Hong Kong, April 10, 2017 -- Moody's Investors Service has affirmed its medium-term note
(MTN) program ratings for Bank of China Limited (BOC) and its overseas
branches at (P)A1, after the program was upsized to USD30 billion
from USD20 billion. In addition, Moody's has assigned
A1 ratings to various proposed senior unsecured notes to be issued by
BOC's branches and subsidiaries under the updated MTN program:
• USD-denominated notes by BOC Dubai Branch;
• RMB-denominated notes by BOC Johannesburg Branch;
• USD-denominated notes by BOC Macau Branch;
• AUD-denominated notes by BOC Sydney Branch; and
• EUR-denominated notes by Bank of China (Luxembourg) S.A.
guaranteed by BOC Luxembourg Branch.
The outlook on the ratings of the notes is negative.
The full list of ratings is at the end of this press release.
RATINGS RATIONALE
The provisional (P)A1 rating for the MTN program and the A1 ratings for
the various proposed notes are in line with BOC's long-term A1
deposit rating and reflect the structure of the issuance.
The senior unsecured notes issued under the program by BOC and its branches
constitute BOC's direct, general, unsubordinated, unconditional,
and unsecured obligations. The (P)A1 MTN program rating does not
automatically apply to notes with a maturity of less than one year,
subordinated notes or any securities issued by its subsidiaries.
For the notes to be issued by BOC Johannesburg Branch, the A1 rating
is higher than South Africa's long-term foreign currency
bond country ceiling of A2 due to four reasons: (1) Chinese legislation
requires the head office to assume debt obligations of BOC's overseas
branches if the branches are unable to do so; (2) the notes will
be issued under international (English) law; (3) in the event of
capital controls in South Africa, Moody's does not anticipate impediments
to BOC performing its payment obligations in RMB from its head office
or from its other overseas branches; and (4) BOC has a very strong
incentive to perform the payment obligations of BOC Johannesburg Branch,
if needed, because of the reputational risks associated with a potential
default.
The updated MTN program documents allow BOC's overseas subsidiaries
to issue notes under the program, which may or may not be guaranteed
by a BOC branch. Moody's has only currently assigned ratings
for BOC and its branches under the MTN program, and the ratings
do not automatically apply to BOC's subsidiaries. Moody's
currently rates only two overseas banking subsidiaries of BOC: Bank
of China (Hong Kong) Limited (Aa3/Aa3 negative, a2) and Bank of
China (New Zealand) Limited (A1/A1 negative). Moody's has
assigned A1 rating to the notes to be issued by Bank of China (Luxembourg)
S.A., the bank's wholly-owned subsidiary.
BOC Luxembourg Branch will unconditionally and irrevocably guarantee the
notes to be issued by Bank of China (Luxembourg) S.A. For
more information, please see Moody's cross-sector rating
methodology, "Rating Transactions Based on the Credit Substitution
Approach: Letter of Credit-backed, Insured and Guaranteed
Debts" published in December 2015.
The (P)A1 rating for the MTN program does not automatically apply to any
individual notes issued under the program in the future. Ratings
on future individual notes issued under the program will be subject to
Moody's satisfactory review of the terms and conditions set forth in the
final base and supplementary offering circular, and the pricing
supplements of the notes to be issued.
Moody's does not intend to assign ratings to individual notes issued under
the program with features linked to the performance of another obligor
(credit-linked notes).
Moody's also does not intend to assign ratings to notes for which the
payment of principal or interest is variable and contractually dependent
on the occurrence of a non-credit-linked event or the performance
of an index (non-credit-linked notes).
The only exception will be for notes with principal and coupon payments
that are affected by standard sources of variation. For more information,
please see Moody's cross-sector rating methodology,
"Rating Obligations with Variable Promises" published in April
2016.
WHAT COULD MOVE THE RATING UP
The (P)A1 rating for the MTN program and the A1 ratings for the senior
unsecured notes are in line with BOC's deposit and senior unsecured
debt ratings after incorporating a very high level of government support.
