MOODY'S PLACES ON REVIEW FOR DOWNGRADE CREDIT RATINGS OF FUJI BANK (DEPOSITS AT A1) AND HELLER FINANCIAL (SENIOR AT A2)
Tokyo, 11-19-97 -- Moody's Investors Service placed the A1/ Prime-1 deposit ratings and C bank financial strength rating of The Fuji Bank, Limited on review for possible downgrade following the bank's announcement that it would incur credit costs of 650 billion yen for the fiscal year ending March 31, 1998. As a result of this rating review, the credit ratings of Heller Financial Inc. (senior debt at A2), Fuji's wholly owned subsidary, were also put on review for possible downgrade. Moody's said that the review will focus on the extent to which Fuji's financial flexibility and capital adequacy will be constrained by the effect of higher requirements for loan loss reserves, the impact of recent stock market volatility, as well as weaker earnings prospects in a more challenging environment.
Fuji raised its loan loss reserves in order to comply with new self-assessment standards, the prompt corrective action measures, which will go into effect on April 1, 1998. Moody's said that the reserve increase is a constructive action, because it indicates management's intention to dispose of problem assets. Nonetheless, the rating agency added, Fuji's reserve coverage remains significantly lower than certain other Japanese banks'. Fuji has also announced the deferral of its interim dividends until the regular payment date for its annual dividend in June. This is a prudent step to conserve capital, Moody's said, but the dividend deferral, together with the lower reserve coverage, raises issues about Fuji's capital adequacy and financial flexibility relative to its peers.
Moody's said that the rating review will also take into consideration Fuji's plans for enhancing its profitability, reducing its lower-return assets and improving its capital position.
The following ratings are affected:
The Fuji Bank, Limited-the A1 deposit rating for long-term deposits, the Prime-1 rating for short-term deposits, the A1 senior debt rating, the A2 subordinated debt rating, and the C bank financial strength rating.
Heller Financial, Inc.-the Prime-1 rating of the company for commercial paper, A2 senior debt ratings, the (P)A2 senior unsecured shelf rating, the (P)A3 subordinated shelf rating, the "a3" cumulative preferred stock rating, the "baa1" non-cumulative preferred stock, and the A2 counterparty rating.
As of March 31, 1997, Fuji Bank had assets of 55 trillion yen and stockholders' equity of 1.7 trillion yen.
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