News Column

Moody's assigns A1 to Mizuho Bank JPY senior unsecured bonds

February 23, 2014



Moody's Japan K.K. has assigned an A1 rating

to JPY-denominated senior unsecured bonds issued by Mizuho Bank, Ltd

(MHBK). The rating outlook is stable.

This is a takedown from the bank's JPY2 trillion domestic shelf

registration (effective February 9, 2013), which is rated (P)A1.

The bond issuance is:

 JPY120 billion Series 35 senior unsecured debt due 2019

RATINGS RATIONALE

The A1 rating of MHBK incorporates a three-notch uplift from the bank's

baseline credit assessment (BCA) of baa1, due to our assumption of a very

high probability of systemic support for MHBK -- one of two main

subsidiary banks of Mizuho Financial Group Inc. (Mizuho, P-1) -- given

the group's importance to Japan's financial system, as the second-largest

financial group by total assets, and therefore the low degree of

substitutability. Mizuho's other main subsidiary bank is Mizuho Trust &

Banking Co., Ltd. (A1 stable).

The C- standalone bank financial strength rating (BFSR) -- equivalent to

a BCA of baa1 -- reflects our overall assessment of the bank's: (1)

strong domestic client base and leading positions in Japan's retail and

wholesale markets; (2) its high concentration risk in Japanese corporate

credit, and its equity risk relative to earnings; and (3) its recovering

but still modest financial fundamentals.

The long-term ratings of Mizuho's two main subsidiary banks are at the

same rating level, based on our assessment that: (1) they are closely

inter-connected and under the management of Mizuho; (2) their capital

management is centralized at the holding company level; and (3) they have

close inter-bank support relationships.

The Mizuho banks' long-term ratings are determined by our overall

assessment of the banks on a standalone basis, as well as Mizuho's

financial position on a group consolidated basis.

Given the two-notch upward change of the stand-alone credit profile in

November 2011 and the fact that there are now three notches of systemic

uplift in line with our guidelines, upward pressure on the ratings is

unlikely.

For the Mizuho banks' ratings to be eventually upgraded, Moody's

considers the following factors as crucial: (1) a further improvement in

Mizuho's capital adequacy, such that its common equity Tier 1 (CET1)

ratio (Basel III fully-loaded basis) exceeds 8% on a sustained basis,

while maintaining its stable and solid liquidity profile; (2) an

improvement in Mizuho's profitability, such that there is a sustainable

increase in the ratio of pre-provision profits versus risk-weighted

assets to above 1.5%; and (3) the ongoing disposal of highly volatile and

risky assets, such as Japanese equities. Even if these factors are

exceeded, Moody's would also need to see an improvement in Mizuho's

metrics relative to both its domestic and global peers, in order to

consider an upgrade.

Downward pressure on the ratings would include: (1) a bottom-line annual

loss owing to unexpected developments, such as a default by Tokyo

Electric Power Company (TEPCO), which counts the Japanese mega-banks,

including Mizuho, among its biggest creditors, or a sharp increase in

interest rates; and (2) a downgrade of Japan's sovereign rating since

this may lead to further reassessment of the capacity of Japan to support

its large banking system.

Headquartered in Tokyo, Mizuho Financial Group, Inc. is one of the

largest financial group in Japan with a number of enterprises operating

under its umbrella: Mizuho Bank, Ltd. (a retail/wholesale bank), Mizuho

Trust & Banking Co, Ltd. (a trust bank), Trust and Custody Services Bank

Ltd. (a custodial bank), Mizuho Securities Co., Ltd. (a securities

brokerage), as well as a number of other entities, which together

provide a comprehensive array of financial services.


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Source: EMBIN (Emerging Markets Business Information News)


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