Table of Contents

 

 

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 August 2019

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 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NO. 333-228913) AND TO BE A PART OF SUCH PROSPECTUS FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

 

 

 


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TABLE OF DOCUMENT(S) SUBMITTED

 

1.

Unaudited quarterly consolidated Japanese GAAP financial statements as of and for the three months ended June 30, 2019


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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 Executive Officer

Group Chief Financial Officer

Date: August 20, 2019


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UNAUDITED QUARTERLY CONSOLIDATED JAPANESE GAAP FINANCIAL STATEMENTS

AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 2019

On August 14, 2019, we published our unaudited quarterly consolidated financial statements as of and for the three months ended June 30, 2019 prepared in accordance with accounting principles generally accepted in Japan, or Japanese GAAP, as part of our quarterly securities report ( shihanki hokokusho ) for the same period filed by us with the relevant Japanese authorities. This document is an English translation of the unaudited quarterly consolidated financial statements and the notes thereto included in such quarterly securities report. Japanese GAAP differs in certain respects from International Financial Reporting Standards as issued by the International Accounting Standards Board, or IFRS, and generally accepted accounting principles in the United States. For a description of certain differences between IFRS and Japanese GAAP, see “Item 5.A Operating Results—Reconciliation with Japanese GAAP” in our most recent annual report on Form 20-F filed with the SEC.


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UNAUDITED QUARTERLY

CONSOLIDATED FINANCIAL STATEMENTS (JAPANESE GAAP)

QUARTERLY CONSOLIDATED BALANCE SHEETS

 

    Millions of yen      Millions of
U.S. dollars
 
        March 31, 2019             June 30, 2019              June 30, 2019      

Assets:

            

Cash and due from banks

     ¥ 57,411,276             ¥ 58,018,346           $ 538,453       

Call loans and bills bought

       2,465,744               1,552,415             14,408       

Receivables under resale agreements

       6,429,365               5,959,002             55,304       

Receivables under securities borrowing transactions

       4,097,473               3,583,687             33,259       

Monetary claims bought

       4,594,578               4,625,271             42,926       

Trading assets

       5,328,778               6,778,464             62,909       

Money held in trust

       390               366             3       

Securities

    *2        24,338,005            *2        24,076,935             223,452       

Loans and bills discounted

    *1        77,979,190            *1        77,964,216             723,566       

Foreign exchanges

       1,719,402               2,329,290             21,618       

Lease receivables and investment assets

       247,835               256,908             2,384       

Other assets

       7,307,305               7,796,441             72,357       

Tangible fixed assets

       1,504,703               1,501,670             13,937       

Intangible fixed assets

       769,231               793,314             7,363       

Net defined benefit asset

       329,434               336,206             3,120       

Deferred tax assets

       40,245               20,731             192       

Customers’ liabilities for acceptances and guarantees

       9,564,993               9,451,934             87,721       

Reserve for possible loan losses

       (468,808)              (472,682)            (4,387)      
    

 

 

      

 

 

    

 

 

 

Total assets

     ¥       203,659,146             ¥       204,572,522           $       1,898,585       
    

 

 

      

 

 

    

 

 

 

 

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QUARTERLY CONSOLIDATED BALANCE SHEETS

 

    Millions of yen      Millions of
U.S. dollars
 
        March 31, 2019             June 30, 2019              June 30, 2019      

Liabilities and net assets:

            

Liabilities:

            

Deposits

              ¥ 122,325,038                      ¥ 121,432,599           $ 1,126,985       

Negotiable certificates of deposit

       11,165,486               10,931,951             101,457       

Call money and bills sold

       1,307,778               1,435,254             13,320       

Payables under repurchase agreements

       11,462,559               10,782,691             100,071       

Payables under securities lending transactions

       1,812,820               1,675,108             15,546       

Commercial paper

       2,291,813               2,136,549             19,829       

Trading liabilities

       4,219,293               4,730,915             43,906       

Borrowed money

       10,656,897               11,547,138             107,166       

Foreign exchanges

       1,165,141               1,294,507             12,014       

Short-term bonds

       84,500               172,500             1,601       

Bonds

       9,227,367               9,131,716             84,749       

Due to trust account

       1,352,773               1,578,275             14,648       

Other liabilities

       4,873,630               6,411,607             59,504       

Reserve for employee bonuses

       70,351               28,933             269       

Reserve for executive bonuses

       3,091               —             —       

Net defined benefit liability

       31,816               33,325             309       

Reserve for executive retirement benefits

       1,374               1,056             10       

Reserve for point service program

       23,948               24,698             229       

Reserve for reimbursement of deposits

       7,936               5,798             54       

Reserve for losses on interest repayment

       147,594               137,418             1,275       

Reserves under the special laws

       2,847               2,847             26       

Deferred tax liabilities

       378,220               373,969             3,471       

Deferred tax liabilities for land revaluation

       30,259               30,237             281       

Acceptances and guarantees

       9,564,993               9,451,934             87,721       
    

 

 

      

 

 

    

 

 

 

Total liabilities

       192,207,534               193,351,035             1,794,441       
    

 

