23-D-0956
October 27, 2023

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. Although the profit level is expected to decline due
to an increase in the costs associated with foreign currency-denominated bond investment andtemporary rises in expenses, JCR affirmed the ratings on the Bank, assuming that the Bank canmaintain a certain level of earnings capacity thanks mainly to steady interest on loans and discounts.
(2) Core net business income (excluding gains on cancellation of investment trusts) for the fiscal year
ended March 2023 (FY2022) decreased to 7.8 billion yen from the previous year’s 10.6 billion yen
due to such factors as an increase in foreign currency financing costs. The profit level will likely drop
further in FY2023 partly because of a one-off increase in expenses on top of higher foreign currency
financing costs. However, in terms of loans, the balance is growing even as COVID-related loans arebeing repaid. Interest on loans and discounts is kept at a relatively high level and will probably remain
steady for a while longer. Given also that the elimination of the temporary rises in expenses can beexpected, JCR considers that the Bank can maintain ROA (based on core net business income) moreor less at the level commensurate with the rating. JCR will closely watch whether the earnings
capacity will be ensured with the accumulation of business loans, as well as trends in foreign currency
financing costs.
(3) Non-performing loans ratio under the Financial Reconstruction Act as of March 31, 2023 rose to thehigher 3% range partly because the impact of the COVID crisis has become evident. Other assets
requiring caution have also increased, still accounting for as much as over 30% of gross credit
exposure. On the other hand, the ratio of coverage by guarantees, etc. is high, and the uncoveredamount is small. Moreover, provision ratio is high because of the adoption of the cash flow deduction
method, exceptional provision to prepare for the default of borrowers amid the COVID crisis and soforth. JCR predicts that credit costs are not likely to grow large for a while thanks to sufficient coverageand conservative provision.
(4) Securities-to-deposit ratio is low in the lower 10% range, but, as foreign currency-denominated bonds
account for as much as over 30% of the securities portfolio, a rise in foreign currency interest rates
has a great impact. Looking ahead, the Bank intends to reshuffle the securities portfolio, especiallywith respect to the bonds with valuation losses. JCR will thus pay close attention to the risk-taking
policy and trends in profitability.
(5) Consolidated core capital ratio adjusted for losses on valuation of available-for-sale securities, etc.
as of March 31, 2023 stood at around 8.5%, which is comparable to that of regional financial
institutions in JCR’s A- raging category. Given also the exceptional provision for COVID responses,
the Bank secures a reasonable level of a buffer against risks. Looking ahead, although risk assets
are highly likely to increase partly because of growth in loans not guaranteed by credit guarantee
corporations, JCR assumes that the Bank can still maintain its capital at around the current level witha slow but steady accumulation of internal reserves.
Kengo Sakaguchi, Kyohei YamamotoRating
Issuer: THE ASAHI SHINKIN BANK
<Affirmation>
Long-term Issuer Rating: AShort-term Issuer Rating: J-1

Outlook: Stable

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Rating Assignment Date: October 25, 2023
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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