RAM Ratings Reaffirms Bank of Tokyo-Mitsubishi UFJ's AAA/Stable/P1 Ratings

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1. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications RAM​ ​Ratings​ ​Reaffirms​ ​Bank​ ​of​ ​Tokyo-Mitsubishi UFJ's​ ​AAA/Stable/P1​ ​ratings 7​ ​November​ ​2017 RAM​ ​Ratings​ ​has​ ​reaffirmed​ ​the​ ​AAA/Stable/P1​ ​financial​ ​institution​ ​ratings​ ​of​ ​The​ ​Bank​ ​of Tokyo-Mitsubishi​ ​UFJ,​ ​Ltd​ ​(BTMU​ ​or​ ​the​ ​Bank).​ ​The​ ​ratings​ ​consider​ ​the​ ​Bank's​ ​strong domestic​ ​franchise​ ​and​ ​the​ ​systemic​ ​importance​ ​of​ ​its​ ​Japan-based​ ​holding​ ​company, Mitsubishi​ ​UFJ​ ​Financial​ ​Group,​ ​Inc​ ​(MUFG​ ​or​ ​the​ ​Group).​ ​Given​ ​its​ ​systemic​ ​importance, MUFG​ ​is​ ​expected​ ​to​ ​benefit​ ​from​ ​a​ ​high​ ​likelihood​ ​of​ ​support​ ​from​ ​the​ ​Japanese​ ​government.​ ​It has​ ​also​ ​been​ ​identified​ ​as​ ​a​ ​global​ ​systemically​ ​important​ ​bank​ ​by​ ​the​ ​Financial​ ​Stability​ ​Board. MUFG's​ ​asset​ ​quality​ ​is​ ​deemed​ ​solid.​ ​The​ ​credit​ ​quality​ ​of​ ​its​ ​domestic​ ​exposures​ ​has remained​ ​relatively​ ​sound,​ ​reflective​ ​of​ ​the​ ​resilience​ ​of​ ​its​ ​medium-to-large-sized​ ​local corporate​ ​borrowers.​ ​Given​ ​the​ ​Group's​ ​ongoing​ ​efforts​ ​to​ ​reduce​ ​its​ ​credit​ ​exposure​ ​to​ ​the energy​ ​and​ ​mining​ ​sector​ ​(-JPY1.1​ ​trillion​ ​in​ ​fiscal​ ​2017),​ ​we​ ​expect​ ​its​ ​asset-quality​ ​indicators to​ ​hold​ ​up​ ​well.​ ​The​ ​Group's​ ​gross​ ​impaired-loan​ ​ratio​ ​stood​ ​at​ ​1.3%​ ​as​ ​at​ ​end-June​ ​2017​ ​while its​ ​credit-cost​ ​ratio​ ​was​ ​contained​ ​below​ ​the​ ​10-year​ ​average​ ​of​ ​0.3%​ ​(1Q​ ​FY​ ​Mar​ ​2017:​ ​0.1% on​ ​an​ ​annualised​ ​basis). Funding​ ​and​ ​liquidity​ ​is​ ​a​ ​key​ ​strength​ ​of​ ​Japanese​ ​mega​ ​banks​ ​such​ ​as​ ​MUFG.​ ​The​ ​Group​ ​has a​ ​strong​ ​base​ ​of​ ​retail​ ​deposits​ ​in​ ​Japan;​ ​individual​ ​deposits​ ​constituted​ ​about​ ​41%​ ​of​ ​its​ ​total deposits​ ​as​ ​at​ ​end-June​ ​2017.​ ​With​ ​a​ ​loans-to-deposits​ ​ratio​ ​of​ ​59%​ ​and​ ​substantial​ ​holdings​ ​of Japanese​ ​government​ ​bonds,​ ​the​ ​Group's​ ​liquidity​ ​coverage​ ​ratio​ ​easily​ ​exceeded​ ​100%.​ ​On the​ ​flip​ ​side,​ ​MUFG's​ ​sizeable​ ​equity​ ​cross-shareholdings​ ​and​ ​investments​ ​in​ ​Japanese​ ​bonds render​ ​its​ ​earnings​ ​and​ ​capitalisation​ ​more​ ​volatile.​ ​As​ ​at​ ​end-March​ ​2017,​ ​the​ ​Group's​ ​fully loaded​ ​common-equity​ ​tier-1​ ​(CET-1)​ ​ratio,​ ​which​ ​fully​ ​accounts​ ​for​ ​unrealised​ ​gains​ ​on securities,​ ​came​ ​up​ ​to​ ​11.9%.