 

      

 

 

    

 

 

 

Net assets:

            

Capital stock

       2,339,443               2,339,443             21,712       

Capital surplus

       739,047               691,542             6,418       

Retained earnings

       5,992,247               6,075,295             56,383       

Treasury stock

       (16,302)              (68,274)            (634)      
    

 

 

      

 

 

    

 

 

 

Total stockholders’ equity

       9,054,436               9,038,005             83,879       
    

 

 

      

 

 

    

 

 

 

Net unrealized gains (losses) on other securities

       1,688,852               1,624,151             15,073       

Net deferred gains (losses) on hedges

       (54,650)              (5,675)            (53)      

Land revaluation excess

       36,547               36,497             339       

Foreign currency translation adjustments

       50,379               8,617             80       

Accumulated remeasurements of defined benefit plans

       (7,244)              (6,534)            (61)      
    

 

 

      

 

 

    

 

 

 

Total accumulated other comprehensive income

       1,713,884               1,657,056             15,379       
    

 

 

      

 

 

    

 

 

 

Stock acquisition rights

       4,750               4,062             38       

Non-controlling interests

       678,540               522,362             4,848       
    

 

 

      

 

 

    

 

 

 

Total net assets

       11,451,611               11,221,487             104,144       
    

 

 

      

 

 

    

 

 

 

Total liabilities and net assets

     ¥       203,659,146             ¥       204,572,522           $       1,898,585       
    

 

 

      

 

 

    

 

 

 

 

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QUARTERLY CONSOLIDATED STATEMENTS OF INCOME

 

    Millions of yen      Millions of
U.S. dollars
 

Three months ended June 30

          2018                     2019                      2019          

Ordinary income

     ¥   1,426,372             ¥   1,334,510           $   12,385       

Interest income

       578,790               625,540             5,805       

Interest on loans and discounts

       384,609               446,534             4,144       

Interest and dividends on securities

       85,399               68,240             633       

Trust fees

       1,086               1,002             9       

Fees and commissions

       302,911               307,293             2,852       

Trading income

       47,293               63,959             594       

Other operating income

       425,980               273,844             2,541       

Other income

    *1        70,310            *1        62,868             583       

Ordinary expenses

       1,094,479               1,073,067             9,959       

Interest expenses

       245,182               322,841             2,996       

Interest on deposits

       98,903               128,398             1,192       

Fees and commissions payments

       48,959               52,569             488       

Trading losses

       1,154               —             —       

Other operating expenses

       341,631               214,209             1,988       

General and administrative expenses

       428,772               432,641             4,015       

Other expenses

    *2        28,778            *2        50,805             472       
    

 

 

      

 

 

    

 

 

 

Ordinary profit

       331,893               261,442             2,426       
    

 

 

      

 

 

    

 

 

 

Extraordinary gains

    *3        136            *3        22,010             204       

Extraordinary losses

    *4        1,405            *4        1,069             10       
    

 

 

      

 

 

    

 

 

 

Income before income taxes

       330,624               282,383             2,621       
    

 

 

      

 

 

    

 

 

 

Income taxes

       82,937               60,688             563       
    

 

 

      

 

 

    

 

 

 

Profit

       247,687               221,695             2,057       
    

 

 

      

 

 

    

 

 

 

Profit attributable to non-controlling interests

       20,602               5,967             55       
    

 

 

      

 

 

    

 

 

 

Profit attributable to owners of parent

     ¥              227,084             ¥              215,727           $              2,002       
    

 

 

      

 

 

    

 

 

 

 

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QUARTERLY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

    Millions of yen      Millions of
U.S. dollars
 

Three months ended June 30

  2018     2019      2019  

Profit

     ¥              247,687             ¥              221,695           $              2,057       

Other comprehensive income

       67,608               (55,999)            (520)      

Net unrealized gains (losses) on other securities

                107,188                        (65,526)            (608)      

Net deferred gains (losses) on hedges

       (8,639)              53,910             500       

Foreign currency translation adjustments

       (1,322)              (45,657)            (424)      

Remeasurements of defined benefit plans

       (2,804)              748             7       

Share of other comprehensive income of affiliates

       (26,813)              525             5       
    

 

 

      

 

 

    

 

 

 

Total comprehensive income

       315,295               165,695             1,538       
    

 

 

      

 

 

    

 

 

 

Comprehensive income attributable to owners of parent

       275,153               158,949             1,475       

Comprehensive income attributable to non-controlling interests

       40,142               6,746             63       

 

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NOTES TO UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS

(Basis of presentation)

Sumitomo Mitsui Financial Group, Inc. (“the Company”) was established on December 2, 2002 as a holding company for the SMBC group through a statutory share transfer ( kabushiki iten ) of all of the outstanding equity securities of Sumitomo Mitsui Banking Corporation (“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. Upon formation of the Company and completion of the statutory share transfer, SMBC became a direct wholly owned subsidiary of the Company.

The Company has prepared the accompanying consolidated financial statements in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards (“IFRS”).

