ANNUAL REPORT 2015 - Sumitomo Mitsui Banking · PDF file · 2016-04-18ANNUAL REPORT 2015 ... BALANCE SHEETS AS OF DECEMBER 31ST ,2015 AND 2014 .....16 XIV. STATEMENTS ... Ltd. SMBC’s

Banco Sumitomo Mitsui Brasileiro S/A

SAC: 0800 - 722 - 0248 Page | 0 Ouvidoria: 0800 - 722 - 2762

ANNUAL REPORT 2015

BANCO SUMITOMO MITSUI BRASILEIRO SA


SAC: 0800 - 722 - 0248 Page | 1 OMBUDSMAN: 0800 - 722 - 2762

CONTENT PAGE

I. DIRECTOR PRESIDENT MESSAGE .................................................................... 2

II. THE SYMBOL ..................................................................................................... 3

III. SUMITOMO MITSUI FINANCIAL GROUP (“SMFG”) .......................................... 4

IV. SUMITOMO MITSUI BANKING CORPORATION (“SMBC”) ................................ 5

V. BANCO SUMITOMO MITSUI BRASILEIRO S/A (“SMBCB”) ............................... 6

VI. BUSINESS STRATEGY ....................................................................................... 7

VII. HUMAN RESOURCES ......................................................................................... 8

VIII. CORPORATE COMMITTEES ............................................................................... 9

IX. RISK MANAGEMENT ....................................................................................... 11

X. LOAN CONTROL AND LOAN LOSSES HISTORY ............................................... 13

XI. PERFORMANCE ............................................................................................... 13

XII. FINANCIAL STATAMENT ................................................................................. 14

XIII. BALANCE SHEETS AS OF DECEMBER 31ST ,2015 AND 2014 .......................... 16

XIV. STATEMENTS OF INCOME ............................................................................... 20

XV. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY .............................. 22

XVI. STATEMENT OF CASH FLOWS ......................................................................... 25

XVII. NOTES TO THE FINANCIAL STATEMENTS ....................................................... 27

XVIII. CUSTOMER SERVICE CHANNELS .................................................................... 58



I. DIRECTOR PRESIDENT MESSAGE

Sumitomo Mitsui Banking Corporation ("SMBC") forayed into Brazilian market in 1958 by establishing

Banco Sumitomo Mitsui Brasileiro S/A, in Sao Paulo. Since then, we have provided high quality services to

our valued customers in Brazil.

On 27th November, 2013, we registered "Sumitomo

Mitsui Banking Corporation Brasil" ("SMBCB") as the official trade name in Brazil. The adoption of the trade

name is intended to take the advantage of SMBC's brand image and ever-growing presence around the

world.

Brazil is in an economic and political turmoil, and it is

facing a lot of challenges. However, we, SMBC still Keep a large and strong commitment to Brazil.

We promise you to keep enhancing our product capabilities and try to provide you with the best solution.

Even under a tougher and harsher business environment, we believe that our knowledge, expertise and experience will be able to support your business and surely lead you to certain success in the

future.

Let's keep on sailing into the uncharted waters together!

Takaaki Otani Director President

Sumitomo Mitsui Banking Corporation Brasil



II. THE SYMBOL

The symbol of SMBC was originated with the concept of “Rising Mark”, which means the new

Bank’s growth through the application of the diverse skills of SMBC staff to provide progressive, value-added financial services, to contribute to the welfare of customers.

The “light green” and the “dark green” were selected as the Corporate colors. The light green is

used in the Rising Mark to express Bank’s youthful, knowledgeable and friendly approach, while the dark green is used as the symbol’s background and text color to represent our tradition,

reliability and stability.



III. SUMITOMO MITSUI FINANCIAL GROUP (“SMFG”)

Sumitomo Mitsui Financial Group, Inc., was established in December 2002 through a stock transfer

as a bank holding company. The companies of SMFG offer a diverse range of financial services, centered on banking operations, and including credit card services, leasing, information services,

and securities.

On November 1st, 2010, SMFG listed its American Depositary Receipts (ADR) on the New York Stock Exchange (NYSE). The main objectives of this decision were to build a foundation to

accelerate the process of becoming a global player and to develop further the business through the

improved transparency of the financial condition and the maximization of investor convenience by directly participating in the world’s largest equity market while diversifying our funding channels.



IV. SUMITOMO MITSUI BANKING CORPORATION (“SMBC”)

Sumitomo Mitsui Banking Corporation was established in April 2001 through the merger of two

leading banks: The Sakura Bank, Limited, and The Sumitomo Bank, Limited.

The SMBC became a wholly owned subsidiary of SMFG and in March 2003, SMBC merged with the Wakashio Bank, Ltd. SMBC’s competitive advantages include a strong customer base, the quick

implementation of strategies, and an extensive lineup of financial products and services that leverage the expertise of strategic Group companies in specialized areas. SMBC, as a core member

of SMFG, works together with other members of the Group to offer customers highly sophisticated,

comprehensive financial services.

SMFG and SMBC have relocated their head offices, which were previously located at Hibiya and Otemachi districts, to the following location.

Address: 1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005, Japan

(Sumitomo Mitsui Banking Corporation Head Office Building)

Note: Some departments have been relocated to Otemachi 1-chome Mitsui Building (2-3, Otemachi 1-chome, Chiyoda-ku, Tokyo).



V. BANCO SUMITOMO MITSUI BRASILEIRO S/A (“SMBCB”)

Banco Sumitomo Mitsui Brasileiro S/A, a subsidiary of SMBC, was duly organized under Brazilian

laws, with a commercial bank portfolio, and initiated its activities as a multiple bank, adding to its activities the investment portfolio since 1989.

The Bank was incorporated in the 50’s decade, under the name of Casa Bancária Brazcot Ltda. The

former Sumitomo Bank, Limited (“SBL”) acquired 60% of the bank shareholding control, time at which the Bank became the SBL's second overseas subsidiary, changing its denomination to

"Banco Sumitomo Brasileiro S/A.".

From April 1st, 2001, at the same time that the newly formed SMBC initiated its activities, the

Brazilian subsidiary initiated activities with new name, Banco Sumitomo Mitsui Brasileiro S/A.

Over the past years, SMBCB has been supporting initiatives that aim to integrate sustainability and

financial market, playing a key role in the adoption of best practices against global climate changes.

Since November 27th 2013, "Sumitomo Mitsui Banking Corporation Brasil" is the trade name for Banco Sumitomo Mitsui Brasileiro S/A. The adoption of the trade name is intended to demonstrate

that "Sumitomo Mitsui Banking Corporation Brasil" operates under the parent company, SMBC which operates globally.

http://www.google.com.br/imgres?q=casa+das+rosas+predio+parque+cultural+paulista&hl=pt-BR&gbv=2&biw=1277&bih=558&tbm=isch&tbnid=sBu8EJUv7ON0xM:&imgrefurl=http://www.spcorporate.com.br/empreendimentos.asp?caller=viewOne&imv_cod_id=232&docid=4PKThsYgTyf7cM&imgurl=http://www.spcorporate.com.br/upload/fotos/pcp.jpg&w=600&h=800&ei=6v5YT-_rBYL40gHU2dHLBQ&zoom=1



VI. BUSINESS STRATEGY

SMBCB’s target market is the segment corporate for large companies and Japanese companies, in

regards to extension of credit; however, in some business segments it is related to smaller sized companies, for purposes of fund raising in the third-party asset management segment.

1. Treasury

SMBCB performs interbank transactions and some treasury business with the customers, in order

to accomplish their needs. It has a conservative profile, in the transactions performed, always

aiming at the profitability and security of the transactions.

2. The Time Deposit Market

SMBCB is active in the certificate of deposit (CDB) market.

3. The Interbank Market

Besides issuing certificates of deposits, SMBCB has the policy of maintaining sound relationships

with first tier banks. All brokers with which it deals are approved and regularly reviewed by the local Management.

4. US Dollar Funding

The total funding of SMBCB’s external resources is performed with SMBC New York agency. The

credit lines from SMBC are used for Resolution 3.844 on-lending’s, export and import finance, as

well as foreign currency operations.

5. Asset Management Activities

SMBCB’s Asset Management has been making efforts to offer well-managed administration and service of various mutual funds to investors. SMBCB’s funds meet investors’ demand with high

quality.

Asset Management has as main target the security and preservation of the quota holders’ investments, adopting a very conservative investment policy, however without putting aside the

best opportunities in order to assure a competitive profitability.

The investment policy is developed by making long-term macroeconomic scenarios and short-term

market expectations. This investment policy and also good risk management method enable to assure reasonable return on investment.

Assets under management are kept segregated from SMBCB’s own resources administration and therefore not reported as balance sheet items.

As of December 31, 2015 SMBCB managed a portfolio comprising 4 (four) investment funds;



Funds under Management (as of December 31st, 2015 and December 31st, 2014)

Funds

Net Worth (in thousands of R$)

2015 2014

SM Master Plus FI Ref.DI CPLP 227.938 155.859

SM Prev FI Multimercado 39.866 33.971

SM Platinum Plus FIC FI Ref.DI CPLP 35.540 30.384

SM FIC FIM Pactual High Yield 0 3.659

SM TASC FI Ref.DI 108.802 77.455

VII. HUMAN RESOURCES

SMBCB believes in the importance of its human resources as a major factor in the formation of its

results and maintenance of its businesses.

Thus, SMBCB has as one of its values the dissemination of modern Human Resources Policies

directed to the maintenance of the needs demanded by the businesses that the Bank performs in Brazil.

1. Management

The Management members meet regularly and are responsible for the strategic issues related to

SMBCB, except for the Deputy Director who is responsible for Asset Management. The

Management members also supervise the development of SMBCB activities and approve all policies related to the Bank.

The Senior Management comprises the following members:

Takaaki Otani Director President

Tetsuya Kainaka Director Vice-President

Roberto Isamu Ono Director Vice-President

Isaac Deutsch Director Superintendent

Izumi Tanaka Director

Roberto Hitoshi Mizuno Director

Carlos Eduardo de Moraes Barros Junior Director

Clóvis Prince do Amaral Deputy Director

2. Employees

Employees motivated, encouraged and recognized are requirements in the search for an

increasingly and consistently competitiveness.



Management regularly monitors the Bank’s procedures, policies and programs to ensure that employees are treated consistently with respect and consideration and that professional growth

opportunity are given in a free and fair basis.

SMBCB has established a continuing education program for its employees. The technical trainings

aim to improving and upgrading the knowledge of the employees in order to produce highly skilled professionals. All employees are eligible for this program, as long as they are working at the Bank

for more than three (3) months.

At the closing of December, 2015, SMBCB had 128 employees.

VIII. CORPORATE COMMITTEES

SMBCB’s management and administration are exercised by Senior Management. Besides the Senior

Management, SMBCB has committees established with the following attributions:

1. Asset and Liability Committee

Deliberation of asset and liability management policy, credit and liquidity risks

management.

2. Credit Committee

Analysis of loan portfolio risks and proposed credit limits, establishing restrictions on loans

to companies, companies groups and/or sectors/segments of the economy, always aiming

the security of the Institution.

3. New Products and Services Committee

Analysis of risks involved in developing new products and services;

Recommendation or rejection of new product and/or service to SMBCB Senior Management,

which will determine the implementation or not.

4. Money Laundering Prevention Committee

Ensuring that policies and procedures related to Money Laundering Prevention in the

Institution are being followed by all employees;

Ensuring that face-to-face trainings are conducted annually;

Deciding on the closure of business relationship with customers involved in money

laundering and terrorism financing crimes.

5. Operational Risk Committee

General overview of internal and external events related to operational risk;

Inherent and residual risks;

Database of operational risk events;

Business Continuity Plan;

Compliance with established rules.

6. Compliance Committee

Ensures the proper administration of the Institution’s activities;

Enhances the support to the administration in attendance to the institution's strategy,

policies and measures adopted;



Ensures the dissemination of internal controls, risk mitigation and compliance with local

and international applicable laws.

