TEXT-Fitch Rates Japan's Shizuoka Bank 'A'; Outlook Stable

Mon Aug 6, 2012 2:16am EDT

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(The following was released by the rating agency)

TOKYO, August 06 (Fitch) Fitch Ratings has assigned Japan's Shizuoka Bank, Ltd (Shizuoka) Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) of 'A' with Stable Outlook. Fitch also assigned a Support Floor Rating of 'BBB-' to Shizuoka. All its other ratings have been affirmed. A full rating breakdown is provided below.

Shizuoka's IDRs are driven by its Viability Rating (VR), which in turn reflects the bank's strong capitalisation with a Fitch Core Capital ratio near 18% end-March 2012, and its strong regional franchise. The ratings also factor in the bank's conservative management and its overall resilience to foreseeable risks underpinned by a track record of profitability. These factors, combined with Fitch's expectations that the operating environment will not deteriorate beyond recent past cycles, contribute to the Stable Outlook.

Liquidity is supported by the bank's large holding of Japanese government bonds (JGBs - 11% of total assets at end-March 2012) and substantial retail deposits.

Shizuoka's VR and IDRs may see negative rating action if aggressive growth, earnings volatility or material deterioration in asset quality results in thinning capitalisation. Conversely, significant improvement in profitability on a sustained basis may result in positive rating action. However, the bank's large investment in JGBs may constrain any upward rating movement if the Japanese sovereign 'A+' rating, which is currently on Negative Outlook, is downgraded.

Shizuoka's Support Rating (SR) '2' reflects a high potential for support from the Japanese sovereign, if needed, which in turn underpins the Support Rating Floor of 'BBB-'.

Shizuoka is the largest bank in Shizuoka Prefecture and the fifth-largest regional bank or regional banking group in Japan, by assets. It has overseas branches and a subsidiary abroad mainly to serve its Japanese customers.

The rating actions are as follows:

Shizuoka Bank

Long-Term Foreign and Local Currency IDRs assigned at 'A'; Outlook Stable

Short-Term Foreign and Local Currency IDRs affirmed at 'F1'

Viability Rating affirmed at 'a'

Support Rating affirmed at '2'

Support Rating Floor assigned at 'BBB-'

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