Hong Kong, May 25, 2017 -- Moody's Investors Service has today affirmed Bank of China (Hong
Kong) Limited's (BOC (Hong Kong)) Aa3 long-term deposit ratings,
affirmed the A2 long-term deposit and senior unsecured debt ratings
of China Construction Bank (Asia) Corporation Ltd. (CCB (Asia))
, and affirmed the A2 long-term deposit ratings of Industrial
and Commercial Bank of China (Asia) Ltd. (ICBC (Asia)) and Industrial
and Commercial Bank of China (Macau) Ltd (ICBC (Macau)).
At the same time, Moody's has affirmed BOC (Hong Kong)'s
baseline credit assessment (BCA) and adjusted BCA at a2, CCB (Asia)
and ICBC (Asia)'s BCAs and adjusted BCAs at baa1, and ICBC
(Macau)'s BCA at baa3 and adjusted BCA at baa2.
This follows Moody's decision to downgrade China's sovereign
rating to A1 from Aa3 and Hong Kong's sovereign rating to Aa2 from
Aa1 and revise their outlooks to stable from negative, and the subsequent
rating actions on these banks' Mainland Chinese parents, as
announced on May 24, 2017. For full details on China sovereign
rating action, please refer to webpage: https://www.moodys.com/viewresearchdoc.aspx?docid=PR_366139.
For full details on Hong Kong sovereign rating action, please refer
to webpage: https://www.moodys.com/viewresearchdoc.aspx?docid=PR_366144.
For full details on these banks' Mainland parents, please
refer to webpage: https://www.moodys.com/viewresearchdoc.aspx?docid=PR_366838.
The outlooks on all four banks' ratings have been revised to stable
from negative. Outlooks, which provide an opinion on likely
rating direction over the medium term, are assigned only to banks'
long-term deposit, issuer and senior unsecured debt ratings.
The list of affected ratings follows at the end of the press release.
RATINGS RATIONALE
The change in outlook to stable for these four Hong Kong and Macau subsidiaries
of Chinese banks takes into account the one notch downgrade on China and
Hong Kong's sovereign rating and the revision of their outlooks
to stable, and on the affirmation of the parent banks' ratings
and revision of their outlook to stable.
The long-term deposit ratings of these four banks incorporate uplifts
from either indirect support from the Chinese government, which
flows through their parents, and/or the Hong Kong government.
Therefore, their rating outlook is affected by the change in outlook
for the Chinese and Hong Kong governments.
BOC (Hong Kong)
The affirmation of BOC (Hong Kong)'s a2 BCA takes into account its very
strong market position in Hong Kong, sound asset quality,
strong liquidity profile, and strengthened capitalization following
its disposal of Nanyang Commercial Bank, Ltd. (A3 stable,
baa2) and Chiyu Banking Corporation, Ltd. (Baa1 stable,
baa1). It also takes into account expected changes in the bank's
loan mix as it increases its credit exposures in ASEAN countries.
BOC (Hong Kong) has a well-established franchise in Hong Kong as
the second largest bank in the territory. The bank's strong market
position and deposit franchise lead to low funding costs and strong profitability.
The bank maintains one of the strongest capitalization profiles among
Hong Kong banks, with a tangible common equity/risk weighted assets
ratio of 19.0% at end-2016. The bank has also
maintained good asset quality with an NPL ratio of 0.2%
as of end-2016.
BOC (Hong Kong)'s deposit ratings incorporate expectations of support
from the Hong Kong government, and indirect support from the Chinese
government that Moody's expects would flow through the parent Bank
of China. We continue to expect high probability of support from
the Hong Kong government and the bank's Chinese parent in the event
of stress, resulting in two notches of uplift in the bank's
deposit ratings.
CCB (Asia)
The affirmation of CCB (Asia)'s baa1 BCA takes into account its
strong capitalization and very good asset quality metrics despite the
subdued operating environment. The bank's BCA also reflects
its weaker profitability and funding profile than peers, as well
as its increasing direct credit exposures to Mainland borrowers given
the strengthening collaboration with its parent.
The bank's deposit and senior unsecured debt ratings continue to
incorporate two notches of Chinese government support, following
affirmation of parent bank rating and despite the downgrade of China's
sovereign rating. Moody's continues to expect strong support
from the Chinese government to flow through its parent, given the
Chinese government's majority ownership in the parent, the
parent's systemic importance and the bank's strategic importance
to the group.
ICBC (Asia)
The affirmation of ICBC (Asia)'s baa1 BCA takes into account its
sound asset quality metrics and healthy profitability with better-than-peer
cost efficiency. The bank's asset quality has held up well
despite challenging operating conditions in both Hong Kong and Mainland
China and steady increase in exposure to Mainland corporates. Nonetheless,
the expected strong growth in the bank's balance sheet, and
particularly in its Mainland-related exposures, weighs on
its capital and funding profile.
ICBC (Asia) has one of the largest Mainland exposures among rated peers,
with non-bank Mainland exposures accounting for 45% of total
assets at end-2016. Moody's will continue to monitor
the bank's sizeable Mainland exposure and the impact on the bank's
fundamental credit assessment.