These ratings are unlikely to rise further, particularly in view
of the negative outlook on the sovereign rating of the China government.
BOC's baseline credit assessment (BCA, baa2) is unlikely to
rise as well due to the weakening operating environment. However,
BOC's BCA could experience upward pressure if (1) its operating
environment, as measured by its Macro Profile, improves;
(2) its asset quality, as measured by new problem loan formation,
and profitability, as measured by return on average assets,
remain resilient despite slower economic growth; and (3) its capital
strengthens, such that its common equity Tier 1 capital ratio improves.
WHAT COULD MOVE THE RATING DOWN
The ratings could be downgraded if the sovereign rating of the China government
is downgraded or if we assess that the China government's ability
or likelihood to support the bank is weaker. BOC's BCA could
experience downward pressure if (1) its operating environment weakens
materially, i.e. if China's economic growth
continues to slow, or corporate financial leverage continues to
rise; (2) its asset quality and profitability weaken materially;
and (3) its capital weakens.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Bank of China Limited is headquartered in Beijing. It reported
assets of RMB18.1 trillion at 31 December 2016.
LIST OF AFFECTED RATINGS
Bank of China Limited
• Senior Unsecured MTN Program (Foreign Currency) Affirmed at (P)A1
Bank of China Limited, Abu Dhabi Branch
• Senior Unsecured MTN Program (Foreign Currency) Affirmed at (P)A1
Bank of China Limited, Dubai Branch
• Senior Unsecured MTN Program (Foreign Currency) Assigned at (P)A1
• Senior Unsecured Long-term Debt (Foreign Currency) Assigned
at A1
• Counterparty Risk Assessment Assigned at A1(cr)/P-1(cr)
• Issuer-level Outlook Assigned as Negative
Bank of China Limited, Hong Kong Branch
• Senior Unsecured MTN Program (Foreign Currency) Affirmed at (P)A1
Bank of China Limited, Hungarian Branch
• Senior Unsecured MTN Program (Foreign Currency) Affirmed at (P)A1
Bank of China Ltd, Johannesburg
• Senior Unsecured Long-term Debt (Foreign Currency) Assigned
at A1
• Issuer-level Outlook Assigned as Negative
Bank of China Limited, London Branch
• Senior Unsecured MTN Program (Foreign Currency) Affirmed at (P)A1
Bank of China Limited, Luxembourg Branch
• Senior Unsecured MTN Program (Foreign Currency) Affirmed at (P)A1
Bank of China (Luxembourg) S.A.
• Backed Senior Unsecured Long-term Debt (Local Currency)
Assigned at A1
• Issuer-level Outlook Assigned as Negative
Bank of China Limited, Macau Branch
• Senior Unsecured MTN Program (Foreign Currency) Assigned at (P)A1
• Senior Unsecured Long-term Debt (Foreign Currency) Assigned
at A1
• Counterparty Risk Assessment Assigned at A1(cr)/P-1(cr)
• Issuer-level Outlook Assigned as Negative
Bank of China Limited, New York Branch
• Senior Unsecured MTN Program (Local Currency) Affirmed at (P)A1
Bank of China Limited, Paris Branch
• Senior Unsecured MTN Program (Foreign Currency) Affirmed at (P)A1
Bank of China Limited, Singapore Branch
• Senior Unsecured MTN Program (Foreign Currency) Affirmed at (P)A1
Bank of China Limited, Sydney Branch
• Senior Unsecured MTN Program (Foreign Currency) Affirmed at (P)A1
• Senior Unsecured Long-term Debt (Local Currency) Assigned
at A1
Bank of China Limited, Taipei Branch
• Senior Unsecured MTN Program (Foreign Currency) Affirmed at (P)A1
The outlook on ratings for all above senior unsecured debt is negative.
The Local Market analyst for these ratings is Nicholas Zhu, +86.10.6319.6536.
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.
Sonny Hsu, CFA
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
SUBSCRIBERS: (852) 3551-3077
Minyan Liu
Associate Managing Director
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (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
SUBSCRIBERS: (852) 3551-3077
