The Sumitomo The Sumitomo e Sumitomo Trust e Sumitomo Trust ust ust and B an and B an d B d Ban d Ban d B d B d B anki anki ki king ki king ng C ng C Co., C Co., C o., Ltd o., Ltd Ltd. Ltd. Ltd Ltd Ltd Ltd Sumitomo Trust’s Treasury and financial products business financial products business July 2010
This presentation material contains information that constitutes forward- looking statements. Such forward-looking statements are not guarantees g g g of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors including changes in managerial circumstances. This presentation does not constitute an offer to sell or a solicitation of an offer to subscribe for or purchase any securities.
Meeting agenda Changes in business environment g ・・・ 0 2 What is Sumitomo Trust’s Treasury and financial products business? 4 ・・・ Impact on financial results ・・・ 12 (For reference) Risk Management ・・・ 15 1
中表紙 Changes in business environment 2
Changes in business environment 1. Financial intermediary needs have changed Compared with the high-growth period, the surplus of household savings remains unchanged but funds are flowing from the private sector to governments and overseas i. Government deficit: Private sector losses due to the financial crisis are shouldered by the government ii. Increase in overseas investments: Funds are flowing from domestic investment targets to overseas growth markets amidst globalization. (Partially flowing back) Weak demand for corporate loans (dumping) + Back-flow from overseas markets + Difficulty in investing surplus funds = Massive holdings of government bonds + Weak profits + Risk of rising interest rates 2. Market break-up Chain-reaction of burden in breaking-up markets Losses due to chaos (Shift from efficient, no-arbitrage state to market decoupling led by demand and supply) Reduced risk-taking Renewed chaos 3. Changing trends Increased counter party risk p y Increased volatility Increased volatility Hi h i k/hi h High risk/high return Low risk/stable profits t L i k/ t bl fit Financial management technique Core business Weeding-out market players Liquidity dry-up Declining interest rates Rising interest rates Risk-taking needs Risk-avoiding needs Market decoupling Drop in price discovery function Liberalization (Market-led mechanism) Regulation/ tighter financial guidelines (capital/liquidity), introduction of IFRS 3
中表紙 What is Sumitomo Trust’s Treasury and financial y products business? 4
Mission of Treasury and financial products business First pillar: “Financial functions” maintaining and promoting the overall value of our balance sheet Second pillar: Market intermediary functions intermediate clients and markets ,or Second pillar: “Market intermediary functions” intermediate clients and markets or between markets Mission of Treasury and financial products business and contents of business Financial functions Fi i l f ti (I) Financial operations (I) Fi i l ti : to maintain and promote the : Adequate management relating to potential market risk overall value of balance sheet (interest rate risk, non-interest rate risk) in the entire company’s balance sheet balance sheet Market intermediary functions (II) Marketing functions : to intermediate clients and : Market-making and marketing deals of deposits and loans, markets ,or between markets k t b t k t d derivatives, foreign exchange and etc. i ti f i h d t (III) Investment operations : Proprietary investments taking advantage of market distortions 5
Contents of Treasury and financial products business (I) Financial operations Maintain and promote the overall value of balance sheet through adequate financial management relating to inherent market risk (interest rate risk, non-interest rate risk) involved in the entire company’s balance sheet Pursuit of most efficient and effective strategies utilizing investment instruments with high liquidity, such as domestic and foreign government bonds, stock indexes, etc., focusing on correlation between risk categories for management of non-interest rate risk (Fig.1) Interest rate risk management Major functions and roles Interest rate risk 1. Management of market risk (interest rate-related) (Deposits and loans, liquidity deposits) a a. Interest rate risk management for deposits and loans (categorized as Interest rate risk management for deposits and loans (categorized as “Marketing functions” in profit-record keeping) b. Interest rate risk management contained in deposit spread (liquidity Interest rate risk deposits, etc.) ( (Interest rate swaps, domestic and e es a e s aps, do es c a d 2 2. M Management of market risk (non interest rate-related) t f k t i k ( i t t t l t d) foreign government bonds) a. Stock price risk contained in stock holdings (Fig.2) Non-interest rate risk management b. Credit risk contained mainly in international credit securities investments Non interest rate risk Non-interest rate risk 3 3. Liquidity risk management Liquidity risk management (Stock price risk, credit risk) a. Securing a stable fund raising structure and lower fund raising costs through the efficient liquidity risk management covering all currencies Focus on correlation between risk categories g Major risk control methods Major risk control methods (Note: related to market risk management) (Note: related to market risk management) Interest rate risk a. Interest rates: domestic and foreign government bonds, interest rate swaps, etc. (Domestic and foreign bonds) b. Stocks: stock index-related mutual funds, etc Stock price risk (Note: containing no foreign exchange risk in principle.) (Stock index-related mutual funds) limited to methods with high liquidity 6
(For reference 1) Correlation between interest rate and stock price, credit spread and stock price (Chart.1) Trends of stock price and long term interest rate (%) (Yen) 7.0 7 0 21,000 21 000 U.S. Treasury 10year (Left) 6.0 18,000 Nikkei 225 (Right) 5.0 15,000 4.0 12,000 3.0 9,000 2.0 6,000 00 01 02 03 04 05 06 07 08 09 10 (Chart.2) Trends of stock price and credit spread (bp) (pt) 0 1,850 100 1,600 200 1,350 300 1,100 BBB spread (Left) BBB spread (Left) 400 850 S&P500 (Right) 500 600 00 01 02 03 04 05 06 07 08 09 10 7
(For reference 2) Status of balance sheet (As of Mar. 2010) (Chart.1) Yen denominated balance sheet Loans Time deposits (11.9 trillion yen) (11 9 trillion yen) (11.9 trillion yen) (11 9 trillion yen) (For reference) Interest rate attribution of loans and deposits Over 1 year Over 1 year (9.7 trillion yen) (8.5 trillion yen) • Fixed rate loans with tenor of 1 year or longer : 2.5 trillion yen y g y Less than 1 year Less than 1 year • Fixed rate deposits with tenor of 1 year or longer : 6.9 trillion yen (2.2 trillion yen) (1.2 trillion yen) NCD (2 1 trillion yen) (2.1 trillion yen) (Chart.2) Foreign currency denominated balance sheet Bond investments Liquidity deposits (2.0 trillion yen) Loans and credit Deposits, etc. i investments t t Foreign currency (1.6 trillion yen) Ratio of foreign JPY deposit converted deposit converted currency deposit Commercial paper, etc. into foreign currencies from JPY converted from JPY to total funding to total funding Capital etc Capital etc. Cross shareholding methods CD, etc. Approximately 45% Bond investments Inter-bank funding Inter-bank depo 8
Recommend
More recommend