7. Shareholder Information Committee

Performance of the bank (both on accounting base and on management account base);

Credit Portfolio ;

Risk Management;

Litigation (contingent liabilities);

8. Legal Committee

Litigation (contingent liabilities);

Legal dept. activities’ progress follow-up;

9. Project Committee

Oversee the projects’ progress;

Anticipate and prevent future bottle-necks;

Take corrective measures in a timely manner, if applicable.

10. Audit Committee

Establish operating rules for its own operation, which must be approved by the board of

directors or, if there aren’t, by the Directors, formalized in writing and made available to

the respective shareholders;

Recommending to SMBCB, the hiring of external auditing company as well as its

replacement, when judged necessary;

Revising, previously to the publication, semiannual financial statements, inclusive footnotes,

administration report, as well as external auditor recommendation;

Assessment of internal and external auditors revision effectiveness, inclusive those related

to the verification of compliance internal codes, legal rules and regulation applicable to

SMBCB;

Assessment the accomplishment, by Senior Management, the recommendation made by

external and internal auditors;

Establishing and publishing procedures to the reception and treatment of information in

regard to the noncompliance to the rules and regulation applicable to SMBCB, besides the

internal codes , inclusive to the procedures specific to the protection of service rendering and confidentiality of information;

Recommend to the executive committee, correction or improvement of policies, practices

and procedures identified within the scope of its duties;

Conducting quarterly meetings with the Senior Management, external and internal auditors

in order to verify compliance with raised recommendation, inclusive with audit plan, formalizing, in minutes, the contents of such meetings;

Conduction meeting with management, at their request, to discuss the policies, practices

and procedures identified within their respective competences;



11. Compensation Committee

This committee aims to establishes objectives for the Variable Compensation (RV)

calculation and also a criteria for its payment based upon Resolution 3921 (“Resolution”),

of Brazilian Central bank, dated November 15, 2010. It applies to Senior Management (“Director” od “Management”), except foreigner directors that maintain labor relationship

with the controller Sumitomo Mitsui Banking Corporation (“SMBC”).

12. Investment Committee

Evaluates and decides about funds allocation possibilities for Investment Funds, exclusive

or not. Approves procedures and criteria needed for the development of Asset Management

activities.

Oversees on the return of investments funds.

Maintains the Asset Management activities according to the Brazilian Securities Commission

– CVM and Central Bank regulations.

IX. RISK MANAGEMENT

SMBCB is constantly pursuing to evaluate and improve its risk management structure, influencing in the culture and operation mode of this Institution.

Such practice is based on procedures, methods and standardized techniques and aims to monitor, measure, mitigate and report about risk exposures of any nature in the various activities and

processes, developed products or services offered, in order to support the continued sustainable development of its activities.

SMBCB’s Risk Management structure has been performing successfully the control and mitigation of risks that may cause damage or losses to the customers, to the environment or to its own image.

1. Risk Management Methodology

SMBCB approaches risk management inherent to its activities within a process of continuous

improvement, aiming monitor the business evolution and minimize the risks that may compromise

the quality of such management.

The risk management methodology is adequate to SMBCB’s activities profile, and it is worth mentioning that the Compliance structure and Internal Audit are important elements in the

improvement of our methodology.

The Organization’s risk management framework allows risks to be effectively identified, measured,

mitigated, monitored and reported to the Management.

2. Credit Risk Credit Risk is defined as the possibility of losses associated to the non-fulfilment by the borrower or counterparty to their respective obligations under the terms agreed, the devaluation of credit assets, resulting from deterioration in the borrower's risk rating, the reduction in earnings or remuneration, the advantages granted in the renegotiation and recovery costs. Credit Risk is strongly associated with other types of risk, such as Market, Liquidity and Settlement risks, among others. These types of risks often stem from the Credit Risk and may occur simultaneously.



According to the Resolution 3.721, the Bank has a single component responsible for managing credit, market and liquidity risks. The structure’s size is proportionate to the risks related to the products complexity offered by the Institution, operations nature and guidelines for the Bank’s risk exposure and companies of the Group. In the Bank's organizational structure, the function of Risk Management is represented by an independent Management from audit and business areas, which reports directly to the Risk Management Director of the Bank, being essential to have a vision and control independently of risk. Management is responsible for providing the necessary resources for effective credit risk management and for monitoring the activities related to such management. Periodic reports, as well as the guidelines adopted by Credit Risk management department are evaluated and approved by the Management of the Bank.

3. Market Risk

Market risk is the possibility of losses resulting from fluctuations in market prices.

Exchange rate risk is the possibility of loss due to changes in currency value equivalent to a

position in foreign currencies attributable to a change in the exchange rate.

Interest rate risk is the possibility of loss due to changes in the present value of future cash flow attributable to changes in interest rates.

In line with best corporate governance practices, aiming to preserve and strengthen Market and Liquidity risks management in the Institution, as well as comply with the provisions of Resolution

no. 3.464, of the National Monetary Council, market risk management in SMBCB involves many areas, which have specific responsibilities in the process, ensuring an effective framework for

measuring and controlling market risk. The Management approved the Market and Liquidity Risks

Management Policy, which review is conducted, at least annually, in order to provide the main guidelines for performance acceptance, control and market and liquidity risks management.

4. Liquidity Risk

Liquidity risk includes the funding risk and the product or market risk. Funding liquidity risk is the

uncertainty that the bank will be able to fulfill its funding needs or to compensate the mismatches

in fees and maturities. Market liquidity risk is the uncertainty that the Bank will be unable to liquidate or compensate positions efficiently, i.e. at reasonable prices.

5. Operational Risk

SMBCB has adopted the definition of operational risk from Basel Committee:

"The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events." Therefore, the operational risk is related to losses originated from operational errors of any sort,

which affects the profit of the Bank.

This definition includes legal risk associated to the unsuitability or deficiency in contracts signed by

SMBCB as well as the sanctions in order of unfulfilled of legal devices and the compensations by mischief to third parties resulting of SMBCB activities



X. LOAN CONTROL AND LOAN LOSSES HISTORY

After the previous approval performed by the local credit committee, the Credit department prepares the credit documentation with a detailed analysis of customer, financing, market data, as

well as other risk factors, submits to approval of Management and, subsequently, to the credit approval unit in Head Office.

After the final approval the limits are inserted into the local and global credit system for the

controlling purposes.

Credit exposure and credit quality reviews are thoroughly performed at least semi-annually.

The Asset and Liability Committee review assets and liabilities positions in regards to changes in

market conditions, economic perspectives and financial indicators.

SMBCB’s internal credit controls are conservative, as demonstrated by its loan loss history,

adopting as policy the effective risk mitigation and maximizing the quality of its portfolio.

1. Loan and Investment Loss History1

The policy of reserve for losses on loans and investments is the establishment of specific reserves, based on the general policy adopted by SMBCB, which has a conservative profile, properly aligned

with the regulations.

According to Central Bank regulation allowance for doubtful accounts (PDD) is mandatory for any

unsecured loan that is overdue by more than 15 days.

The following table presents the amount of SMBCB’s general loan loss reserves by risk level as of December 31st, 2015.

General Reserve

2015 2014

Risk Provision Total % of Allowance Total % of Allowance

rating rate - % transactions portfolio Recognized transactions portfolio Recognized

AA - 3.151.042 97 5.295 2.069.228 86 3.310

A 0,5 49 0 0 230.447 10 1.958

B 1,0 96.262 3 1.454 96.659 4 1.208

Total 3.247.353 100 6.749 2.396.334 100 6.476

XI. PERFORMANCE

1. Balance Sheet

At the closing of December, 2015, the Bank presented a total assets of R$ $ 7.956.748 and a net worth of R$789.498. Most of the liabilities obtained to fund SMBCB’s assets were provided by

Sumitomo Mitsui Banking Corporation, New York, under import, export, Resolution 3.844, and also under time deposits of local customers.

1 In Thousand of Reais



2. Income Statement

SMBCB’s net income after taxes for December end, 2015 represented a profit of approximately R$ 161,09 for each thousands of shares.

Due to the Bank’s customer oriented profile, the main income resources of SMBCB are related

credit operations (loans, on lending, export and import finance), intermediation of structured transactions and treasury.

XII. FINANCIAL STATAMENT

BANCO SUMITOMO MITSUI BRASILEIRO S/A

As of December 31, 2015

Independent auditors’ report on the financial statements

To

The Board of Directors and Shareholders Banco Sumitomo Mitsui Brasileiro S.A.

São Paulo - SP

We have audited the financials statements of Banco Sumitomo Mitsui Brasileiro S.A. (Bank), which

comprise the statement of financial position as of December 31, 2015, the related statements of income, the statement of changes in shareholders’ equity and statements of cash flows for the

year and half then ended, and notes, comprising a summary of significant accounting policies and

other explanatory information.

Management's responsibility for the financial statements Bank Management is responsible for preparing and adequately presenting these financial

statements in accordance with the accounting practices adopted in Brazil that apply to institutions

licensed to operate by the Brazilian Central Bank and the internal controls necessary to ensure the financial statements are free from material misstatement, whether due to fraud or error.

Independent auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Brazilian and International Standards on Auditing.

Those standards require that we comply with ethical requirements and plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to

the entity's preparation and fair presentation of the Bank's financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the Bank’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.



Opinion In our opinion, the aforementioned financial statements give a true and fair view of the financial

position of Banco Sumitomo Mitsui Brasileiro S.A. as of December 31, 2015, and the performance

of its operations and cash flows for the year and half then ended, in conformity with accounting practices adopted in Brazil that apply to institutions licensed to operate by the Brazilian Central

Bank.

São Paulo, February 24, 2016

KPMG Auditores Independentes

CRC 2SP014428/O-6

Silbert Christo Sasdelli Júnior Accountant CRC 1SP230685/O-0



XIII. BALANCE SHEETS AS OF DECEMBER 31ST ,2015 AND 2014 Statements of financial position as of December 31, 2015 and 2014

(In thousands of Reais)

Note Note

Assets 2015 2014 Liabilities 2015 2014

Current 5.386.696 2.685.867 Current 4.623.335 1.963.114

Cash and banks 102.502

35.769

Deposits 14 1.740.249 1.207.296

Interbank funds applied 5 1.884.615 1.101.455 Demand deposits 102.712

59.192

Money market 1.736.634 819.128

Foreign-currency deposits 2

9.812

Interfinancial deposits 147.981

282.327

Time deposits 1.637.535 1.138.292

Securities and derivatives 20.777

328.723

Money market funding 15 94.250

68.423

Own Portfolio 6.a 552

168.316

Third-party portfolio

94.250

68.423 Subject to guarantees 6.d -

134.583

Derivative financial instruments 6.b 20.225

25.824

Interbranch accounts 22.637

21.549

Third-party funds in transit 22.637

21.549

Interbank transactions 1.186.381 14.548

Term Deposits 1.186.381 14.548

Borrowings 16.a 901.455

510.444

Central Bank of Brazil deposits 7.674

13.553

Foreign currency borrowings 901.455

510.444

Interbank on-lending 7 1.178.707 995

Local on-lendings 16.c 71.923

1.092

Loans 8 1.340.185 663.048

Finame-Exim 71.923

1.092

Private sector 1.345.334



668.259

Allowance for doubtful accounts (5.149)

(5.211)

Foreign on-lendings 16.b 1.311.842 78.673

On-lending borrowings from abroad 1.311.842 78.673

Other accounts receivable 851.343

541.798

Foreign exchange portfolio 9 850.468

537.367

Derivative financial instruments 6.b - 6.478

Accounts receivable

1.349

781 Derivative financial instruments -

6.478 Other 10

1.126

4.915

Allowance for other possible loan losses

8 (1.600)

(1.265)

Other obligations 480.979

69.159

Collection of taxes 1.531

491

Assets received in settlement of debt 11 893 526 Foreign exchange portfolio 9 388.732

