request for loan restructuring would be made due to the prolonged impact of sanctions targeting Russia imposed by the Japanese government and authorities in several other jurisdictions, Russia’s measures to defend its economy and mitigate the effect of sanctions, and a deterioration of credit condition of Russia. For the COVID-19 pandemic, additional ECL adjustments included the consideration of the temporary impact on probability of default of various measures taken by governments. The Group evaluated the forward-looking impact on credit risks and losses of certain industry-related portfolios selected based on changes in factors such as the market conditions and bankruptcy trends as a result of the reduction in economic activity by requests for voluntary restraint on movement and business closure requests to commercial facilities. As a consequence, the Group decided to maintain ECL adjustments for the above portfolios affected by the situation in Russia and Ukraine and the COVID-19 pandemic.

As a result, for the six months ended September 30, 2022, the allowance for loan losses slightly decreased by ¥2,886 million from ¥993,054 million at the beginning of period to ¥990,168 million at end of period. The decrease was primarily due to charge-offs related to some large borrowers through the sales of loans and write-offs , which was partially offset by the increase in the provision for loan losses related to some other large borrowers .

8	BORROWINGS

Borrowings at September 30, 2022 and March 31, 2022 consisted of the following:

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Unsubordinated borrowings	¥	12,029,633	¥	18,766,117
Subordinated borrowings		219,210		234,680
Liabilities associated with securitization transactions		1,178,378		1,200,147
Lease liabilities		378,853		383,707
Total borrowings	¥	13,806,074	¥	20,584,651
9	DEBT SECURITIES IN ISSUE
---	---

Debt securities in issue at September 30, 2022 and March 31, 2022 consisted of the following:

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Commercial paper	¥	2,588,279	¥	2,424,579
Unsubordinated bonds		8,316,555		8,000,837
Subordinated bonds		1,043,418		1,003,021
Total debt securities in issue	¥	11,948,252	¥	11,428,437

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10	PROVISIONS

The following table presents movements by class of provisions for the six months ended September 30, 2022.

	Provision for<br>interest repayment			Other provisions			Total
	(In millions)
Balance at April 1, 2022	¥	135,123		¥	92,661		¥	227,784
Additional provisions		—			4,142			4,142
Amounts used		(17,268	)		(3,759	)		(21,027	)
Unused amounts reversed		—			(7,448	)		(7,448	)
Amortization of discount and effect of change in discount rate		(1	)		68			67
Others		—			273			273
Balance at September 30, 2022	¥	117,854		¥	85,937		¥	203,791

Provision for Interest Repayment

Japan has two laws restricting interest rates on loans. The Interest Rate Restriction Act sets the maximum interest rates on loans ranging from 15% to 20%. The Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates capped the interest rate on loans at 29.2% up to June 2010. Interest rates on loans greater than the range of 15-20% but below the maximum allowable of 29.2% were called “gray zone interest,” and many consumer lending and credit card companies were charging interest in this zone.

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

In December 2006, the Government of Japan made amendments to laws regulating money lenders to implement regulatory reforms affecting the consumer finance industry. As a result, in June 2010, the maximum legal interest rates on loans were reduced to the range of 15-20%, and gray zone interest was abolished.

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

For the six months ended September 30, 2022, the provision for interest repayment decreased primarily due to the use of the provision.

Other Provisions

Other provisions include asset retirement obligations and provisions for loan commitments, point programs, reimbursement of deposits and litigation claims. Most of these provisions occurred in the normal course of business and none of them were individually significant at September 30, 2022 and April 1, 2022.

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11	SHAREHOLDERS’ EQUITY

Common Stock

The number of issued shares of common stock and common stock held by the Company at September 30, 2022 and March 31, 2022 was as follows:

	At September 30,<br> 2022		At March 31,<br> 2022
Shares outstanding		1,374,691,194		1,374,362,102
Shares in treasury		3,466,127		3,542,321

The total number of authorized shares of common stock was 3,000 million at September 30, 2022 and March 31, 2022 with no stated value.

