Moody's Investors Service Inc. announced Wednesday that it has placed its long-term and short-term credit ratings of Tokai Bank and Asahi Bank as well as the short-term rating of Sanwa Bank under review for possible upgrading.
The U.S. credit rating agency also said that Sanwa's current financial strength rating of D will be reviewed for possible downgrading following Tuesday's announcement of a consolidation plan by the three banks.
Moody's said: "The consolidation scheme may have positive credit-risk implications due to the group's significant size and the combined customer base that encompasses Japan's most lucrative metropolitan regions."
The agency said both Tokai and Asahi possess very weak financial fundamentals on a stand-alone basis and that the "consolidation with the weaker institutions . . . does not positively alter Sanwa's credit profile in the near term."
Moody's expressed concerns about Sanwa's remaining asset quality problems, decreasing financial flexibility and its narrowing profitability margins.