Hong Kong, January 28, 2021 -- Moody's Investors Service, ("Moody's") has
assigned an A1 rating to senior unsecured Yulan bonds issued by Bank of
China Limited (BOC), Hong Kong Branch:
• USD-denominated 3-year fixed-rate.
The rated bonds will be issued under BOC's USD40 billion Medium
Term Note Programme. Yulan bonds are offshore bonds denominated
in U.S. dollars or euro or other currencies and issued by
entities incorporated in People's Republic of China (including offshore
entities or branches under their control), pursuant to the cooperation
between Shanghai Clearing House and Euroclear.
The rating outlook on the Yulan bonds is stable.
The assigned rating is subject to receipt of final documentations,
the terms and conditions of which are not expected to change in any material
way from the draft documents that Moody's has reviewed.
RATINGS RATIONALE
The assigned rating and stable outlook are in line with BOC's long-term
deposit rating and outlook, and reflect the structure of the issuance.
The bonds will constitute direct, unconditional, unsubordinated,
and unsecured obligations of BOC and will at all time rank pari passu
among themselves. The bonds will be redeemable at par on maturity.
BOC's Baseline Credit Assessment (BCA) is baa1 and Adjusted BCA,
which incorporates no affiliate support, is the same as its BCA.
China does not have an operational resolution regime. Therefore,
Moody's applies a basic Loss Given Failure approach in rating BOC's debt
securities and assumes a very high level of support from the Chinese government
in times of need. As a result, ratings of senior unsecured
debts are uplifted by three notches to A1.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The senior unsecured bond rating is in line with BOC's long-term
deposit rating. Therefore, an upgrade/downgrade of BOC's
long-term deposit rating would also cause a similar rating action
on the senior unsecured bond rating.
BOC's long-term deposit rating is at the same level as the
senior unsecured debt rating of the Government of China, after factoring
in a very high level of government support. Hence, there
could be upward pressure on the rating should the Chinese government's
capacity to support the bank, as reflected in the senior unsecured
debt rating of the Government of China, strengthen.
Moody's could upgrade BOC's BCA if China's credit conditions improve with
strong economic recovery supported by a less intensive credit growth,
and the bank's capitalization strengthens, with an improvement in
its Core Tier 1 capital ratio consistently above 14.0% while
its profitability maintained at around the current level.
There could be downward pressure on BOC's long-term deposit rating
should the Chinese government's willingness or capacity to support the
bank weaken or if the bank's BCA is downgraded.
Moody's could downgrade BOC'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 BOC's BCA if the bank's capitalization weakens,
with a deterioration in its Core Tier 1 capital ratio to consistently
below 10.5% to 11.0%; and profitability,
as measured by net income/tangible banking assets, reduces,
which could be a result of much weaker asset quality, and is consistently
below 0.7%. In addition, the BCA could be downgraded
if the bank's operations become less geographically diversified,
or the profitability of its overseas operations weakens materially.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was Banks Methodology published
in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Bank of China Limited is a state-owned commercial bank and a global
systemically important bank, as identified by the Financial Stability
Board. Headquartered in Beijing, China, the bank reported
total assets of RMB24.7 trillion and total equity of RMB2.1
trillion as of 30 September 2020.
The local market analyst for this rating is Nicholas Zhu, +86
(106) 319-6536.
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
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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy for Designating
and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Moody's considers a rated entity or its agent(s) to be participating when
it maintains an overall relationship with Moody's. Unless noted
in the Regulatory Disclosures as a Non-Participating Entity,
the rated entity is participating and the rated entity or its agent(s)
generally provides Moody's with information for the purposes of its ratings
process. Please refer to www.moodys.com for the Regulatory
Disclosures for each credit rating action under the ratings tab on the
issuer/entity page and for details of Moody's Policy for Designating Non-Participating
Rated Entities.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social and
governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
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
Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main
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
that issued the credit rating is available on www.moodys.com.
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
Moody's Investors Service Limited, One Canada Square, Canary
Wharf, London E14 5FA under the law applicable to credit rating
agencies in the UK. Further information on the UK endorsement status
and on the Moody's office that issued the credit rating is available on
www.moodys.com.
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.
Ray Heung
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.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
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