On November 14, 2022, the Company announced the progress of the repurchase of its own shares pursuant to the resolution of the board of directors held on November 12, 2021. The resolution authorized the repurchase of up to the lesser of (i) an aggregate

of 33,000,000 shares of its common stock and (ii) an aggregate of ¥100

billion between November 15, 2021 and November 11, 2022. However, its share repurchases were suspended during periods in which it may have been deemed to hold material non-public information. As a result, the repurchase period beginning November 15, 2021 ended without any repurchase of shares.

Simultaneously, the Company announced that the board of directors resolved to repurchase shares of the Company’s common stock and cancel all the repurchased shares. The resolution authorized the repurchase of up to the lesser of (i) an aggregate of 61,000,000 shares of its common stock and (ii) an aggregate of ¥200 billion between November 15, 2022 and May 31, 2023. The cancellation of the repurchased shares is scheduled on June 20, 2023.

During November 2022, the Company entered into contracts to repurchase 4,593,700 shares of common stock for ¥ 21 billion in aggregate.

Preferred Stock

The following table shows the number of shares of preferred stock at September 30, 2022 and March 31, 2022.

	At September 30, 2022				At March 31, 2022
	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		—
12	EQUITY ATTRIBUTABLE TO OTHER EQUITY INSTRUMENTS HOLDERS
---	---

Equity attributable to other equity instruments holders at September 30, 2022 and March 31, 2022 consisted of the following:

	At September 30,<br>2022		At March 31,<br>2022
	(In millions)
Perpetual subordinated bonds	¥	734,613	¥	733,611
Total equity attributable to other equity instruments holders	¥	734,613	¥	733,611

SMFG issued perpetual subordinated bonds, which are Basel III-c

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

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The bonds bear a fixed rate of interest until the first call date. After the first call date, they will bear a floating rate of interest unless they are redeemed. SMFG may at any time and in its sole discretion, elect to cancel any interest payment. If cancelled, interest payments are non-cumulative and will not increase to compensate for any short-fall in interest payments in any previous year.

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

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

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

13	FEE AND COMMISSION INCOME

Fee and commission income for the six months ended September 30, 2022 and 2021 consisted of the following:

	For the six months ended<br>September 30,
	2022		2021
	(In millions)
Loans	¥	68,340	¥	60,585
Credit card business		181,965		160,119
Guarantees		35,386		32,579
Securities-related business		55,537		84,673
Deposits		8,560		8,300
Remittances and transfers		73,526		72,036
Safe deposits		2,051		2,021
Trust fees		3,044		2,631
Investment trusts		74,220		93,860
Agency		4,630		4,574
Others		100,287		86,779
Total fee and commission income	¥	607,546	¥	608,157

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

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14	IMPAIRMENT CHARGES ON FINANCIAL ASSETS

Impairment charges (reversals) on financial assets for the six months ended September 30, 2022 and 2021 consisted of the following:

	For the six months ended<br><br><br>September 30,
	2022			2021
	(In millions)
Loans and advances	¥	86,989		¥	13,855
Loan commitments		(7,429	)		7,694
Financial guarantees		8,465			(2,779	)
Total impairment charges on financial assets	¥	88,025		¥	18,770

15	EARNINGS PER SHARE

The following table shows the income and share data used in the basic and diluted earnings per share calculations for the six months ended September 30, 2022 and 2021.

	For the six months ended<br><br><br>September 30,
	2022		2021
	(In millions, except number of<br> <br>shares and per share data)
Basic:
Profit attributable to shareholders of the Company	¥	762,185	¥	361,393
Weighted average number of common stock in issue (in thousands of shares)		1,371,054		1,370,657
Basic earnings per share	¥	555.91	¥	263.66
Diluted:
Profit attributable to the common shareholders of the Company	¥	762,185	¥	361,393
Impact of dilutive potential ordinary shares issued by subsidiaries		—		—
Net profit used to determine diluted earnings per share	¥	762,185	¥	361,393
Weighted average number of common stock in issue (in thousands of shares)		1,371,054		1,370,657
Adjustments for stock options (in thousands of shares)		478		602
Weighted average number of common stock for diluted earnings per share (in thousands of shares)		1,371,532		1,371,259
Diluted earnings per share	¥	555.72	¥	263.55
16	DIVIDENDS PER SHARE
---	---

The dividends recognized by the Company for the six months ended September 30, 2022 and 2021 were as follows:

	Per share		Aggregate amount
	(In yen)		(In millions)
Dividends on common stock for the six months ended September 30,
2022	¥	105	¥	143,936
2021	¥	95	¥	130,190

November 14 , 2022, the board of directors approved a dividend of ¥115 per share of common stock totaling ¥157,691 million in respect of the six months ended September 30, 2022. The consolidated financial statements for the six months ended September 30, 2022 do not include this dividend

payable.

