Hong Kong, May 11, 2021 -- Moody's Investors Service, ("Moody's") has
assigned (P)A1/(P)P-1 local and foreign currency senior unsecured
medium-term note (MTN) programme ratings to Agricultural Bank of
China Limited (ABC) London Branch.
Moody's has also assigned A1 ratings to the proposed US dollar senior
unsecured fixed rate notes issued by ABC London Branch under ABC's
USD15 billion MTN programme.
At the same time, Moody's has also assigned the following
ratings and assessments to ABC London Branch:
• A1(cr) long term and P-1(cr) short term counterparty risk
assessment
• A1 long term and P-1 short term local and foreign currency
counterparty risk rating
The outlooks on the notes' rating and ABC London Branch are stable.
RATINGS RATIONALE
The USD15 billion MTN programme is now updated to include ABC's London
Branch.
The (P)A1/(P)P-1 ratings are in line with ABC's long-term
and short-term deposit rating of A1/P-1 as ABC London Branch
is a branch of ABC, and it is a natural extension of the parent
bank. According to the MTN program Offering Circular, ABC
and the relevant issuing branch of the ABC located outside the People's
Republic of China specified as an issuer in the applicable Pricing Supplement
may from time to time issue notes under this program.
The senior unsecured notes to be issued under the MTN programme will constitute
direct, general and unconditional obligations of the issuer that
will at all times rank pari passu among themselves and at least pari passu
with all other present and future unsubordinated and unsecured obligations
of the issuer. The notes will be redeemable at principal on maturity.
ABC's Baseline Credit Assessment (BCA) is baa2, and its Adjusted
BCA, which incorporates no affiliate support, is at the same
level as its BCA. China does not have an operational resolution
regime. Moody's therefore applies a basic Loss Given Failure
approach in rating the debt securities of Chinese banks.
The Preliminary Rating Assessment on the senior unsecured debt,
representing Moody's view of the expected loss on the senior unsecured
debt in the absence of government support and before considerations of
local and foreign currency country ceilings, is at the same level
as the Adjusted BCA. Moody's assesses that, in times
of need, ABC would receive a very high level of support from the
Chinese government, resulting in a three-notch uplift to
the Preliminary Rating Assessment on counterparty risk rating and counter
party risk assessment; and four-notch uplift to the Preliminary
Rating Assessment on the senior unsecured debt, to A1.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings on the proposed senior unsecured notes are in line with ABC's
long-term deposit rating. Any changes in ABC's long-term
deposit rating will lead to a similar rating action on the rating of its
senior unsecured MTN programme and senior unsecured notes.
ABC's long-term deposit rating is already at the same level as
Government of China's senior unsecured debt rating and factors in a very
high level of government support. As such, Moody's could
upgrade ABC's rating if China's senior unsecured rating is upgraded.
Moody's could upgrade ABC's BCA if China's credit conditions improve with
strong economic recovery supported by a less intensive credit growth,
and the bank's (1) capitalization strengthens, with an improvement
in its Common Equity Tier 1 (CET1) ratio consistently above 11%,
(2) its NPL provision coverage ratio is consistently maintained at the
current level; (3) its assets and profitability are maintained at
around the current level consistently.
Conversely, Moody's could downgrade the long-term deposit
rating if the government's willingness or capability to support the bank
weakens.
Moody's could downgrade ABC's BCA if the operating environment weakens
significantly, for example, if China's economic growth moderates
further or corporate financial leverage continues to increase.
Moody's could also downgrade ABC's BCA if the bank's (1) profitability,
as measured by net income/tangible assets, reduced, which
could be a result of much weaker asset quality, and is consistently
below 0.5%; or (2) capitalization weakens, with
a deterioration in its CET 1 ratios to consistently below 9.5%-10%.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in March 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1261354.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Agricultural Bank of China Limited is headquartered in Beijing,
and reported total assets of RMB27.2 trillion as of 31 December
2020.
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
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
be assigned subsequent to the final issuance of the debt, in each
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3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
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The first name below is the lead rating analyst for this Credit Rating
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this Credit Rating.
Chen Huang
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.)
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Yat Man Sally Yim, CFA
MD - Financial Institutions
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