The ratings on Aozora Bank Ltd. reflect the bank's improved profitability and sound capital structure and asset portfolio. These strengths are offset by Aozora's business franchise, which is weak compared with that of its peers. In September 2000, Aozora Bank gained independence from state control and relaunched under its current name. Since then, Aozora has reduced its NPLs through loan recovery and a loss-protection arrangement with the Japanese government. Furthermore, the bank has improved its risk management of loan assets. As a result, its asset portfolio has substantially improved to a level currently higher than that of other major Japanese banks, and its risk-managed loan balance fell below its bad debt reserves as of the end of fiscal 2005 (ended
