3. Improving capital, asset, and cost efficiency

In April 2017, SMFG initiated the new medium-term management plan “SMFG Next Stage” (FY2017 to 2019) under the leadership of the new management team. In the face of unfavorable external conditions and a likely sizable increase in risk-weighted assets as an outcome of the finalized Basel III reforms, the new management plan was designed to raise the efficiency of capital, assets, and costs in order to achieve steady growth of bottom-line profit.

Specific plans were to promote prioritized resource allocation by area in light of SMBC Group’s competitive advantages and growth potential, in order to improve capital efficiency. At the same time, considerable efforts were put into addressing tighter international financial regulations. While increasing control of risk-weighted assets, various reform and restructuring programs were carried out, including improvement in technology-enabled operational process for higher efficiency, retail branch reorganization, and the restructuring of group companies. When planning these programs, cost reduction targets were set to achieve 50 billion yen within the period of the medium-term management plan and 100 billion yen over the medium term.

As part of the above restructuring programs, Kansai Urban Banking Corporation, Minato Bank, and Sumitomo Mitsui Finance and Leasing Company were deconsolidated, thereby decreasing risk-weighted assets. This also exempted the three companies from the application of Basel III to SMFG on a consolidated basis and made SMFL eligible for entry into non-financial business.

Also, for securities services, SMBC Nikko Securities merged with SMBC Friend Securities a mid-sized retail securities firm, in January 2018, to strengthen the business foundation.

In the area of asset management, Sumitomo Mitsui Asset Management Company, which became a consolidated subsidiary of SMFG in October 2016, merged with Daiwa SB Investments, an investment trust specialist, to establish Sumitomo Mitsui DS Asset Management Company in April 2019. SMFG also invested substantial management resources into overseas development, specifically to acquire the UK-based TT International. and obtain a stake in the U.S.-based Ares Management Corporation.