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Rating Action:

Moody's lowers ratings of Citigroup's Japan subsidiaries

 The document has been translated in other languages

22 Jun 2012

Tokyo, June 22, 2012 -- Moody's Japan K.K. has downgraded Citibank Japan Ltd.'s (1) long-term deposit rating to Baa1 from A2, (2) standalone credit assessment to baa3 from baa1, and (3) short-term deposit rating to Prime-2 from Prime-1. The ratings outlook is stable.

Moody's has also downgraded the long-term ratings of Citigroup Japan Holdings Inc. (CJH) and Citigroup Global Markets Japan Limited (CGMJ) to Baa3 from Baa1.

The short-term rating of CGMJ was downgraded to Prime-3 from Prime-2. The ratings outlook for CJH and CGMJ is negative.

The downgrade of these three subsidiaries was prompted by Moody's downgrade of their parents, Citigroup Inc. (Citigroup) and Citibank N.A. on 21 June 2012. For further details on these actions, please refer to Moody's press release, "Moody's downgrades firms with global capital markets operations" published on June 21, 2012.

Today's rating actions on these subsidiaries conclude the reviews initiated on 16 February 2012.

RATINGS RATIONALE -- Citibank Japan

The two-notch downgrade on 21 June 2012 of Citibank N.A.'s standalone credit assessment to baa3 from baa1 has had a direct impact on the standalone credit assessment of Citibank Japan, which was also lowered to baa3 from baa1.

Citibank Japan's standalone credit assessment is strongly aligned with that of its parent, Citibank N.A., due to their close integration.

As Citibank Japan is a strategically important subsidiary to Citibank N.A, Moody's incorporates a very high probability of support from Citibank N.A., in case of need.

Hence, the downgrade of Citibank N.A.'s deposit ratings to A3 *has resulted in the downgrade of Citibank Japan's deposit ratings. (*: This Moody's Investors Service's rating is not governed by Japanese regulation.)

A two-notch uplift from Citibank Japan's standalone credit assessment reflects Moody's view that given Citibank Japan's integration of its business and operating platform with the parent bank, its deposit rating indirectly benefits from our assumption of US government support for Citibank N.A.

The stable outlook for Citibank Japan's deposit rating reflects the stable rating outlooks of Citibank N.A.'s deposit ratings.

Upward rating pressure on Citibank Japan's rating would emerge if (1) there was an upgrade to Citibank N.A.'s deposit ratings, or (2) there was an improvement in the standalone credit assessment of Citibank N.A.

Downward rating pressure on Citibank Japan's rating would emerge if (1) Citibank N.A.'s rating was downgraded, (2) there was a deterioration in Citibank Japan's business or in its operating integration with Citibank N.A. or (3) there was a deterioration in the strategic importance of Citibank Japan to Citibank N.A.

RATINGS RATIONALE -- Citigroup Japan Holdings and Citigroup Global Markets Japan

The ratings of CJH and CGMJ benefit from an uplift because of Moody's expectation of a high probability of support from their parent, Citigroup (senior debt rating Baa2*), based on a view that these companies remain strategically important subsidiaries of Citigroup. (*: This Moody's Investors Service's rating is not governed by Japanese regulation.)

The securities business is a core strategic focus for Citigroup, and Japan's operations are fully aligned with Citigroup's business model.

Citigroup's also demonstrates this strategic importance through its explicit support in the form of a guarantee to CJH's on all outstanding bonds (which have not been rated by Moody's).

This is a debt-specific guarantee, rather than an issuer guarantee, and in Moody's view, it reinforces the likelihood of capital and liquidity support to the legal entities and helps to offset the deteriorating market conditions faced by CJH and CGMJ.

Moody's has also lowered the standalone credit assessment of CJH and CGMJ, as it expects that the profitability of these subsidiaries will remain under pressure, given the difficult operating environment of Japan's wholesale securities business.