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17	CONTINGENCY AND CAPITAL COMMITMENTS

Legal Proceedings

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

estimated.

In addition, the Group’s wholly-owned broker-dealer subsidiary, SMBC Nikko Securities Inc. (“SMBC Nikko Securities”), is involved in ongoing legal proceedings in Japan. On March 24 and April 13, 2022, the Tokyo District Public Prosecutors Office brought charges against SMBC Nikko Securities and several of its former and current officers and employees, on allegations of illegal stabilization transactions in violation of the Financial Instruments and Exchange Act of Japan (“FIEA”). The first hearing in the trial was conducted on October 28, 2022, at which SMBC Nikko Securities admitted culpability with respect to the charges. A criminal proceeding is ongoing before the Tokyo District Court, which could result in monetary penalties for SMBC Nikko Securities as an entity, although the expected duration and outcome of the proceedings are uncertain.

Capital Commitments

At September 30, 2022 and March 31, 2022, the Group had ¥3,981 million and ¥6,587 million, respectively, of contractual commitments to acquire property, plant and equipment. The Group’s management is confident that future net revenues and funding will be sufficient to cover these commitments.

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

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

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

The table below shows the nominal amounts of undrawn loan commitments, and financial guarantees and other credit-related contingent liabilities at September 30, 2022 and March 31, 2022.

	At September 30,<br><br><br>2022		At March 31,<br><br><br>2022
	(In millions)
Loan commitments	¥	78,115,920	¥	73,246,384
Financial guarantees and other credit-related contingent liabilities		14,425,845		11,722,240
Total	¥	92,541,765	¥	84,968,624

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18	FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Accounting policies and the valuation process of fair value measurement for the six months ended September 30, 2022 are consistent with those described in Note 44 “Fair Value of Financial Assets and Liabilities” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2022.

Financial Assets and Liabilities Carried at Fair Value

Fair Value Hierarchy

The following tables present the carrying amounts of financial assets and liabilities carried at fair value based on the three levels of the fair value hierarchy at September 30, 2022 and March 31, 2022. 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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	At September 30, 2022
	Level 1<br>(1)		Level 2<br>(1)			Level 3			Total
	(In millions)
Financial assets:
Trading assets:
Debt instruments	¥	3,307,309	¥	608,927		¥	—		¥	3,916,236
Equity instruments		89,077		1,037			—			90,114
Total trading assets		3,396,386		609,964			—			4,006,350
Derivative financial instruments:
Interest rate derivatives		713,868		6,697,081			8			7,410,957
Currency derivatives		—		5,708,487			742			5,709,229
Equity derivatives		77,847		758			31,745			110,350
Commodity derivatives		1,444		13,973			—			15,417
Credit derivatives		—		21,669			381			22,050
Total derivative financial instruments		793,159		12,441,968			32,876			13,268,003
Financial assets at fair value through profit or loss:
Debt instruments		45,278		294,637			633,479			973,394
Equity instruments		2,459		83			39,110			41,652
Total financial assets at fair value through <br>profit or loss		47,737		294,720			672,589			1,015,046
Investment securities at fair value through other comprehensive income:
Japanese government bonds		9,988,100		—			—			9,988,100
U.S. Treasury and other U.S. government agency bonds		5,637,454		—			—			5,637,454
Other debt instruments		1,279,381		5,569,657			—			6,849,038
Total debt instruments		16,904,935		5,569,657			—			22,474,592
Equity instruments		3,875,528		6,583			460,461			4,342,572
Total investment securities at fair value through other comprehensive<br> income		20,780,463		5,576,240			460,461			26,817,164
Total	¥	25,017,745	¥	18,922,892		¥	1,165,926		¥	45,106,563
Financial liabilities:
Trading liabilities:
Debt instruments	¥	2,814,727	¥	137,831		¥	—		¥	2,952,558
Equity instruments		21,612		6,391			—			28,003
Total trading liabilities		2,836,339		144,222			—			2,980,561
Derivative financial instruments:
Interest rate derivatives		261,247		8,828,893			10,601			9,100,741
Currency derivatives		1,387		6,093,563			6,057			6,101,007
Equity derivatives		109,314		57			15,147			124,518
Commodity derivatives		2,005		12,018			—			14,023
Credit derivatives		—		25,940			360			26,300
Total derivative financial instruments		373,953		14,960,471			32,165			15,366,589
Financial liabilities designated at fair value through profit or loss		—		194,128			228,601			422,729
Others<br><br>(2)		—		(6,457	)		(10,196	)		(16,653	)
Total	¥	3,210,292	¥	15,292,364		¥	250,570		¥	18,753,226