21.731

Prepaid expenses 662 40

Due to shareholders 40.721

11.525

Assets not for company use 200 200 Tax and social security 17.a 33.780

23.727

Inventory material 31

286 Subordinated debt 17.c 2.892

2.008

Other 17.b 13.323

9.677

Long-term assets 2.562.678 2.955.695

Interbank funds applied 5 25.833

27.290

Interfinancial deposits 25.833

27.290

Noncurrent liabilities 2.540.437 2.967.589

Securities and derivatives 664.412

512.124

Deposits 14 52.321

-

Own portfolio 6.a 166.767

326.985

Interbank deposits 52.321

-

Subject to guarantees 6.d



418.254 185.139


- Borrowings 16.a 712.388

-

Foreign currency borrowings 712.388

-

Interbank Accounts 7 262.474

1.062.390 Local on-lendings 16.c 68.249

106.987

Interbank onlending 262.474

1.062.390 Finame/Exim 68.249

106.987

Loans 8 1.530.478 1.271.363 Foreign on-lendings 16.b 820.847

2.293.075

Private sector 1.530.478 1.271.363 On-lending borrowings from abroad 820.847

2.293.075

Other accounts receivable 10 79.478

82.521


-

Other 79.478

82.521

Derivative financial instruments 64.832

-

Assets received in settlement of debt 11 3

7

Other obligations 821.800

567.527

Prepaid expenses 3

7

Tax and social security 17.a 13.390

12.420

Subordinated debt 17.c 780.960

531.120

Permanent assets 7.374

5.598

Other 17.b 27.450

23.987

Investment 122 25

Interests in subsidiaries - - Deferred income 3.478

2.464

Domestic 12 - - Deferred income 3.478

2.464

Other investments 122 25

Shareholders' equity 19 789.498

713.993



Fixed assets in use 13 4.378

2.772

Capital 667.806

667.806

Other fixed assets 8.012

7.039

Domestic 1

1

Accumulated depreciation (3.634)

(4.267)

Foreign 667.805

667.805

Profit reserves 121.946

48.895

Deferred charges 54

7

Mark-to-market of securities (492)

(1.476)

Organization and expansion expenses

1.652

1.652

Adjustment actuarial liabilities 238 (1.232)

Accumulated amortization (1.598)

(1.645)

Intangible assets 2.820

2.794

Intangible Assets 8.984

8.483

Accumulated amortization (6.164)

(5.689)

Total assets 7.956.748 5.647.160 Total liabilities 7.956.748 5.647.160

See the accompanying notes to the financial statements.



XIV. STATEMENTS OF INCOME Years ended December 31, 2015 and 2014, and

Semester ended December 31, 2015

(In thousands of Reais - except net income/ (loss) per thousand shares) 2015 2014

Note

2nd half Year Year

Financial operations revenue 641.597 1.086.770 494.949

Loans 21.a 290.548 449.969 180.661

Securities income 21.b 133.201 260.302 195.759

Foreign exchange funding expenses 21.d 179.336 271.262 108.598

Income on financial derivatives 6.b / 21.c 38.512 105.237 9.931

Financial operations expenses (536.893)

(873.045)

(426.530)

Deposits, money market and interbank funds

21.e (103.950)

(180.681)

(129.446)

Borrowings and repasses 21.f (431.638)

(692.091)

(295.840)

Allowance for doubtful accounts 8.e (1.305)

(273)

(1.244)

Gross income on financial operations 104.704 213.725 68.419

Other Operating Income (Expenses) (27.679)

(75.320)

5.524

Service fee income 21.g 14.498

23.727

19.049

Personnel expenses 21.h (22.825)

(42.419)

(35.644)

Other administrative expenses 21.i (13.114)

(22.959)

(17.589)

Tax expenses 21.j (5.827)

(9.849)

(6.606)

Equity in earnings (losses) of subsidiaries

12 - - 72

Other operating revenue 21.k 14.428

21.759

85.089

Other operating expenses 21.l (14.839)

(45.579)

(38.847)

Operating income 77.025

138.405

73.943

Nonoperating income 21.m 20 138 137

Net income before taxes and after profit



sharing 77.045 138.543 74.080

Income and social contribution taxes 20 (9.121)

(29.544)

(29.866)

Income Tax (3.594)

(12.541)

(13.016)

Social Contribution (2.970)

(8.311)

(7.828)

Deferred tax assets - IR and CS 20.b (2.557)

(8.692)

(9.022)

Statutory profit-sharing (763)

(1.425)

(1.011)

Net income for the half/years 67.161

107.574

43.203

Interest on shareholders’ equity 44.783

44.783

-

Number of shares 667.806 667.806 667.806

Net income per lot of a thousand shares - R$

100,57

161,09

64,69




XV. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Years ended December 31, 2015 and 2014, and Semester ended December 31, 2015


Profit reserve Equity appraisal adjustments

Note Capital realized

Legal Statutory Own Other equity appraisal

adjustments

Retained earnings

Total

Balances at December 31, 2013 667.806

798

11.166

(2.036)

712

-

678.446

Dividends not distributed -

-

3.988

-

-

-

3.988

Mark-to-market of securities -

-

-

560

-

-

560

Adjustment actuarial liabilities -

-

-

-

(1.944)

-

(1.944)

Net income for the year -

-

-

-

-

43.203

43.203

Legal reserve 19.c -

2.160

-

-

-

(2.160)

-

Statutory reserve 19.d -

-

30.783

-

-

(30.783)

-

Dividends 19.b

-

-

-

-

-

(10.260)

(10.260)

Balances at December 31, 2014 667.806 2.958 45.937

(1.476)

(1.232)

- 713.993

Dividends not distributed -

-

10.260

-

-

-

10.260

Mark-to-market of securities



- - - 984 - - 984


-

-

-

1.470

-

1.470

Net income for the year -

-

-

-

-

107.574

107.574

Legal reserve 19.c -

3.140

-

-

- (3.140)

-

Statutory reserve 19.d -

-

59.651

-

-

(59.651)

-

Interest on shareholders’ equity

19.b -

-

-

-

-

(44.783)

(44.783)


6.098

115.848

(492)

238

-

789.498

Balances at June 30, 2015 667.806

4.979

84.992

(1.327)

(1.232)

-

755.218

Dividends not distributed

9.597

9.597

Mark-to-market of securities -

-

-

835

-

- 835


-

-

-

1.470

-

1.470

Net income in the half -

-

-

-

-

67.161

67.161

Legal reserve 19.c

-

1.119

-

-

-

(1.119)

- Statutory reserve 19.d

-

-

21.259

-

-

(21.259)

-




Interest on shareholders’ equity

19.b -

-

-

-

-

(44.783)

(44.783)


6.098

115.848

(492)

238

-

789.498



XVI. STATEMENT OF CASH FLOWS

Years ended December 31, 2015 and 2014, and Semester ended December 31, 2015


Bank

2015 2014

2nd Half Year Year

Cash flows from operating activities

Net income in the half/year before tax and profit sharing

77.045

138.543

74.080

Items including not affecting cash flow:

Depreciation and amortization 610

1.169

745

Provision for contingencies 4.037

7.109

771

Equity in net income of subsidiaries -

-

(73)

Allowance for doubtful accounts 1.305

273

1.244

Statutory profit-sharing (2.087)

(1.425)

(1.011)

Income before income tax and social contributions

(9.121)

(29.545)

(29.866)

Net income before changes in working capital

71.789

116.124

45.890

Change in assets and liabilities:

(Increase) Decrease in interbank funds applied 118.076

135.803

(211.905)

(Increase) Decrease in securities (43.346)

229.450

(30.118)

(Increase) Decrease in interbank accounts 59.792

(371.917)

(512.151)

(Increase) Decrease in loans (468.843)

(936.190)

(840.830)

(Increase) Decrease in other receivables (244.235)

(296.868)

116.692

(Increase) Decrease in Other Assets received in settlement of debt

(1)

(363)

(288)

Increase (Decrease) in Deposits 469.668

585.274

47.612

Increase (Decrease) in money market funding 69.779

25.827

(59.219)

Increase (Decrease) in onlending and loan obligations

-

3.936

(1.337)

Increase (decrease) in subordinated debt instruments eligible for capital

-

108

196

Increase (Decrease) in interbank accounts (4.017)

1.088

(1.268)

Increase (Decrease) in other obligations 229.360 418.520 (58.678)

Increase (Decrease) in derivative financial instruments

(35.263)

(15.438)

44



See the accompanying notes to the financial statement.

Increase (Decrease) in deferred income

831

1.014

725 Increase (Decrease) adjustment equity

instruments and securities and CVM 600

2.304

2.453

(1.384) Income and social contribution taxes paid

(13.927)

(9.969)

(6.016)

Net cash provided by (used in) operating activities

211.967

(111.148)

(1.512.035) Cash flows from investing activities:

Sale of investments -

-

1.177

Sale/acquisition of PPE in use (-) (2.261)

(2.345)

(2.111)

Acquisition of investments (-) 1

(97)

-

Additions to intangible assets (-) (407)

(501)

(2.722)

Net cash provided by (used) in investment activities

(2.667)

(2.943)

(3.656)

Cash flows from financing activities:

Increase (decrease) in onlending and loan

obligations

902.444

892.497

1.289.088 Increase (decrease) in subordinated debt

instruments eligible for capital

161.216

250.616

62.720 Interest on shareholders’ equity

(44.783)

(44.783) -

Net cash provided by (used) in financing activities 1.018.877

1.098.330

1.351.808

Net increase (decrease) in cash and cash equivalents

1.228.177

984.239

(163.883)


35.769

10.662

Interbank funds applied 541.997

819.128

1.008.118

Cash and cash equivalents at beginning of half/year

610.959

854.897

1.018.780


102.502 35.769

Interbank funds applied 1.736.634

1.736.634

819.128

Cash and cash equivalents at end of half/year 1.839.136 1.839.136 854.897

Net increase (decrease) in cash and cash equivalents

1.228.177 984.239 (163.883)



XVII. NOTES TO THE FINANCIAL STATEMENTS

Financial Statements as of December 31, 2015


1. Reporting entity

Banco Sumitomo Mitsui Brasileiro S.A. (the “Bank”) is a multiple service bank authorized to operate commercial portfolios, including foreign-exchange and investment portfolios, by

National Monetary Council (CMN) Resolution 1524/88.

The Bank is responsible for managing investment funds whose net worth as of December 31,

2015 totaled R$ 376,608 (R$ 247,646 in 2014).

On January 18, 2012, the Bank received authorization from the Central Bank of Brazil to open a

branch in the Cayman Islands. The documents approving the opening of this branch were issued on January 08, 2013. The Bank effectively initiated its operations at the branch in

September 2013. The accounting balances of the foreign branches have been included in the financial statements.

2. Presentation and preparation of the financial statements

The financial statements have been prepared and disclosed herein in accordance with Brazilian accounting practices, considering the changes required by Law 11638/07 and Law 11941/08,

together with the standards and instructions issued by the Central Bank of Brazil (BACEN) through the Accounting Chart for Institutions of the National Financial System (COSIF).

Price assumptions and estimates for purposes of recording in the accounting and determining asset and liability values were used in the preparation of these financial statements. Accordingly,

the results recorded upon the actual financial settlement of these assets and liabilities could be different from the estimates.

The accounting pronouncements which have already been approved by the Central Bank of Brazil are:

CMN Resolution 3566/08 – Asset Impairment (CPC 01)

CMN Resolution 3604/08 – Statement of Cash Flow (CPC 03)

CMN Resolution 3750/09 - Disclosure of Related-Party Transactions (CPC 05)

CMN Resolution 3823/09 - Provisions, contingent liabilities and contingent assets (CPC

25)

CMN Resolution 3973/11 - Subsequent Events (CPC 24)

CMN Resolution 3989/11 - Share-based payments (CPC 10)

CMN Resolution 4007/11 – Accounting Policies, Changes in Estimation and Correction of Errors (CPC 23)

Resolution 4144/12 - Basic conceptual pronouncement (R1)

Resolution 4424/15 – Employee benefits (CPC 33)



The Executive Board authorized the issuance of the financial statements as of December 31,

2015 on February 24, 2016.

3. Description of significant accounting policies

The Bank adopts the following significant accounting practices in the preparation of its financial

statements:

a. Statement of income

Revenues and expenses are recognized on the accrual basis, on a daily pro rata basis for

financial income and expenses.

Financial income and expenses are calculated under the exponential method, except those related to factored invoices or foreign transactions, which are calculated under the straight-line

method.

