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Moody's lowers Chugoku Bank's baseline credit assessment

Moody's downgraded Chugoku Bank Ltd.'s baseline credit assessment andadjusted baseline credit assessment to "a3" from "a2".

At the same time, the rating agency affirmed Chugoku Bank'sA1 long-term deposit ratings and Prime-1 short-term deposit ratings.

The ratings outlook is stable.

The downgrade reflects a decline in the bank'scapitalization measured as tangible common equity to risk-weighted assets. Thebank's TCE ratio was 12.1% as of the end of March, falling short of the 13%threshold Moody's expected for maintaining the baseline credit assessment at"a2".

The baseline credit assessment takes into account the bank'sstrong capital, strong overall asset risk profile, weak but stable profitabilityand solid liquidity profile.

Moody's does not expect to upgrade the bank's long-termrating given that it is at the same level as Japan's sovereign rating. Thebank's ratings may be downgraded if it fails to maintain its TCE ratio of 11%.The ratings may also be downgraded if there are signs of asset qualitydeterioration or lower profitability. A weakening of the bank's liquidityprofile and a downgrade of Japan's sovereign rating may also lead to a ratingsdowngrade.