Chapter 3
Expanding Our Global Business

1. Global banking business: going on the offensive

Looking back, we can see that the global financial crisis provided SMBC Group with opportunities to expand its global business. During the first half of fiscal year 2007 (ended March 2008), Sumitomo Mitsui Banking Corporation (SMBC) sold off most of the subprime mortgage-backed securities it held, thus minimizing direct losses related to such products when the financial crisis occurred. Although the sharp economic slowdown had a considerable impact on the performance of the bank, such as with the increase of credit costs and decline of stock prices, the losses incurred by the bank due to the financial crisis were limited, in contrast to what happened to many major U.S. and European financial institutions. European banks, in particular, suffered from the ensuing European sovereign debt crisis over years, which forced many of them to reduce assets and sell off businesses. In fiscal year 2010, SMBC began to deploy global business strategies, seeking to capture a greater market share by taking advantage of this situation. Its own capital basis was strengthened by the issuance of common stock during fiscal year 2009, which also favored the strategy.

One of the key issues facing SMBC in expanding its overseas business was funding in foreign currencies to meet the increasing demand for foreign currency-denominated assets. The International Banking Unit and Treasury Unit worked together to ensure stable funding in foreign currencies. The major potential methods of these included foreign currency deposits, certificates of deposit (CDs), commercial paper (CP), foreign currency-denominated corporate bonds, and currency swaps (buying foreign currencies with yen funds). By fiscal year 2016, the amount of foreign currency deposits and medium- to-long term marketable securities, including corporate bonds, exceeded that of foreign currency-denominated loans and other assets.