Fixed-rate transactions are stated at redemption value and income and expenses for the future

period are stated as a reduction in related assets and liabilities. Floating-rate or foreign currency-denominated transactions are inflation adjusted through the reporting date.

b. Cash and cash equivalentes

Cash and cash equivalents consist of local-currency funds, foreign-currency funds and money market investments, with a liquidity at the maturity date of 90 days or less and which pose a

negligible risk of impairment, which the Bank uses to manage its short-term commitments.

c. Interbank funds applied

Interbank funds applied are stated at cost, plus income earned up to the reporting date up to

the reporting date.

d. Securities and derivatives

Securities Under BACEN Circular 3068, of November 8, 2001, securities are classified according to

Management’s intent, into the following categories:

Trading securities - Securities acquired for active and frequent trading, adjusted to

market value and charged to the statement of income for the year.

Available-for-sale securities - Securities that are neither classified as marketable or

held to maturity, adjusted to market value and charged to the relevant item in the

shareholders' equity, net of tax.

Held-to-maturity securities - Securities acquired for which the Management has the

intention and financial ability to hold as part of its portfolio until maturity date. These

securities are measured at acquisition cost, plus income earned. Interest income is recognized in profit or loss for the year.

Derivative financial instruments The Bank conducts derivative financial instrument transactions to hedge its operations against

variations in market prices and to mitigate currency and interest rate risks posed to its assets

and liabilities and cash flows agreed on by contract for proper terms, rates and amounts



Derivative financial instruments are used as a risk-transfer tool to cover the positions of banking book and trading book portfolios. In addition, highly liquid derivatives traded on the stock

exchange are used, within the strict limits and under periodical reviews, with the purpose of

managing trading portfolio exposures.

In order to manage the ensuing risks, internal limits to global and portfolio exposures were set. These limits are monitored daily. Considering the possibility of exceeding the limits as a result

of unexpected situations, Management established internal policies which entail the immediate definition of conditions for realignment. These risks are monitored by an area independent from

operational areas and reported daily to senior management.

Under BACEN Circular 3082, issued January 30, 2002 and BACEN Circular Letter 3026, issued

July 5, 2002 derivative financial instruments are solely composed of swap and Non Deliverable Forward transactions and accounted for according to the following criteria:

Difference receivable or payable recorded in assets or liabilities, respectively, and recognized as income or expense on a pro rata die basis through the reporting date. Derivative transactions

conducted at the request of clients or on one’s own, which meet or do not meet the hedging criteria applied to global exposure to risks and which are not considered as related transactions

according to the assumptions disclosed by circular 3150/2002 issued by BACEN (Central Bank of Brazil), are stated at market value, and valuations and devaluations are recognized as follows:

Derivative financial instruments not classified as hedge should be recorded in the revenue or expense account in the income statement for the half/period.

Financial instruments considered as hedging instruments:

Against market risks – are used to offset the risks arising from exposure to the variation in the

market value of the hedged item. Their valuations or devaluations are accounted for as an offsetting entry to revenue or expense accounts in the profit or loss for the half/year.

For cash flows – have the purpose of offsetting the changes in estimated future cash flows.

Their valuations or devaluations are accounted for as an offsetting entry to a separate item in shareholders’ equity.

On initial designation of the derivative as hedging instrument, the Institution formally documents the relationship between the hedging instruments and the items subject to hedge,

including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging

relationship, considering traditional calculation methods. The Institution makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of

whether the hedging instruments are expected to be "highly effective" in offsetting the changes in the market value of the respective hedged items during the period for which the

hedged risk is attributable, and whether the actual results of each hedge are within a range of

80% to 125%.

The hedged item is also adjusted at market value thus producing effects on borrowing and onlending borrowing expenses, in the situations in which the adjustment is negative, or other

operating income, in case of inversion of balance.

e. Loans and allowance for doubtful accounts

Loans are classified according to the Management’s assessment of risk, in accordance with the

Bank’s policy taking into account economic conditions, past experience and the specific risks of each operation, its debtors and guarantors, according to the parameters established by the



CMN Resolution 2682/99, procedure which requires a periodic analysis of the portfolio and its

classification into nine levels, from “AA” (minimum risk) to “H” (loss).

The Bank has established policies and procedures for granting credit, approved by the Credit

Committee and incorporated into the Bank’s internal control systems. These policies and procedures determine the need for evaluation of customer data to define the "Obligor Grade" -

"grading" of the client, considering qualitative and quantitative aspects.

Regardless of their level of risk, income from loans more than 60 days overdue is only recorded as revenue when actually received.

Loans classified as level “H” ” (100% of allowance) remain in this classification for six months, whereupon they are written off against the existing provision and controlled for five years in

memorandum accounts, no longer appearing in the balance sheet.

Renegotiated loans are held at the level they were classified in or higher. Renegotiations of

loans which had already been written off against the provision and were held in memorandum accounts are classified as level H and any gains deriving from the renegotiation shall only be

recognized as revenue when effectively received. When there is significant amortization of the transaction, or when new significant factors justify a change in the level of risk, there may be

the reclassification of the transaction to the lower-risk category.

The Bank records provision for guarantees provided and guarantee operations which used as

criteria, at least, the assumptions established in CMN Resolution 2682.

f. Other current and noncurrent assets

Other current and long-term assets are stated at cost plus, when applicable, income and

monetary variations earned, less allowance for losses at realization value adjustments.

g. Property, plant and equipment

Property and equipment are stated at acquisition cost, less accumulated depreciation,

calculated through the year reporting date. Depreciation is calculated under the straight-line method at annual rates which reflect the estimated useful lives of the assets. The main annual

depreciation rates are 20% for vehicles and data processing equipment, and 10% for other assets.

h. Deferred charges

Deferred assets are stated at the cost of acquisition or formation, less accumulated amortization calculated up to the year-end date, amortized over the lease term.

i. Intangible assets

Intangible assets consist of expenses incurred with the acquisition and development of the systems, which are amortized on a straight line basis at an annual rate of 20% and leasehold

improvements are stated at the cost of acquisition or formation, less accumulated amortization calculated up to the year-end date, amortized over the lease term.

j. Impairment of non-monetary assets

An impairment loss is recognized if the carrying value of an asset or its cash generating unit exceeds its recoverable value. A cash generating unit is the smallest identifiable group of assets

that generate cash flows with substantial independence from other assets and groups. Impairment losses are recognized in the statement of income for the period in which they were



observed. Non-financial assets, except tax credits, are reviewed at least annually to check for

any signs of impairment.

k. Monetary restatement of rights and liabilities

Receivables and payables legally or contractually subject to exchange rate or index variations

are adjusted for inflation through the reporting date. Offsetting entries for these monetary restatements are recognized directly in the profit or loss for the half/year.

l. Deposits and money market funding

Deposits and money market repurchase commitments are stated at the enforceable amounts and consist of charges incurred up to the reporting date, recognized on a pro rata die basis.

m. Contingent assets and liabilities and legal obligations

The recognition, measurement and disclosure of contingent assets and liabilities and of legal obligations (tax and social security) are performed in accordance with criteria set by the

National Monetary Council (CMN) Resolution 3823/09, which approved CPC 25 issued by the Accounting Pronouncements Committee (CPC). The criteria applied by the Management for the

measurement and disclosure of contingent assets and liabilities are:

Contingent assets - Are only recognized in the financial statements when evidence

exists that the decision will be favorable, and cannot be appealed.

Contingent liabilities - Are recognized in the financial statements when a present

obligation exists as a result of a past event, and according to the legal advisors’ and the

Management’s opinion it is probable that an outflow of economic benefits will be required to settle the obligation and whenever the amounts involved can be reliably estimated.

Provisions for labor contingencies are recognized according to lower court decisions at

labor courts.

Legal obligations - tax and social security - consist of legal claims, whereby the

legality and constitutionality of some taxes and contributions have been challenged. The amounts disputed are fully recorded in the financial statements and corrected in

accordance with the legislation in force.

Contingent liabilities are disclosed in notes to the financial statements, unless the likelihood of

any disbursement to settle them is remote.

Court deposits are held in an asset account, and corrected based on their bank statements, without deducting them from provisions for contingent liabilities and legal obligations, in

compliance with the BACEN rules.

n. Income and social contribution taxes

The provision for income and social contribution taxes is calculated according to the rate of

15% plus a surtax of 10% on taxable income in excess of R$ 240 for the year, adjusted by

additions and deductions established by law. The social contribution determined on income adjusted in accordance with the legislation in force is calculated at a rate of 15% until August

and 20% from September in accordance with Normative Instruction 1591.

Tax credits are recognized according to the provisions included in Resolution 3059 of December 31, 2002 and Resolution 3355 of March 31, 2006, issued by the National Monetary Council.

Under those resolutions, in order to recognize and keep in the accounting tax credits arising



from income and social contribution tax losses and from temporary differences, the entity must

fulfill all of the following conditions:

(i) Report a history of taxable income or revenues for income and social contribution tax purposes in at least three of the last five fiscal period, including the current year;

(ii) Future taxable income is expected to be generated for income and social contribution tax purposes, as the case may be, in subsequent periods, according to technical studies

which allow the realization of tax credit over a maximum period of ten years.

Deferred tax assets on tax loss carryforwards and social contribution were calculated at

rates of 25% for income tax and 15% for social contribution on net income and are presented as "Other receivables - sundry" as shown in Note 20.b. By decision of the

administration, it was not considered for tax credit purposes the impact related to the

increase of the social contribution rate to 20%.

Tax benefits arising from the right to offset other temporary differences are recognized only when they are actually used, as explained in Note 20.c

o. Employee benefit plan

The post-employment benefit plan comprises the commitment made by the Bank to supplement the benefits of pension plan system.

Defined Benefit Plan

With respect to this type of plan, the obligation of the Sponsor is to provide the benefits agreed

on to the employees, undertaking the potential actuarial risk that the benefits may cost more

than the original amount forecast.

CVM Resolution 695 of December 13, 2012, approved the CPC Technical Pronouncement 33 (R1) which addresses the matter of employee benefits, in accordance with the amendments to

the International Accounting Standard IAS 19. CPC Technical Pronouncement CPC 33 (R1)

established essential changes in the accounting and disclosure of employee benefits such as the removal of the corridor mechanism in the recording of the plan’s liabilities, and changes in the

recognition criterion of the plans’ assets (appreciations and devaluations). The adoption of the aforementioned Pronouncement applies to years started as from January 1, 2014, and the

effects are recorded retrospectively in the accounting, as changes in accounting practices. The

adoption of this new accounting practice will essentially result in the full recognition in a liability account of actuarial losses (actuarial deficit), in contra-entry to equity account, net of tax

effects.

The present value of the defined-benefit obligation is the present value without adopting any of the plan's assets, the future expected payments necessary to settle the obligation resulting

from the employee's service in current and past periods.

On June 25, 2015 the Central Bank issued Resolution 4424 stating that financial institutions

should comply with CPC Technical Pronouncement 33 (R1) from January 01, 2016.

The effects of the adoption of CPC 33 (R1) as of December 31, 2015 were R$ 1,470 (R$ 1,944

in 2014). The difference in amounts was due to the variations in the assumptions adopted by the Entity when compared to December 31, 2014, and are based on the report issued and

restated as of December 31, 2015.