The accounts of overseas subsidiaries and affiliated companies are, in principle, integrated with those of the Company’s accounting policies for purposes of consolidation unless they apply different accounting principles and standards as required under U.S. GAAP or IFRS, in which case a certain limited number of items are adjusted based on their materiality.

These consolidated financial statements are translated from the consolidated financial statements contained in the quarterly securities report filed under the Financial Instruments and Exchange Act of Japan (“FIEA based financial statements”) except for the addition of U.S. dollar figures.

Amounts less than 1 million yen have been rounded down. As a result, the totals in Japanese yen shown in the financial statements do not necessarily agree with the sum of the individual amounts.

The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers outside Japan, using the prevailing exchange rate at June 30, 2019 which was ¥107.75 to US$1. These translations should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at that rate.

 

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(Changes in the scope of consolidation or in the scope of equity method)

 

  (1)

Significant changes in the scope of consolidation

Not applicable.

 

  (2)

Significant changes in the scope of equity method

Daiwa SB Investments Ltd. was excluded from the scope of equity method affiliates from the three months ended June 30, 2019 as it ceased to be an affiliate due to a merger.

(Applied special accounting methods used for preparing quarterly consolidated financial statements)

Accounting treatment of tax expenses

The Company and certain domestic consolidated subsidiaries calculated tax expenses by multiplying Income before income taxes by an effective tax rate that was reasonably estimated by applying tax effect accounting to estimated Income before income taxes for the fiscal year ending March 31, 2020 including the period for the three months ended June 30, 2019.

Amounts of Income taxes include Income taxes-deferred.

(Notes to quarterly consolidated balance sheets)

 

*1

Risk-monitored loans

Risk-monitored loans at March 31, 2019 and June 30, 2019 were as follows:

 

     Millions of yen  
         March 31, 2019                        June 30, 2019          

Bankrupt loans

    ¥ 12,806            ¥ 14,549       

Non-accrual loans

     456,802             462,457       

Past due loans (3 months or more)

     13,444             15,821       

Restructured loans

     193,427             209,359       
  

 

 

    

 

 

 

Risk-monitored loans

    ¥                  676,481            ¥                  702,188       

The amounts of loans presented above are the amounts before deduction of reserve for possible loan losses.

 

*2

Guaranteed amount to privately-placed bonds

The amounts guaranteed by SMBC and its banking subsidiaries to privately-placed bonds (stipulated by Article 2-3 of the Financial Instruments and Exchange Act) in “Securities” at March 31, 2019 and June 30, 2019 were as follows:

 

     Millions of yen  
         March 31, 2019                June 30, 2019        

Guaranteed amount to privately-placed bonds

    ¥               1,662,777            ¥               1,622,205       

 

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(Notes to quarterly consolidated statements of income)

 

*1

Other income

“Other income” for the three months ended June 30, 2018 and 2019 included the following:

 

Three months ended June 30, 2018

  

 Millions of yen 

  

Three months ended June 30, 2019

   Millions of yen  

Gains on sales of stocks

    ¥      33,015   

Gains on sales of stocks

    ¥       37,186  

 

*2

Other expenses

“Other expenses” for the three months ended June 30, 2018 and 2019 included the following:

 

Three months ended June 30, 2018

  

 Millions of yen 

  

Three months ended June 30, 2019

   Millions of yen  

Write-off of loans

    ¥      18,147   

Provision for reserve for possible loan losses

    ¥       23,031  

 

*3

Extraordinary gains

“Extraordinary gains” for the three months ended June 30, 2018 and 2019 included the following:

 

Three months ended June 30, 2018

  

 Millions of yen 

  

Three months ended June 30, 2019

   Millions of yen  

Gains on disposal of fixed assets

    ¥           136   

Gains on step acquisitions

    ¥       21,997  

 

*4

Extraordinary losses

“Extraordinary losses” for the three months ended June 30, 2018 and 2019 included the following:

 

Three months ended June 30, 2018

    Millions of yen      

Three months ended June 30, 2019

   Millions of yen  

Losses on impairment of fixed assets

    ¥            610      Losses on impairment of fixed assets     ¥            650  

Losses on disposal of fixed assets

     613      Losses on disposal of fixed assets      419  

 

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(Notes to quarterly consolidated statements of cash flows)

Quarterly consolidated statements of cash flows are not prepared for the three months ended June 30, 2019. “Depreciation” (including amortization of intangible fixed assets other than goodwill) and “Amortization of goodwill” for the three months ended June 30, 2018 and 2019 are as follows:

 

     Millions of yen  

Three months ended June 30

                            2018                                                       2019                          

Depreciation

    ¥ 70,701            ¥ 50,803       

Amortization of goodwill

     5,725             4,337       

(Notes to stockholders’ equity)

Dividends paid in the three months ended June 30, 2018

 

Date of resolution

    Type of shares         Millions of yen, except per share amount
    Cash dividends        Cash
dividends
       per share       
        Record date          Effective date      Source of
       dividends       

Ordinary general meeting of shareholders
held on June 28, 2018

  Common stock     ¥   126,950          ¥ 90          March 31, 2018    June 29, 2018   Retained
earnings