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	At March 31, 2022
	Level 1<br>(1)		Level 2<br>(1)		Level 3			Total
	(In millions)
Financial assets:
Trading assets:
Debt instruments	¥	2,860,215	¥	629,043	¥	—		¥	3,489,258
Equity instruments		245,186		1,852		—			247,038
Total trading assets		3,105,401		630,895		—			3,736,296
Derivative financial instruments:
Interest rate derivatives		612,246		2,981,691		6			3,593,943
Currency derivatives		101		2,697,933		5,951			2,703,985
Equity derivatives		74,820		689		26,804			102,313
Commodity derivatives		1,413		20,127		—			21,540
Credit derivatives		—		21,318		649			21,967
Total derivative financial instruments		688,580		5,721,758		33,410			6,443,748
Financial assets at fair value through profit or loss:
Debt instruments		516,455		447,738		693,013			1,657,206
Equity instruments		2,375		120		35,884			38,379
Total financial assets at fair value through<br> profit or loss		518,830		447,858		728,897			1,695,585
Investment securities at fair value through other comprehensive income:
Japanese government bonds		15,774,197		—		—			15,774,197
U.S. Treasury and other U.S. government agency bonds		5,681,789		—		—			5,681,789
Other debt instruments		1,378,880		5,232,100		—			6,610,980
Total debt instruments		22,834,866		5,232,100		—			28,066,966
Equity instruments		4,117,832		11,940		468,713			4,598,485
Total investment securities at fair value through other comprehensive income		26,952,698		5,244,040		468,713			32,665,451
Total	¥	31,265,509	¥	12,044,551	¥	1,231,020		¥	44,541,080
Financial liabilities:
Trading liabilities:
Debt instruments	¥	3,026,965	¥	125,078	¥	—		¥	3,152,043
Equity instruments		23,339		6,610		—			29,949
Total trading liabilities		3,050,304		131,688		—			3,181,992
Derivative financial instruments:
Interest rate derivatives		218,193		3,547,303		7,168			3,772,664
Currency derivatives		204		2,983,028		4,299			2,987,531
Equity derivatives		145,021		2,676		11,420			159,117
Commodity derivatives		202		19,342		—			19,544
Credit derivatives		—		27,352		128			27,480
Total derivative financial instruments		363,620		6,579,701		23,015			6,966,336
Financial liabilities designated at fair value through profit or loss		—		164,648		291,086			455,734
Others<br><br>(2) (3)		—		917		(3,052	)		(2,135	)
Total	¥	3,413,924	¥	6,876,954	¥	311,049		¥	10,601,927

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(1)	Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the period. There were no significant transfers between Level 1 and Level 2 for the six months ended September 30, 2022 and for the fiscal year ended March 31, 2022.
(2)	Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract. The separated embedded derivatives are measured at fair value using the valuation techniques described in “Derivative financial instruments<br>(including embedded derivatives)”<br> in Note 44 “Fair Value of Financial Assets and Liabilities” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2022.
---	---
(3)	Contingent consideration liabilities arising from business combinations, which are measured at fair value using discounted cash flow models, are presented as others.
---	---

The following tables present reconciliations from the beginning to the ending balances for financial assets and liabilities carried at fair value and categorized within Level 3 of the fair value hierarchy for the six months ended September 30, 2022 and 2021.