4. Cash and cash equivalents



Cash and cash equivalents presented in the statement of cash flows are broken down as

follows:

2015 2014

Cash and banks 102,502 35,769

Interbank funds applied 1,736,634 819,128

Total cash and cash equivalents 1,839,136 854,897

5. Interbank funds applied

Money market, as of December 31, 2015 and 2014, is composed as follows:

2015

Up to 3 3 to Over months 12 months 12 months Total

Money market - 1,736,634 - 1,736,634

Bank position - 1,642,384 - 1,642,384

National Treasury Bills - 966,044 - 966,044 National Treasury Notes - Series B - 676,340 - 676,340

Financed position

National Treasury Bills - 94,250 - 94,250

Interfinancial deposits 17,959 130,022 25,833 173,814

Not Related 17,959 130,022 25,833 173,814

Total 17,959 130,022 1,762,467 1,910,448

2014

Up to 3 3 to Over months 12 months 12 months Total

Money market 819,128 - - 819,128

Bank position 750,705 - - 750,705

National Treasury Bills 331,707 - - 331,707 National Treasury Notes - Series B 418,998 - - 418,998

Financed position 68,423 - - 68,423

National Treasury Bills 68,423 - - 68,423

Interfinancial deposits 33,590 248,737 27,290 309,617

Not Related 33,590 248,737 27,290 309,617

Total 852,718 248,737 27,290 1,128,745



6. Securities and derivatives

a. Securities

It is not the Bank’s strategy to acquire securities for the purpose of actively and frequently

trading them. Thus, as of December 31, 2015 and 2014 the securities portfolio is classified under the available-for-sale securities category, as shown below:

2015

Market (carrying) value

Available-for-sale securities

Total

Up to 90 days

180 to 360

days Over 360

days

Adjustment to market

value Cost

value

Own portfolio: Financial Treasury Bills - - 166,767 166,767 (191) 166,958

- - 166,767 166,767 (191) 166,958

Investment fund quotas:

Equity fund quotas – FIP - - 552 552 (84) 636

Subject to guarantees- Financial Treasury Bills - - 418,254 418,254 (576) 418,830

- - 418,254 418,254 (576) 418,830

Total - - 585,573 585,573 (851) 586,424

2014



Total

Up to 90 days

180 to 360

days Over 360

days

Adjustment to market

value Cost

value

Own portfolio: National Treasury Bills - - 27,479 27,479 (1,722) 29,201 Financial Treasury Bills 168,316 - 298,954 467,270 (338) 467,608

168,316 - 326,433 494,749 (2,060) 496,809

Investment fund quotas:

Equity fund quotas – FIP

-

- 552 552 (80) 632

Subject to guarantees- Financial Treasury Bills 134,583 - 185,139 319,722 (278) 320,000

134,583 - 185,139 319,722 (278) 320,000

Total 302,899 - 512,124 815,023 (2,418) 817,441



The market value of marketable securities is calculated in the following manner:

Securities bearing interest at SELIC (Central Bank overnight rate) and DI

(Interbank Deposit) rates - The market value is calculated by applying the SELIC rate accrued over the period to the issue price per unit, considering the market premium or

discount. The premium or discount is obtained daily according to the expectations of ANBIMA - Brazilian Financial and Capital Markets Association for each maturity on the day

before the calculation.

Securities bearing interest at fixed rates - The market value is obtained by applying a discount rate to the future flow of payments on the security. The rate is calculated

according to the fixed-rate curve of BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias

e Futuros (São Paulo Stock Exchange) (futures interbank deposit).

Investment fund quotas - The investment fund is valued according to the last value of the quota disclosed as of the fund’s reporting date by the manager.

Government securities are book-entry and registered with the Special System for Settlement

and Custody - SELIC.

b. Derivative financial instruments

Derivative financial instruments consist of swap and Non Deliverable Forward (NDF) operations

which are held in custody at BM&FBOVESPA and CETIP S.A. - Mercados Organizados, respectively.

The exposures of asset and liability positions and the amounts recorded in asset and memorandum accounts as of December 31, 2015 and 2014, which are segregated into the

categories of index, maturity ranges, notional and carrying values, and whose counterparts are participants in the national financial system are shown below:

2015


Index

Total

Place of trading Reference

value Up to

90 days Over 90

days Restated

cost

SWAP Receivable position: US dollar

BM&FBOVESPA 1,091,593 5,574 1,187,137 1,192,711 1,199,384

Liability position: CDI BM&FBOVESPA 1,091,593 5,170 1,130,474 1,135,644 1,145,811

Difference receivable 404 56,663 57,067 53,573

Receivable position: CDI Cetip 375,104 - 387,530 387,530 379,294

Liability position: US dollar

Cetip 375,104 - 409,614 409,614 410,681

Differential (payable) - (22,084) (22,084) (31,387)

NDF Receivable position: US dollar

BM&FBOVESPA 18,434 26,994 - 26,994 26,516



Liability position: Pre BM&FBOVESPA 18,434 20,188 - 20,188 20,207

Difference (receivable) 6,806 - 6,806 6,309

NDF Receivable position: Pre Cetip 22,122 21,923 2,077 24,000 24,031


Cetip 22,122 28,717 2,288 31,005 30,505

Differential payable (6,794) (211) (7,005) (6,474)

2014


Index

Total

Place of trading

Reference

value

Up to

90 days

Over 90

days

Restated

cost

SWAP Receivable position: US dollar

BM&FBOVESPA 518,657 - 550,518 550,518 557,308

Liability position: CDI BM&FBOVESPA 518,657 - 528,781 528,781 528,781

Difference receivable - 21,737 21,737 28,527

Receivable position: CDI Cetip 26,049 - 26,666 26,666 26,666


Cetip 26,049 - 28,624 28,624 28,554

Differential (payable) - (1,958) (1,958) (1,888)

NDF Receivable position: US dollar

BM&FBOVESPA 46,248 17,748 26,244 43,992 44,600

Liability position: Pre BM&FBOVESPA 46,248 20,316 27,748 48,064 48,605

Differential (payable) (2,568) (1,504) (4,072) (4,005)

NDF Receivable position: Pre Cetip 50,473 23,326 29,100 52,426 52,967


Cetip 50,473 21,041 27,746 48,787 49,425

Difference receivable 2,285 1,354 3,639 3,542

The market value of derivative financial instruments is determined by discounting the future values at present value according to the interest rate curves obtained by employing the market

method, which is mostly based on data disclosed by BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros.

The adjustment at market value determined in derivative financial instruments for the year

ended December 31, 2015 totaled R$ (12,763) (R$ 6,830 in 2014), and was recognized in

income accounts.



Profit or loss from derivative financial instruments for the years ended December 31, 2015 and

2014 are directly influenced by market interest rates prevailing at the time of the transaction,

and by the Dollar rate variation. They are presented below:

Profit or loss

2015 2014

Derivative financial

instruments Revenue Expense Net Revenue Expense Net

Swap 200,051 (87,557) 112,494 61,391 (39,299) 22,092

“NDF” 5,276 (12,533) (7,257) 12,858 (25,019) (12,161)

205,327 (100,090) 105,237 74,249 (64,318) 9,931

c. Hedge accounting

On December 31, 2015 the Bank had just operations with derivative financial instruments aimed

at mitigating the effect of exchange variation in funding performed in foreign currency and loans in Reais. Such operations were designated as market risk accounting hedge and were

performed on the over-the-counter market.

1- Composition of derivative financial instruments by maturity range and index

2015

Description Index Notional Curve Market MTM

Adjustment

Swap Receivable Point US dollar 698,633 764,560 759,741 (4,819)

Swap Liability Point: CDI 698,633 729,454 720,987 8,467

Differential receivable/(payable) 35,106 38,754 3,648

Description Index Notional Curve Market MTM

Adjustment

Swap Receivable Point CDI 15,090 15,902 15,902 -

Swap Liability Point: Pre 15,090 15,865 14,844 1,021

Differential receivable/(payable) 37 1,058 1,021

Maturity – Market Value – 2015

Description Index Up to 12

months

1 to 3

years

3 to 5

years Total

Swap Receivable

Point US dollar 574,928 184,813 - 759,741

Swap Liability Point CDI 560,885 160,102 - 720,987

Description Index Up to 12

months

1 to 3

years

3 to 5

years Total

Swap Receivable CDI 2,542 7,138 6,222 15,902



Point

Swap Liability Point Pre 2,511 6,785 5,548 14,844

2- Market value assessment

The market value assessment regarding the funding in foreign currency was performed using

Swap operations, designated as hedging instruments, in compliance the BACEN Circular

3082/02.

2015

Analysis of the Hedging Instrument Effectiveness

Description Exposure Principal Curve Market

MTM

Adjustment

Swap Receivable

Point US dollar 698,633 764,560 759,741 (4,819)

Funding US dollar 762,294 764,387 759,740 4,647

2015

Analysis of the Hedging Instrument Effectiveness

Description Exposure Principal Curve Market

MTM Adjustment

Loan Pre 15,600 15,917 15,177 (740)

Swap Liability Point Pre 15,090 15,865 14,844 1,021

d. Value and type of margins given in guarantee

The amount of margin deposited as collateral for derivative financial instrument transactions at BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuro as of December 31, 2015 and

2014 can be broken down as follows:

Market value

2015 2014


Financial Treasury Bills 271,795 156,269

Total 271,795 156,269

The other amounts deposited as guarantee as of December 31, 2015 and 2014, have the

following composition: Market value

2015 2014


Financial Treasury Bills 146,458 163,453

Total 146,458 163,453

The market values of securities and derivative financial instruments are calculated according to

market price quotations or quotations from market agents and pricing models developed by the management, which use rate interpolation mathematical models for intermediate terms.

7. Interbank transactions



They refer to on lending borrowing operations from abroad, to the Financial Institution in the

country and abroad (branch in Cayman), and are thus already stated considering their provisions:

2015 2014

Outstanding: Up to 30 days 1,969 138 31 to 60 days 1,484 539 61 to 90 days 66 5 91 to 180 days 447 313 181 to 360 days 1,174,741 -

More than 360 days 262,474 1,062,390

Total 1,441,181 1,063,385

8. Loans

As of December 31, 2015 and 2014, information on the loan portfolio is summarized as follows:

a. By operation

Description 2015 2014

Advances to depositors - 44 Overdraft 62,372 173,463 Resolution 3844 (formerly Resolution 63) 109,111 76,308 BNDES on-lending - FINAME - FINEM and EXIM- Other 140,517 108,411 Compror financing 18,022 11,130 Working capital 1,071,536 709,226 Vendor - 943 Private financing 48 53 Financing in foreign currency 897,849 817,483

Export Credit Notes - NCE 575,962 41,287 Discounted trade bills 1,135 1,274

Total loans (*) 2,876,553 1,939,622

Advance on foreign exchange contracts (Note 9) 366,506 452,362 Income receivable from advances (Note 9) 4,294 4,350

Total loan portfolio 3,247,353 2,396,334

(*) The difference in the amount of R $ 740 to the balance sheet refers to the market adjustment had to hedge accounting lending operations, as described in Note 6.c.

b. By maturity

2015 2014

Outstanding: Up to 30 days 263,374 93,606 31 to 60 days 196,346 161,623 61 to 90 days 204,768 269,920 91 to 180 days 249,736 314,277 181 to 360 days 789,645 356,242

More than 360 days 1,543,484 1,200,666

Overdue - -



Total 3,247,353 2,396,334

Loans of the 20 largest debtors as of December 31, 2015 account for 86.18% of the loan portfolio (84.55% in 2014) in the amount of R$ 2,798,610 (R$ 2,026,071 in 2014).

c. By risk rating 2015 2014

Risk rating

Total % of Provision

Total % of Provision

Provision rate %

operations portfolio creation operations portfolio creation

AA - 3,151,042 0% 5,295 2,069,228 86 3,310 To 0.5 49 97% - 230,447 10 1,958

B 1.0 96,262 3% 1,454 96,659 4 1,208

Total 3,247,353 100% 6,749 2,396,334 100 6,476

d. By business sector

2015 2014

Private sector: Industry 3,074,896 2,190,576 Trade 150,866 204,197 Other services 21,542 1,508 Private sector 49 53

Total 3,247,353 2,396,334

e. Change in the allowance for doubtful accounts

2015 2014

Opening balance 6,476 5,232 Reversal of the allowance for doubtful accounts (4,639) (3,280)

Creation of allowance for doubtful accounts 4,912 4,524

Closing balance 6,749 6,476

In the financial year ended December 31, 2015 there were no renegotiated operations. (R$ 784 in 2014).

