Hong Kong, December 16, 2021 -- 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 long-term and short-term
Counterparty Risk Assessment (CR Assessment) at Baa2(cr)/P-2(cr),
its long-term and short-term local currency and foreign
currency Counterparty Risk Rating (CRR) at Baa2/P-2, and
its foreign currency senior unsecured debt rating at Baa2.
The outlook on the ratings remains stable.
A list of all affected ratings and assessments is provided at the end
of this press release.
RATINGS RATIONALE
The affirmation of CITICB's ba2 BCA and Baa2 deposit ratings reflects
the bank'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 modest, despite
recent development.
Moody's expects CITICB's asset quality to remain stable, benefiting
from its increased exposure of the retail banking business. However,
the formation of new nonperforming loans (NPLs) remains a risk to CITICB's
asset quality because of potential transitional risks from the structural
adjustment in China's economic growth model, especially the
increasing pressure on China's property market. Retails loans accounted
for 41.3% of gross loans as of 30 September 2021,
up from only 26.4% at the end of 2015. As of 30 September
2021, the bank's reported NPL ratio was 1.48%,
a decrease from 1.64% as of the end of 2020. As of
30 September 2021, the bank's NPL coverage ratio was 184.6%,
up from 171.7% as of the end of 2020.
Moody's believes CITICB is able to manage the risk associated with the
correction in China's property market because its exposures to property
developers are not substantial. As of 30 June 2021, CITICB's
exposures to property development loans equal to 6.3% of
gross loans, lower than peer banks that Moody's rates.
However, in Moody's view, the bank is subject to reputational
risk from the property-related off-balance sheet businesses
of which it does not bear credit risks, such as wealth management
funds, entrusted loans, agency distribution of trust schemes
under the active management by cooperative institutions, and debt-financing
instruments with CITICB as the lead underwriter.
CITICB has improved its capital position in recent years, supported
by its moderate risk-weighted asset growth and steady profitability.
Moody's expect the bank to maintain its tangible common equity/risk-weighted
Assets (RWA) above 8.0% for next 12 to 18 months.
The bank's Common Equity Tier 1 (CET1) capital ratio was 8.8%
as of 30 September 2021. It is the fourth-largest joint
stock commercial bank in China and is on the domestic systematic important
banks (D-SIBs) list, and thus is required to adhere to the
additional CET-1 requirement of 50 basis points.
Moody's expects CITICB to maintain its profitability for next 12-18
months with return on average assets at 0.7-0.8%,
supported by decreasing credit costs from the high level in 2020 and the
bank's well-managed operating expenses. However,
its net interest margin (NIM) faces downward pressure because of the government's
guidance to lower loan pricing to support real economy. CITICB's
NIM was in line with the sector average at 2.06% for the
first three quarters of 2021.
CITICB will continue to maintain adequate liquid resources to cover its
use of market funds. The bank has kept its ratio of market funds
to tangible banking assets at a stable level of 29%-30%
since 2016.
CITICB's rating is based on China's Moderate+ Banking System Macro
Profile. CITICB's current deposit rating of Baa2 incorporates the
bank's ba2 BCA and a three-notch uplift, based on Moody's
assessment of a very high level of government support for the bank in
times of need. CITICB's Adjusted BCA, which incorporates
no uplift of affiliate support, is at the same level as its BCA.
China does not have an operational bank resolution regime. Therefore,
Moody's applies a basic Loss Given Failure (LGF) approach in rating Chinese
banks' securities.
Moody's assessment of a very high level of government support is
driven by the bank's position as one of 19 domestic systematic importance
banks in China, with a nationwide deposit market share of 2.5%
as of 30 September 2021; and the 65.97% ownership of
CITICB through the wholly-state-owned CITIC Group Corporation.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could upgrade the bank's ratings if it assesses that
the Chinese government's capacity to support the bank strengthens,
as reflected by an upgrade of China's sovereign rating, or if the
bank's BCA is upgraded.
Moody's could upgrade the BCA if the bank's asset quality,
as measured by problem loans/gross loans, remains unaffected by
the structural adjustments in China's economy; its profitability
remains resilient, with its return on average assets consistently
above 0.8%; its capitalization strengthens, with
its Core Tier 1 capital ratio consistently above 9%; and its
reliance on market funding decreases, with an improvement in its
market funds/tangible banking assets.
Moody's could downgrade the bank's ratings if it assesses
that the Chinese government's capacity or willingness to support
the bank weakens, or if the bank's BCA is downgraded.
Moody's could downgrade the BCA if the bank's operating environment
weakens significantly, which could arise as China's economic growth
moderates further, or its corporate financial leverage continues
to increase; the bank's asset quality weakens significantly;
its capitalization weakens with a decline in its Core Tier 1 capital ratio
to consistently below 7.5% - 8.0%;
its profitability deteriorates, with its return on average assets
consistently below 0.5%; its reliance on market funding
increases, with an increase in its market funds/tangible banking
assets.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625.
Alternatively, 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 RMB7,893
billion and a total equity of RMB633.5 billion as of 30 September
2021.
LIST OF AFFECTED RATINGS/ASSESSMENTS FOR CITICB:
- Affirmed Baa2 rating of long-term foreign currency bank
deposits; outlook remains stable
- Affirmed P-2 rating of short-term foreign currency
bank deposits
- Affirmed Baa2(cr)/P-2(cr) long-term/short-term
Counterparty Risk Assessment
- Affirmed Baa2/P-2 long-term/short-term local
currency and foreign currency Counterparty Risk Rating
- Affirmed ba2 BCA and Adjusted BCA
- Affirmed Baa2 rating of long-term foreign currency senior
unsecured Regular Bond/Debenture ; outlook remains stable
- Outlook remains stable
The local market analyst for these ratings is Yan Li, +86 (106)
319-6561.
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
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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
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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
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provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
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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
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Chen Huang
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
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China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
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