Hong Kong, May 30, 2018 -- Moody's Investors Service has today taken rating actions on nineteen
Chinese commercial banks and four Chinese subsidiaries of international
banks.
Moody's has upgraded by one notch the ratings of the following banks.
Their ratings outlook is stable.
• to A1 from A2 for the long-term deposits and senior unsecured
debt of Agricultural Bank of China Limited (ABC) and senior unsecured
debt of its Hong Kong and New York branches;
• to A1 from A2 for the long-term deposits of Postal Savings
Bank of China Co., Ltd. (PSBC);
• to A2 from A3 for the long-term deposits of Bank of Communications
Co., Ltd. (BoCom) and senior unsecured debt of its
Hong Kong branch;
• to A3 from Baa1 for the long-term deposits of China Merchants
Bank Co., Ltd. (CMB) and senior unsecured debt of
its Hong Kong branch;
• to Baa2 from Baa3 for the long-term deposits of Industrial
Bank Co., Ltd. (CIB) and senior unsecured debt of
its Hong Kong branch;
• to Baa2 from Baa3 for the long-term deposits of Bank of
Shanghai Co., Ltd. (BOSC);
• to Baa2 from Baa3 for the long-term deposits of Bank of
Ningbo Co., Ltd. (BONB); and
• to Ba1 from Ba2 for the long-term deposits of Bank of Suzhou
Co., Ltd. (BOSZ).
Moody's has also upgraded by one notch the ratings of the capital
securities of following banks:
• to Baa2 (hyb) from Baa3 (hyb) for the subordinate debt of Bank
of China Limited (BOC), and Industrial and Commercial Bank of China
Limited (ICBC);
• to Ba1 (hyb) from Ba2 (hyb) for the non-cumulative preferred
stock of China Construction Bank Corporation (CCB), BOC and ICBC;
• to Ba2 (hyb) from Ba3 (hyb) for the non-cumulative preferred
stock of PSBC; and
• to Ba3 (hyb) from B1 (hyb) for the non-cumulative preferred
stock of BoCom.
At the same time, Moody's has affirmed the A1 ratings --
with a stable outlook -- for the long-term deposits
of BOC, CCB, and ICBC, and the A1 ratings for the senior
unsecured debt of the three banks' overseas branches.
Moody's has changed the outlook to positive from stable, while
affirming the ratings of the following banks:
• Baa2 for the long-term deposits and senior unsecured debt
of China CITIC Bank Corporation Limited (CITICB);
• Baa2 for the long-term deposits of China Everbright Bank
Company Limited (CEB); and
• Baa3 for the long-term deposits of Bank of Nanjing Co.,
Ltd. (BONJ).
In addition, Moody's has affirmed the ratings with a stable
outlook of the following banks:
• Baa2 for the long-term deposits of Ping An Bank Co.,
Ltd (PAB);
• Baa2 for the long-term deposits of Shanghai Pudong Development
Bank Co., Ltd. (SPDB) and senior unsecured debt of
its Hong Kong branch;
• Baa2 for the long-term deposits of Guangzhou Rural Comm
Bank Co., Ltd. (GZRCB);
• Baa3 for the long-term deposits of China Guangfa Bank Co.,
Ltd. (CGB); and
• Ba1 for the long-term deposits of China Zheshang Bank Co.,
Ltd. (CZBANK).
For the following Chinese subsidiaries of four international banks,
Moody's has affirmed their ratings with a stable outlook:
• A1 for the long-term deposits of HSBC Bank (China) Company
Limited (HBCN);
• A2 for the long-term deposits of Hang Seng Bank (China)
Limited (HSCN);
• A3 for the long-term deposits of Bank of Tokyo-Mitsubishi
UFJ (China) Limited (BTCN); and
• Baa1 for the long-term deposits of Fubon Bank (China) Co.,
Ltd. (FBCN).
Moody's has upgraded by one notch the following baseline credit
assessments (BCAs):
• to baa1 from baa2 for BOC, CCB, ICBC and HBCN;
• to baa2 from baa3 for ABC and PSBC;
• to baa3 from ba1 for BoCom, CMB, HSCN and BTCN;
• to ba1 from ba2 for BOSC and BONB; and
• to ba2 from ba3 for CIB, BOSZ and PAB.
In addition, Moody's has affirmed following BCAs:
• ba1 for GZRCB;
• ba2 for CITICB, CEB, BONJ, SPDB, and FBCN;
and
• ba3 for CGB and CZBANK.
Moody's took these rating actions after changing the Macro Profile
for China to "Moderate +" from "Moderate",
driven by an improvement from "Strong +" to "Very
Strong --" in the country's banking country risk score.
During the past year, Moody's has raised its economic growth forecasts
for China, from the original expectation of a drop in the growth
rate to below 6% in 2019 to an expectation of 6.4%
for the same year.
The growth expectation for 2018 has also been raised to 6.6%
from 6.3%. The pace of fast growth in credit since
2008 has been moderating amid steadying economic growth from the second
half of 2016.