9. Foreign exchange portfolio (other receivables and other liabilities)

Foreign exchange operations are recorded in balance sheet accounts, as follows: 2015 2014

Assets:

Unsettled purchased exchange 778,565 520,940 Receivables on exchange sale 71,854 13,200 Advances received in local currency (4,245) (1,123)

Income receivable from advances granted (Note 8) 4,294 4,350

Total 850,468 537,367

Liabilities:



Unsettled sold exchange 70,050 13,546

Obligations on exchange purchase 685,188 460,547

Advance on foreign exchange contracts (Note 8) (366,506)

(452,362)

Total 388,732 21,731

10. Other receivables – Other

Other receivables – other consist of the following amounts:

2015 2014

Tax credit – income and social contribution tax negative basis (see note 20b)

50,111 58,803

Collateral deposit receivables (see note 18) 17,242 15,435 Prepaid income tax and social contributions 11,986 8,033 Other tax credits (see note 20c) 819 4,445

Other 446 720

Total 80,604 87,436

Current assets 1,126 7,270

Noncurrent assets 79,478 82,521

11. Assets received in settlement of debt

Other receivables – other consist of the following amounts: 2015 2014

Non-operating assets 200 200 Inventory material 31 40

Prepaid expenses 665 293

Total 896 533

In the year ended December 31, 2015, the Bank has recorded as goods not for own use the

property received as collateral in the debt recovery and renegotiation operations, as per adjudication letter dated April 30, 2014.

12. Investments

BSMB Consultoria Ltda. (“BCC”), which had been established on July 1, 2008, had its activities

discontinued on November 28, 2014. Its capital, fully subscribed and paid in was R$ 800, and

was divided into 1,000 quotas with a par value of R$ 800 (eight hundred reais) each. The Bank held 99.9% of that company’s capital. BCC was engaged in: (a) planning, preparing,

implementing and providing technical and financial advisory on energy projects and projects for reducing the emissions of greenhouse effect gases; and (b) intermediation, brokerage,

mediation and management of services and businesses related to the carbon credit market.

The amount of equity transferred to the Bank on the occasion of the discontinuance was R$

1,178, R$ 72 of which related to the income for the year 2014 plus R$ 1,106 deriving from the amount of the investment in 2013.

13. Property, plant and equipment



As of December 31, 2015 and 2014 property, plant and equipment are represented as follows:

2015 2014

Description

Annual depreciation

rate %

Cost Accumulated

depreciation

Net

amount

Net

amount

Data processing system 20 4,409 (1,613) 2,796 970

Furniture and equipment 10 1,603 (795) 808 890 Communications system 10 125 (72) 53 63

Security system 10 298 (281) 17 10

Transportation system 20 1,577 (873) 704 839

Total 8,012 (3,634) 4,378 2,772

The increase in fixed assets for the year was principally due to the fact that the Bank expanded

its premises, and started to use another suite at its current address.

14. Deposits

Breakdown by maturity as of December 31, 2015 and 2014:

2015 2014

Demand deposits

Time deposits

Interbank deposits

Foreign-currency deposits

Demand

deposits

Time deposits

Foreign-currency deposits

Description No maturity 102,712 - - 2 59,192 - 9,812 Up to 30 days - 57,802 - - - 35,270 - 31 to 60 days - 19,755 - - - 11,809 - 61 to 90 days - 147,036 - - - 17,252 - 91 to 180 days - 98,200 - - - 77,772 - 181 to 360 days - 662,656 - - - 540,491 - More than 360 days

- 652,086 52,321

- - 455,698 -

Total 102,712 1,637,535 52,321

2 59,192 1,138,29

2 9,812

The time deposit portfolio was classified under current liabilities because deposits are entirely registered with Cetip S.A. - Mercados Organizados with early redemption clause.

15. Money market funding

2015 2014

Portfolio Portfolio

Securities third

parties Total third

parties Total

National Treasury Bills

94,250

94,250 68,423 68,423



94,250 94,250 68,423 68,423

16. Onlending and loan obligations

Foreign funding is basically performed through the use of credit facilities granted by the shareholder Sumitomo Mitsui Banking Corporation, as follows:

a. Obligations on overseas loans

As of December 31, 2015 the balance of USD 413,361 (USD 191,970 in 2014) basically consists

of import and export financing agreements which mature up to September 30, 2015 and are

subject to interest rates of up to 0.96% p.a., plus exchange variance for these transactions. The balance as of December 31, 2015 is R$ 1,613,843 (R$ 510,444 in 2014).

b. Foreign on-lendings

Foreign on-lending as of December 31, 2015, correspond to USD 546,255 (USD 893,112 in 2014). These obligations, translated at the official period-end buying rate, are governed by the

CMN Resolution 3844/00 and are subject to interest rates that range from 0.67% to 1.83% p.a., plus exchange variance, with repayment periods between 1 and 60 months. The balance as of

December 31, 2015 is R$ 2,132,689 (R$ 2,371,748 in 2014).

c. Local on-lendings

Domestic on-lendings basically consist of financing granted by the National Bank for Economic

and Social Development - BNDES under the Government Agency Fund for Machinery and Equipment Financing (FINAME) and Credit Agency for Brazil Exports (EXIM) program, maturing

up to April 16, 2016, and interest rates of up to 6.50% p.a., in the amount of R$ 140,172

(R$ 108,079 in 2014).

17. Other obligations a. Tax and social security

Description 2015 2014

Provision for income tax and social contribution (see note 20.a) 20,854 20,844 Provision for tax risks (see note 18) 8,258 7,623 Services Tax - ISS 257 190 Withholding income tax - IRRF on fixed-income transactions 915 235 Tax for Social Security Financing - COFINS 1,532 672 Contribution to Social Integration Program (PIS) 249 109 Deferred income and social contribution taxes 7,921 9 Government Severance Indemnity Fund for Employees - FGTS 220 189 Taxes and contributions on outsourced services 6 6 PIS Offsetting (see note 18) 2,797 2,668 PIS constitutional amendment (note 18) 2,336 2,129

Payroll taxes and contributions 1,228 1,032 Contribution to the Credit Guarantee Fund - FGC 435 302

Other 162 139

Total 47,170 36,147

Current liabilities 33,780 23,727

Noncurrent liabilities 13,390 12,420



b. Other

2015 2014

Description Current

Current

Total Noncurrent

liabilities Total Noncurrent

liabilities

Provision for civil and labor risks (note 18) - 27,450 27,450 - 21,226 21,226 Provision for personnel expenses 9,303 - 9,303 7,427 - 7,427 Provision for general expenses 3,250 - 3,250 1,596 - 1,596 Actuarial liabilities - - - - 2,761 2,761 Guarantees provided 643 - 643 538 - 538

Other 127 - - 116 - 116

Total 13,323 27,450 40,773 9,677 23,987 33,664

c. Subordinated debt instruments eligible for capital

The Bank has a loan in the amount USD 40 million from the controlling shareholder, Sumitomo

Mitsui Banking Corporation, for a period of 15 years, which was authorized by BACEN on November 10, 2006, and is to be considered as subordinated debt and part of tier II capital of

the Bank’s regulatory shareholders’ equity.

The Bank obtained a new loan in the amount of USD 160 million in October 2013, for a 10-year

period, which was authorized by the Central Bank of Brazil (Bacen) on December 5, 2013, and the Bank was also authorized to incorporate its notional equity level II. Both loans have already

been authorized based on the terms of Resolution 4192 of March 1, 2014, amended by Resolution 4278 of October 31, 2013 The restated balance as of December 31, 2015 is

R$ 783,852 (R$ 533,128 as of December 31, 2014).

18. Provision for tax, civil and labor risks

The Bank is involved in tax, civil and labor proceedings. The provision amounts and related court deposits are as follows:

Provision Court deposits

Description 2015 2014 2015 2014

Provision for tax risks:

ISS - RJ (a) - - 3,572 3,302

ISS - SP (b) 267 231 2,226 2,060

Legal obligations: Demutualization Cetip (h) 81 - - -

PIS offsetting (c) 2,797 2,668 - - PIS constitutional amendment (d) 2,336 2,129 1,656 1,502

Social Contribution on Net Income - CSLL (e) 7,909 7,392 7,908 7,392

Total 13,390 12,420 15,362 14,256

Provision for risks:

Civil (f) 23,917 19,617 70 -

Labor (g) 3,533 1,609 1,810 1,179



Total 27,450 21,226 1,880 1,179

Total provisions and court deposits 40,840 33,646 17,242 15,435

a. The Bank is involved in tax proceedings related to Service Tax (ISS), in Rio de Janeiro, levied on commissions received from borrowings and onlending borrowings, and also revenues

recorded in the “Apportionment of internal income” account. Management, based on the

opinion of its legal advisors, assesses that the chances of success in these proceedings are possible, and therefore no provision was recorded. However, the deposit made to proceed with

the litigation in court, which totals R$ 3,572 as of December 31, 2015, was maintained. (R$ 3,302 in 2014).

b. The provision consists of a part of the amount involved in the judicial proceedings filed in connection with the service tax charged by the city of São Paulo. The lawsuit basically refers to

the tax levied on foreign exchange transactions in the period from 2001 to 2003 and guarantees provided in 2004, for which the Bank understands that the financial disbursement is

probable. As for the non-accrued portion in the amount of R$ 1,830, Management understands, based on the opinion of its legal advisors, that the chances of success are possible

and, therefore, did not recognize any provision. The deposit to proceed with the litigation in

court totals R$ 2,226 (R$ 2,060 in 2014).

c. The provision consists of the offsetting of PIS credits claimed in courts due to the disallowance by the Brazilian Federal Revenue Department of the credits offset and not approved. The

provisioned amounts include the periods covering September 2002 to December 2003. The

restated amount as of December 31, 2015 is R$ 2,797 (R$ 2,668 in 2014).

d. The Bank has filed lawsuits challenging the constitutionality of the changes in PIS established by Constitutional Amendments EC 10/96 and 17/97. In December 2014 the Bank reversed the

amount of R$ 1,580 in connection with the lawsuit challenging the constitutionality of

Constitutional Amendment 17/97, due to the filing of the administrative proceeding owing to its lapsing and, only remaining provided for the amounts related to lawyer’s fees, which will be

restated and paid on the occasion of the trial by the High Court of Justice (STJ). The restated amount as of December 31, 2015 is R$ 2,336 (R$ 2,129 in 2014).

e. The Bank questions the increase in the rates from 18% to 30% for the year of 1996 and the determination of the social contribution calculation base. A provision was accrued for the

underpaid difference due to the matters under litigation. According to the opinion of the legal advisors the chances of loss related to this litigation are possible. The restated amount as of

December 31, 2015 is R$ 7,909 (R$ 7,392 in 2014).

f. The provision has been accrued basically for lawsuits related to the elimination of inflation

effects on time deposits when the likelihood of disbursements is probable. Management, based on the opinion of its legal counsel, understands that the applicable legal actions already taken

are appropriate. The restated amount as of December 31, 2015 is R$ 23,917. (R$ 19,617 in

2014).

g. The provision refers to lawsuits filed by former employees claiming labor rights they understand are due. Lawsuits are individually controlled and the provision is recognized according to lower

labor court decisions. Management, based on the opinion of its legal advisors, understands that

the amounts currently accrued are adequate. The restated amount as of December 31, 2015 is R$ 3,533 (R$ 1,609 in 2014).

h. The bank recorded the amount referring to the portion of the proceeding in progress rated and

a probable defeat regarding the demutualization of Cetip shares in the amount of R$ 81.

Changes in provisions and legal obligations



2015

Tax Labor Civil Total

Balance at December 31, 2014 12,420 1,609 19,617 33,646

Making of provision

262

1,926 -

2,188

Monetary restatement

708

148 4,300

5,156

Operating reversals

- - - -

Write-offs due to payment

- (150) - (150)

Balance as of December 31, 2015 13,390 3,533 23,917 40,840

19. Shareholders' equity

a. Capital The share capital as of December 31, 2015 consists of common shares, with a par value of

R$ 1.00 each, distributed as follows:

Number

of shares

(thousand)

Sumitomo Mitsui Banking Corporation (Japan) 667,806

Shareholders domiciled in Brazil 1

Total 667,807

b. Dividends

Under the Company’s by-laws and Corporate Law, shareholders are entitled to mandatory minimum dividends corresponding to 25% of net income for the year.

As of December 31, 2015 we had not presented the dividends, amounting to R$ 21,650, since they were entered into the equity interest amount paid in the year, totaling R$ 44,783. The

amount outstanding in the year 2014 was R$ 10,260.

