Hong Kong, April 21, 2022 -- Moody's Investors Service ("Moody's") has assigned A1 ratings to various proposed senior unsecured green notes to be issued by three branches of Bank of China Limited (BOC):
• USD-denominated 3-year SOFR (Secured Overnight Financing Rate) floating-rate notes by BOC, Macau Branch;
• USD-denominated 3-year fixed-rate notes by BOC, Singapore Branch;
• EUR-denominated 3-year fixed-rate notes by BOC, Luxembourg Branch.
The notes will be issued under BOC's USD40 billion Medium Term Note Programme.
The proceeds of the issuance of the notes will be used to finance and/or refinance eligible green projects.
The rating outlook on the proposed notes is stable.
The assigned ratings are subject to receipt of final documents, 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 ratings are in line with BOC's senior unsecured MTN programme rating, reflecting the structure of the issuance. The notes will constitute direct, unconditional, unsubordinated, and unsecured obligations of BOC. The notes will at all time rank pari passu among themselves and with all other present and future unsecured and unsubordinated obligations of BOC. The notes will be redeemable at par on maturity.
BOC, Macau Branch; BOC, Singapore Branch and BOC, Luxembourg Branch are not separate and independent legal persons but are offshore institutions of BOC. The obligations of the three branches under the MTN notes shall be finally assumed by BOC if the branches fail to perform the obligations under the MTN notes, because the head office shall be ultimately liable for the debts incurred by its branches under the law of People's Republic of China.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The MTN notes' ratings are in line with BOC's senior unsecured MTN programme rating. Therefore, an upgrade/downgrade of BOC's senior unsecured MTN programme rating would also cause a similar rating action on the MTN notes' ratings.
BOC's senior unsecured MTN programme rating is at the same level as the issuer 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 issuer rating of the Government of China, strengthen.
Moody's could upgrade BOC's Baseline Credit Assessment (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 senior unsecured MTN programme 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.
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.
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 RMB26.7 trillion and total equity of RMB2.4 trillion as of 31 December 2021.
The local market analyst for these ratings is Nicholas Zhu, +86 (10) 6319-6536.
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 ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
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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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
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.
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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.
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
Client Service: 852 3551 3077
Chen Huang
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