ICBC (Asia)'s deposit ratings continue to incorporate two notches
of Chinese government support, following affirmation of parent bank
rating and despite the downgrade of China's sovereign rating.
Moody's continues to expect strong support from the Chinese government
to flow through the bank's parent, given the Chinese government's
majority ownership in the parent, the parent's systemic importance
and the bank's strategic importance to the group.
ICBC (Macau)
The affirmation of ICBC (Macau)'s BCA takes into account its resilient
asset quality metrics and relatively stable performance despite the volatility
in Macau's economic growth and property market. The baa3
BCA reflects the bank's market position as the second largest bank
in Macau by assets, as well as its good capitalization, stable
profitability and sound asset quality metrics. These strengths
are offset by Moody's concerns over its fast balance sheet growth,
high lending concentration, and high reliance on corporate deposits
for funding.
Moody's expectations of very strong support from its parent and
indirect systemic support from the Chinese government flowing through
its parent, result in a four-notch uplift in the bank's
deposit ratings to A2. The support uplift stems from the parent's
systemic importance in China, and ICBC (Macau)'s close business
ties with its parent.
WHAT COULD MOVE THE RATINGS UP
The banks' deposit ratings could be upgraded if China's sovereign
or the parent banks' ratings are upgraded. The banks'
standalone credit assessments are unlikely to be upgraded given the expected
deterioration in operating conditions.
WHAT COULD MOVE THE RATINGS DOWN
The banks' deposit ratings could be downgraded if government support
diminishes or if the parents' ratings are downgraded.
The banks' BCAs will likely be downgraded if rapid growth in their
Mainland or overseas exposures results in weakened capitalization and
liquidity profiles.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Bank of China (Hong Kong) Limited, headquartered in Hong Kong,
held total assets of HKD2,217 billion at end-2016.
China Construction Bank (Asia) Corporation Ltd., headquartered
in Hong Kong, held total assets of HKD512 billion at end-2016.
Industrial and Commercial Bank of China (Asia) Ltd., headquartered
in Hong Kong, held total assets of HKD799 billion at end-2016.
Industrial and Commercial Bank of China (Macau) Ltd, headquartered
in Macau, held total asset of MOP203 billion at end-June
2016.
LIST OF AFFECTED RATINGS
Issuer: Bank of China (Hong Kong) Limited -- lead analyst:
Sonny Hsu
.... BCA affirmed at a2
.... Adjusted BCA affirmed at a2
.... CR Assessment affirmed at Aa2(cr)/P-1(cr)
.... Long term deposit rating affirmed at
Aa3, outlook is revised to stable from negative
.... Short term deposit rating affirmed at
P-1
.... Commercial paper affirmed at P-1
.... Senior unsecured MTN program affirmed
at (P)Aa3
.... Subordinate debt affirmed at A3
.... Subordinated MTN program affirmed at
(P)A3
Outlook for the bank is revised to stable from negative
Issuer: China Construction Bank (Asia) Corp. Ltd.
-- lead analyst: Sherry Zhang
.... BCA affirmed at baa1
.... Adjusted BCA affirmed at baa1
.... CR Assessment affirmed at A1(cr)/P-1(cr)
.... Long term deposit rating affirmed at
A2, outlook is revised to stable from negative
.... Short term deposit rating affirmed at
P-1
.... Long term Deposit note/CD program affirmed
at (P)A2
.... Short term Deposit note/CD program affirmed
at (P)P-1
.... Senior unsecured debt affirmed at A2,
outlook is revised to stable from negative
.... Senior unsecured MTN program affirmed
at (P)A2
.... Basel III-compliant subordinate
debt affirmed at Baa2(hyb)
.... Other short term affirmed at (P)P-1
Outlook for the bank is revised to stable from negative
Issuer: Industrial & Commercial Bank of China (Asia) Ltd.
-- lead analyst: Sherry Zhang
.... BCA affirmed at baa1
.... Adjusted BCA affirmed at baa1
.... CR Assessment affirmed at A1(cr)/P-1(cr)
.... Long term deposit rating affirmed at
A2, outlook is revised to stable from negative
.... Short term deposit rating affirmed at
P-1
.... Senior unsecured MTN program affirmed
at (P)A2
. Commercial paper affirmed at P-1
. Non-cumulative preferred stock affirmed at Ba1(hyb)
.... Subordinate debt affirmed at Baa2
. Subordinate MTN program affirmed at (P)Baa2
.... Other short term affirmed at (P)P-1
Outlook for the bank is revised to stable from negative
Issuer: Industrial & Commercial Bank of China (Macau) Ltd --
lead analyst: Sherry Zhang
.... BCA affirmed at baa3
.... Adjusted BCA affirmed at baa2
.... CR Assessment affirmed at A1(cr)/P-1(cr)
.... Long term deposit rating affirmed at
A2, outlook is revised to stable from negative
.... Short term deposit rating affirmed at
P-1
.... Long term Deposit note/CD program affirmed
at (P)A2
.... Short term Deposit note/CD program affirmed
at (P)P-1
Outlook for the bank is revised to stable from negative
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Sonny Hsu, CFA
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Minyan Liu
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077