Citigroup#s Two Japanese Entities And Morgan Stanley MUFG Securities Upgraded To #A+#; Off C Outlooks Stable

Stocks and Financial Services Press Releases Monday December 19, 2016 17:29
TOKYO--19 Dec--S&P Global Ratings

TOKYO (S&P Global Ratings) Dec. 19, 2016--S&P Global Ratings today said it has raised by one notch to 'A+' its long-term counterparty credit ratings on Citibank Japan Ltd. (CJL), Citigroup Global Markets Japan Inc. (CGMJ), and Japan-based Morgan Stanley MUFG Securities Co. Ltd. (MSMS). We also raised to 'A+' our issue rating on the senior unsecured debt of CGMJ. At the same time, we removed the ratings from CreditWatch with positive implications, where they were placed on Nov. 5, 2015. In addition, we affirmed our short-term counterparty credit ratings on the three Japanese entities and our issue rating on CGMJ's junior subordinated debt (see list below).

We upgraded CJL and CGMJ and removed the ratings from CreditWatch to reflect our rating actions on the major core operating subsidiaries of U.S.-based Citigroup Inc. (BBB+/Stable/A-2), which indirectly and wholly owns the two companies.

For MSMS, the one-notch upgrade and CreditWatch removal mirror our rating actions on the major core operating subsidiaries of U.S.-based Morgan Stanley (Holding Co.: BBB+/Stable/A-2), which indirectly owns 51% of the voting interest in MSMS.

We took the Dec. 16 rating actions on the major core operating subsidiaries of Citigroup and Morgan Stanley to incorporate an additional upward notch in the ratings for additional loss-absorbing capacity (ALAC). This is because the U.S. Federal Reserve Board has clarified its final rules related to total loss-absorbing capacity instruments (see "Operating Subsidiaries Of Four U.S. Global Systemically Important Banks Upgraded Following Final TLAC Rules," published Dec. 16, 2016).

Under our group rating methodology, we consider CJL, CGMJ, and MSMS as core subsidiaries of their respective groups because we view these companies as strongly integrated into their groups. As such, we equalize our ratings on the three companies with our ratings on the other core operating subsidiaries of their respective groups. The ratings on each group's core operating subsidiaries are equal to their respective supported group credit profile (GCP), which is our opinion of a group's creditworthiness, including the likelihood of extraordinary support.

The stable rating outlooks on CJL, CGMJ, and MSMS reflect our view that our ratings on the three companies will likely remain stable for the next two years, reflecting the stable outlooks on the major core operating subsidiaries of their respective groups. We might consider upgrading the three Japanese entities if we revise upward the respective GCPs. However, under such a scenario, the ratings will likely be constrained by our sovereign ratings on Japan.

Conversely, we might consider downgrading the three Japanese entities if we revise downward the respective GCPs or if we believe the entities have become less integral to their respective groups or their likelihood of receiving extraordinary group support has declined, which could happen if the Japanese market becomes less important to their respective groups.

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