NEWS RELEASE

Nov 24, 2020 R&I Affirms A, Stable: The Kiyo Bank, Ltd.

Rating and Investment Information, Inc. (R&I) has announced the following: ISSUER: The Kiyo Bank, Ltd. Issuer Rating: A, Affirmed Rating Outlook: Stable

RATIONALE: The Kiyo Bank, Ltd. is a regional bank which primarily operates in Wakayama Prefecture and southern Osaka Prefecture (the areas south of Sakai City) with a focus on lending to small and medium-sized enterprises (SMEs). By pursuing a strategy of effectively allocating management resources based on analysis of profitability and transaction volume per customer, the bank has delivered results. Although its earning capacity is weaker than the rating suggests, the core operating profit-based ROA and profits from customer transactions have been improving. Market risk is comparatively small, and the bank's risk resilience is fully commensurate with the A rating category. Its credit management is prudent. With a credit portfolio diversified into small accounts, the bank has avoided risk of credit concentration in large borrowers and specific industries. Given a policy to lower reliance on market transactions by expanding profits from customer transactions, a surge in market risk is unlikely. No problem has been found in liquidity management. While asset quality is relatively sound, it is largely affected by lending in Osaka Prefecture, which accounts for the majority of the loan portfolio. For customers in Osaka City in particular, whose business relationships with the bank are of shorter standing compared to those in Wakayama Prefecture and southern Osaka Prefecture, it is not easy to precisely assess their actual status and secure protection for loans. Because SMEs in urban areas are more prone to the impact of economic fluctuations, a delay in economic recovery resulting from the protracted novel coronavirus pandemic may accelerate a decline in their creditworthiness across diverse sectors. With a view to controlling a substantial increase in credit cost, the bank has in place a loan screening process based on characteristics of each region. R&I will pay attention to the future developments.

The primary rating methodologies applied to this rating are provided at "R&I's Basic Methodology for Corporate Credit Ratings", "Shared Rating Approach for Financial Institutions, etc." and "Depository Financial Institutions". The methodologies are available at the web site listed below, together with other rating methodologies that are taken into consideration when assigning the rating. https://www.r-i.co.jp/en/rating/about/rating_method.html

R&I RATINGS: ISSUER: The Kiyo Bank, Ltd. (Sec. Code: 8370) Issuer Rating RATING: A, Affirmed RATING OUTLOOK: Stable

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