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Rating Action: Moody's affirms Mizuho Securities' ratings; outlook stable
Global Credit Research - 20 Jul 2020
Tokyo, July 20, 2020 -- Moody's Japan K.K. has affirmed all the ratings of Mizuho Securities Co., Ltd. (MHSC). The outlook on the ratings is stable.
At the same time, Moody's has withdrawn the outlook on the long-term issuer and backed senior unsecured ratings of MHSC for its own business reasons. Please refer to the Moody's Investors Service's Policy for Withdrawal of Credit Ratings, available on www.moodys.com.
The list of affected ratings are below.
Mizuho Securities Co., Ltd. (MHSC)
.... Long-term Issuer Rating (Foreign and Local Currency), Affirmed A1
.... Short-term Issuer Rating (Foreign and Local Currency), Affirmed P-1
.... Backed Senior Unsecured Regular Bond/Debenture (Foreign Currency), Affirmed A1
.... Senior Unsecured Medium-Term Note Program (Foreign and Local Currency), Affirmed (P)A1
.... Backed Senior Unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)A1
.... Other Short Term (Foreign and Local Currency), Affirmed (P)P-1
.... Backed Other Short Term (Foreign Currency), Affirmed (P)P-1
.... Outlook, Remains Stable
MHSC's A1 long-term issuer rating is aligned with the ratings of MHSC's parent, Mizuho Financial Group, Inc. (Mizuho, A1 stable).
The alignment of the ratings reflects Moody's view that Mizuho and its major subsidiaries, including Mizuho Bank, Ltd. (MHBK, deposits A1/senior unsecured A1 stable, Baseline Credit Assessment (BCA) baa1), Mizuho Trust & Banking Co., Ltd. (MHTB, deposits A1 stable, BCA baa1), and MHSC, will benefit from the same level of government support.
Moody's does not expect the slowdown of the global economy caused by the coronavirus outbreak to immediately impact MHSC's ratings, because it assumes a very high probability of support from Mizuho. Any potential negative impact of the global economic slowdown would affect MHSC through a change in the rating of the parent.
MHSC's A1 issuer rating is three notches higher than its Baa1 standalone assessment after incorporating affiliate support, given Moody's assessment of a very high probability of support from the Government of Japan (A1 stable) in times of need.
MHSC's Baa1 standalone assessment after incorporating affiliate support is four notches higher than its standalone assessment of Ba2, because of Moody's assessment that there is a very high probability of MHSC receiving support from Mizuho and MHBK in both normal and stress situations, given that MHSC is a key operating entity and closely integrated into the operations of Mizuho.
Moody's lowered MHSC's standalone assessment to Ba2 from Ba1, reflecting MHSC's weakening profitability as well as deteriorating funding because of the integration of MHSC's and MHBK's sales platforms for derivatives.
MHSC's Ba2 standalone assessment considers its (1) moderate funding profile, backed by stable longer-term funding; (2) weak liquidity profile, offset by its status as a bank-related entity, which reduces its need to hold excess liquidity; (3) weak and relatively volatile profitability because of its high dependence on wholesale business when compared to domestic peers; and (4) high leverage, offset by its moderate risk appetite.
The stable outlook on the ratings reflects Moody's expectation that Mizuho and MHBK will provide a high level of support to MHSC in times of need.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of MHSC's A1 rating is unlikely because the rating is at the same level as Japan's sovereign rating. We may raise its standalone assessment if profitability strengthens, funding improves, and risk appetite further declines.
Factors that could result in a downgrade of the ratings include, but are not limited to, the following: (1) a downgrade of Japan's sovereign rating; (2) a downgrade of Mizuho's ratings; or (3) a decline in the strategic importance of MHSC to Mizuho.
The principal methodology used in these ratings was Securities Industry Market Makers Methodology (Japanese) published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187336. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Mizuho Securities Co., Ltd., headquartered in Tokyo, is one of the core entities of Mizuho Financial Group, Inc., which is in turn one of the largest banking groups in Japan. As of the end of March 2020, MHSC reported total consolidated assets of JPY17.6 trillion.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Tetsuya Yamamoto VP - Senior Credit Officer Financial Institutions Group Moody's Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: 81 3 5408 4110 Client Service: 81 3 5408 4100 Graeme Knowd MD - Banking Financial Institutions Group JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Releasing Office: Moody's Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: 81 3 5408 4110 Client Service: 81 3 5408 4100
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