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Investing.com -- S&P Global Ratings has lowered its ratings on Seven Bank Ltd. following the bank’s deconsolidation from Seven & i Holdings Co. Ltd.
The rating agency cut Seven Bank’s long-term issuer credit rating from ’A’ to ’A-’ and its short-term issuer credit rating from ’A-1’ to ’A-2’ on Wednesday. The ratings were also removed from CreditWatch, where they had been placed with negative implications on March 12, 2025.
The downgrade comes after Seven & i Holdings announced on Tuesday that it had reduced its stake in Seven Bank, making the bank more autonomous. This change has diminished the links between the two entities and reduced the possibility of group support, according to S&P.
Despite the downgrade, S&P still considers Seven Bank a "strategically important" member of the Seven & i Group, noting that the bank’s ATM business contributes to earnings and that Seven & i Holdings remains the largest shareholder with more than one-third of voting rights.
About 80% of Seven Bank’s ATMs are located in Seven-Eleven stores, creating a close relationship with the group’s core convenience store business. Due to this connection, S&P stated that its ratings on Seven Bank will be influenced by those on Seven & i Holdings.
The rating agency believes the deconsolidation will have limited impact on the bank’s stand-alone credit profile. Seven Bank repurchased shares of three Seven & i Holdings subsidiaries for approximately ¥50 billion, but S&P expects the bank’s risk-adjusted capital ratio to remain above 20% after this transaction.
The outlook on Seven Bank is stable, reflecting its strategic importance to the group and S&P’s expectation that the bank’s financial health will be maintained over the next one to two years.
S&P outlined potential scenarios for future rating actions, noting that a downgrade could occur if Seven & i Holdings is downgraded by two notches or more, or if Seven Bank’s risk-adjusted capital ratio falls below 15% while Seven & i Holdings experiences a one-notch downgrade.
An upgrade would require Seven Bank to significantly strengthen its business base by diversifying revenue streams while Seven & i Holdings maintains its current rating level, though S&P considers this scenario "highly unlikely."
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