Hong Kong, November 11, 2019 -- Moody's Investors Service has affirmed China CITIC Bank Corporation
Limited's (CITICB) long-term and short-term foreign
currency deposit ratings at Baa2/P-2, its Baseline Credit
Assessment (BCA) and adjusted BCA at ba2, its Counterparty Risk
Assessment (CR Assessment) at Baa2(cr)/P-2(cr), its long-term
and short-term local/foreign currency Counterparty Risk Rating
(CRR) at Baa2/P-2, and its foreign currency senior unsecured
debt rating at Baa2.
The rating outlook is revised to stable from positive, reflecting
Moody's view that (1) the Chinese government's willingness
and ability to support CITICB will remain broadly unchanged over the next
12-18 months; and (2) CITICB's standalone BCA will remain
appropriately positioned over the same period.
A full list of the affected ratings and assessments is provided at the
end of this press release.
RATINGS RATIONALE
CITICB's Baa2 long-term deposit rating incorporates (1) the
bank's BCA of ba2; (2) no uplift for affiliate support;
(3) a three-notch uplift reflecting Moody's assessment of
a very high level of support from the government of China (A1 stable)
in times of need.
The affirmation of CITICB's ba2 BCA and deposit ratings reflects
CITICB's stable asset quality, sound profitability and steady funding
profile. Moody's expects the bank will continue to hold adequate
liquid resources to cover its market funds/tangible banking assets.
However, the bank's capitalization remains under pressure.
CITICB's asset quality remains stable, benefiting from its
increasing exposure to its retail banking business, although unseasoned
risk comes from still high corporate leverage in China.
CITICB's capitalization remains under pressure, mainly due to a
rebound in asset growth and a shift in the asset allocation to bank loans
and away from non-loan investments and off-balance sheet
assets.
Moody's expects the bank's profitability will remain stable,
supported by a steady net interest margin (NIM), sound fee and commission
income, and a well-managed cost to income ratio. Credit
costs should remain broadly unchanged from 2018.
CITICB's liquidity profile is stable. Liquid resources,
while down slightly relative to tangible banking assets, are adequate
and more than market funds.
Moody's does not have particular governance concern for CITICB,
and does not apply corporate behavior adjustment to the bank.
CITICB's Adjusted BCA incorporates no affiliate support and is at the
same level as its BCA. China does not have an operational resolution
regime. Therefore, Moody's applies a basic Loss Given
Failure approach in rating CITICB's long-term deposits,
CRR and CR Assessment. Moody's also assumes a very high level
of support from the Chinese government in times of need. As a result,
the bank's long-term deposit rating, CRR and CR Assessment
incorporate a three-notch uplift.
The assessment of a very high level of government support considers (1)
the bank's systemic importance, as indicated by its market share
of the Chinese banking sector's total loans (2.5% as of
30 June 2019) and deposits (2.1% as of 30 June 2019);
and (2) the government's majority stake in the bank through its wholly
owned China CITIC Corporation Limited (A3 stable), which held 65.4%
stake in CITICB as of 30 June 2019.
WHAT COULD CHANGE THE RATINGS UP
Moody's could upgrade CITICB's long-term deposit rating
if the government's willingness or ability to support the bank strengthens.
Moody's could upgrade the bank's BCA if (1) asset quality --
as measured by the problem loan formation rate -- improves;
(2) profitability -- as measured by return on assets -- improves;
(3) its capital strengthens, as a result of equity raising and restrained
growth in RWAs; and (4) its reliance on market funds continues to
decrease, with an improvement in its market funds/tangible banking
assets ratio.
WHAT COULD CHANGE THE RATINGS DOWN
Moody's could downgrade CITICB's long-term deposit
rating if the Chinese government's willingness or ability to support
the bank weakens.
Moody's could downgrade the bank's BCA if (1) the operating environment
weakens materially, for example due to a significant slowdown in
China's economic growth or corporate leverage continues to rise;
(2) its asset quality and profitability weaken materially; (3) its
capital weakens, with a deterioration in its TCE capital ratio;
or (4) its reliance on market funds increases, with a deterioration
in its market funds/tangible banking assets ratio.
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
China CITIC Bank Corporation Limited is a joint-stock commercial
bank, headquartered in Beijing, with total assets of RMB6,399
billion and total equity of RMB471 billion as of 30 June 2019.
LIST OF AFFECTED RATINGS/ASSESSMENTS FOR CITICB:
- Affirmed Baa2/P-2 rating of long-term/short-term
foreign currency deposits; outlook is revised to stable from positive
where applicable
- Affirmed Baa2(cr)/P-2(cr) Counterparty Risk Assessment
- Affirmed Baa2/P-2 long-term/short-term local/foreign
currency Counterparty Risk Rating
- Affirmed ba2 BCA and Adjusted BCA
- Affirmed senior unsecured debt rating at Baa2; outlook is
revised to stable from positive
- Outlook is revised to stable from positive
The local market analyst for these ratings is Yan Li, +86 (106)
319-6561.
REGULATORY DISCLOSURES
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.
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 entity is participating and the rated entity or its agent(s)
generally provides Moody's with information for the purposes of
its ratings process. Please refer to www.moodys.com
for the Regulatory 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
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.
Ray Heung
Senior Vice President
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, 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