China's regulators continue to focus and make progress on de-risking
the financial sector with coordinated measures. This has resulted
in a slowdown in shadow banking activities and has reduced the interconnectedness
among banks and non-bank financial institutions (NBFIs).
For full details on the change of Macro Profile for China, please
see "Banks -- China: Macro profile - Moderate +",
http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1120054.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_199592
for a full List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_199592
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
Local Market Analyst
Moody's expects the continued execution of regulatory measures and
the subsequent slowdown in shadow banking and interbank activities to
help reduce systemic risks for the banking system, a net positive
to the Chinese banking sector overall.
The moderation in growth in shadow banking activities and continued corporate
sector deleveraging nevertheless are also bringing challenges to the banking
system. One impact of the tighter regulations on shadow banking
is that some previously off-balance sheet transactions are migrating
back to the banks' balance sheets as loans with higher capital and
provisioning requirements. Moreover, the deleveraging process
is resulting in elevated default risks among more marginal corporate borrowers.
The banks whose baseline credit assessments have been upgraded by Moody's
are those for which the rating agency judges the net benefits of reduced
systemic risk to more than offset the transitional challenges of the deleveraging
process. In particular, larger state-owned banks and
banks with a strong retail franchise -- such as CMB --
will likely have more flexibility in coping with the tighter regulations
on shadow banking and interbank activities.
For medium-sized joint-stock commercial banks other than
CMB and smaller city and rural commercial banks, Moody's judges
that there is an increasing divergence in standalone credit profiles.
Among this group of banks, it has upgraded the baseline credit assessments
of those that are managing the transition well by virtue of their capital
strength, liability franchise, and/or relatively modest involvement
in shadow banking activities. However, it has affirmed the
baseline credit assessments of those banks where the challenges of the
transition are considerable and the reduction in systemic risks is not
enough to raise their standalone credit fundamentals.
Moody's does not expect to see a material improvement in the banks'
financial metrics in the next 12-18 months. The trend for
asset quality is likely to remain stable rather than improve materially
in the next 12-18 months as deleveraging will crystalize the default
risks of weaker borrowers.
The pressure on the banks' equity capital positions will ease in
general among rated banks as asset growth slows. However,
risk-weighted assets are likely to grow faster than assets as banks
shift their asset mix to loans carrying higher risk weights from investment
in shadow banking products that have been lightly risk-weighted.
Regulatory constraints on the banks' use of market funding will
become more binding, and price competition for deposits will intensify,
in particular among those lacking a strong deposit franchise. The
negative impact on profitability is likely to be mitigated by the banks'
ability to price loans higher in the face of higher demand for formal
financing and the regulators' accommodative liquidity management
policies, such as the recent cut of the required reserve rate.
Nevertheless, Moody's expects the recovery of profitability
to be modest, given the relatively high level of credit costs.
Actions on big five banks, and PSBC and CMB
Moody's has upgraded by one notch the BCAs of each of these seven
banks to reflect the improvement of macro risk as captured by the change
of China's Macro Profile to "Moderate +" from "Moderate".
This group of larger banks has stable to improving capital positions,
resilience in asset quality, and relatively low exposure to shadow
banking activities, and hence more flexibility in coping with the
tighter regulations on shadow banking and interbank activities.
Liquid resources remain strong for this group. Retail deposits
accounted for around one third of their total deposits or more,
with PSBC leading the group by reporting 85% at the end of 2017.
BoCom has a weaker funding profile and profitability when compared to
other state-owned Chinese banks. Meanwhile, CMB's
exposure to shadow banking activities is relatively high. Both
banks have these weaker credit factors reflected in their baa3 BCAs.
Moody's continues to factor in a very high level of government support
for this group of banks, resulting in uplifts in their ratings for
long-term deposits: three notches for BOC, CCB,
ICBC and CMB; and four notches for ABC, PSBC, and BoCom.
The long-term deposit ratings of BOC, CCB, and ICBC
were already at the same level as China's A1 sovereign rating prior
to this action. This explains why the upgrade of BCA has not resulted
in an upgrade of the long-term deposit ratings.
The stable outlooks for the seven banks reflect Moody's view that
the government's willingness and ability to support them will remain
broadly unchanged over the next 12-18 months, and that these
banks' BCAs will remain appropriately positioned at their current
levels during this period.
Actions on medium-sized banks (other than CMB) and smaller banks
Moody's observes more divergence in the standalone credit profiles
for this group of banks after the change of the Macro Profile for China.
Individual banks in this group are coping differently with the challenges
of adjusting to tighter regulations.
• Upgrading deposit ratings and BCAs of CIB, BOSC, BONB
and BOSZ; affirming deposit rating of PAB with an upgrade of BCA;
outlook stable
Moody's has upgraded by one notch the BCAs of each of the above
five banks after the change of Macro Profile for China to "Moderate
+" from "Moderate".
CIB has reduced its reliance on market funding and shadow banking activities
from a relatively high level compared with its peers. Its strengthened
capital position after a private placement in 2017 and sound profitability
enable it to deal with the challenges in the transition period.
