Sony Bank earns higher investment-grade rating from S&P on group aid

2 September 2010 - S&P today lifted by one step its investment-grade ratings on Japanese lender Sony Bank citing stronger support from its parent, Sony Financial Holdings (TYO:8729).

The bank now carries A/A-1 counterparty ratings with a "stable" outlook, compared with earlier A-/A-2 ratings with a "positive" outlook, denoting its "strong" debt-repayment ability.

The increased parental backing, which is factored into the bank's rating, is evident in its improved cooperation with the group companies as well as in ongoing and previous capital infusions by Sony Financial, which is 60% owned by electronics major Sony (TYO:6758).

The bank's closer ties and working partnership with other subsidiaries of Sony Financial, including Sony Life, helped it expand its assets under management by 15% and its loan book by 23% in fiscal 2009/10 ended March 31, 2010. At the same time, the bank continued to receive capital injections from the group cementing analysts' belief that the bank plays a major role for the group's growth strategy despite its limited contribution to the profits of its sole shareholder.

Moreover, strong business expansion of Sony Life, which accounts for more than 90% of Sony Financial's profits, has hiked the life insurer's rating to AA-, meaning that the group has stronger ability to help its banking unit out of financial troubles should the latter face such pressure.

The "stable" outlook on Sony Bank incorporates its solid stand-alone credit quality, which is supported by its good underwriting policy and current group funding, but limited by stiff fees and commissions competition, given its web-based business model, combined with unfavourable interest rates and even higher competitive pressure in the mortgage loan segment, the service added.