 

Dividends paid in the three months ended June 30, 2019

 

 

Date of resolution

    Type of shares         Millions of yen, except per share amount
    Cash dividends        Cash
dividends
       per share       
        Record date          Effective date      Source of
       dividends       

Ordinary general meeting of shareholders
held on June 27, 2019

  Common stock     ¥   132,582          ¥ 95          March 31, 2019    June 28, 2019   Retained
earnings

 

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(Notes to segment and other related information)

[Segment information]

1. Information on profit and loss amount by reportable segment

 

    Millions of yen         

Three months ended June 30, 2018

  Wholesale
Business
Unit
    Retail
Business
Unit
    International
Business
Unit
    Global Markets
Business
Unit
    Head office
account and
others
    Total         

Consolidated gross profit

  ¥ 182,380          ¥      315,662          ¥      163,711          ¥    105,497          ¥ (48,117)         ¥ 719,133                   

Expenses

    (86,009)           (258,271)           (78,680)           (13,125)           7,314            (428,772)         

Others

    9,408            1,398            9,692            4,543            (1,014)           24,028          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Consolidated net business profit

  ¥       105,779          ¥ 58,789          ¥ 94,724          ¥ 96,915          ¥     (41,817)         ¥     314,389          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

Notes:    1.      Figures shown in the parenthesis represent the loss.
   2.      “Others” includes equity in profit and loss of affiliates and cooperated profit and loss based on internal managerial accounting.
   3.      “Head office account and others” includes profit or loss to be eliminated as inter-segment transactions.

 

    Millions of yen         

Three months ended June 30, 2019

  Wholesale
Business
Unit
    Retail
Business
Unit
    International
Business
Unit
    Global Markets
Business
Unit
    Head office
account and
others
    Total         

Consolidated gross profit

  ¥ 144,341          ¥      302,568          ¥      159,833          ¥    135,020          ¥ (59,742)         ¥ 682,021                   

Expenses

    (68,978)           (252,729)           (90,719)           (14,279)           (5,936)           (432,641)         

Others

    10,468            430            15,465            6,902            (13,469)           19,796          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Consolidated net business profit

  ¥         85,830          ¥ 50,270          ¥ 84,579          ¥ 127,644          ¥     (79,147)         ¥     269,176          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

Notes:    1.      Figures shown in the parenthesis represent the loss.
   2.      “Others” includes equity in profit and loss of affiliates and cooperated profit and loss based on internal managerial accounting.
   3.      “Head office account and others” includes profit or loss to be eliminated as inter-segment transactions.

 

2.

Difference between total amount of consolidated net business profit by reportable segment and ordinary profit on quarterly consolidated statements of income (adjustment of difference)

 

Three months ended June 30, 2018

   Millions of yen         

Consolidated net business profit

   ¥ 314,389          

Other ordinary income (excluding equity in gains of affiliates)

     46,282          

Other ordinary expenses

     (28,778)         
  

 

 

    

Ordinary profit on quarterly consolidated statements of income

   ¥                 331,893          
  

 

 

    

 

Note:     Figures shown in the parenthesis represent the loss.

 

Three months ended June 30, 2019

   Millions of yen         

Consolidated net business profit

   ¥ 269,176          

Other ordinary income (excluding equity in gains of affiliates)

     43,071          

Other ordinary expenses

     (50,805)         
  

 

 

    

Ordinary profit on quarterly consolidated statements of income

   ¥                 261,442          
  

 

 

    

 

Note:     Figures shown in the parenthesis represent the loss.

 

9


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(Notes to financial instruments)

There are no significant matters to be disclosed regarding financial instruments.

(Notes to securities)

The amounts shown in the following tables include negotiable certificates of deposit classified as “Cash and due from banks” and beneficiary claims on loan trust classified as “Monetary claims bought,” in addition to “Securities” stated in the consolidated balance sheets.

1.    Bonds classified as held-to-maturity

 

March 31, 2019

   Millions of yen       
               Consolidated balance             
sheet amount
                 Fair value                               Net unrealized             
gains (losses)
 

Japanese government bonds

   ¥         280,247           ¥           281,136           ¥             888          

Japanese local government bonds

     —             —             —          

Japanese corporate bonds

     —             —             —          

Other

     —             —             —          
  

 

 

    

 

 

    

 

 

    

Total

   ¥ 280,247           ¥ 281,136           ¥ 888          
  

 

 

    

 

 

    

 

 

    

 

Note:       The fair values are based on their market prices and others at the end of the fiscal year.

 

June 30, 2019

  

 

Millions of yen

      
               Consolidated balance             
sheet amount
                     Fair value                                   Net unrealized             
gains (losses)
 

Japanese government bonds

   ¥         260,202           ¥           260,962           ¥             759          

Japanese local government bonds

     —             —             —          

Japanese corporate bonds

     —             —             —          

Other

     —             —             —          
  

 

 

    

 

 

    

 

 

    

Total

   ¥ 260,202           ¥ 260,962           ¥ 759          
  

 

 

    

 

 

    

 

 

    

 

Note:      The fair values are based on their market prices and others at the end of the period.

