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Fitch Sector Update Shows Japanese Banks' Margin Prospects Dim
May 27, 2014 / 12:36 AM / 3 years ago

Fitch Sector Update Shows Japanese Banks' Margin Prospects Dim

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Japanese Banking Sector Update here TOKYO, May 26 (Fitch) Fitch Ratings says Japanese banks' core profitability is unlikely to improve materially in the near term, with no meaningful increase in the net interest margins. However, this would be mitigated by decreased costs relating to credit and reduced securities investment risk, Fitch says in a series of presentation slides. The presentation slides, titled "Japanese Banking Sector Update", formed the basis of presentations to investors in Hong Kong and Singapore. The slides include an overview of Japanese banks' operating environment and current conditions. Optimism over the Japanese economy has been increasing gradually since Prime Minister Shinzo Abe took office in December 2012. In fact, leading macro indicators are showing positive signs. However, it remains unclear whether the economy can achieve a self-sustaining exit from deflation if and when policy support is withdrawn. Fitch's sovereign team affirmed Japan's rating at 'A+'/Negative in May 2014. The Japanese banks have built reasonable capital buffers. However, Fitch believes that the banks' ability to further raise their capital buffers is diminishing, given investors' expectations for higher dividends, which are underpinned by better prospects for the banks' financial performances. Also, the banks' expansion of their overseas businesses is likely to result in more capital charges in the medium term. Fitch expects the Japanese mega banks to continue to issue capital instruments over the next few years to meet their Basel III capital requirements. So far, Sumitomo Mitsui Financial Group, Inc. and Mizuho Financial Group, Inc. have issued Tier 2 bonds, and Mitsubishi UFJ Financial Group, Inc. has filed for a Tier 2 issue program. Meanwhile, Additional Tier 1 instruments have yet to be issued. The presentation slides, titled "Japanese Banking Sector Update", are available at or by clicking on the link above. Contact: Miki Murakami Director +81 3 3288 2686 Fitch Ratings Japan Limited Kojimachi Crystal City East Wing 3F 4-8 Kojimachi, Chiyoda-ku, Tokyo 102-0083 Chikako Horiuchi Director +852 2263 9924 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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