22-D-1154
December 19, 2022

Japan Credit Rating Agency, Ltd. (JCR) announces the following credit rating.

THE ASAHI SHINKIN BANK (security code: -)<Affirmation>
Long-term Issuer Rating: AOutlook:
StableShort-term Issuer Rating: J-1

Rationale(1) THE ASAHI SHINKIN BANK (the “Bank”) is a shinkin bank headquartered in Taito Ward, Tokyo witha fund volume of 2.4 trillion yen. While there are many business opportunities in Tokyo, competitionis fierce. Even so, the Bank has a certain share for deposits and loans in Taito and Edogawa wards,
its primary sales areas. Factors reflected in the ratings include the good business base, decent capital
adequacy and sufficient coverage for loan assets. The Bank currently has relatively high earnings
capacity but is facing downward pressure, and JCR will watch how well it can absorb such pressure
going forward.
(2) Profit level has been staying fairly high since the fiscal year ended March 2021 (FY2020). Thanks tothe execution of a very large volume of COVID-related loans, interest on loans and discounts hasgrown significantly from the previous level. Looking ahead, it will probably remain high for the time
being despite the likelihood of the repayment of COVID-related loans. Although the profit level will
likely be dragged down by growth in foreign currency financing costs, JCR predicts that, given therelatively high earnings capacity as of now, it will nevertheless stay at the level commensurate withthe rating for a while.
(3) Non-performing loans disclosed under the Financial Reconstruction Act have been increasing due tothe COVID crisis, etc., but their ratio stays at around the same level as shinkin banks’ average,
standing at 3.5% as of September 30, 2022. While other assets requiring caution account for as muchas over 30% of gross credit exposure, coverage by guarantees, etc. is sufficient, making theuncovered amount small. Moreover, the Bank makes conservative allowances, as indicated by theadoption of the cash flow deduction method and the posting of exceptional provision to prepare forthe default of borrowers amid the COVID crisis. JCR assumes that sufficient coverage and reserves
will help contain credit costs for the time being.
(4) Securities-to-deposit ratio is low in the lower 10% range, and the amount of securities investment risk
is not excessive relative to the Bank’s business vitality. However, as foreign currency-denominatedbonds account for as much as over 40% of the securities portfolio, losses on valuation of availablefor-sale securities as of September 30, 2022 were somewhat large due in part to a rise in foreign
currency interest rates. JCR will keep an eye on the Bank’s future risk-taking amid the unpredictable
market environment.
(5) Non-consolidated core capital ratio as of September 30, 2022 was in the upper 9% range. Although
the posting of losses on valuation of available-for-sale securities negatively affects the assessmentof capital adequacy, given the exceptional provision for COVID responses, etc., the Bank still securesa reasonable level of a risk buffer. Looking ahead, risk assets may increase partly because of anincrease in loans not guaranteed by credit guarantee corporations. That said, JCR assumes thatcredit costs will not weigh on heavily on profits in the near future, and a slow but steady accumulationof internal reserves can be expected. Financial strength relative to risks will probably be kept ataround the current level.
Kengo Sakaguchi, Ippei Koga
RatingIssuer: THE ASAHI SHINKIN BANK
<Affirmation>
Long-term Issuer Rating: AShort-term Issuer Rating: J-1

Outlook: Stable

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Rating Assignment Date: December 14, 2022
The assumptions for the credit ratings and the definitions of the rating symbols are published as "Types of Credit Ratings and Definitionsof Rating Symbols" (January 6, 2014) in Information about JCR Ratings on JCR's website (https://www.jcr.co.jp/en/).
Outline of the rating methodology is shown as "JCR's Rating Methodology" (November 7, 2014) and "Banks" (October 1, 2021)
in Information about JCR Ratings on JCR's website (https://www.jcr.co.jp/en/).
The rating stakeholder participated in the rating process of the aforementioned credit ratings.

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