 

10


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2.    Other securities

 

     Millions of yen         

March 31, 2019

   Acquisition cost      Consolidated
balance sheet amount
     Net unrealized
gains (losses)
        

Stocks

   ¥ 1,444,638           ¥         3,347,577           ¥ 1,902,938          

Bonds

     8,923,365             8,983,731             60,365          

Japanese government bonds

     6,211,070             6,234,326             23,255          

Japanese local government bonds

     98,428             99,164             735          

Japanese corporate bonds

     2,613,866             2,650,240             36,374          

Other

     10,725,378             11,083,416             358,038          
  

 

 

    

 

 

    

 

 

    

Total

   ¥         21,093,383           ¥         23,414,725           ¥         2,321,342          
  

 

 

    

 

 

    

 

 

    

 

Notes:    1.  

Consolidated balance sheet amounts of stocks (including foreign stocks) are carried at their average market prices during the final month of the fiscal year, and bonds and others are carried at their fiscal year-end market prices.

   2.  

Net unrealized gains on other securities shown above include losses of ¥12,277 million for the fiscal year ended March 31, 2019 which are recognized in the earnings by applying fair value hedge accounting.

   3.  

Consolidated balance sheet amounts of other securities whose fair values are extremely difficult to determine are as follows:

 

March 31, 2019

  Millions of yen  

Stocks

  ¥         139,051       

Other

    246,765       
 

 

 

 

Total

  ¥ 385,817       
 

 

 

 

 

    

These amounts are not included in “2. Other securities” since there are no market prices and it is extremely difficult to determine their fair values.

              4.  

In light of the “Practical Solution on Measurement of Fair Value for Financial Assets” (ASBJ Practical Issue Task Force No. 25), the fair values of floating rate government bonds are based on the present value of future cash flows (the government bond yield is used to discount and estimate future cash flows). Bond yield and yield volatility are the main price parameters.

 

     Millions of yen         

June 30, 2019

   Acquisition cost      Consolidated
balance sheet amount
     Net unrealized
gains (losses)
        

Stocks

   ¥         1,417,783           ¥         3,149,594           ¥         1,731,811          

Bonds

     8,985,408             9,051,977             66,568          

Japanese government bonds

     6,207,018             6,234,379             27,360          

Japanese local government bonds

     121,671             122,422             750          

Japanese corporate bonds

     2,656,718             2,695,175             38,457          

Other

     10,524,871             10,970,524             445,653          
  

 

 

    

 

 

    

 

 

    

Total

   ¥         20,928,062           ¥         23,172,096           ¥         2,244,033          
  

 

 

    

 

 

    

 

 

    

 

Notes:    1.  

Quarterly consolidated balance sheet amounts of stocks (including foreign stocks) are carried at their average market prices during the final month of the period, and bonds and others are carried at their period-end market prices.

   2.  

Net unrealized losses on other securities shown above include losses of ¥11,751 million for the three months ended June 30, 2019 that are recognized in the earnings by applying fair value hedge accounting.

   3.  

Consolidated balance sheet amounts of other securities whose fair values are extremely difficult to determine are as follows:

 

June 30, 2019

  Millions of yen  

Stocks

  ¥             140,466       

Other

    255,059       
 

 

 

 

Total

  ¥             395,525       
 

 

 

 

 

    

These amounts are not included in “2. Other securities” since there are no market prices and it is extremely difficult to determine their fair values.

              4.  

In light of the “Practical Solution on Measurement of Fair Value for Financial Assets” (ASBJ Practical Issue Task Force No. 25), the fair values of floating rate government bonds are based on the present value of future cash flows (the government bond yield is used to discount and estimate future cash flows). Bond yield and yield volatility are the main price parameters.

 

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3.     Write-down of securities

Bonds classified as held-to-maturity and other securities (excluding securities whose fair values are extremely difficult to determine) are considered as impaired if the fair value decreases materially below the acquisition cost and such decline is not considered as recoverable. The fair value is recognized as the consolidated balance sheet amount and the amount of write-down is accounted for as valuation loss. Valuation losses for the fiscal year ended March 31, 2019 and for the three months ended June 30, 2019 were ¥9,013 million and ¥3,583 million, respectively. The rule for determining “material decline” is as follows and is based on the classification of issuers under the rules of self-assessment of assets.

 

Bankrupt/Effectively bankrupt/Potentially bankrupt issuers:    Fair value is lower than acquisition cost.   
Issuers requiring caution:    Fair value is 30% or lower than acquisition cost.   
Normal issuers:    Fair value is 50% or lower than acquisition cost.   

Bankrupt issuers: Issuers that are legally bankrupt or formally declared bankrupt.

Effectively bankrupt issuers: Issuers that are not legally bankrupt but regarded as substantially bankrupt.

Potentially bankrupt issuers: Issuers that are not bankrupt now, but are perceived to have a high risk of falling into bankruptcy.

Issuers requiring caution: Issuers that are identified for close monitoring.

