July 11, 2017 / 7:23 AM / a year ago

Fitch Assigns First-Time 'A' Rating to MUMSS

(The following statement was released by the rating agency) TOKYO, July 11 (Fitch) Fitch Ratings has assigned Japan-based Mitsubishi UFJ Morgan Stanley Securities Co., Ltd (MUMSS) a first-time Long-Term Foreign- and Local-Currency Issuer Default Rating (IDRs) of 'A'. The Outlook is Stable. The agency has also assigned the company a Short-Term Foreign- and Local-Currency IDRs of 'F1' and a Support Rating of '1'. MUMSS is a consolidated subsidiary of Mitsubishi UFJ Financial Group, Inc. (MUFG; A/Stable/F1/a) and is 60% owned by MUFG via an intermediate holding company, Mitsubishi UFJ Securities Holdings Co., Ltd. (which is fully owned by MUFG), and 40% owned by US-based Morgan Stanley (A/Stable/F1/a). KEY RATING DRIVERS MUMSS's IDRs are aligned with those of its majority shareholder, MUFG. This reflects Fitch's view that MUFG would be extremely likely to extend its subsidiary support in a timely manner, if required. There is a history of MUFG supporting MUMSS in its early years of conception, although Fitch would now expect capital support for business expansion to be apportioned between shareholders. Fitch believes liquidity support is readily available from Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU; A/Stable/F1/a), a core subsidiary of MUFG. Fitch believes MUMSS's role of supporting the group's aggregate securities business and the high degree of operational integration and branding underlines the parent's strong commitment to MUMSS. Furthermore, MUFG has effective operational control over MUMSS through representation on its board and in senior management. Fitch sees MUMSS as a core subsidiary of MUFG, engaging in the retail business, investment banking business, sales, trading and research. MUMSS plays a key role in collaborating with other core group entities, including BTMU and Mitsubishi UFJ Trust and Banking Corporation (A/Stable/F1/a), in the retail and middle-market business as well as acting as a group investment banking arm. RATING SENSITIVITIES MUMSS's IDRs would be directly affected by changes to MUFG's IDRs, which are currently underpinned by its Viability Rating of 'a'. Fitch does not envisage negative rating action on the MUFG's Viability Rating due to its strong domestic franchises, solid yen liquidity profile, sound asset quality and adequate capital position. However, the Viability Rating may be negatively affected if an unexpected deterioration in the operating environment, such as increased uncertainty or failure of Abenomics, adversely affects the bank's financial profile. Downward pressure may also result from a substantial increase in risk appetite without a corresponding increase in risk buffers or higher volatility in earnings and capital. Negative rating action on MUFG's Viability Rating would also likely to be a reflection of negative action on Japan's sovereign rating (A/Stable). MUMSS's Support Rating and IDRs could be downgraded if MUFG's propensity to support its subsidiary diminished, MUMSS's functions within the group were substantially lessened and Fitch no longer viewed its position within the group as core and integral. Also, a large reduction in ownership and management oversight, would likely result in a review of MUMSS's Support Rating and IDRs. Fitch does not assign a Viability Rating to MUMSS as its operation is highly integrated with the parent's business. Contact: Primary Analyst Naoki Morimura Director +81 3 3288 2686 Fitch Ratings Japan Limited Kojimachi Crystal City East Wing 3F 4-8 Kojimachi, Chiyoda-ku, Tokyo 102-0083 Secondary Analyst Kaori Nishizawa Director +81 3 3288 2783 Committee Chairperson Jonathan Cornish Managing Director +852 2263 9901 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Global Non-Bank Financial Institutions Rating Criteria (pub. 10 Mar 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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