Research: Rating Action: Moody’s Confirms Norinchukin Bank’s A1 Ratings; stable outlook

Tokyo, August 02, 2022 — Moody’s Japan KK has affirmed all ratings assigned to The Norinchukin Bank (Norinchukin) and Norinchukin Australia Pty Limited. The outlook for ratings is stable.

The confirmed ratings and assessments are as follows:

Norinchukin Bank:

– Basic Credit Assessment (BCA): confirmed at a3

– Adjusted BCA: affirmed at a3

– Rating of long-term bank deposits (domestic and foreign currencies): confirmed at A1, outlook stable

– Short-term bank deposit ratings (domestic and foreign currencies): confirmed at P-1

– Long-term issuer rating: affirmed at A1, stable outlook

– Senior unsecured debt rating (domestic and foreign currency): confirmed at A1, stable outlook

– Long-term counterparty risk ratings (domestic and foreign currencies): confirmed at A1

– Short-term counterparty risk ratings (domestic and foreign currencies): confirmed at P-1

– Assessment of long-term counterparty risk: confirmed at A1(cr)

– Assessment of short-term counterparty risk: confirmed at P-1(cr)

– The outlook remains stable

Norinchukin Australia Pty Limited:

– Long-term ratings of issuers (domestic and foreign currencies): confirmed at A1, stable outlook

– The outlook remains stable

RATINGS RATIONALE

The rating affirmation reflects Norinchukin’s very strong capital and high liquidity, offset by its low profitability and the risks associated with the bank’s business model, which involves managing a large portfolio of investment securities. These same factors are behind Norinchukin’s BCA a3 claim.

Norinchukin’s unrealized capital gains in its market investment portfolio declined significantly by more than 60%, from 2.7 trillion yen at the end of March 2022 to 1 trillion yen at the end of March 2021. explained by a substantial decline in unrealized capital gains. and losses on its bond holdings at JPY 334 billion in losses versus JPY 960 billion in gains respectively, mainly due to higher USD interest rates in the first quarter of 2022.

However, Norinchukin’s proactive reduction of interest rate and credit risk exposures will help prevent further increases in unrealized losses in the bank’s market investment portfolio. Yen weakness will also help offset the negative effects of rising USD interest rates.

Norinchukin’s low profitability reflects low interest rates globally and the fact that the bank does not take on much credit risk. In addition, Norinchukin’s proactive reduction of interest rate and credit risk will reduce the bank’s interest income in the year ending March 2023 (fiscal year 2022).

Norinchukin’s A1 long-term deposit and senior unsecured debt ratings incorporate a two-notch upside from the bank’s A3-adjusted BCA. Adjusted BCA and BCA are the same as there is no affiliate support. The two-notch hike reflects Moody’s assumption that the Japanese government (A1 stable) is most likely to support the bank in times of crisis, given the bank’s importance as a central financial organization for cooperatives. agriculture, forestry and fisheries of Japan, and the prefectural banking federations of the three segments (collectively referred to as the member cooperatives).

Norinchukin’s stable ratings outlook reflects Moody’s expectation that the bank’s very strong capital and strong liquidity will remain unchanged over the next 12 to 18 months, mitigating the risks inherent in its investment securities portfolio.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

An upgrade is unlikely as Norinchukin’s long-term deposits and senior debt are rated at the same level as Japan’s sovereign rating.

Factors that could lower the rating include: (1) a change in Norinchukin’s investment strategy that results in higher credit or market risk; (2) Norinchukin’s common tangible equity (TCE)/risk-weighted assets (RWA) remaining below 14% for an extended period; (3) Norinchukin’s nominal debt ratio falls below 5%; (4) failure of member cooperatives, resulting in losses to depositors or the need for extraordinary financial assistance from Norinchukin; or (5) signs of diminishing importance of Norinchukin as the central institution for agricultural, forestry, and fisheries cooperatives in Japan.

The main methodology used in these ratings is the (Japanese) bank methodology published in July 2021 and available on https://ratings.moodys.com/api/rmc-documents/73737. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Based in Tokyo, Norinchukin Bank (Norinchukin) is a national-level cooperative financial institution, with member organizations related to agriculture, forestry and fisheries. The bank had total consolidated assets of 106 trillion yen at the end of March 2022.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following information, if applicable to the jurisdiction: Ancillary services, Information to be provided to the rated entity, Information to be provided by the rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued without modification as a result of such disclosure.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Tetsuya Yamamoto
VP – Senior Credit Officer
Financial Institutions Group
Moody’s Japan KK
Atago Green Hills Tower Mori 20fl
2-5-1 Atago, Minato-ku
Tokyo, 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Customer service: 81 3 5408 4100

Graeme known
MD – Bank
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Customer Service: 852 3551 3077

Release Office:
Moody’s Japan KK
Atago Green Hills Tower Mori 20fl
2-5-1 Atago, Minato-ku
Tokyo, 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Customer service: 81 3 5408 4100

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