Tear Sheet: Sumitomo Mitsui Financial Group Inc.; Sumitomo Mitsui Banking Corp.

Japan Bank Outlook 2024: BOJ Hikes Will Widen Disparities, Jan. 23, 2024 Sumitomo Mitsui Financial Group Inc, Sumitomo Mitsui Banking Corp., Aug. 3, 2023 Banking Industry Country Risk Assessment: Japan, June 15, 2023 Japan's Megabanks: After A Robust 2022, Risks Loom, June 14, 2023 Stable outlooks on SMBC Group's nonoperating holding company, Sumitomo Mitsui Financial Group Inc. (SMFG), its lead bank, Sumitomo Mitsui Banking Corp. (SMBC), and the group's core banking subsidiaries reflect our expectation that the entities will maintain stable credit profiles for the coming two years. This reflects our view that a likelihood of government support in times of need will underpin their creditworthiness. The outlooks also reflect our view that, for the next two years, the group

... in Japan can support group earnings stability. We forecast the group will continue to invest in areas where it expects growth and profitability, such as Asia. In 2023, it completed investments in RCBC in the Philippines and VPBank in Vietnam. It also announced the restructuring of Indonesian auto loan subsidiaries. In the retail sector, it has been enhancing its business model, including through a comprehensive digital financial services platform. The group's RAC ratio should remain slightly above 7%. We believe the group's stable profits (net income of Ñ526.5 billion in the first half of 2023) will endure and the funding through AT1 hybrids (total Ñ549 billion in fiscal 2023) will support the improvement in its RAC ratio, which measures the balance between capital and risk assets. About 70% of banks' loans are linked to market interest rates. We expect a gradual rise in yen interest rates (policy rates: 0% in 2024, 0.25% in 2025) will benefit...

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