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

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				Total gains (losses)																								Changes in<br>unrealized gains<br>(losses) included in<br>profit or loss<br><br><br>related to assets<br>and liabilities held<br>at September 30,<br>2021
	At April 1,<br>2021			Included in<br>profit or<br>loss			Included in<br>other<br>comprehensive<br>income		Purchases		Sales			Issuances			Settlements<br>(1)			Transfers<br>into<br>Level 3<br>(2)		Transfers<br>out of<br>Level 3<br>(2)			At<br>September 30,<br>2021
	(In millions)
Derivative financial instruments—net:
Interest rate derivatives—net	¥	(3,588	)	¥	1,799		¥	—	¥	101	¥	—		¥	—		¥	—		¥	—	¥	(135	)	¥	(1,823	)	¥	1,799
Currency derivatives—net		(5,341	)		674			—		—		—			—			—			—		—			(4,667	)		615
Equity derivatives—net		7,132			(296	)		—		5,423		(3,987	)		—			—			—		—			8,272			1,442
Credit derivatives—net		1,766			166			5		—		—			—			(437	)		—		—			1,500			172
Total derivative financial instruments—net		(31	)		2,343			5		5,524		(3,987	)		—			(437	)		—		(135	)		3,282			4,028
Financial assets at fair value through profit or loss:
Debt instruments		561,450			47,629			20		58,818		(43,278	)		—			(28,643	)		—		(848	)		595,148			46,888
Equity instruments		32,777			(1,291	)		—		3,975		(374	)		—			(2,109	)		—		(359	)		32,619			(1,369	)
Total financial assets at fair value through profit or loss		594,227			46,338			20		62,793		(43,652	)		—			(30,752	)		—		(1,207	)		627,767			45,519
Investment securities at fair value through other comprehensive income:
Equity instruments		447,605			—			29,590		46,753		(585	)		—			(5,031	)		—		(1	)		518,331			—
Total investment securities at fair value through other comprehensive income		447,605			—			29,590		46,753		(585	)		—			(5,031	)		—		(1	)		518,331			—
Financial liabilities designated at fair value through profit or loss		(166,896	)		3,064			775		—		—			(217,324	)		135,967			—		5,378			(239,036	)		3,041
Others<br>(3)<br>—liabilities		(1,104	)		(2,607	)		—		—		—			—			—			—		615			(3,096	)		(2,915	)
Total	¥	873,801		¥	49,138		¥	30,390	¥	115,070	¥	(48,224	)	¥	(217,324	)	¥	99,747		¥	—	¥	4,650		¥	907,248		¥	49,673
(1)	Settlements for equity instruments include redemption of preferred stocks and receipt of cash distributions which represent a return of investment.
---	---
(2)	Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the period. For the six months ended September 30, 2022, transfers out of Level 3 amounted to<br> ¥87,603 <br>million primarily due to a decrease of significance of unobservable inputs of certain financial assets at fair value through profit or loss, including <br>certain<br>investment funds. On the other hand, for the six months ended September 30, 2021, those amounted to<br> ¥(4,650) <br>million primarily due to an increase in observability of inputs for certain financial liabilities designated at fair value through profit or loss.
---	---
(3)	Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract.
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The following table presents total gains or losses included in profit or loss for the Level 3 financial assets and liabilities, and changes in unrealized gains or losses included in profit or loss related to those financial assets and liabilities held at September 30, 2022 and 2021 by line item of the consolidated income statements.

