Banking profit (before provision of allowance for general loan losses)

In the current severe business environment, Sumitomo Mitsui Banking Corporation (“SMBC”), a major subsidiary of SMFG, expects to secure banking profit of approximately ¥810 billion, which is higher than the previous forecast. This is due to factors such as (1) an increase in net interest income from an increase in loan balances and an improvement in interest margins by the International Banking Unit and (2) an increase in gains on bond-related transactions amid declining interest rates.

Total credit cost

(1) SMBC expects total credit cost to be approximately ¥550 billion, or ¥180 billion above the previous forecast, due mainly to an increase in credit cost resulting from the rapid global economic downturn and additional provisions made in preparation for the continuation of such economic situation.

(2) For fiscal 2008, SMBC will record provisions conservatively. From fiscal 2009, its headquarters and branches will work as a team to strengthen SMBC’s relationships with customers, support its customers’ recovery, and prevent the deterioration of its asset quality. SMBC aims to steadily reduce credit cost through these measures.

Impairment loss on stocks

SMBC expects to record impairment loss on stocks of approximately ¥220 billion for fiscal 2008 due mainly to a decline in stock prices.

As a result, the risk of further impairment on stocks in the future is expected to be diminished. For example, should the Nikkei Stock Average decline to around ¥6,500, which is ¥500 below the lowest level it has registered in the past 15 months (¥7,054), an impairment loss on listed stocks would be limited to about ¥35 billion, though it depends on stock price behavior of the specified stocks held by SMBC.

Securitized products

SMBC expects loss on securitized products, excluding bonds issued or guaranteed by Government Sponsored Enterprises, to be approximately ¥9 billion. It expects the balance of securitized products as of March 31, 2009, to be approximately ¥36 billion after write-offs and provisions. As a result, it expects the impact of securitized products on future financial results to be limited.

Deferred tax assets (Deferred income taxes)

(1) SMBC calculates deferred tax assets conservatively by assuming stronger stress on its estimated future earnings, which affects the collectability of its deferred tax assets, for sharp economic downturns in order to further enhance its sound financial base.

(2) As a result, adjustments for income taxes will decrease net income by ¥300 billion, but net deferred tax assets^(*) as of March 31, 2009, will decrease ¥300 billion year on year to ¥670 billion. Through such conservative recognition of deferred tax assets, the associated financial risks of deferred tax assets will be lower from fiscal 2009.

(*) Excluding deferred tax liabilities on valuation difference on available-for-sale securities and deferred tax assets on net deferred losses on hedges. Net deferred tax assets were ¥969.5 billion as of March 31, 2008.

Ordinary profit and Net loss

Ordinary profit is expected to be approximately ¥20 billion, or ¥300 billion below the previous forecast. Net loss will be approximately ¥310 billion, or ¥470 billion below the previous forecast.

Other subsidiaries and affiliates

Earnings of certain subsidiaries other than SMBC and of some affiliates worsened. In addition, they have made additional loss provisions for their assets in preparation for the recent economic and business environment, disposed of securities, and recognized deferred tax assets conservatively. As a result, the impact of our subsidiaries other than SMBC and our affiliates on SMFG’s consolidated net income is expected to be minus ¥80 billion, compared with the previous forecast of plus ¥20 billion.

Ordinary profit and Net loss

We expect ordinary profit to be approximately ¥30 billion, a decrease of ¥450 billion from the previous forecast. Net loss is expected to be approximately ¥390 billion, ¥570 billion below the previous forecast.

As described above, for fiscal 2008, we have taken conservative financial measures in response to the difficult economic and business environment and aiming for promoting a steady recovery of our earnings in the following years.

We have established a more sophisticated risk-assets management system. We have been using the Advanced Measurement Approach, which is the most sophisticated measurement technique under the Basel II framework, for the measurement of operational risk weighted assets since March 31, 2008, and have decided to adopt the Advanced Internal Ratings-Based Approach for the measurement of credit risk weighted assets from March 31, 2009.

As a result, SMFG’s capital ratio on a consolidated basis, as of March 31, 2009, is expected to rise to approximately 11%, due mainly to a decrease in risk-weighted assets resulting from the adoption of the Advanced Internal Ratings-Based Approach.

Problem assets based on the Financial Reconstruction Law as of March 31, 2009 are expected be approximately ¥1,230 billion, an increase of ¥150 billion from September 30, 2008. Problem asset ratio will remain at a low-level of around 1.8%.