Owing to a shareholders’ decision, the amount of dividends for 2014 was not paid and was reversed against the Bank’s reserves balance for 2015.

c. Legal reserve

The legal reserve was recorded as established by Corporate Law, and may be used for offsetting losses or increasing the Company’s capital.

d. Statutory reserve

The statutory reserve corresponds to the transfer of the balance of retained earnings, subsequent to the mandatory distributions. The remaining balance of R$ 115,848 (R$ 45,934 in

2014) will be transferred to the following year, or will be allocated as proposed by the Board,



"ad referendum" of the General Assembly. These values are already covered dividend reversal

of values as item "b" of this note.

20. Income and social contribution taxes

a. As of December 31, 2015 and 2014, expenses were calculated as follows:

2015 2014

Income

Tax Social

contribution Income

Tax Social

contribution

Income before taxes on income less profit sharing 92,335 92,335 73,069 73,069

Reversal of operating provisions – contingent

liabilities - - (2,061) (2,061) Provision for contingent liabilities 7,344 7,344 3,305 3,305

Allowance for doubtful loans 1,158 1,158 (1,607) (1,607) Temporary provisions 912 912 999 999

Adjustment to market value of derivative financial instruments (11,159) (11,159) 4,318 4,318

Adjustment to market value of hedge accounting

operations (2,148) (2,148) - - Nondeductible expenses 1,824 400 1,322 311

Equity in net income of subsidiaries - - (72) (72)

Other exclusions (i) (17,299) (17,299) (3,709) (3,709)

Offsetting of tax loss carry forwards (21,890) (21,463) (22,669) (22,366)

Taxable income 51,077 50,080 52,895 52,187

Income tax - 15% (note 3.n) 7,661 - 7,934 - Income tax surcharge - 10% (see note 3.n) 5,084 - 5,266 -

Workers’ Meal Program (PAT) (135) - (114) - Rouanet Law Contribution (60) - (60) -

Empresa cidadã law (8) - (10)

Social contribution - 15% (see note 3.n) - 8,312 - 7,828

Total 12,542 8,312 13,016 7,828

(i) Refers to the exchange variation on foreign investments, the amount of which has been

considered for tax purposes, in equity income.

b. Tax credits

Tax credits were recorded as of June 30, 2014 in the amount of R$ 76,113 based on total tax

loss and negative basis of social contribution. Management understands that these tax credits are subject to offsetting in a period of up to 10 years. These amounts are recorded under

"Other receivables - other".

1. Breakdown of tax credit as of 12/31/2015

Breakdown of tax credit 12/31/2015 12/31/2014

Tax loss 31,487 36,960

Negative social contribution base 18,624 21,843



Total 50,111 58,803

2. Project realization of tax credits as of 12/31/2015

Year

Deferred income tax

Deferred social contribution

Total

2016 12,384 7,430 19,814

2017 12,665 7,599 20,264

2018 6,438 3,595 10,033

Total 31,487 18,624 50,111

3. Change in tax credit The realization of tax credits is being performed in accordance with the estimated amounts in the corresponding study and its assumptions.

Balances at

12/31/2014 Realizations Balance at

12/31/2015

Tax loss 36,960 5,473 31,487

Negative base (CSLL)

21,843 3,219 18,624

Total 58,803 8,692 50,111

4. Present value of tax credit

Year

Deferred

income tax

Deferred

social

contributions Total

2016 7,153 4,292 11,445

2017 6,086 3,651 9,737 2018 5,088 3,053 8,141

2019 2,542 1,412 3,954

Total 20,869 12,408 33,277

c. Other receivables

The Bank also has deferred tax assets and liabilities in the amounts of R$ 680 and R$ 7,920,

respectively, which are solely related to the market value adjustments of transactions with available-for-sale securities, as established by the BACEN Circular 3068, at the market value of

derivative financial instruments in accordance with Circular 3082 and the rules for the recognition of the actuarial liabilities related to the defined benefit retirement plan in which the

Bank is a sponsor according to CVM 600 and 695/2014, and the mark-to-market adjustment of operations involving hedge accounting, whose amounts at present value are R$ 306 and



R$ 4,621. These amounts are recorded under the caption “Other credits – Other” and “Other

liabilities – tax and social security”, respectively.

There are also tax credits not recognized as assets on provisions for contingencies in the

amount of R$ 19,036 (R$ 16,700 in 2014), due to uncertainties with respect to their realization in a time frame shorter than 10 years.

21. Statement of operations

a. Loans

2015 2014

Loan income 197,152 107,213 Income from financing and on lending 252,817 73,448

Total 449,969 180,661

b. Securities income

2015 2014

Interbank Funding 188,409 106,610

Securities income 71,893 89,149

Total 260,302 195,759

c. Income on financial derivatives

2015 2014

Revenues from swap operations 205,327 74,249

Expenses on NDF operations (100,090) (64,318)

Total 105,237 9,931

d. Foreign exchange funding expenses

2015 2014

Income from foreign exchange operations 570,789 399,910

Expenses on foreign exchange operations (299,527) (291,312)

Total 271,262 108,598

e. Deposits, money market and interbank funds

2015 2014

Time deposit expenses (162,047) (116,545) Interbank deposit expenses (6,046) (419)

Expenses incurred on securities held under repurchase agreements (10,469) (10,704)

Expenses on contributions to the loan guarantee fund (2,119) (1,778)

Total (180,681) (129,446)



f. Borrowings and onlending

2015 2014

Expenses on BNDES pass-troughs (5,501) (2,482)

Expenses on foreign borrowings and pass-troughs (594,501) (192,398)

Expenses on subordinated debt (92,089) (100,960)

Total (692,091) (295,840)

g. Service fee income

2015 2014

Income from fees and services 169 168 Income from business intermediation 14,495 11,733

Income from guarantees granted 9,063 7,148

Total 23,727 19,049

h. Personnel expenses

2015 2014

Salaries (24,669) (21,357)

Payroll charges (8,255) (7,151) Benefits (6,108) (4,158)

Management fees (3,228) (2,681)

Our training (159) (297)

Total (42,419) (35,644)

i. Other administrative expenses

2015 2014

Rental expenses (6,068) (4,759)

Data processing expenses (6,072) (3,975) Expenses on outsourced technical services (2,819) (2,296)

Communication expenses (2,288) (1,714) Financial system service expenses (425) (339)

Asset maintenance and upkeep expenses (373) (305) Security and surveillance services (457) (414)

Transportation expenses (148) (122)

Material expenses (103) (99) Water, energy and gas expenses (249) (140)

Expenses on outsourced services (745) (788) Advertising and marketing expenses (7) (8)

Insurance costs (205) (164)

Promotion and public relations (62) (47) Charitable contributions (78) (77)

Amortization and depreciation (1,166) (744)

Other administrative expenses (1,694) (1,598)



2015 2014

Total (22,959) (17,589)

j. Tax expenses

2015 2014

COFINS (7,263) (4,704)

ISS (1,278) (1,026) PIS (1,180) (764)

Other (128) (112)

Total (9,849) (6,606)

k. Other operating revenue

2015 2014

Exchange variance - foreign-currency borrowings - 21,174 Exchange variance - foreign onlending - 6,530

Exchange variance subordinated debt - 28,020 Exchange variance - interbank onlending - 18,213

Exchange variance - investments abroad (*) 17,299 3,346

Reversal of operating provisions – contingent liabilities - 1,937 Reversal of operating provisions - other 595 -

Investment fund management fees 1,909 2,037 Restatement of court deposits 1,254 916

Recovery of charges and expenses 630 337 Recovery of loans written off as loss - 784

Cash received – Cayman commissions - 1,727

Other 72 68

Total 21,759 85,089

l. Other operating expenses

2015 2014

Exchange variance - interbank onlending - (18,213) Exchange variance financing - (1,479)

Exchange variance financing in foreign currency (36,477) (14,532) Provisions for Guarantees submitted (138) (538)

Expenses on operating provisions - contingent liabilities (2,188) (387)

Monetary restatement of provisions (tax, civil and labor) (5,156) (2,918)

Other (1,620) (780)

Total (45,579) (38,847)

m. Nonoperating income

2015 2014

Other nonoperating income 138 137



Total 138 137

22. Related-party transactions and balances

a. Transactions with parent companies (direct and indirect)

The balances of related party transactions with Sumitomo Mitsui Banking Corporation are as follows:

Assets / (liabilities) Revenue /

(expense)

2015 2014 2015 2014

Cash and cash equivalents – foreign currency deposits 101,716 34,973 - -

Investments in foreign currency abroad - - 25,421 6,330 Accounts receivable for brokering sales (see

note 21.g) - - 14,489 11,705

Obligations on overseas loans (1,613,843) (510,444) (242,543) (78,376) Foreign on-lendings (2,132.689) (2,371,748) (351,958) (68,105)

Subordinated debt (783,852) (533,128) (92,089) (72,840)

Total (4,428,668) (3,380,347) (646,680) (201,286)

b. Compensation of key management personnel

Pursuant to Resolution 3750/09 of the Central Bank of Brazil and Technical Pronouncement CPC

05 – Disclosure of Related Parties, all Management members have been defined as key personnel of the institution.

The global compensation is paid to executive officers in conformity with the by-laws of Banco

Sumitomo Mitsui Brasileiro S.A.

In the most recent statutory reform occurred in April 2014, the maximum global monthly

compensation of the executive officers was set at R$ 330 (salaries of executives officers).

Short-term benefits for executive officers 2015 2014

Salaries 2,228 2,653

Variable compensation 1,887 1,420 Contributions to INSS (Social Security Contribution) /FGTS (Severance

Pay Fund) 1,390 809

Total 5,505 4,882

Post-employment benefits In accordance with the pension fund ruling, executive officers may opt to participate in the

defined-benefit supplementary pension plan, fully sponsored by Banco Sumitomo Mitsui Brasileiro S.A., under the same conditions of the other employees of the Bank (Note 25).

Banco Sumitomo Mitsui does not award long-term benefits or share-based compensation to its key Management personnel.



c. Further information

Under the existing legislation, financial institutions are forbidden to provide loans, financing or

advances to:

Officers and members of the advisory board, board of directors, audit committee and other similar boards, in addition to their spouses and relatives (to the second-degree)

Individuals or companies with interests in their capital of over 10%, and

Companies in which the bank itself, or any of its officers or directors or their spouses and relatives (to the second-degree) have an interest in excess of 10%.

Based on the foregoing, the Bank does not and did not grant loans, financing or any other

advance to its executive officers or to any member of their families.

Management members did not hold any interest in the capital of the Bank.

23. Operating limits

Capital Adequacy Ratio (Basel)

The Bank falls within the National Monetary Council (CMN) Resolution 2099/94, as amended by the CMN Resolutions 4192/13 and 4913/13 and the BACEN Circular 3644/13, which presents the

Equity index in relation to the Weighted Assets, as follows:

12/31/2015 12/31/2014

Credit Risk 6,015,534 4,516,485

Market Risk 128,954 67,851

Operational Risk 313,622 145,335

Assets weighted by risk (RWA) 6,458,110 4,729,671

Rban portion 9,662 10,088

Reference Equity Tiers I and II (PR) 1,552,134 1,232,906

Required Regulatory Shareholders’ Equity (RWA*11%) 710,392 520,264

Margin over Required Regulatory Capital 841,742 712,642

Capital Adequacy Ratio (IB) - PR/RWA 24.03 26.07

24. Guarantees provided and liabilities for opened import credit facilities

As of December 31, 2015 and 2014, guarantees provided by the Bank total:

2015 2014

Domestic 1,472,310 1,077,098

Foreign 39,847 52,138

Total 1,512,157 1,129,236



As of December 31, 2015 the Bank has a balance of R$ 5,201 in the account of liabilities for

opened import credit facilities (R$ 3,637 in 2014).

The Bank recorded an allowance for doubtful loans for these guarantees, based on the

assumptions of the Bacen Resolution 2682 in the amount of R$ 643 (R$ 538 in 2014).

25. Post-employment benefits sponsored by the Bank

The Bank sponsors Banco Sumitomo Mitsui Brasileiro Sociedade de Previdência Privada (“Entity”), established on April 20, 1992 and primarily engaged in granting lump sum benefits

and/or supplemental income to the Bank’s employees and directors by means of a defined

benefit plan. Participants (employees) are entitled to a benefit upon termination of the employment relationship, calculated according to regulatory provisions, whose amount will

depend on the participant’s salary and length of service at termination date.

