[Sumitomo Mitsui Financial Group, Inc.]Revision of Earnings Forecasts for Fiscal 2007(1/1)
Sumitomo Mitsui Financial Group, Inc.
Revision of Earnings Forecasts for Fiscal
2007
SMFG hereby
revises its earnings forecasts for the first half and full year 2007, which
were previously announced in May 2007 (“previous forecast”), as shown below.
1. Earnings
forecast on a consolidated basis
(Billions of yen, except percentages)
|
Six months ended September 30,
2007
|
Fiscal year ending March 31, 2008
|
||||
Ordinary income
|
Ordinary profit
|
Net income
|
Ordinary income
|
Ordinary profit
|
Net income
|
|
Previous forecast
|
1,950yen
|
400 yen
|
220 yen
|
4,100 yen
|
980 yen
|
540 yen
|
Revised forecast
|
2,075
|
353
|
170
|
4,300
|
940
|
570
|
Change
|
125
|
(47)
|
(50)
|
200
|
(40)
|
30
|
Percentage
change
|
6.4%
|
(11.8)%
|
(22.7)%
|
4.9%
|
(4.1)%
|
5.6%
|
2. Earnings
forecast on a non-consolidated basis
(Billions of yen, except percentages)
|
Six months ended September 30,
2007
|
Fiscal year ending March 31, 2008
|
||||||
Ordinary income
|
Operating profit
|
Ordinary profit
|
Net income
|
Ordinary income
|
Operating profit
|
Ordinary profit
|
Net income
|
|
Previous forecast
|
24yen
|
22yen
|
17yen
|
14yen
|
105yen
|
100yen
|
90yen
|
85yen
|
Revised forecast
|
24
|
20
|
11
|
9
|
110
|
105
|
90
|
80
|
Change
|
–
|
(2)
|
(6)
|
(5)
|
5
|
5
|
–
|
(5)
|
Percentage
change
|
–
|
(9.1)%
|
(35.3)%
|
(35.7)%
|
4.8%
|
5.0%
|
–
|
(5.9)%
|
Reference
I. Revision of earnings forecast (SMFG, Consolidated)
(Billions of yen)
|
|
|
|
|
|
Six months ended
Sept. 30, 2007
|
Change from the previous forecast
|
Fiscal year ending
Mar. 31, 2008
|
Change from the previous forecast
|
Ordinary profit
|
353yen
|
(47)yen
|
940yen
|
(40)yen
|
Net income
|
170
|
(50)
|
570
|
30
|
|
|
|
|
|
Total credit cost
|
(143)
|
|
|
|
<First
Half>
As described hereinbelow,
Sumitomo Mitsui Banking Corporation
(“SMBC”), a major consolidated subsidiary of SMFG, expects banking profit (before provision for general
reserve for possible loan losses) to
be 25 billion yen above the previous forecast, and credit cost and write-downs
on shares to be higher than previously expected. As a result, SMFG expects
ordinary profit to be approximately 353 billion yen, 47 billion yen below the
previous forecast. Net income will be approximately 170 billion yen, a
decrease from the previous forecast of 50 billion yen.
<Full Year>
Ordinary profit is expected to be 940 billion yen, 40
billion yen below the previous forecast, due mainly
to the profit decline in the first half. However, net income will be
approximately 570 billion yen, 30 billion yen above the previous forecast, due mainly to recording of extraordinary gains (“gains on change in equity”) of 100 billion yen as a result
of mergers of leasing subsidiaries in the second half of fiscal 2007.
(For more details, please refer to Appendix 2.)
|
II. Revision of earnings forecast (SMFG, Non-consolidated)
(Billions of yen)
|
|
|
|
|
|
Six months ended
Sept. 30, 2007
|
Change from the previous forecast
|
Fiscal year ending
Mar. 31, 2008
|
Change from the previous forecast
|
Ordinary profit
|
11yen
|
(6)yen
|
90yen
|
– yen
|
Net income
|
9
|
(5)
|
80
|
(5)
|
<First Half>
Ordinary profit is expected to be approximately 11
billion yen, 6 billion yen below the previous forecast. Net income is
expected to be approximately 9 billion yen, a shortfall of 5 billion yen.
This is mainly attributable to impairment on shares of an affiliated company.
<Full Year>
Net income will be 80 billion yen, due mainly to the
profit decline in the first half.
|
III. Revision of earnings forecast (SMBC, Non-consolidated)
* Earnings forecast for the fiscal
year ending March 31, 2008 is calculated based on the stock prices as of
September 30, 2007.
<First
Half>
Banking profit (before provision for general reserve
for possible loan losses):
SMBC expects banking profit to be approximately 390
billion yen, 25 billion yen above the previous forecast. This increase is
mainly attributable to recording of gains on bond-related transactions of the
Treasury Unit amid declining interest rates in domestic and overseas markets
and an increase in revenue from foreign currency-related transactions
reflecting customers’ hedging needs under the sharp appreciation of the
Japanese yen since this summer.
Total credit cost:
SMBC expects total credit cost to be approximately 115
billion yen, 45 billion yen above the previous forecast, due mainly to a loss
provision for
Ordinary profit:
SMBC expects ordinary profit to be approximately 157
billion yen, 103 billion yen below the previous forecast. This shortfall is
mainly attributable to losses on stocks of 104 billion yen as a result of
impairment on shares of equity method affiliates reflecting the decline in
stock markets, as well as the factors mentioned above.
Net income:
SMBC expects net income to be approximately 63 billion
yen, 87 billion yen below the previous forecast, due mainly to the
lower-than-expected ordinary profit.