Normal issuers: Issuers other than the above 4 categories of issuers.

(Notes to money held in trust)

1.    Money held in trust classified as held-to-maturity

Fiscal year ended March 31, 2019

There are no corresponding transactions.

Three months ended June 30, 2019

There are no corresponding transactions.

2.    Other money held in trust (Other than trading and held to maturity)

 

March 31, 2019

  Millions of yen  
              Acquisition cost                  Consolidated
balance sheet
            amount             
    Net unrealized
            gains (losses)             
 

Other money held in trust

  ¥         390          ¥         390            —       

 

Note:    Consolidated balance sheet amount is measured at fair value based on its market price and others at the end of the fiscal year.

 

June 30, 2019

  Millions of yen  
              Acquisition cost                  Consolidated
balance sheet
            amount             
    Net unrealized
            gains (losses)             
 

Other money held in trust

  ¥         366          ¥         366            —       

 

Note:    Quarterly consolidated balance sheet amount is measured at fair value based on its market price and others at the end of the period.

 

 

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(Notes to derivative transactions)

 

(1)

Interest rate derivatives

 

                                                                                                                                
     Millions of yen  

March 31, 2019

       Contract amount                  Fair Value              Valuation
    gains  (losses)    
 

Listed

        

   Interest rate futures

   ¥ 59,431,284           ¥ 618           ¥ 618       

   Interest rate options

         134,241,530             22,079             22,079       

Over-the-counter

        

   Forward rate agreements

     54,470,715             (542)            (542)      

   Interest rate swaps

     444,871,798             294,408             294,408       

   Interest rate swaptions

     12,036,115             (480)            (480)      

   Caps

     59,064,895             (51,326)            (51,326)      

   Floors

     2,193,601             780             780       

   Other

     9,288,882             28,837             28,837       
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥     294,374           ¥     294,374       
  

 

 

    

 

 

    

 

 

 

 

Note:

 

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income.

Derivative transactions to which the hedge accounting method is applied are not included in the table above.

 

                                                                                                                                
     Millions of yen  

June 30, 2019

       Contract amount                  Fair Value              Valuation
    gains (losses)    
 

Listed

        

   Interest rate futures

   ¥ 97,479,668           ¥ (1,031)          ¥ (1,031)      

   Interest rate options

         160,307,366             14,081             14,081       

Over-the-counter

        

   Forward rate agreements

     75,362,356             4             4       

   Interest rate swaps

     458,415,099             385,641             385,641       

   Interest rate swaptions

     12,063,197             (7,742)            (7,742)      

   Caps

     60,239,746             (26,161)            (26,161)      

   Floors

     2,625,168             308             308       

   Other

     9,496,502             25,115             25,115       
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥     390,215           ¥     390,215       
  

 

 

    

 

 

    

 

 

 

 

Note:

 

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the quarterly consolidated statements of income.

Derivative transactions to which the hedge accounting method is applied are not included in the table above.

 

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(2)

Currency derivatives

 

                                                                                                                                
     Millions of yen  

March 31, 2019

       Contract amount                  Fair value              Valuation
    gains  (losses)    
 

Listed

        

Currency futures

   ¥ 3,942           ¥ 21           ¥ 21       

Over-the-counter

                  

Currency swaps

         46,383,650             82,884             76,881       

Currency swaptions

     1,158,840             855             855       

Forward foreign exchange

     81,510,434             24,012                 24,012       

Currency options

     5,708,189             5,294             5,294       
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥     113,069           ¥     107,066       
  

 

 

    

 

 

    

 

 

 

 

Note:

 

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income.

Derivative transactions to which the hedge accounting method is applied are not included in the table above. In addition, transactions related to financial assets and liabilities denominated in foreign currencies and recognized in the consolidated balance sheets, or transactions related to financial assets and liabilities denominated in foreign currencies which have been eliminated in the consolidation are not included in the above table.

 

                                                                                                                                
     Millions of yen  

June 30, 2019

       Contract amount                  Fair value              Valuation
    gains  (losses)    
 

Listed

        

Currency futures

   ¥ 2,891           ¥ 814           ¥ 814       

Over-the-counter

        

Currency swaps

         49,827,239               48,041                   62,642       

Currency swaptions

     1,135,522             1,348             1,348       

Forward foreign exchange

     77,023,959             (73,713)            (73,713)      

Currency options

     5,552,695             8,047             8,047       
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥     (15,462)          ¥ (860)      
  

 

 

    

 

 

    

 

 

 

 

Note:

 

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the quarterly consolidated statements of income.

Derivative transactions to which the hedge accounting method is applied are not included in the table above. In addition, transactions related to financial assets and liabilities denominated in foreign currencies and recognized in the quarterly consolidated balance sheets, or transactions related to financial assets and liabilities denominated in foreign currencies which have been eliminated in the consolidation are not included in the above table.

