Tokyo, August 29, 2019 -- Moody's Japan K.K. has today taken rating actions
on 12 Japanese regional banks -- including Concordia Financial
Group, Ltd. -- as well as on Japan Post Bank
Co., Ltd., two banks under Resona Holdings,
Inc., and Shinhan Bank Japan (SBJ).
The Baseline Credit Assessment (BCA) for all 16 banks, and the long-term
deposit ratings of all banks except for Shizuoka Bank, Ltd.
and SBJ, are placed on review for downgrade.
At the same time, Moody's has affirmed Shizuoka Bank's
and SBJ's long-term deposit ratings, with the outlook
at stable for both banks' ratings.
The 12 regional banks are:
77 Bank, Ltd. (The)
Bank of Fukuoka, Ltd. (The)
Chiba Bank, Ltd. (The)
Chugoku Bank, Limited (The)
Bank of Yokohama, Ltd. (The) [Concordia Financial Group,
Ltd., the parent company of Bank of Yokohama, Ltd.
(The)]
Daishi Bank, Ltd. (The)
Gunma Bank, Ltd. (The)
Hiroshima Bank, Ltd. (The)
Hyakujushi Bank, Ltd. (The)
Joyo Bank, Ltd. (The)
San-in Godo Bank, Ltd. (The)
Shizuoka Bank, Ltd. (The)
The two banks under Resona Holdings, Inc. are:
Resona Bank, Limited
Saitama Resona Bank, Limited
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_204222
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
Moody's review of the 16 banks' ratings is driven by the inability
of Japanese banks to maintain profits without taking on more risk;
a result of the increasingly challenging operating environment in the
country. Domestic loan and investment yields continue to decline,
because of ultralow domestic interest rates, while structural rigidities
slow consolidation and systemwide cost rationalization.
Bank deposits continue to grow, driven by excess liquidity,
which is caused in turn by extremely loose monetary policy.
Fierce competition to deploy increasing deposits leads to declining loan
rates and hinders the banks from growing loans profitably and compressing
the loan spreads required to absorb loan losses. At the same time,
the banks are extending loans to marginally weaker borrowers to generate
more loan volume, which will result in higher credit cost as the
loans season.
Yields on yen-denominated bonds have declined to a record low.
The banks are unable to generate income from excess deposits without taking
on more investment risk, because interest rates across most of the
yield curve have dropped and stayed near zero since 2016. Investment
risks can come in many forms, including credit risk, interest
rate risk, market risk, liquidity risk, structure risk,
and foreign currency risk.
Banks that are taking on more investment risks will experience wider earnings
volatility and incur additional risk-weight charges that will cause
risk-weighted assets to increase and exert downward pressure on
regulatory risk-adjusted capital ratios.
Moody's has captured these challenges by lowering the Macro Profile it
assigns to Japan to Strong from Strong+ by applying a negative one-notch
adjustment to the Industry Structure score.
The change in the Macro Profile for Japan does not affect Moody's
assumption of a very high probability of government support for most rated
banks.
FACTORS TO BE CONSIDERED IN THE RATING REVIEW
The rating reviews for downgrade will predominantly focus on the evolution
of the banks' loan and investment portfolios in light of the prolonged
period of ultralow interest rates. Moody's will assess the bank's
strategy to halt the decline in their core pre-provision profitability,
focusing on the incremental risk taken by the banks relative to their
internal capital generation capabilities.
FACTORS THAT COULD LEAD TO AN UPGRADE
An upgrade of these banks' ratings is unlikely, given that
their BCAs and/or ratings are on review for downgrade.
Nevertheless, Moody's could confirm the ratings of these banks if
they demonstrate a clear path to improving their core profitability or
capitalization.
