Moody's Japan K.K. upgraded Shinsei Bank Ltd.'s long-term bank deposit ratings to Baa1 from Baa2 due to the bank's demonstrated ability to generate stable profits despite the current ultra-low interest rates and intense competition in Japan.
The rating agency said Aug. 29 that it also raised the bank's baseline credit assessment and adjusted BCA to "baa3" from "ba1" and its long-term counterparty risk assessment to A3(cr) from Baa1(cr). At the same time, the bank's short-term bank deposit ratings were affirmed at P-2, while its short-term counterparty risk assessment was affirmed at P-2 (cr).
Shinsei Bank's outlook was maintained at stable.
While intense competition in the Japanese banking sector has prevented many banks from growing loans profitably, Shinsei Bank's is somewhat insulated from these pressures because its core businesses, such as consumer finance and structured finance, face less competition, Moody's said.
The bank's baseline credit assessment reflects its stable asset quality, moderate profitability, improved capitalization and its improving ability to attract deposits. While the bank's deposit funding has improved, its deposit franchise remains weak when compared to Japanese mega and regional banks, which hold dominant positions in their home markets, the agency added.