	Total gains (losses) included in<br>profit or loss for the six<br>months ended September 30,					Changes in unrealized gains<br>(losses) included in profit or<br>loss related to assets and<br>liabilities held<br>at September 30,
	2022		2021			2022		2021
	(In millions)
Net interest income	¥	861	¥	2,566		¥	576	¥	868
Net trading income (loss)		5,120		(1,756	)		8,531		1,319
Net income from financial assets and liabilities at fair value<br><br>through<br> profit or loss		67,074		49,402			84,196		48,560
Other expenses		89		1,074			—		1,074
Total	¥	72,966	¥	49,138		¥	93,303	¥	49,673

The aggregate deferred day one profit yet to be recognized in profit or loss at the beginning and end of the six months ended September 30, 2022 and 2021, and reconciliation of changes in the balances were as follows:

	For the six months ended<br><br><br>September 30,
	2022			2021
	(In millions)
Balance at beginning of period	¥	27,100		¥	18,392
Increase due to new trades		7,061			14,309
Reduction due to redemption, sales or passage of time		(16,017	)		(11,712	)
Balance at end of period	¥	18,144		¥	20,989

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

Valuation Techniques

Valuation techniques are consistent with those described in Note 44 “Fair Value of Financial Assets and Liabilities” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2022.

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Significant Unobservable Inputs

The following tables present quantitative information about significant unobservable inputs used in the fair value measurement for Level 3 financial assets and liabilities at September 30, 2022 and March 31, 2022. Qualitative information about significant unobservable inputs is consistent with those described in Note 44 “Fair Value of Financial Assets and Liabilities” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2022.

	At September 30, 2022
	Assets		Liabilities			Valuation technique(s)<br>(1)	Significant unobservable inputs<br>(1)	Range of<br>inputs<br>(1)
	(In millions)
Derivative financial instruments:
Interest rate derivatives	¥	8	¥	10,601		Option model	Interest rate to interest rate correlation		36%-99%
							Quanto correlation		4%-41%
Currency derivatives		742		6,057		Option model	Interest rate to interest rate correlation		29%-99%
							Quanto correlation		7%-50%
							Foreign exchange volatility		12%-48%
Equity derivatives		31,745		15,147		Option model	Equity to equity correlation		47%-92%
							Quanto correlation		(13)%-33%
							Equity volatility		17%-104%
Credit derivatives		381		360		Credit Default model	Quanto correlation		15%-25%
Financial assets at fair value through profit or loss:
Debt instruments		633,479		—		Option model	Foreign exchange volatility		13%-42%
						DCF model	Probability of default rate		0%-13%
							Loss given default rate		0%-100%
						Net asset value<br>(2)	—		—
Equity instruments		39,110		—		DCF model	Probability of default rate		0%-2%
							Loss given default rate		90%
						See note (3) below	—		—
Investment securities at fair value through other comprehensive income:
Equity instruments		460,461		—		Market multiples	Price/<br>Book value<br> multiple		0.2x-3.4x
							Liquidity discount		20%
						See note (3) below	—		—
Financial liabilities designated at fair value through<br> profit or loss		—		228,601		Option model	Equity to equity correlation		45%-93%
							Interest rate to interest rate correlation		29%-30%
							Quanto correlation		(13)%-50%
							Equity volatility		19%-104%
						Credit Default model	Quanto correlation		15%-25%
Others<br>(4)		—		(10,196	)	Option model	Equity to equity correlation		59%-84%
							Interest rate to interest rate correlation		29%-99%
							Quanto correlation		4%-50%
							Equity volatility		21%-37%
							Foreign exchange volatility		12%-48%
						Credit Default model	Quanto correlation		15%-25%

