ข่าวประชาสัมพันธ์การเงิน/หลักทรัพย์

Ratings On Japan-Based Aozora Bank Affirmed At ‘A-/A-2’; Outlook Remains Negative

          TOKYO (S&P Global Ratings) April 25, 2018--S&P Global Ratings today said that it has affirmed its long-term issuer credit and senior unsecured ratings on Aozora Bank Ltd. at 'A-'. We also affirmed our 'A-2' short-term issuer credit rating on the bank. The outlook on the long-term rating remains negative. 
          The affirmation reflects our following views: Aozora Bank's credit in countries and regions we consider as having higher economic risk than Japan is increasing; on the other hand, it maintains relatively high profitability among Japanese banks, thanks to limited costs for credit in such countries and regions. 
          We have revised downward the anchor for Aozora Bank to 'bbb+' from 'a-'. This reflects the bank's increasing credit to countries and regions we consider as having higher economic risk than Japan, and our view that this trend will likely continue. The credit amount for such countries and regions has reached a level that is high enough for us to revise the anchor on the bank. Accordingly, we believe Aozora Bank's growing ratio of overseas credit to total credit is unlikely to fall materially in the next one to two years, given the likelihood that domestic interest income will remain under pressure and the bank's current business strategy.
          Meanwhile, we have also revised upward our assessment of Aozora Bank's business position to adequate from moderate. We base the revision on our view that the bank has relatively high profitability among Japanese banks, supported by growing overseas credit that carry higher yields than domestic credit. We assume that Aozora Bank's overseas credit-related costs remain below our expectation. 
          The outlook remains negative, reflecting our view that there is an over one-in-three chance of a downgrade due to a downward revision in our assessment of its risk position or funding and liquidity within the next two years. Overseas credit accounts for nearly 40% of Aozora Bank's total credit, including a large volume of real estate nonrecourse loans in overseas markets. The proportion of domestic and foreign real estate financing to total credit is slightly higher than those of other Japanese major banks, leaving the bank relatively susceptible to volatility in the real estate market. As such, we need to keep monitoring the degree of concentration in its business. At the same time, rising overseas credit has made the bank's future profit more susceptible to foreign exchange fluctuations, in our view. In addition, Aozora Bank relies on the interbank market for foreign-currency funding, making its funding structure for foreign currencies significantly less favorable than that for local currency. Consequently, the stability of its funding structure will weaken further if it continues to extend credit in foreign markets, in our view. 
          We may consider downgrading Aozora Bank if lower asset quality and higher concentration on large-lot credit and industrial sectors due to a more aggressive overseas lending stance increases downward pressure on our assessment of its risk position. We may also consider downgrading the bank if changes in its funding structure weaken stability in funding and liquidity. 
          Conversely, we may revise upward the outlook on Aozora Bank to stable if we expect a smaller proportion of overseas assets and lower concentration on large-lot credit or industrial sectors to ease downward pressure on our assessment of its risk position. We may also revise the outlook to stable if changes in its funding structure for foreign currencies eases downward pressure on our assessment of the bank's funding.