S&P could lower MUFG, subsidiaries

Standard & Poor's said it revised its view of the economic risk trend for Japan's banking sector to negative from stable and simultaneously placed its long-term counterparty credit ratings on Mitsubishi UFJ Financial Group Inc. (MUFG) and three "core" subsidiaries on CreditWatch with negative implications.

The subsidiaries include Bank of Tokyo-Mitsubishi UFJ Ltd., Mitsubishi UFJ Trust and Banking Corp. and Bank of Tokyo-Mitsubishi UFJ (China) Ltd.

The agency also placed on CreditWatch negative the issue ratings on the long-term debts and hybrid securities issued by either MUFG or the group subsidiaries that are subject to this round of rating actions.

In addition, S&P affirmed the short-term counterparty credit ratings on the three "core" subsidiaries of MUFG as well as the short-term issue ratings on some subsidiaries' short-term debts.

S&P also revised to negative from stable the outlooks on the long-term counterparty credit ratings on Nomura Holdings Inc. and its four "core" subsidiaries; Shinsei Bank Ltd. and a subsidiary; and Aozora Bank Ltd., and affirmed its short-term counterparty credit ratings on these entities as well as the issue ratings on some of them.

The agency said it believes the likelihood of an economic recovery in Japan, which is strong enough to revive growth that supports – and is commensurate with – the previous stable view of the economic risk trend in our Banking Industry Country Risk Assessment (BICRA), has diminished. A weaker economic recovery than S&P’s previous expectation will constrain the profitability and asset quality of financial institutions, in its view.

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