Hong Kong, September 24, 2021 -- Moody's Investors Service has affirmed Chong Hing Bank Limited's
(Chong Hing) long-term deposit ratings at Baa1.
Moody's has also affirmed the bank's (1) Baseline Credit Assessment
(BCA) and Adjusted BCA at baa2, and (2) Counterparty Risk Ratings
(CRR) at A2/P-1 and Counterparty Risk (CR) Assessment at A2(cr)/P-1(cr).
The outlook on Chong Hing's ratings remains stable. Moody's
expects the bank to maintain stable asset quality, adequate capitalization
and profitability, and good liquidity over the next 12-18
months.
A list of all affected ratings can be found at the end of the press release.
RATINGS RATIONALE
The rating affirmations and the bank's stable outlook reflect its
good asset quality, adequate profitability and strong liquidity.
The bank's BCA also considers its strong loan growth over the last
four years, increasing exposure to mainland China and adequate,
but declining capitalization.
Chong Hing Bank has maintained good asset quality. Its impaired
loan ratio was 0.58% as of 30 June 2021, down from
0.65% at the end of 2020. However there is an increasing
unseasoned loan risk, with Chong Hing Bank reporting faster loan
growth than the system average in Hong Kong SAR, China (Aa3 stable)
in the last four years, mainly driven by lending to mainland China
customers. The bank's lending to mainland China customers
(after taking into account risk transfer) represented 35% of its
gross loans at the end of June 2021. Moody's expects the
bank to continue to post double digit loan grow, driven by its mainland
China loan.
Chong Hing Bank's capitalization has been declining due to its fast
loan growth, but has remained adequate. The bank reported
a Common Equity Tier 1 (CET1) ratio of 11.2% as of 30 June
2021. Chong Hing Bank is majority-owned by Guangzhou Yue
Xiu Holdings Limited (Yue Xiu), which is wholly-owned by
the Guangzhou government. The bank announced privatization by Yue
Xiu, and consequently the withdrawal of listing shares which will
be completed by the end of September. Yue Xiu may provide capital
support to Chong Hing Bank given the bank is strategically important to
Yue Xiu and Yue Xiu is supportive of the bank's growth plan.
However Moody's has not reflected this into our current assessment
of Chong Hing Bank's capitalization due to lack of information at
this stage.
Moody's expects the bank's profitability to improve from 2020's
levels, supported by strong fee and commission income and lower
credit costs as the economy recovers. However, the low interest
rate environment will continue to weigh on the bank's net interest
margin.
Chong Hing Bank has strong liquidity and a low reliance on wholesale funding,
despite a modest deposit market share. The bank is primarily funded
by customer deposits and has increased its current and savings accounts
deposits. While the bank's liquidity is strong, Moody's
expect its liquidity to weaken if the bank maintains strong loan growth.
Moody's does not incorporate any affiliate support uplift to Chong
Hing Bank's ratings because Yue Xiu's capacity to provide
support is limited. Therefore, Chong Hing Bank's baa2
Adjusted BCA is at the same level of its BCA.
Moody's applies advanced Loss Given Failure (LGF) framework to analyze
Chong Hing Bank's liabilities because the bank is incorporated in
Hong Kong, which Moody's considers as an operational resolution
regime. Moody's LGF analysis indicates low expected losses
for the bank's deposits and senior unsecured debt because of the subordination
of the bank's junior capital instruments, resulting in a one-notch
uplift from the bank's Adjusted BCA. For the bank's other
junior securities, Moody's LGF analysis shows a moderate loss
given failure for subordinated debt and a high loss given failure for
preference shares, given the modest volume of junior debt and limited
protection from more subordinated instruments and residual equity.
Moody's does not incorporate any government uplift to Chong Hing
Bank's deposit, senior unsecured and junior securities ratings because
of the bank's relatively small market share and our assessment of a low
likelihood of support from the Hong Kong government.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Chong Hing Bank's BCA could be upgraded if it consistently maintains
good asset quality and improve its capitalization, with tangible
common equity (TCE)/risk-weighted assets (RWA) remaining above
13.5%, while it grows its loan book at a more measured
pace and its deposit market share improves.
Chong Hing Bank's deposit and senior unsecured ratings could be
upgraded if the bank's BCA is upgraded; or if the greater subordination
of junior liabilities leads to a lower loss given failure. The
deposit and senior unsecured rating could also be upgraded if Yue Xiu's
capacity to support Chong Hing Bank improves, leading to the incorporation
of affiliates support uplift into the bank's ratings.
Chong Hing Bank's subordinated notes and Additional Tier 1 (AT1)
securities' ratings could be upgraded if the bank's BCA is upgraded
or if Yue Xiu's capacity to support Chong Hing Bank improves,
leading to an upgrade of the bank's Adjusted BCA.
Chong Hing Bank's BCA could be downgraded if it adopts a more aggressive
risk-taking approach to grow its loan book; its asset quality
deteriorates - impaired loans exceeding 3% of gross loans,
its capital adequacy weakens - TCE/RWA falling below 10.5%,
and its liquidity position weakened materially - liquid banking
assets/tangible banking assets below 25%; or operating conditions
in Hong Kong and mainland China deteriorate significantly.
Chong Hing Bank's deposit and senior unsecured ratings could be downgraded
if the bank's BCA is downgraded; or if the subordination of
junior liabilities decreases compared with its tangible banking assets,
leading to a higher severity of loss.
The ratings of Chong Hing Bank's subordinated notes and AT1 securities
could be downgraded if the bank's BCA is downgraded.
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.
Headquartered in Hong Kong, Chong Hing Bank Limited reported total
assets of HK$242.6 billion at the end of June 2021.
LIST OF AFFECTED RATINGS AND ASSESSMENTS
Outlook Action:
..Issuer: Chong Hing Bank Limited
....Outlook, Remains Stable
Affirmations:
..Issuer: Chong Hing Bank Limited
.... Adjusted Baseline Credit Assessment,
Affirmed baa2
.... Baseline Credit Assessment, Affirmed
baa2
.... Long-term Counterparty Risk Assessment,
Affirmed A2(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long-term Foreign and Local Currency
Counterparty Risk Ratings, Affirmed A2
.... Short-term Foreign and Local Currency
Counterparty Risk Ratings, Affirmed P-1
.... Short-term Foreign and Local Currency
Deposit Ratings, Affirmed P-2
.... Long-term Foreign and Local Currency
Deposit Ratings, Affirmed Baa1, Outlook Remains Stable
.... Long-term Foreign Currency Pref.
Stock Non-cumulative Preferred Stock, Affirmed Ba2 (hyb)
.... Foreign and Local Currency Other Short-term
, Affirmed (P)P-2
.... Long-term Foreign and Local Currency
Pref. Stock Non-cumulative Medium-Term Note Program,
Affirmed (P)Ba2
.... Long-term Foreign and Local Currency
Subordinate Medium-Term Note Program, Affirmed (P)Baa2
.... Long-term Foreign and Local Currency
Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa1
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
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issued on a support provider, this announcement provides certain
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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
be assigned subsequent to the final issuance of the debt, in each
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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
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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
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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
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Please see www.moodys.com for any updates on changes to
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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.
Helen Zhang
Analyst
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
