3. Reforming domestic business operations

SMFG’s consolidated net income began to grow steadily in the second half of fiscal year 2012, driven by an upturn in economic conditions in and outside of Japan, recording a new high for two straight years in fiscal years 2012 and 2013. Despite these favorable results, the management team shared concerns over the future possibility of facing a bleak outcome from simply maintaining existing business models, given huge changes likely to occur in the economy and society as well as in our customers’ behavior. They recognized the need to drastically transform business in response to the expected changes. Thus, SMFG began to develop new business models, looking ahead five to ten years.

At SMBC, major domestic business reforms were implemented, starting in April 2014. These reforms were undertaken to revise customer segmentation, with the aim of increasing customer service capabilities. The primary objective was to “overhaul corporate service functions from the viewpoint of customers” with a focus on refurbishing domestic corporate business to create a “next-generation business model” (President Kunibe).

Specific procedures were as follows: 1. Broaden the definition of the large corporation and increase the number of Corporate Banking Departments in charge of large corporate clients to apply the Global-Corporate and Investment Banking (G-CIB) model; 2. Consolidate the Business Support Plaza, the small enterprise business with annual sales below one billion yen, and the customer segment with annual sales below three billion yen in the Middle Market Banking Unit into the Retail Banking Unit; and 3. Serve customers categorized between large enterprises and small- to medium-sized enterprises, applying the one-to-one model which delivers services tailored to the needs of each customer.

The three previous units, Consumer Banking, Middle Market Banking and Corporate Banking, were restructured into two units: Wholesale Banking Unit and Retail Banking Unit. This reorganization was the largest-ever cross-organizational restructuring plan since the inception of SMBC.