 

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(3)

Equity derivatives

 

                                                                                                                                
     Millions of yen  
         Contract amount                  Fair value               Valuation
    gains (losses)    
 

March 31, 2019

Listed         

Equity price index futures

   ¥     931,225           ¥ 2,088           ¥ 2,088       

Equity price index options

           1,259,342                 (27,469)            (27,469)      

Over-the-counter

        

Equity options

     721,754             (1,529)            (1,529)      

Equity index forward contracts

     8,094             554             554       

Equity index swaps

     322,428                 13,521                 13,521       
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥ (12,835)          ¥     (12,835)      
  

 

 

    

 

 

    

 

 

 

 

Note:

 

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income.

Derivative transactions to which the hedge accounting method is applied are not included in the table above.

 

                                                                                                                                
     Millions of yen  
         Contract amount                  Fair value               Valuation
    gains (losses)    
 

June 30, 2019

Listed

        

Equity price index futures

   ¥     1,201,661           ¥ 1,973           ¥ 1,973       

Equity price index options

           1,214,247                 (23,140)                (23,140)      

Over-the-counter

        

Equity options

     699,091             (809)            (809)      

Equity index forward contracts

     12,411             212             212       

Equity index swaps

     335,756                 13,948                 13,948       
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥ (7,815)          ¥ (7,815)      
  

 

 

    

 

 

    

 

 

 

 

Note:

 

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the quarterly consolidated statements of income.

Derivative transactions to which the hedge accounting method is applied are not included in the table above.

 

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(4)

Bond derivatives

 

                                                                                                                                
     Millions of yen  

March 31, 2019

       Contract amount                  Fair value               Valuation
    gains (losses)    
 

Listed

        

Bond futures

   ¥       3,901,032           ¥       (2,233)          ¥       (2,233)      

Bond futures options

     491,611             (541)            (541)      

Over-the-counter

        

Bond forward contracts

     1,328                       2                      2       

Bond options

     1,100,342             (1,033)            (1,033)      
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥ (3,805)          ¥ (3,805)      
  

 

 

    

 

 

    

 

 

 

 

Note:

 

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income.

 

Derivative transactions to which the hedge accounting method is applied are not included in the table above.

 

                                                                                                                                
     Millions of yen  

June 30, 2019

       Contract amount                  Fair value               Valuation
    gains (losses)    
 

Listed

        

Bond futures

   ¥       5,452,176           ¥    (28)          ¥        (28)      

Bond futures options

     247,490                      (181)                     (181)      

Over-the-counter

        

Bond options

     693,218                     126                     126       
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥ (83)          ¥ (83)      
  

 

 

    

 

 

    

 

 

 

 

Note:

 

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the quarterly consolidated statements of income.

 

Derivative transactions to which the hedge accounting method is applied are not included in the table above.

 

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(5)

Commodity derivatives

 

                                                                                                                                
     Millions of yen  

March 31, 2019

       Contract amount                  Fair value              Valuation
    gains (losses)    
 

Listed

        

Commodity futures

   ¥ 28,823           ¥ 30           ¥ 30       

Over-the-counter

        

Commodity swaps

              183,117                 1,915                 1,915       

Commodity options

     13,714                      (388)                     (388)      
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥ 1,556           ¥ 1,556       
  

 

 

    

 

 

    

 

 

 

 

Notes:   1.   

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income.

    

Derivative transactions to which the hedge accounting method is applied are not included in the table above.

  2.   

Underlying assets of commodity derivatives are fuels and metals.

 

                                                                                                                                
     Millions of yen  

June 30, 2019

       Contract amount                  Fair value              Valuation
    gains (losses)    
 

Listed

        

Commodity futures

   ¥ 63,672           ¥     (24)          ¥     (24)      

Over-the-counter

        

Commodity swaps

              175,284               1,853             1,853       

Commodity options

     8,975                      (374)                     (374)      
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥ 1,453           ¥ 1,453       
  

 

 

    

 

 

    

 

 

 

 

Notes:

  1.   

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the quarterly consolidated statements of income.

    

Derivative transactions to which the hedge accounting method is applied are not included in the table above.

  2.   

Underlying assets of commodity derivatives are fuels and metals.

 

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(6)

Credit derivative transactions

 

                                                                                                                                
     Millions of yen  

March 31, 2019

       Contract amount                  Fair value              Valuation
    gains (losses)    
 

Over-the-counter

        

Credit default options

   ¥       1,504,765           ¥          (651)          ¥          (651)      
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥ (651)          ¥ (651)      
  

 

 

    

 

 

    

 

 

 

 

Note:

 

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the consolidated statements of income.

 

Derivative transactions to which the hedge accounting method is applied are not included in the table above.

 

                                                                                                                                
     Millions of yen  

June 30, 2019

       Contract amount                  Fair value              Valuation
    gains (losses)    
 

Over-the-counter

        

Credit default options

   ¥       1,621,285           ¥       (1,964)          ¥       (1,964)      
  

 

 

    

 

 

    

 

 

 

Total

     /           ¥ (1,964)          ¥ (1,964)      
  

 

 

    

 

 

    

 

 

 

 

Note:

 

The above transactions are valued at fair value and the valuation gains (losses) are accounted for in the quarterly consolidated statements of income.

 

Derivative transactions to which the hedge accounting method is applied are not included in the table above.