<Full Year>
Total credit cost:
For the second half of fiscal 2007, SMBC expects to
record a gain on reversal of provisions for credit losses of approximately
100 billion yen due mainly to a decrease in the historical loan loss ratio.
As a result, total credit cost for the full year 2007 is expected to be 110
billion yen, 20 billion yen above the previous forecast. Ratio of total
credit cost to total claims will be less than 0.2%.
Ordinary profit and Net income:
Ordinary profit will be 600 billion yen, 100 billion
yen below the previous forecast. Net income will be 315 billion yen, a 95
billion yen decrease from the previous forecast. This is attributable mainly
to impairment on shares of affiliated companies.
|
IV. Estimate of problem assets based on the Financial
Reconstruction Law (SMBC, Non-consolidated)
(Billions of yen, except percentages)
|
September 30, 2007 (Estimate)
|
March 31, 2007(Result)
|
Change
|
|
Problem assets based on
the Financial Reconstruction Law
|
774.0yen
|
738.7yen
|
35.3yen
|
|
|
Problem
asset ratio
|
1.2 %
|
1.2 %
|
−
|
|
|
|
|
|
Problem assets are expected to be 774
billion yen as of September 30, 2007. Problem asset ratio will remain at a
low-level of 1.2%.
|
V. Estimate
of net unrealized gains on other securities (SMBC, Non-consolidated)
(Billions of yen)
|
September 30, 2007 (Estimate)
|
March 31, 2007(Result)
|
Change
|
|
Net unrealized gains (losses) on other securities
|
1,517.0yen
|
1,833.2yen
|
(316.2)yen
|
|
|
Stocks
|
1,716.0
|
1,978.7
|
(262.7)
|
|
Bonds
|
(158.0)
|
(151.4)
|
(6.6)
|
|
Others
|
(41.0)
|
5.9
|
(46.9)
|
(Appendix 1)
Subprime-related exposure and its impact on the business results
for the first half of fiscal 2007
1. SMBC had approximately 95 billion yen in exposure related to subprime mortgage loans in the
2. SMBC sold
securitized products such as RMBSs and ABSCDOs of approximately 350 billion yen and recorded a
loss on sale of these products of around 4 billion yen in the first half of
fiscal 2007. SMBC wrote off some of the remaining products with fair value
below 50% of face value as of September 30, 2007. Write-offs totaled
approximately 17 billion yen and the book value after the write-offs was about
70 billion yen as of September 30, 2007.
SMBC provided warehousing loans of
approximately 40 billion yen in the
However, the above loss on sale
and credit cost totaling 32 billion yen was offset by an increase in Treasury
Unit’s profits including bond related
gains amid declining interest rates in domestic and overseas markets arising
from the subprime loans issues.
SMBC held net unrealized losses on RMBSs and ABSCDOs, etc. of
18 billion yen as of September 30, 2007, against book value of 70 billion yen.
3. Subsidiaries other than SMBC had no subprime-related
exposure as of September 30, 2007.
Most of the assets held by ABCP
programs which SMBC sponsors are receivables of corporate clients and do not
include subprime loan related assets.
(Appendix 2)
Outline of “Gains on
change in equity”
As announced on July 30, 2007 in the press release, “Final Agreement concerning Strategic Joint Business in Leasing and Auto
Leasing Businesses and Merger Agreement of the Two Businesses,” SMFG will apply the purchase method stipulated in the
“Guidance on Accounting Standard for Business Combinations and Accounting
Standard for Business Divestures (Accounting Standards Board of Japan’s
Guidance No. 10) to the merger between SMBC Leasing Company, Limited and
Sumisho Lease Co., Ltd. (October 1, 2007), and the assets and liabilities that
will be succeeded are valuated at their fair values.
As a result, SMFG acquired 55% of the fair
value of Sumisho Lease and transferred 45% of the shares of SMBC Leasing,
equivalent in value to the acquired Sumisho Lease shares. Consequently, the difference
between the transfer price of the shares of SMBC Leasing and 45% of SMBC Leasing’s stockholders’ equity is recognized as “Gains on
change in equity” and recorded as extraordinary gains. In addition, the
difference between the acquisition cost of shares of Sumisho Lease and the
amount of 55% of Sumisho Lease’s assets less liabilities, for which fair value
is estimated individually, is recognized as goodwill and will be amortized on a
straight-line method over 20 years from the second half of fiscal 2007.
<< Concept of Gains on
Change in Equity >>
Shareholding ratios after the
merger are 55% for SMFG and 45% for Sumitomo Corporation.
(Notes) 1.
Stockholders’ equity (consolidated)
= Net assets – Valuation and translation
adjustments – Stock acquisition rights – Minority interests
2. The
difference between assets and liabilities which fair values can be individually
estimated.
Gains on change in equity (*) and goodwill (**) will
be recognized also for the merger between Sumisho Auto Leasing Corporation and
SMBC Auto Leasing Company Limited on October 1, 2007 in accordance with the
ASBJ Guidance No. 10.
* Total amount of gains on change in equity on the two mergers is expected
to be approximately \100 billion.
** Amount of
goodwill will be determined based on the consolidated net assets at fair value.
This press release contains
certain forward-looking statements. Such forward-looking statements are not guarantees of future performance
and involve risks and uncertainties, and actual results may materially differ
from those contained in the forward-looking statements as a result of various
factors.
The following items are among the
factors that could cause actual results to differ materially from the
forward-looking statements in this material: business conditions in the banking
industry, the regulatory environment, new legislation, competition with other
financial services companies, changing technology and evolving banking industry
standards and similar matters.