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	At March 31, 2022
	Assets		Liabilities			Valuation technique(s)<br>(1)	Significant unobservable inputs<br>(1)	Range of<br>inputs<br>(1)
	(In millions)
Derivative financial instruments:
Interest rate derivatives	¥	6	¥	7,168		Option model	Interest rate to interest rate correlation		16%-99%
							Quanto correlation		7%-30%
Currency derivatives		5,951		4,299		Option model	Interest rate to interest rate correlation		29%-99%
							Quanto correlation		7%-49%
							Foreign exchange volatility		11%-39%
						DCF model	Prepayment rate		22%
Equity derivatives		26,804		11,420		Option model	Equity to equity correlation		45%-92%
							Quanto correlation		(16)%-35%
							Equity volatility		17%-79%
Credit derivatives		649		128		Credit Default model	Quanto correlation		15%-25%
Financial assets at fair value through profit or loss:
Debt instruments		693,013		—		Monte Carlo Simulation	Equity volatility		17%-38%
						Option model	Foreign exchange volatility		12%-41%
						DCF model	Probability of default rate		0%-23%
							Loss given default rate		10%-100%
						Net asset value<br>(2)	—		—
Equity instruments		35,884		—		DCF model	Probability of default rate		0%-2%
							Loss given default rate		90%
						See note (3) below	—		—
Investment securities at fair value through other comprehensive income:
Equity instruments		468,713		—		Market multiples	Price/Earnings multiple		9.3x-48.5x
							Price/Book value multiple		0.3x-2.2x
							EV/EBITDA multiple		5.8x-15.5x
							Liquidity discount		20%
						See note (3) below	—		—
Financial liabilities designated at fair value through profit or loss		—		291,086		Option model	Equity to equity correlation		43%-93%
							Interest rate to interest rate correlation		29%-30%
							Quanto correlation		(16)%-49%
							Equity volatility		13%-57%
						Credit Default model	Quanto correlation		15%-25%
Others<br>(4)		—		(3,052	)	Option model	Equity to equity correlation		57%-93%
							Interest rate to interest rate correlation		16%-99%
							Quanto correlation		7%-49%
							Equity volatility		17%-49%
							Foreign exchange volatility		12%-41%
						Credit Default model	Quanto correlation		15%-90%
(1)	Valuation techniques and unobservable inputs for insignificant Level 3 financial assets and liabilities are excluded.
---	---
(2)	The Group has determined that the net asset value represents fair values of certain investment funds.
---	---
(3)	Fair values of certain equity instruments such as unlisted stocks are estimated on the basis of an analysis of the investee’s financial position and results, risk profile, prospects and other factors. A range of key inputs is not provided in these tables as it is not practical to do so given the nature of such valuation techniques.
---	---
(4)	Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract.
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Sensitivity Analysis

The fair values 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. Qualitative information about sensitivity to changes in significant unobservable inputs is consistent with those described in Note 44 “Fair Value of Financial Assets and Liabilities” of the Group’s consolidated financial statements for the fiscal year ended March 31, 2022.

	At September 30, 2022
	Total fair value<br> measured using<br> valuation<br> techniques				Effect recorded in profit or loss						Effect recorded directly in equity
				Favorable<br> changes			Unfavorable<br> changes			Favorable<br> changes			Unfavorable<br> changes
	(In millions)
Financial instruments—net:
Derivative financial instruments—net:
Interest rate derivatives—net	¥	(10,593	)		¥	—		¥	—		¥	—		¥	—
Currency derivatives—net		(5,315	)			7			7			—			—
Equity derivatives—net		16,598				2,643			2,687			—			—
Credit derivatives—net		21				27			27			—			—
Financial assets at fair value through profit or loss:
Debt instruments		633,479				841			2,127			—			—
Equity instruments		39,110				70			139			—			—
Investment securities at fair value through other comprehensive income:
Equity instruments		460,461				—			—			16,141			16,141
Financial liabilities designated at fair value through profit or loss<br>(1)		(228,601	)			1,915			2,228			—			—
Others<br>(1)(2)<br>—liabilities:		10,196				94			89			—			—
	At March 31, 2022
	Total fair value<br> measured using<br> valuation<br> techniques				Effect recorded in profit or loss						Effect recorded directly in equity
				Favorable<br> changes			Unfavorable<br> changes			Favorable<br> changes			Unfavorable<br> changes
	(In millions)
Financial instruments—net:
Derivative financial instruments—net:
Interest rate derivatives—net	¥	(7,162	)		¥	—		¥	—		¥	—		¥	—
Currency derivatives—net		1,652				75			73			—			—
Equity derivatives—net		15,384				3,274			3,309			—			—
Credit derivatives—net		521				17			18			—			—
Financial assets at fair value through profit or loss:
Debt instruments		693,013				3,347			7,422			—			—
Equity instruments		35,884				88			167			—			—
Investment securities at fair value through other comprehensive income:
Equity instruments		468,713				—			—			12,914			12,019
Financial liabilities designated at fair value through profit or loss<br>(1)		(291,086	)			2,008			2,319			—			—
Others<br>(1)(2)<br>—liabilities:		3,052				126			118			—			—
(1)	As part of risk management, the Group enters into transactions to offset the profit or loss of certain financial instruments, including embedded derivatives. Sensitivity of embedded derivatives related to these transactions is presented as derivative financial instruments or financial assets at fair value through profit or loss, according to the presentation of the financial instruments arising from these transactions.
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(2)

