Moody's has again downgraded Suruga Bank Ltd., with various ratings to remain on review for another downgrade, on the back of a real estate investment lending case.
The rating agency on Oct. 4 lowered the bank's long- and short-term bank deposit ratings to Ba2 and Not Prime, respectively, from Baa1 and P-2. The lender's baseline and adjusted baseline credit assessments are now at "ba3" from "baa3."
Meanwhile, the long- and short-term counterparty risk assessments were downgraded to Ba1(cr) and Not Prime(cr), respectively, from A3(cr) and P-2(cr).
Suruga Bank's long-term bank deposit rating, long-term counterparty risk assessment, and baseline and adjusted baseline credit assessments will continue to be under review for further downgrade.
The downgrades mirror the risk of further material credit costs and increased provisioning after an independent review showed that the real estate portfolio affected by widespread lending breaches and falsification of documents was larger than previously reported. The downgrades also reflect a deterioration in the lender's liquidity.
In addition, Moody's lowered the government support assumption to moderate from high, given that the issues faced by the lender are limited to itself and may not have material implications for the broader Japanese banking system.
Moody's added that the continuing review for further downgrade will center on the quality of Suruga Bank's loan portfolio and the impact on profitability, as well as its liquidity and funding positions.