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Moody's revises outlook on Daishi Bank, affirms ratings

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Moody's revises outlook on Daishi Bank, affirms ratings

Moody's revised its outlook on Japan-based Daishi Bank Ltd. to negative from stable amid the risk of potential weakening of the bank's financial profile.

The rating agency said March 15 that the outlook revision reflects the risk of a further deterioration in the bank's capitalization due to continued growth in risk-weighted assets, which could potentially weaken its financial profile.

Meanwhile, the rating agency affirmed the bank's long- and short-term bank deposit ratings at A2 and P-1, respectively. The bank's baseline credit assessment, or BCA, and adjusted BCA were affirmed at baa1, while the counterparty risk assessment was affirmed at A1(cr)/P-1(cr).

The bank's A2 long-term deposit rating incorporates a two-notch uplift from its BCA of baa1, reflecting Moody's assessment of a very high likelihood of government support for the bank in times of stress.

Further, Moody's said the Japan Fair Trade Commission's approval of the planned merger of Daishi Bank and Hokuetsu Bank Ltd. in December 2017 is credit positive for the former as it removes a major regulatory hurdle to the deal.

The two banks plan to finalize their merger agreement in March, two months earlier than the original deadline. The merger will allow the two banks to reduce costs and improve operational efficiency by consolidating overlapping branches in Japan's Niigata Prefecture.