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

Financial Assets and Liabilities Not Carried at Fair Value

The table below presents the carrying amounts and fair values of financial assets and liabilities not carried at fair value on the Group’s consolidated statements of financial position at September 30, 2022 and March 31, 2022. It does not include the carrying amounts and fair values of financial assets and liabilities whose carrying amounts are reasonable approximations of fair values.

		At September 30, 2022				At March 31, 2022
	Notes	Carrying<br>amount		Fair value		Carrying<br>amount		Fair value
		(In millions)
Financial assets:
Investment securities:
Debt instruments at amortized cost	a	¥	178,466	¥	178,251	¥	83,954	¥	83,965
Loans and advances	b		115,535,519		117,766,894		104,635,815		107,177,195
Other financial assets	b		5,788,957		5,785,908		5,309,839		5,307,008
Financial liabilities:
Deposits:
Non-interest-bearing<br> deposits, demand deposits and deposits at notice	c	¥	119,961,737	¥	119,960,567	¥	114,512,622	¥	114,511,759
Other deposits	c		52,766,561		52,753,411		48,080,870		48,074,478
Borrowings	c		13,427,221		13,410,416		20,200,944		20,234,044
Debt securities in issue	c		11,948,252		11,725,610		11,428,437		11,440,260
Other financial liabilities	c		9,284,232		9,284,152		7,808,826		7,808,773

Notes:

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

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19	INTEREST RATE BENCHMARK REFORM

The following tables show quantitative information about financial instruments that have yet to be transitioned to an alternative benchmark rate at September 30, 2022 and March 31, 2022.

	At September 30, 2022
	LIBOR(1)	Others<br>(1) (2)
	(In billions)
Carrying amount of <br>non-derivative<br> financial assets		¥	39
Carrying amount of <br>non-derivative<br> financial liabilities			—
Derivative notional amounts			69

All values are in US Dollars.

	At March 31, 2022
	LIBOR(1)	Others<br>(1) (2)
	(In billions)
Carrying amount of <br>non-derivative<br> financial assets		¥	370
Carrying amount of <br>non-derivative<br> financial liabilities			—
Derivative notional amounts			1,756

All values are in US Dollars.

(1)	The amounts in the tables above are the aggregation of the amounts used for regulatory reporting of SMFG, SMBC, SMBC’s subsidiaries and SMBC Nikko Securities Inc.
(2)	“Others” consists of JPY and GBP LIBOR contracts, most of which include contracts that will switch to using alternative reference rates at the next reset after September 30, 2022 and March 31, 2022. It also includes, to a limited extent, synthetic LIBOR contracts that the Group utilized as a temporary solution.
---	---
20	EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE
---	---

Administrative actions from the Financial Services Agency

On October 7, 2022, SMBC Nikko Securities Inc. (“SMBC Nikko Securities”), which is a wholly owned subsidiary of SMFG, received from the Financial Services Agency of Japan (“FSA”) a business suspension order based on Article 52, Paragraph 1 of the Financial Instruments and Exchange Act (“FIEA”), generally prohibiting it from engaging in new business relating to block offer transactions for the period from October 7, 2022 to January 6, 2023. In addition, SMBC Nikko Securities received from the FSA business improvement orders based on Article 51 of the FIEA in connection with the market manipulation conduct and the firewall regulation violations.

On the same day, SMFG received from the FSA an improvement measures order based on Article 32-2, Paragraph 2 of the FIEA in connection with the market manipulation conduct.

These administrative actions issued to SMBC Nikko Securities and SMFG are not expected to have a material impact on the Group’s consolidated financial statements.

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