FACTORS THAT COULD LEAD TO A DOWNGRADE
Moody's could downgrade the ratings of the banks if they are unable
to demonstrate a clear path to improving their core profitability or capitalization.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks (Japanese) published
in August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
BANK PROFILES
The 77 Bank, Ltd., headquartered in Sendai City,
Miyagi Prefecture, is a regional bank in Japan. At the end
of June 2019, the bank reported consolidated assets totaling JPY8.6
trillion.
The Bank of Fukuoka, Ltd., headquartered in Fukuoka
City, Fukuoka Prefecture, is a regional bank in Japan and
is a principal operating subsidiary of Fukuoka Financial Group,
Inc. At the end of March 2019, the bank reported consolidated
assets totaling JPY17.4 trillion.
The Chiba Bank, Ltd., headquartered in Chiba City,
Chiba Prefecture, is a regional bank in Japan. At the end
of June 2019, the bank reported consolidated assets totaling JPY15.3
trillion.
The Chugoku Bank, Limited, headquartered in Okayama City,
Okayama Prefecture, is a regional bank in Japan. At the end
of June 2019, the bank reported consolidated assets totaling JPY8.3
trillion.
The Bank of Yokohama, Ltd., headquartered in Yokohama
City, Kanagawa Prefecture, is a regional bank in Japan and
is a principal operating subsidiary of Concordia Financial Group,
Ltd. At the end of March 2019, The Bank of Yokohama's
reported unconsolidated assets totaling JPY16.9 trillion,
while Concordia Financial Group reported consolidated assets totaling
JPY18.9 trillion.
The Daishi Bank, Ltd., headquartered in Niigata City,
Niigata Prefecture, is a regional bank in Japan. At the end
of March 2019, the bank reported consolidated assets totaling JPY6.0
trillion.
The Gunma Bank, Ltd., headquartered in Maebashi City,
Gunma Prefecture, is a regional bank in Japan. At the end
of June 2019, the bank reported consolidated assets totaling JPY8.3
trillion.
The Hiroshima Bank, Ltd., headquartered in Hiroshima
City, Hiroshima Prefecture, is a regional bank in Japan.
At the end of June 2019, the bank reported consolidated assets totaling
JPY9.4 trillion.
The Hyakujushi Bank, Ltd., headquartered in Takamatsu
City, Kagawa Prefecture, is a regional bank in Japan.
At the end of June 2019, the bank reported consolidated assets totaling
JPY5.0 trillion.
The Joyo Bank, Ltd., headquartered in Mito City,
Ibaraki Prefecture, is a regional bank in Japan. At the end
of March 2019, the bank reported consolidated assets totaling JPY10.6
trillion.
The San-in Godo Bank, Ltd., headquartered in
Matsue City, Shimane Prefecture, is a regional bank in Japan.
At the end of June 2019, the bank reported consolidated assets totaling
JPY5.6 trillion.
The Shizuoka Bank, Ltd., headquartered in Shizuoka
City, Shizuoka Prefecture, is a regional bank in Japan.
At the end of June 2019, the bank reported consolidated assets totaling
JPY12.2 trillion.
Japan Post Bank Co., Ltd., headquartered in
Tokyo, is one of the largest Japanese banks. At the end of
June 2019, the bank reported consolidated assets totaling JPY212.5
trillion.
Resona Bank, Limited, headquartered in Osaka City, Osaka
Prefecture, is one of Resona group banks. At the end of March
2019, the bank reported consolidated assets totaling JPY32.9
trillion.
Saitama Resona Bank, Limited, headquartered in Saitama City,
Saitama Prefecture, is one of the Resona group banks. At
the end of March 2019, the bank reported unconsolidated assets totaling
JPY14.6 trillion.
Shinhan Bank Japan is the Japanese subsidiary of Korea-based,
Shinhan Bank. At the end of March 2019, the bank reported
unconsolidated assets totaling JPY0.8 trillion.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Tomoya Suzuki
Asst Vice President - Analyst
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: 81 3 5408 4110
Client Service: 81 3 5408 4100
Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 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: 81 3 5408 4110
Client Service: 81 3 5408 4100
