P.M. BRIEFING : 4 Japanese Banks’ Ratings Drop

Moody’s Investors Service today downgraded the debt ratings of four major Japanese banks, citing concern about profitability and asset quality, particularly in real estate loan portfolios.

Sumitomo Bank Ltd. and Mitsubishi Bank Ltd. were lowered to AA-1 from AAA, while Long-Term Credit Bank of Japan Ltd. was downgraded to A-1 from AA-2 and Tokai Bank Ltd. was lowered to AA-3 from AA-2.

Moody’s noted that Sumitomo remains Japan’s most profitable bank. It praised Mitsubishi’s conservative management, Long-Term Credit Bank’s strong fee-based businesses and Tokai’s solid base in and around the city of Nagoya, in central Japan.

But the agency said it is concerned about the banks’ exposure to loans in a soft real estate market, their need to restructure assets and their ability to compete as interest rates are deregulated.