New York, October 11, 2017 -- Moody's Investors Service upgraded the ratings of MUFG Americas Holdings
Corporation (MUAH) and certain ratings of its bank subsidiary, MUFG
Union Bank, N.A. (MUB). At MUAH, the
senior unsecured rating was upgraded to A2 from A3 and the subordinate
shelf rating was upgraded to (P)A2 from (P)A3. At MUB, the
long-term deposit rating of Aa2 and the senior unsecured rating
of A2 were affirmed. The MUB subordinate bank note program was
upgraded to (P)A2 from (P)A3. The bank's baseline credit
assessment (BCA) of a2 was affirmed, and the adjusted BCA was upgraded
to a1 from a2. The bank's long-term counterparty risk
assessment (CRA) was upgraded to Aa3(cr) from A1(cr). The rating
outlook is stable.
A complete list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
The rating upgrades incorporate a change in Moody's assumption of
parental support to MUAH ratings. Moody's noted that MUAH
is a 100% owned subsidiary of Mitsubishi UFJ Financial Group,
Inc. (MUFG, senior A1 stable) primarily through The Bank
of Tokyo-Mitsubishi UFJ, Ltd. (BTMU, BCA a3,
senior A1 stable). MUFG is one of the three megabank groups in
Japan and Moody's incorporates a very high level of Japanese government
support in MUFG's ratings. MUAH is a strategic and material
subsidiary of MUFG, accounting for approximately 6% of its
assets at year-end 2016. MUAH is also the intermediate holding
company for MUFG's US operations and MUAH is included in MUFG's
resolution strategy. Moody's assumes a very high probability
of support to MUAH from its parent. As a result, the rating
agency has increased the benefit from parental support to MUAH's
ratings, which is reflected in the upgrade of the adjusted BCA to
a1 from a2.
The upgrade of MUAH's debt ratings and CRA is the result of the
upgrade of the adjusted BCA to a1 and Moody's Advanced Loss Given
Failure (LGF) framework, which is a component of Moody's rating
methodology for banks that incorporates MUAH's liability structure.
The current notching configuration of MUAH and MUB's ratings is
typical of most US regional banks now that MUAH's current liability
structure includes a lower volume of debt than in the past. Moody's
assumes that MUAH is subject to Title I resolution if it fails,
and applies its standard loss assumption for Title I US banks under its
LGF framework. Because of this loss assumption, together
with depositor preference in resolution and the relative thinness of the
company's debt structure, the rating agency sees the loss
severity for debt at both the bank and at the holding company to be high
compared to that for deposits.
This typical notching from the higher adjusted BCA resulted in the affirmation
of MUB's long-term deposit rating of Aa2 and senior unsecured
rating of A2, while the subordinate bank note program rating was
upgraded to (P)A2 and the long term CRA was upgraded to Aa3(cr).
For the bank deposit and senior ratings, Moody's change in
assumption of parental support offset the effect of the change from lower
debt amounts in MUAH's liability structure.
The holding company ratings were upgraded by one notch following the upgrade
of the adjusted BCA and also incorporate the current liability structure.
The affirmation of MUAH's standalone BCA reflects MUAH's strong
balance sheet, particularly its conservative asset risk and good
capital position. These strengths offset its key challenges of
weak profitability and a higher level of wholesale funding.
WHAT COULD MOVE THE RATINGS UP/DOWN
Regarding MUAH's BCA, an increase in MUAH's profitability
would drive upward pressure. Moody's believes that improvements
in non-interest income and a more efficient operating profile are
necessary for MUAH to achieve meaningfully higher profitability.
A reduction of wholesale funding would also be positive.
Downward movement of the standalone BCA could occur if MUAH's growth
initiatives were perceived as aggressive with potential to increase its
risk profile. Signals of this would be a large acquisition,
above-average organic growth, and/or increased leverage.
A weakening of MUAH's underwriting discipline would also be negative
given that this is a key support to the current above-average BCA.
Change in the adjusted BCA could result from changes in Moody's
assumption of parental support or change in the credit profile of MUFG
and BTMU.
Upgrades:
..Issuer: MUFG Americas Holdings Corporation
.... Issuer Rating, Upgraded to A2,
stable from A3,stable
....Senior Unsecured Shelf, Upgraded
to (P)A2 from (P)A3
....Subordinate Shelf, Upgraded to (P)A2
from (P)A3
....Preferred Shelf, Upgraded to (P)A3
from (P)Baa1
....Preferred Shelf Non-cumulative,
Upgraded to (P)Baa1 from (P)Baa2
....Senior Unsecured Regular Bond/Debenture,
Upgraded to A2, stable from A3,stable
..Issuer: MUFG Union Bank, N.A.
.... Adjusted Baseline Credit Assessment,
Upgraded to a1 from a2
.... Long Term Counterparty Risk Assessment,
Upgraded to Aa3(cr) from A1(cr)
....Subordinate Bank Note Program, Upgraded
to (P)A2 from (P)A3
Outlook Actions:
..Issuer: MUFG Americas Holdings Corporation
....Outlook, Remains Stable
..Issuer: MUFG Union Bank, N.A.
....Outlook, Remains Stable
Affirmations:
..Issuer: MUFG Union Bank, N.A.
.... Baseline Credit Assessment, Affirmed
a2
.... Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Issuer Rating, Affirmed A2,
stable
.... Short Term Deposit Rating, Affirmed
P-1
....Senior Unsecured Bank Note Program,
Affirmed (P)A2
....Short Term Bank Note Program, Affirmed
(P)P-1
....Senior Unsecured Commercial Paper,
Affirmed P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed A2, Stable
....Long Term Deposit Rating, Affirmed
Aa2, Stable
The principal methodology used in these ratings was Banks published in
September 2017. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 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.
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.
Rita Sahu
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
