Hong Kong, November 12, 2021 -- Moody's Investors Service has affirmed CMB Financial Leasing Co.,
Ltd.'s (CMB Financial Leasing) A3 long-term and P-2
short-term issuer ratings, and changed the company's
outlook to positive from stable.
At the same time, Moody's has affirmed the ratings of CMB Financial
Leasing's offshore subsidiary, CMB International Leasing Management
Limited, and changed its entity-level outlook to positive
from stable. Moody's has also affirmed the ratings of CMBLEMTN
1 Limited, a special purpose vehicle incorporated in the British
Virgin Islands, and assigned a positive outlook to the entity.
A list of the affected ratings can be found at the end of this press release.
RATINGS RATIONALE
Today's rating actions follows Moody's affirmation of China Merchants
Bank Co., Ltd.'s (CMB, A3 positive) ratings
and change of outlook to positive from stable on 12 November 2021.
For more information on this rating action, please refer to https://www.moodys.com/research/Moodys-affirms-CMBs-ratings-changes-outlook-to-positive--PR_457448.
The change in CMB Financial Leasing's outlook to positive from stable
reflects Moody's assumption of an affiliate-backed level
of support from CMB. An enhancement in CMB's credit profile
will improve CMB's capacity to support CMB Financial Leasing in
times of need.
CMB Financial Leasing's A3 long-term issuer rating is on
par with the long-term deposit rating of its parent, CMB.
As a fully owned subsidiary, CMB Financial Leasing holds strategically
important roles in facilitating CMB's businesses, and its
operations are closely integrated with those of the parent. A failure
by the parent to support CMB Financial Leasing would result in significant
business, operational and reputational risks for CMB.
CMB has included a commitment in CMB Financial Leasing's Articles
of Association to provide liquidity and capital support to the subsidiary
in times of stress, as required by China Banking and Insurance Regulatory
Commission's regulation on financial leasing companies.
CMB Financial Leasing's standalone assessment of ba2 reflects its good
franchise in China's leasing industry; its diversified business
and geographic composition; and our expectation that the company
will maintain good asset quality, stable capital position and strong
profitability in the next 12-18 months. These strengths
are affected by the asset-quality pressures stemming from the coronavirus
pandemic and the company's reliance on short-term wholesale renminbi
funding to support its long-term renminbi-denominated assets.
CMB Financial Leasing has maintained good asset quality and profitability
despite the disruption caused the coronavirus pandemic. The company's
nonperforming leasing assets accounted for 0.56% of its
total leasing assets as of the end of June 2021, decreasing slightly
from 0.71% as of year-end 2020. The company's
annualized return on average assets increased to 1.55% in
H1 2021 from 1.32% in 2020, a level that was higher
than that of most other bank-affiliated leasing companies.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Because CMB Financial Leasing's ratings are aligned with the ratings of
its parent, an upgrade of its ratings would require an upgrade of
CMB's ratings.
CMB Financial Leasing's standalone assessment could be raised if
the company reduces the tenor mismatches between its assets and liabilities
and increases liquid assets on the balance sheet, maintains good
asset quality, and strengthens its capital position with its tangible
common equity/tangible managed assets ratio above 12% on a sustained
basis.
Moody's could change CMB Financial Leasing's outlook to stable
if the outlook of CMB is changed to stable from positive.
Moody's could downgrade CMB Financial Leasing's ratings if
Moody's observes a weakening in the liquidity and capital support
from CMB, a decline in the company's business relationship
with CMB, or a significant reduction in CMB's stake in the
leasing company to below 50.1%.
CMB Financial Leasing's standalone assessment could be lowered if the
company shows deteriorating asset quality and rising credit costs,
weakening liquidity and funding profiles, or weakening capital position
with its tangible common equity/tangible managed assets ratio below 9.5%
on a sustained basis.
LIST OF AFFECTED RATINGS
CMB Financial Leasing Co., Ltd.:
• Long-term (local and foreign currency) issuer rating of
A3 affirmed
• Short-term (local and foreign currency) issuer rating of
P-2 affirmed
• Entity-level outlook changed to positive from stable
CMB International Leasing Management Limited:
• Backed long-term (local and foreign currency) senior unsecured
medium-term-note (MTN) program rating of (P)Baa1 affirmed
• Backed other short-term (local and foreign currency) MTN
program rating of (P)P-2 affirmed
• Backed long-term (foreign currency) senior unsecured debt
rating of Baa1 affirmed
• Entity-level outlook changed to positive from stable
CMBLEMTN 1 Limited:
• Backed long-term (local currency) senior unsecured MTN program
rating of (P)A3 affirmed
• Backed other short-term (local currency) MTN program rating
of (P)P-2 affirmed
• Backed long-term (local currency) senior unsecured debt
rating of A3 affirmed
• Entity-level outlook assigned at positive
The principal methodology used in these ratings was Finance Companies
Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Headquartered in Shanghai, CMB Financial Leasing reported assets
of RMB215.7 billion as of 30 June 2021.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions in the disclosure form. Moody's Rating Symbols and
Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for
Designating and Assigning Unsolicited Credit Ratings available on its
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Moody's considers a rated entity or its agent(s) to be participating when
it maintains an overall relationship with Moody's. Unless noted
in the Regulatory Disclosures as a Non-Participating Entity,
the rated entities are participating and the rated entities or their agent(s)
generally provide Moody's with information for the purposes of its ratings
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Disclosures for each credit rating action under the ratings tab on the
issuer/entity page and for details of Moody's Policy for Designating Non-Participating
Rated Entities.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social and
governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed by
Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main
60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's office
that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed by
Moody's Investors Service Limited, One Canada Square, Canary
Wharf, London E14 5FA under the law applicable to credit rating
agencies in the UK. Further information on the UK endorsement status
and on the Moody's office that issued the credit rating is available on
www.moodys.com.
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.
David Jinhua Yin
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
Sophia Lee, CFA
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
