Moody's Investor Service on Monday downgraded a financial rating for the Bank of Tokyo-Mitsubishi (BTM), while maintaining that of Daiwa Bank Ltd, despite a major restructuring announcement by the mid-sized lender.
The financial strength rating of the No. 3 bank in Japan was revised down to D from D+ reflecting BTM's declining financial flexibility, the credit risk evaluator said.
Other BTM ratings were unaffected and its outlook remained stable, it said.
"Moody's believes that BTM's current internal credit policy is relatively conservative as compared with other Japanese banks and that BTM's self-assessment of loans has captured a fair proportion of major problem borrowers," it said in a statement. In general, the agency said it remained pessimistic about an early recovery of Japanese banks' asset quality.
Moody's supported a move by Daiwa bank, which had been rumoured near to collapse, to consolidate its banking operations with affiliated regional banks Kinki Osaka Bank Ltd. and Nara Bank Ltd, but was sceptical about any real benefits.
"Moody's believes this development has limited financial merits, other than cost cutting," it said.
On Aug. 1 the three banks pledged to cut around 3,000 jobs and close 140 outlets by 2005 as a result of the merger.
"However, Moody's interprets this development as a noteable event because it is a clear indication of a strong regulatory support for Daiwa Bank," it said.
Daiwa received ?408 billion from the Japanese government in 1999 as part of a bail-out of 15 leading lenders designed to shore up their weak capital.
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