Japan’s Shizuoka Bank maintains strong loan quality as profits continue to be weak

The bank has the strongest capitalization amongst regional banks in Japan.

Japan’s Shizuoka Bank is expected to maintain strong loan quality, capitalization, and liquidity over the next 12-18 months, according to Moody’s latest ratings report on the bank.

However, it will continue to struggle with weak, albeit stabilizing profitability. 

Shizuoka Bank is noted for its strong capitalization, reportedly the strongest among rated Japanese regional banks'. It also has a consistently better average non-performing loans (NPL) ratio than other regional banks in Japan

“Shizuoka Bank's loan quality has not been materially affected by the coronavirus pandemic, as the Japanese government's relief measures for local businesses have kept default rates among small and medium-size enterprises (SMEs) low,” Moody’s reported.

Despite this, Moody’s warned that the bank's loan quality could worsen if energy and commodity prices remain persistently high, as it would weaken the debt repayment capability of domestically oriented businesses.

Shizuoka Bank's liquidity also remains strong, supported by its solid deposit franchise. The bank maintains a 26% share in its home market and a low loan to deposit ratio of 83% as of the end of March 2021.