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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (28017)	9/16/1998 7:06:00 AM
From: flickerful	Respond to of 94695

S&P Revises Outlook to Negative on Four Japanese Banks TOKYO--(BUSINESS WIRE)--Standard & Poor's CreditWire 9/16/98-- Standard & Poor's today revised its outlook for Dai-Ichi Kangyo Bank Ltd., Industrial Bank of Japan Ltd., Sanwa Bank Ltd., and Fuji Bank Ltd., and their related entities (see list below), to negative from stable. Standard & Poor's has affirmed the ratings of these four banks. A worsening operating environment has heightened the risk faced by Japanese banks, with new problem loans, due to the recession, adding to the burden of the still unresolved problem loans dating back to the burst of the economic ''bubble'' in the 1980s. Standard & Poor's is also concerned that the continuing political wrangling and delays in implementing decisive and effective measures to revitalize the banking system will further aggravate the situation. As a result, all major banks including city banks, trust banks, and long-term credit banks have negative outlooks. The ratings could be revised if future credit costs significantly exceed previous estimates and further weaken the banks' financial strength; liquidity conditions deteriorate; or unrealized losses on stock portfolios enlarge substantially. New problem loans will likely increase, in line with the weakening domestic economy and the increasing number of bankruptcies. Japan's GDP shrank by an annualized 3.3% in the first quarter of fiscal 1998 (year ends March 31, 1999) over the previous quarter, posting three quarters of consecutive negative growth, the worst performance since World War II. The rate cut by the Bank of Japan, on September 9, is unlikely to have a substantial impact on economic activity. In addition, unstable conditions in other Asian markets will likely place additional pressure on the asset quality of the major Japanese banks, though the magnitude of the problems is expected to be smaller than the problems in the domestic market. Relative to the high number of potential problem loans, the capitalization of the Japanese banks is very low. Furthermore, Japanese banks are highly exposed to the volatile stock market, and the sharp decline in stock prices has eroded their financial capacity. If the Nikkei Stock Index ends the year below 14,000, most major Japanese banks will have unrealized losses. The change of accounting rules, which allows banks to use the original-cost valuation method, could avoid a negative impact on the reported results, but the strains on the banks' true financial conditions remain. Despite the severity of the banking industry's problems, the Japanese government has not shown strong leadership in managing the problems and restoring market confidence. The Japanese government's ''Comprehensive Plan for Financial Revitalization'' and other related laws, which were expected to go through the Diet (parliament) in August, have not yet been approved. Standard & Poor's is concerned that further delay in taking decisive action will further increase future bail-out costs and postpone an economic recovery. Furthermore, political disputes between the ruling party and the opposition parties over support for The Long-Term Credit Bank of Japan Ltd. (LTCB) have intensified. Given the government's previous strong statements of support for LTCB and its proposed merger with Sumitomo Trust & Banking Co. Ltd., there could be a negative impact on the funding conditions for all Japanese banks, if the merger were to fall through and creditors lose money, said Standard & Poor's.---CreditWire RATINGS AFFIRMED; OUTLOOK NEGATIVE TO FROM Dai-Ichi Kangyo Bank Ltd. Counterparty credit rtg BBB+/Negative/A-2 BBB+/Stable/A-2 CD BBB+/A-2 Euro CP A-2 Sr unsecd BBB+ Dai-Ichi Kangyo Bank Nederland N.V. Counterparty credit rtg BBB+/Negative/-- BBB+/Stable/-- Sr unsecd BBB+ Dai-Ichi Kangyo Australia Ltd. Counterparty credit rtg BBB+/Negative/A-2 BBB+/Stable/A-2 Industrial Bank of Japan Ltd. Counterparty credit rtg A-/Negative/A-2 A-/Stable/A-2 CD A-/A-2 Sr unsecd A- Sub debt BBB+ Jr sub debt BBB Industrial Bank of Japan Finance Co. N.V. Counterparty credit rtg A-/Negative/-- A-/Stable/-- Sr unsecd A- Sub debt BBB+ Jr sub debt BBB Industrial Bank of Japan (Canada) Counterparty credit rtg --/A-2 CD A-2 IBJ Australia Bank Ltd. Counterparty credit rtg A-/Negative/A-2 A-/Stable/A-2 CP A-2 Sanwa Bank Ltd. Counterparty credit rtg A-/Negative/A-2 A-/Stable/A-2 CD A-/A-2 Sr unsecd A- Sanwa Business Credit Corp. Counterparty credit rtg BBB+/Negative/A-2 BBB+/Stable/A-2 CP A-2 Sr unsecd BBB+ Sanwa Australia Finance Ltd. Counterparty credit rtg A-/Negative/A-2 A-/Stable/A-2 Sr unsecd (gtd. Sanwa Bank Ltd.) A- Sanwa International Finance Ltd. Counterparty credit rtg A-/Negative/-- A-/Stable/-- Sanwa Australia Ltd. Counterparty credit rtg A-/Negative/A-2 A-/Stable/A-2 CP A-2 Sr unsecd (gtd. Sanwa Bank Ltd.) A- Sanwa Singapore Ltd. Counterparty credit rtg A-/Negative/-- A-/Stable/-- Sanwa Finance Aruba A.E.C. Counterparty credit rtg BBB+/Negative/-- BBB+/Stable/-- Sr unsecd (gtd. Sanwa Bank Ltd.) BBB+/BBB Fuji Bank Ltd. Counterparty credit rtg BBB+/Negative/A-2 BBB+/Stable/A-2 CD BBB+/A-2 Sr unsecd BBB+ Fuji International Finance PLC Counterparty credit rtg A-2 CP A-2 Fuji Bank (Luxembourg) S.A. Counterparty credit rtg BBB+/Negative/-- BBB+/Stable/- Fuji International Finance (Australia) Ltd. Counterparty credit rtg BBB+/Negative/A-2 BBB+/Stable/A-2 Fuji International Finance (HK) Ltd. Counterparty credit rtg BBB+/Negative/-- BBB+/Stable/-- Fuji Finance (Bermuda) Trust Preferred stock BB+ ------------------------------------------------------------------------ Contact: Yoshiyuki Mitsugi, Tokyo (81) 3-3593-8721 Naoko Nemoto, Tokyo (81) 3-3593-8720 Roger B Taillon, New York (1) 212-208-1570 David A Collins (Media), Tokyo (81) 3-3593-8579 For more information on criteria or subscriptions: ratings.standardpoor.com