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S&P Ratings takes ratings action on Japanese banks over low profitability

S&P Global Ratings on Aug. 2 changed Japan's classification to Group 3 from Group 2 under the Banking Industry Country Risk Assessment after raising the country's industry risk score to 4.

The agency said Japanese banks face a higher industry risk than peers because of the country's fragmented market and low profitability. The negative interest rate in Japan is expected to keep profitability flat even if it has bolstered local economic growth since there is a surplus of funds in the private sector.

As a result of low profitability, Ratings downgraded its long-term issuer credit rating on three banks. Japan Post Bank Co. Ltd.'s issuer credit rating was lowered to A from A+, with a stable outlook, and the agency affirmed its short-term issuer credit rating of A-1.

Nomura Holdings Inc.'s issuer credit rating was lowered to BBB+ from A-, and that of its core subsidiaries was lowered to A-/A-2 from A/A-1. The outlook is stable since the agency anticipates Nomura to maintain its market position over two years by implementing its realignment plan.

Finally, Orix Bank Corp.'s long-term issuer credit rating was lowered to BBB+ from A-, with a stable outlook. The agency finds the bank's degree of group support to be constrained since Orix Bank's stand-alone credit profile of bbb+ is a notch lower than its group credit profile.

Ratings also affirmed its issuer credit ratings on the following banks as it anticipates a parent or the government to provide them some headroom for their weakened stand-alone creditworthiness.

Sumitomo Mitsui Trust Bank Ltd. and its core subsidiaries' issuer credit ratings were affirmed at A/A-1, with a positive outlook.

The agency affirmed its issuer credit ratings on Resona Bank Ltd. at A/A-1, with a stable outlook.

Shinkin Central Bank's issuer credit ratings was affirmed at A/A-1, with a stable outlook.

Ratings affirmed Shinsei Bank Ltd.'s issuer credit ratings at BBB+/A-2, with a stable outlook.

Development Bank of Japan Inc.'s issuer credit ratings at A/A-1 was affirmed, with a positive outlook.

Ratings affirmed its issuer credit ratings on Bank of Kyoto Ltd. at A/A-1, with a negative outlook.

Chiba Bank Ltd.'s issuer credit ratings was affirmed at A/A-1, with a negative outlook.

The agency affirmed Gunma Bank Ltd.'s issuer credit ratings at A-/A-2, with a stable outlook.

Ratings affirmed its issuer credit ratings on Hachijuni Bank Ltd. at A/A-1, with a negative outlook.

Hokkoku Bank Ltd.'s issuer credit ratings at A-/A-2 was affirmed, with a stable outlook.

Hokuriku Bank Ltd.'s issuer credit ratings was affirmed at A-, with a stable outlook.

The agency affirmed Iyo Bank Ltd.'s issuer credit ratings at A/A-1, with a negative outlook.

Keiyo Bank Ltd.'s issuer credit ratings was affirmed at A-/A-2, with a stable outlook.

Ratings affirmed its issuer credit ratings on Higo Bank Ltd. at A-/A-2, with a stable outlook.

Kagoshima Bank Ltd.'s issuer credit ratings at A-/A-2 was affirmed, with a stable outlook.

The agency affirmed its issuer credit ratings on Shizuoka Bank Ltd. at A/A-1, with a negative outlook.

Seven Bank Ltd.'s issuer credit ratings of A+/A-1 was affirmed, with a positive outlook.

Ratings affirmed its issuer credit ratings on Sony Bank Inc. at A/A-1, with a positive outlook.

"We expect future rating actions on Japanese banks to be entity-specific because we don't anticipate any further changes in our overall view of the nation's banking system in the next two years," S&P Global Ratings added.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.