The negative outlook on the long-term ratings of CJH and CGMJ reflects the negative outlook on Citigroup's long-term ratings.

Upward rating pressure on CJH and CGMJ ratings would emerge if (1) there was an improvement in the standalone credit profile of the major operating subsidiary, CGMJ or (2) there was an upgrade of Citigroup's rating, although this is unlikely given the negative outlook.

Downward pressure on CJH and CGMJ ratings would emerge (1) if CGMJ's credit fundamentals continued to deteriorate, (2) Citigroup's rating was downgraded, or (3) if CGMJ's strategic importance to Citigroup's investment banking operations diminished.

Complete list of rating actions

Citibank Japan Ltd.

Bank Financial Strength rating: to D+ from C-

Long-term Bank Deposits rating (domestic and foreign currency): to Baa1 from A2

Short- term Bank Deposits rating (domestic and foreign currency): to Prime-2 from Prime-1

Citigroup Japan Holdings Corp.

Long-term issuer rating (foreign currency): to Baa3 from Baa1

Citigroup Global Markets Japan Inc.

Long-term issuer rating (foreign currency): to Baa3 from Baa1

Senior Unsecured debt rating (domestic currency): to Baa3 from Baa1

Senior Unsecured Medium Term Note Program rating (foreign currency): to (P)Baa3 from (P)Baa1

Subordinate debt rating (domestic currency): to Ba1 (hyb) from Baa2 (hyb)

Subordinate Medium Term Note Program rating (foreign currency): to (P)Ba1 from (P)Baa2

Junior Subordinate Medium Term Note Program rating (foreign currency): to (P)Ba1 from (P)Baa2

Short-term issuer rating (foreign currency): to Prime-3 from Prime-2

Commercial Paper rating (domestic currency): to Prime-3 from Prime-2

The principal methodologies used in Citibank Japan's ratings were Moody's Bank Financial Strength Ratings: Global Methodology published on September 30, 2010, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: Global Methodology published on April 9, 2012, and available on www.moodys.co.jp.

The principal methodologies used in rating CJH and CGMJ were Global Securities Industry Methodology published on September 30, 2010, and available on www.moodys.co.jp.

Citibank Japan Ltd., headquartered in Tokyo, is a wholly owned subsidiary of Citibank N.A.

Citigroup Japan Holdings Corp., headquartered in Tokyo, is a wholly owned subsidiary of Citigroup Inc.

Citigroup Global Markets Japan Inc., a wholesale brokerage firm, is a wholly owned subsidiary of Citigroup Japan Holdings Corp.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's information.

Measures taken to ensure the quality of this information include use of public information, reviews by a third party and verification by the lead analyst.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Credit ratings are Moody's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. Moody's defines credit risk as the risk that an entity may not meet its contractual, financial obligations as they come due and any estimated financial loss in the event of default. Credit ratings do not address any other risk, including but not limited to: liquidity risk, market value risk, or price volatility. Credit ratings do not constitute investment or financial advice, and credit ratings are not recommendations to purchase, sell, or hold particular securities. No warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such rating or other opinion or information is given or made by Moody's in any form or manner whatsoever. The credit risk of an issuer or its obligations is assessed based on information received from the issuer or from public sources. Moody's may change the rating when it deems necessary. Moody's may also withdraw the rating due to insufficient information, or for other reasons.

Moody's Japan K.K. is a credit rating agency registered with the Japan Financial Services Agency and its registration number is FSA Commissioner (Ratings) No. 2. The Financial Services Agency has not imposed any supervisory measures on Moody's Japan K.K. in the past year.

Please see ratings tab on the issuer/entity page on the Moody's website for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on the Moody's website for further information.

Please see the Credit Policy page on the Moody's website for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Maki Hanatate
VP - Senior Credit Officer
Financial Institutions Group
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Moody's lowers ratings of Citigroup's Japan subsidiaries
No Related Data.
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