Strengths and Challenges

(Case 1) Total credit cost

We have been constantly reinforcing credit risk management framework, based on our experience during the intensive resolution period of non-performing loan problems (in December 2002, Japanese government designated the period as until FY3/2005). Especially after the subprime crisis, we have been focusing on preventing credit deterioration and business turnaround of our corporate customers through further enhancing our organization by:

- establishing a department to globally manage credit risk of non-Japanese companies ("Credit Management Dept., International Banking Unit"),
- establishing specialized departments in Americas and Europe to manage various risks comprehensively, and,
- enhancing a specialized department to support business turnaround of our corporate customers.

Going forward, while controlling and reducing credit costs through detailed responses to our clients, we will focus on securing an appropriate risk-return profile.

Regarding non-performing loans, SMBC maintains the ratio to total claims (or NPL ratio) at low level of 1.74% as of March 31, 2010.

<Reference> Total credit cost and Non-performing loans (SMBC)