Hong Kong, October 19, 2017 -- Moody's Investors Service has today affirmed Dah Sing Bank,
Limited's A3 long-term deposit rating and Prime-2
short-term deposit rating.
At the same time, Moody's has affirmed the bank's a3
baseline credit assessment (BCA) and adjusted BCA, and its A2(cr)/P-1(cr)
counterparty risk assessments.
The outlook on Dah Sing Bank's ratings is revised to stable from
negative. For a list of all affected ratings, please refer
to the end of this press release.
RATINGS RATIONALE
The affirmation of Dah Sing Bank's ratings with a stable outlook
reflects the bank's resilient performance in recent years,
despite subdued economic growth in Hong Kong. The bank has maintained
sound financial metrics with strong asset quality, adequate capitalization
and a good liquidity profile.
The bank has a greater focus on small and medium-sized (SME) lending
and has managed the asset quality on such exposures well. It has
maintained impaired loan ratios consistently below or around 1.0%
in recent years. Impaired loan ratio was 0.82% at
end-June 2017, down 23bps compared to end-2016,
mainly driven by a decrease in impaired loans among its SME borrowers.
Moody's expects the bank's asset risks will likely stabilize
on the back of strong economic growth momentum.
Dah Sing Bank's capital adequacy has improved since 2014,
with reported Common Equity Tier 1 (CET1) ratio of 13.1%
at end-June 2017, up from 12.7% at end-2016.
We expect capitalization will be largely stable on the back of subdued
loan growth and better retained earnings.
The bank maintains a sound liquidity profile. As with other Hong
Kong banks, the bank is primarily funded by customer deposits,
which accounted for 84.9% of total liabilities at end-June
2017.
The bank also has ample liquid assets that can be used to meet unexpected
outflow of funds. The bank's liquid assets which mainly consist
of cash, interbank placements, treasury bills and government
securities amounted to 32.5% of total assets at end June-2017.
On the other hand, Dah Sing Bank's core profitability has
been trending below the peer average partly because of its high operating
expenses. The bank has weaker operating efficiency compared with
other rated banks in Hong Kong. Its cost-to-income
ratio was 51% in H1 2017, higher than the average of rated
banks at mid-40%. The bank's earnings are highly
reliant on associate income from Bank of Chongqing, which accounted
for a high 25% of Dah Sing Bank's first half 2017 pre-tax
profits.
We do not incorporate any systemic support in the bank's deposit rating,
given its limited market share, leaving the long-term deposit
rating at A3.
WHAT COULD CHANGE THE RATING UP
Given the bank's rating is high relative to other rated mid-sized
banks in Hong Kong, the potential for an upgrade of its deposit
rating and baseline credit assessment is limited.
WHAT COULD CHANGE THE RATING DOWN
Adverse developments in major advanced economies that would cause volatilities
in the economic growth of Hong Kong and China, or a significant
fall in the local property prices that weaken Dah Sing Bank's financial
profile could trigger a downgrade of the bank's ratings.
The bank's ratings could also be downgraded if strong asset growth weakens
its capitalization, such that its CET1 ratio falls below 9.5%,
or if impaired loans ratio exceeds 1.5% of gross loans.
A significant impairment on the bank's investment in Bank of Chongqing
could also lead to a rating downgrade.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
September 2017. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Dah Sing Bank, Limited is headquartered in Hong Kong and reported
total assets of HKD210 billion at end-June 2017.
Outlook Actions:
..Issuer: Dah Sing Bank, Limited
....Outlook, Changed To Stable From
Negative
Affirmations:
..Issuer: Dah Sing Bank, Limited
.... Baseline Credit Assessment, Affirmed
a3
.... Adjusted Baseline Credit Assessment,
Affirmed a3
.... Counterparty Risk Assessment, Affirmed
A2(cr)/P-1(cr)
.... Long-term Deposit Rating,
Affirmed A3, outlook is changed to Stable from Negative
.... Short-term Deposit Rating,
Affirmed P-2
.... Senior Unsecured Medium-Term Note
Program, Affirmed (P)A3
.... Subordinated Medium-Term Note
Program, Affirmed (P)Baa2
.... Junior Subordinated Medium-Term
Note Program, Affirmed (P)Baa2
.... Subordinate Regular Bond/Debenture,
Affirmed Baa1
.... Subordinate Regular Bond/Debenture,
Affirmed Baa2 (hyb)
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.
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.
Sherry 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
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