​ ​Excluding​ ​these​ ​gains,​ ​its​ ​CET-1​ ​capital​ ​ratio​ ​would​ ​ease​ ​to​ ​9.8%. On​ ​the​ ​whole,​ ​profit​ ​prospects​ ​for​ ​Japanese​ ​banks​ ​remain​ ​dim.​ ​Fierce​ ​competition​ ​and​ ​ultra-low lending​ ​rates​ ​will​ ​keep​ ​suppressing​ ​MUFG's​ ​net​ ​interest​ ​margin;​ ​we​ ​envisage​ ​little​ ​improvement in​ ​the​ ​foreseeable​ ​future​ ​given​ ​the​ ​Bank​ ​of​ ​Japan's​ ​negative​ ​interest-rate​ ​policy.​ ​MUFG's​ ​pre-tax profit​ ​shrank​ ​13%​ ​to​ ​JPY1.3​ ​trillion​ ​in​ ​FY​ ​Mar​ ​2017,​ ​translating​ ​into​ ​a​ ​low​ ​return​ ​on​ ​risk-weighted assets​ ​of​ ​1.1%.​ ​This​ ​was​ ​subsequently​ ​lifted​ ​to​ ​1.3%​ ​in​ ​1Q​ ​FY​ ​Mar​ ​2018,​ ​thanks​ ​to​ ​stronger trading​ ​gains.
2. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications Organisation​ ​Name: News​ ​Type: RAM​ ​Rating​ ​Services​ ​Berhad RATING​ ​ANNOUNCEMENT Source: BNM​ ​Announcements Media​ ​Contact Padthma​ ​Subbiah (603)​ ​7628​ ​1162 padthma@ram.com.my Disclaimer: The​ ​credit​ ​rating​ ​is​ ​not​ ​a​ ​recommendation​ ​to​ ​purchase,​ ​sell​ ​or​ ​hold​ ​a security,​ ​inasmuch​ ​as​ ​it​ ​does​ ​not​ ​comment​ ​on​ ​the​ ​security's​ ​market price​ ​or​ ​its​ ​suitability​ ​for​ ​a​ ​particular​ ​investor,​ ​nor​ ​does​ ​it​ ​involve​ ​any audit​ ​by​ ​RAM​ ​Ratings.​ ​The​ ​credit​ ​rating​ ​also​ ​does​ ​not​ ​reflect​ ​the legality​ ​and​ ​enforceability​ ​of​ ​financial​ ​obligations. RAM​ ​Ratings​ ​receives​ ​compensation​ ​for​ ​its​ ​rating​ ​services,​ ​normally paid​ ​by​ ​the​ ​issuers​ ​of​ ​such​ ​securities​ ​or​ ​the​ ​rated​ ​entity,​ ​and sometimes​ ​third​ ​parties​ ​participating​ ​in​ ​marketing​ ​the​ ​securities, insurers,​ ​guarantors,​ ​other​ ​obligors,​ ​underwriters,​ ​etc.​ ​The​ ​receipt​ ​of this​ ​compensation​ ​has​ ​no​ ​influence​ ​on​ ​RAM​ ​Ratings'​ ​credit​ ​opinions or​ ​other​ ​analytical​ ​processes.​ ​In​ ​all​ ​instances,​ ​RAM​ ​Ratings​ ​is committed​ ​to​ ​preserving​ ​the​ ​objectivity,​ ​integrity​ ​and​ ​independence​ ​of its​ ​ratings.​ ​Rating​ ​fees​ ​are​ ​communicated​ ​to​ ​clients​ ​prior​ ​to​ ​the issuance​ ​of​ ​rating​ ​opinions.​ ​While​ ​RAM​ ​Ratings​ ​reserves​ ​the​ ​right​ ​to disseminate​ ​the​ ​ratings,​ ​it​ ​receives​ ​no​ ​payment​ ​for​ ​doing​ ​so,​ ​except for​ ​subscriptions​ ​to​ ​its​ ​publications. Similarly,​ ​the​ ​disclaimers​ ​above​ ​also​ ​apply​ ​to​ ​RAM​ ​Ratings' credit-related​ ​analysis​ ​and​ ​commentaries,​ ​where​ ​relevant.