MOODY'S LOWERS CREDIT RATINGS OF SAKURA BANK (SENIOR TO A3)
New York, 01-23-96 -- Moody's Investors Service lowered the senior debt rating of Sakura Bank, Ltd. (Sakura), as well as the rating of the bank for long-term deposits and long-term LOC obligations, to A3 from A2. Also lowered to A3 from A2 were the long-term ratings of Sakura's guaranteed subsidiaries. The Prime-1 ratings of the bank for short-term deposits and short-term LOC obligations and of its guaranteed subsidiaries for commercial paper were lowered to Prime-2. These rating actions conclude a review begun on June 30, 1995.
Moody's said that Sakura's creditworthiness has suffered from large amounts of problem assets, moderate capitalization, and weak core earnings capacity. Moody's does not expect any substantial increases in the amount of problem assets (principally nonperforming and restructured loans, including the bank's exposure to insolvent housing loan companies), but the ultimate losses resulting from the workout and disposal of problem assets will be high. Moody's anticipates a period of several years during which Sakura will have to focus on the restoration of its balance sheet to good health. During this period, Sakura is likely to have to realize hidden reserves in order to maintain capital adequacy.
Competitive pressures could intensify as some of the bank's closest competitors will be able to conclude the restoration of their financial fundamentals sooner than Sakura. Moody's views Sakura's renewed restructuring efforts (focused on operating cost reductions and the elimination of unprofitable business activities) as being crucial for the bank's continued ability to take full advantage of its strong domestic retail franchise and to produce core earnings that compare favorably with its peers'. The recent growth of loans to medium-sized companies and to individual home owners, as well as the positive impact that favorable interest rate and bond market conditions had on 1995 earnings, are healthy developments for Sakura.
The following ratings were lowered:
Sakura Bank, Ltd. -- the senior debt rating, the rating of the bank for long-term deposits, the counterparty rating, to A3 from A2; the preferred stock rating, to "baa2" from "baa1"; the rating for short-term deposits, to Prime-2 from Prime-1.
Sakura Bank, Ltd. (Paris Branch) -- the rating for long-term deposits, to A3 from A2; the rating for short-term deposits, to Prime-2 from Prime-1.
Sakura Bank (Canada) -- the guaranteed senior debt rating, to A3 from A2; the rating for guaranteed short-term deposits to Prime-2 from Prime-1.
Sakura Bank (Luxembourg) S.A. -- the guaranteed senior debt rating, to A3 from A2.
Sakura Finance Asia Ltd. -- the guaranteed senior debt rating, to A3 from A2; the guaranteed subordinated debt rating, to Baa1 from A3.
Sakura Finance Australia Ltd. -- the rating for guaranteed commercial paper, to Prime-2 from Prime-1.
Sakura Finance (Cayman) Ltd. -- the guaranteed subordinated debt rating, to Baa1 from A3.
Sakura Holdings S.C.A. -- the guaranteed preferred stock rating, to "baa2" from "baa1".
Sakura Bank, Ltd. (Cayman Branch) -- the rating for short-term deposits, to Prime-2 from Prime-1.
Sakura Finance International Ltd. -- the rating for guaranteed commercial paper, to Prime-2 from Prime-1.
The following rating was confirmed:
Sakura Bank, Ltd. -- D+ bank financial strength rating.
Headquartered in Tokyo, Sakura Bank is the largest banks in Japan, with unconsolidated assets of Yen 54 trillion (approximately US$540 billion) as of September 30, 1995.
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