The Entity’s actuarial liabilities were determined in accordance with the model established in the

respective plan and represent the amount of commitments made and to be made.

CVM Resolution 695 of December 13, 2014, approved the CPC Technical Pronouncement 33 (R1) which addresses the matter of employee benefits, in accordance with the amendments to

the International Accounting Standard IAS 19. CPC Technical Pronouncement CPC 33 established essential changes in the accounting and disclosure of employee benefits such as the

removal of the corridor mechanism in the recording of the plan’s liabilities, and changes in the

recognition criterion of the plans’ assets (appreciations and devaluations). The adoption of the aforementioned Pronouncement applies to years started as from January 1, 2014, and the

effects are recorded retrospectively in the accounting, as changes in accounting practices. Adopting this new accounting practice will basically lead to the full recognition as liabilities of

actuarial losses (actuarial deficit) not recognized to date as an offsetting entry to an equity

account.

Description Retirement Plan

12/31/2015 12/31/2014

Present value of actuarial obligations 35,940 35,865

Fair value of the plan’s assets (38,656) (33,104)

Deficit/(Surplus) for covered plans 2,716

2,761

Unrecognized actuarial gains/(losses) - - Adjustments for permitted deferrals

Effect deriving from the limit on recognizing onerous assets/liabilities 2,716 -

Net actuarial liability/(asset) - 2,761

Actuarial assumptions: .Nominal discount rate for the actuarial

obligation 12.78%p.a. 12.04%p.a. Estimated rate of nominal salary increase 8.46% p.a. 8.97% p.a.

Estimated nominal benefit increase 5.30% p.a. 5.80%p.a.

Estimated inflation rate 5.30% p.a. 5.80%p.a. Biometric table of general mortality AT-2000 AT-2000

Biometric table for classification as disabled “Mercer” table “Mercer” table

Expected turnover rate

0.30/ (length of

service +1)

0.30/ (length of

service +1)



Description Retirement Plan

12/31/2015 12/31/2014

Chance of entering retirement

10% on the first date of eligibility to early

retirement 3% between the first eligibility to earlier and normal

retirement

100% on the date of eligibility to normal retirement

As of December 31, 2015, the Entity had 116 active participants in the defined-benefit plan and 18 participants enjoying the benefits (retirement and pension). In the year ended December 31,

2015, the Bank made contributions to the Pension Fund Company described earlier herein in the amount of R$ 1,853 (R$ 1,213 in 2014).

26. Operational, market, credit and capital management risk management framework

Operational risk Operational risk is defined as the risk of loss arising from deficiencies, failures or inadequacy of internal processes, human conduct or systems or that arising from external causes. This

definition includes the legal risk.

The Operational Risk Management framework is considered a strategic and competitive factor for Banco Sumitomo Mitsui Brasileiro S.A. and is defined in the Bank’s Operational Risk

Management Policy established and approved by the Bank’s Management at least annually,

pursuant to Resolution 3380/2006. It is reported directly to the Bank’s Vice-Presidency. It is an important tool for the effective management of the entity’s economic and regulatory capital.

The size of the framework is proportional to the risks related to the complexity of the products offered by the institution, nature of transactions and risk exposure guidelines of the Bank and

the companies whose accounts are included in the consolidated financial statements.

The Operational Risk Management practice of Banco Sumitomo Mitsui Brasileiro S.A. adopts a

management method shared with the Bank’s business areas, therefore leading to a clear view of the respective tactical and strategic roles and responsibilities of the business and Operational

Risk Management departments, allowing the coordination and cooperation of all Bank’s employees to reduce operational losses and duplicate activities.

Under this management method, the Operational Risk Management department is in charge of:

Establishing the structure, policies and tools for managing operational risks;

Conducting periodical tests which are independent from identified control risks;

Preparing periodical reports

Coordinating the operational risk management committees set up by the Bank

Consolidating and monitoring the losses incurred by the Bank.

Management, aligned with its Corporate Governance Policy, recognizes, participates in and

shares responsibility for continuous improvements in this structure, to ensure compliance with the established objectives and goals and security and quality for the Bank’s clients,

shareholders and related parties.



Banco Sumitomo Mitsui Brasileiro S.A. adopted the Basic Indicator Approach, “BIA”, to calculate

the capital requirement for Operational Risks.

Information related to the Bank’s Operational Risk Management framework, and Management’s

responsibility for published information, are included in the publicly disclosed report available at www.smbcgroup.com.br.

Market and Liquidity Risk Market risk is the possibility of losses being incurred due to variations in prices, indexes and

rates from mismatches of terms, currencies and indexes for asset and liability portfolios. Banco

Sumitomo Mitsui Brasileiro S.A. adopts a highly conservative policy and exposure to market risk factors.

Liquidity Risk is the possibility that the entity is unable to meet its expected and unexpected

obligations, whether current or future, including those resulting from guarantees, without

affecting its daily transactions and without sustaining significant losses; and the possibility of the entity being unable to trade a position at market price, due to its high size in relation to the

volume which is usually traded or due to some market discontinuity.

The Market and Liquidity Risk Management structure is a specific unit of the Bank, independent from the business and audit areas, and reports directly to the Bank’s Vice-Presidency. It is

responsible for managing market, liquidity and credit risks, and ensuring prudent practices and

effective techniques of risk control. The size of the framework is proportional to the risks related to the complexity of the products offered by the institution, nature of transactions and

risk exposure guidelines of the Bank and the companies whose accounts are included in the consolidated financial statements.

The Market and Liquidity Risk Management policy is based on the daily control of the Bank’s market risk positions, on the control of limits for positions, divided into limits for exposure to

interest rate and exposure to exchange rates, as well as Limits/Guidelines for “Stop Loss”. In addition, the Risk Management Department also monitors the market risk using the Value at

Risk (VAR) methodology and stress tests.

The Market and Liquidity Risk Management structure was implemented in accordance with the

requirements of Resolution 3464/2007 and Resolution 4090/2014 and is approved and reviewed at least annually by the Bank’s Management. In order to ensure the implementation of the

guidelines and policies in force, Banco Sumitomo Mitsui Brasileiro S.A. has a Committee of Assets and Liabilities (ALM), which usually meets once a month with the participation of

Management members, and extraordinarily whenever necessary. The purposes of said

Committee are, among others, to decide on the market and liquidity risk management policy, asset and liability management policy, to ensure compliance with the limits/guidelines for

market and liquidity risk, to ensure that the entity keeps proper and sufficient liquidity levels and to check procedures in the treatment of new products and their risk management structure.

Information related to the Bank’s Market and Liquidity Risk Management framework is included in the publicly-disclosed report available at www.smbcgroup.com.br. The Management of

Banco Sumitomo Mitsui Brasileiro S.A is responsible for all disclosed information.

Credit risk Credit risk is defined as the possibility of the occurrence of losses related to non-compliance by

the borrower or counterpart with their respective obligations under the terms agreed on, the devaluation of credit assets, deriving from deterioration in the risk rating of the borrower, a

decrease in gains or remunerations, the advantages granted in renegotiation and recovery costs.



Credit risk is strongly related to other types of risk, such as market and liquidity risks These

types of risks derive, many times, from the Credit Risk and may occur concurrently.

The Credit Risk Management structure was implemented in accordance with the requirements

of Resolution 3721/2009 and is approved and reviewed at least annually by the Bank’s Management. The Credit Risk Management structure is a specific unit of the Bank, independent

from the business and audit areas, and reports directly to the Bank’s Vice-Presidency. The size of the framework is proportional to the risks related to the complexity of the products offered

by the institution, nature of transactions and risk exposure guidelines of the Bank and the companies whose accounts are included in the consolidated financial statements.

The Bank’s Credit Risk Management structure is implemented to maintain the policies, procedures and systems for monitoring and controlling credit risk according to prevailing laws,

therefore ensuring that the credit risk is identified, measured, monitored, controlled and reported to Management, so as to allow a proper treatment of risk as one of the factors of

growth and profitability.

The Credit Risk Management framework has policies and strategies which are clearly defined

and duly documented and reviewed, establishing operational limits, risk mitigation mechanisms and procedures to keep exposure to credit risk at levels considered acceptable by the Bank’s

Management;

Information related to the Bank’s Credit Risk Management framework, and Management’s

responsibility for published information, are included in the publicly disclosed report available at www.smbcgroup.com.br.

Capital management Capital management is defined as a continuous process of monitoring and controlling the capital held by the entity; assessing capital needs to face the risks the entity is subject to; and

planning goals and capital needs, considering the entity’s strategic purposes.

The capital management framework was implemented in accordance with the requirements of

Resolution 3988 and is approved and reviewed at least annually by the Bank’s Management. The capital management framework is under the responsibility of the Risk Management

Department, independent from the business and audit areas. The size of the framework is proportional to the risks related to the complexity of the products offered by the institution,

nature of transactions and risk exposure guidelines of the Bank and the companies whose accounts are included in the consolidated financial statements. The capital management

framework aims to identify and assess all the entity’s significant risks according to policies and

strategies, in order to keep the level of capital compatible with incurred risks.

In order to adopt a prospective approach and foresee the need for capital, the Bank has set up a New Product and Service Committee, with the permanent participation of the Risk

Management Department, where the product and/or service is analyzed before being

implemented on the Bank.

The Bank does not follow an Internal Capital Adequacy Assessment Process (ICAAP), pursuant to article six of Resolution 3988 issued on June 30, 2014.

The Risk Management Department tracks portfolio's performance daily and if there are any

differences, communicates them immediately to Top Management so that capital adequacy is

adequately addressed.



Information related to the Bank’s Capital Management framework is included in the publicly-

disclosed report available at www.smbcgroup.com.br. The Management of Banco Sumitomo Mitsui Brasileiro S.A is responsible for all disclosed information.

27. Further information

On December 17, 2015 the Brazilian Central Bank published Resolution 4455 addressing the accounting procedures for recognizing the effects of exchange variance on the translation of

financial statements of an overseas associated company or subsidiary and exchange variance of hedges of overseas associated companies or subsidiaries. This resolution applies to the financial

institutions and other institutions licensed to operate by the Brazilian Central Bank with an

overseas associated company or subsidiary and is applicable from publication. These new procedures will affect the Cayman Agency's seat and the effects will be measured and

implemented.

XVIII. CUSTOMER SERVICE CHANNELS

1. SAC

The SAC - Customer Support Service, according to the dispositions of Decree 6523/08, is a

service provided, by phone, for the resolution of problems in the business relationship, by

providing public and general information about products and services, receipt of complaints and

cancellation requests regarding products and services offered by Banco Sumitomo Mitsui

Brasileiro S.A.

The customer should contact SAC whenever he/she is looking for the solution of some problem

in the relationship with Banco Sumitomo Mitsui Brasileiro S.A., to make complaints, to request the cancellation of products or services or, yet, to request public and general information about

the products and services offered by Banco Sumitomo Mitsui Brasileiro S/A.

0800 - 722 - 0248

[email protected]

2. Ombudsman

The Ombudsman is the link between SMBCB and its customers. The Ombudsman is in charge of

representing the customers, their points of view and interests within the Institution. It must

assure the strict accomplishment of legal and regulation dispositions related to the rights of its

customers and acts as a communication channel, including the mediation of conflicts.

The customer must access the Ombudsman of the Institution whenever the attendance

provided by the other channels was not satisfactory or whenever a solution have not been presented in the stipulated deadline. In this sense, Ombudsman may request, in certain cases,

the protocol of prior attendance in other service channels.

The Ombudsman is in charge of receiving, registering, instructing, analyzing and giving formal

and adequate treatment to the complaints of the Bank’s customers and users of products and

services. It should also propose to the Senior Management corrective or enhancement

mailto:[email protected]



measures of procedures and routines as a result of the received complaints analysis, aiming to

improve the services quality and strengthening the relationship between the Bank and the

customer.

0800 – 722 - 2762

[email protected]

mailto:[email protected]



Documents

ANNUAL REPORT 2015 - Sumitomo Mitsui Banking · PDF file · 2016-04-18ANNUAL REPORT 2015 ... BALANCE SHEETS AS OF DECEMBER 31ST ,2015 AND 2014 .....16 XIV. STATEMENTS ... Ltd. SMBC’s