 

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Table of Contents

(Business combination)

<Business combination through acquisition>

Merger between Sumitomo Mitsui Asset Management Company, Limited and Daiwa SB Investments Ltd.

On April 1, 2019, Sumitomo Mitsui Asset Management Company, Limited (“SMAM”), a consolidated subsidiary of the Company, merged with Daiwa SB Investments Ltd. (“DSBI”), an equity method affiliate of the Company, under a merger agreement concluded on September 28, 2018 between SMAM and DSBI. The trade name of the merged company is Sumitomo Mitsui DS Asset Management Company, Limited.

The outline of the merger is as follows:

 

1.

Outline of the business combination

 

  (1)

Name of the acquired company and its business

 

Name:

  

Daiwa SB Investments Ltd.

Business:

  

Investment management (discretionary/advisory) and investment trust fund management

 

  (2)

Main reasons for the business combination

The asset management business is undergoing global growth, and the investment management capabilities and services desired by clients are progressively becoming more sophisticated. The merger aims to establish an asset management company that combines the strengths and expertise of SMAM and DSBI, and offers the highest quality of investment management performance and services based on its fiduciary duties, in order to address the aforesaid client needs.

 

  (3)

Date of the business combination

April 1, 2019

 

  (4)

Legal form of the business combination

The structure of the merger is an absorption-type merger with SMAM as the surviving company and DSBI as the absorbed company.

 

  (5)

Name of the entity after the business combination

Sumitomo Mitsui Financial Group, Inc.

 

  (6)

The ratio of acquired voting rights

Ratio of voting rights owned by the Company immediately prior to the business combination: 48.96%

Ratio of voting rights increased on the date of business combination: 1.16%

Ratio of voting rights after the merger: 50.12%

 

  (7)

Grounds for deciding on the acquirer

The Company owns a majority of the voting rights of Sumitomo Mitsui DS Asset Management Company, Limited.

 

2.

Period of the acquired company’s financial result included in the quarterly consolidated statements of income of the Company

From April 1, 2019 to June 30, 2019

 

3.

Acquisition cost and consideration of the acquired company

 

Fair value at the business combination of the common shares of DSBI held by the Company immediately prior to the business combination

   40,111 million yen

Consideration (shares of SMAM) for the common shares of DSBI additionally acquired by the Company on the date of business combination

   958 million yen

 

Acquisition cost of the acquired company

   41,070 million yen

 

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Table of Contents
4.

Merger ratio according to the type of shares, method of calculation of merger ratio and number of shares delivered

 

  (1)

Type of shares and merger ratio

Common share                SMAM 1: DSBI 4.2156

 

  (2)

Method of calculation of merger ratio

SMAM and DSBI conducted careful discussion on the merger ratio following a comprehensive consideration of the financial condition, asset condition and future prospects of the two companies based on the analysis by each third party appraiser regarding merger ratio, Ernst & Young Transaction Advisory Services Co., Ltd., appointed by SMAM, and PwC Advisory LLC, appointed by DSBI. As a result, SMAM and DSBI concluded that the merger ratio was appropriate and reached an agreement.

 

  (3)

Number of shares delivered

Common share of SMAM    16,230,060 stocks

 

5.

Difference between acquisition cost and total amount of acquisition cost of each transaction

 

Acquisition cost

     41,070 million yen  

Sum of acquisition costs of each transaction resulting in the acquisition

     19,072 million yen  

 

 

Difference (gains on step acquisitions)

     21,997 million yen  

 

6.

Amount of goodwill, reason for recognizing goodwill, amortization method and the period

 

  (1)

Amount of goodwill

17,022 million yen

 

  (2)

Reason for recognizing goodwill

The Company accounted for the difference between the acquisition cost and fair value of the acquired net assets on the date of the business combination as goodwill.

 

  (3)

Amortization method and the period

Goodwill is amortized using the straight-line method over 14 years.

(Per share data)

Earnings per share, earnings per share (diluted) and each calculation method are as follows:

 

         Millions of yen, except per share data
and number of shares
 
         

Three months ended June 30

                   2018                                       2019                   
 

(i) Earnings per share

   ¥                 161.78           ¥                 155.24       
 

[The calculation method]

     
 

  Profit attributable to owners of parent

     227,084             215,727       
 

  Amount not attributable to common stockholders

     —             —       
 

  Profit attributable to owners of parent concerning common stock

     227,084             215,727       
 

  Average number of common stock during the period (in thousands)

     1,403,702             1,389,636       
 

(ii) Earnings per share (diluted)

   ¥                 161.67           ¥                 155.14       
 

[The calculation method]

     
 

  Adjustment for profit attributable to owners of parent

     (3)            (7)      
 

  Adjustment of dilutive shares issued by consolidated subsidiaries and equity method affiliates

     (3)            (7)      
 

  Increase in the number of common stock (in thousands)

     927             846       
 

  Stock acquisition rights (in thousands)

     927             846       

 

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(Significant Subsequent Events)

There are no significant subsequent events to be disclosed.

(Others)

Not applicable.

 

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