Moody's continues to factor in a very high level of government support
to CIB, resulting in its Baa2 deposit rating benefiting from three
notches of support from its ba2 BCA.
The combination of benign asset quality metrics, equity raising
in recent years, and strong profitability metrics relative to its
peers renders BOSC greater flexibility in coping with challenges in this
transition period. Similarly for BONB, its capital position
is likely to strengthen with the further conversion of outstanding convertible
bonds, slowing asset growth and strong profitability. While
their reliance on market funds remains relatively high compared to their
rated peers, their liquid resources are adequate. Moody's
continues to factor in a high level of government support to BOSC and
BONB, resulting in their Baa2 deposit ratings benefiting from two
notches of support from their ba1 BCAs.
BOSZ's asset quality has improved, benefiting from local economic
growth, despite a larger exposure to small- and medium-sized
enterprises (SMEs) and the manufacturing sector. Improving asset
quality, a stable capital position and sound liquidity profile afford
the bank flexibility in coping with challenges in the transition period.
The bank has also reduced its reliance on shadow banking activities.
Moody's continues to factor in a moderate level of government support
to BOSZ, resulting in its Ba1 deposit rating benefiting from one
notch of uplift from the ba2 BCA.
PAB has transformed its business strategy and continued to work down its
legacy exposures in SME loans, resulting in a continued shift to
retail lending. While its nonperforming loan (NPL) ratio is likely
to stay relatively high as the transformation of its loan mix continues
in 2018, the formation of new NPLs is likely to trend lower.
Moody's has affirmed PAB's deposit rating at Baa2 despite
upgrading its BCA to ba2 from ba3. Moody's factors in a very
high level of affiliate support from its parent Ping An Insurance (Group)
Company of China, Ltd. and a moderate level of government
support, resulting in a two-notch uplift from affiliate support
and a one-notch uplift from the government support.
The stable outlooks for the five banks reflect Moody's view that
the government's (and in the case of PAB, the parent's)
willingness and ability to support them will remain broadly unchanged
over the next 12-18 months, and that these banks' BCAs
will remain appropriately positioned at their current levels during this
period.
• Changing outlook to positive from stable while affirming ratings
and BCAs of CITICB, CEB and BONJ
Moody's has observed positive and rapid shifts in CITICB's
and CEB's balance sheets away from reliance on market funding and
shadow banking activities. Nevertheless, both banks have
relatively modest capital positions and are seeing further pressure on
capital as risk-weighted assets rise more rapidly than assets.
While affirming their deposit ratings and BCAs, Moody's has
revised the rating outlook to positive from stable to reflect both banks'
improving asset quality and liquidity. Moody's continues
to factor in a very high level of government support, resulting
in each bank's Baa2 deposit ratings benefiting from three notches
of support from the ba2 BCAs.
BONJ's growing deposit base and sound profitability will enable
the bank to adjust to the tighter regulations on shadow banking and interbank
activities. Nevertheless, the bank's exposure to shadow
banking activities remains higher than most of its peers, and its
liquid resources are declining as the bank makes more loans and invests
in longer-tenor assets. While affirming its deposit rating
and BCA, Moody's has revised the rating outlook to positive
from stable to reflect the potential improvement of its capital position
after a planned private placement of common shares. Moody's
continues to factor in a high level of government support to BONJ,
resulting in its Baa3 deposit ratings benefiting from two notches of support
from the ba2 BCA.
• Affirming deposit ratings and BCAs of SPDB, GZRCB,
CGB, and CZBANK; outlook stable
For the above four banks, the improvement of macro risks as captured
by the change of Macro Profile for China to "Moderate +"
from "Moderate" is not strong enough to support an upgrade
of their BCAs.
The affirmation of SPDB's BCA reflects the challenges it is facing,
especially the effort required to adjust its reliance on market funding,
and pressure on its asset quality. This is despite the positive
impact from easing macro risks, sound profitability, an improved
capital position, slower asset growth and reduced shadow banking
activities. Moody's continues to factor in a very high level
of government support to SPDB, resulting in its Baa2 deposit rating
benefiting from three notches of support from the ba2 BCA.
Moody's assigned its first-time rating to GZRCB in April
and the bank's credit trends have remained stable since then.
GZRCB's ba1 BCA reflects the bank's established deposit base,
adequate liquid resources, improving asset quality, and strengthened
capital ratios following its listing on the Hong Kong Stock Exchange.
The BCA also considers the risks arising from the bank's rapid loan
growth, its large exposure to SMEs and its weak profitability when
compared to its rated peers. Moody's continues to factor
in a high level of government support to GZRCB, resulting in its
Baa2 deposit rating benefiting from two notches of support from the ba1
BCA.
CGB's asset risk remains high and its lowering reliance on market
funding remains a challenge. A planned equity placement could help
address some of these challenges. Moody's continues to factor
in a high level of affiliate support from its largest shareholder,
China Life Insurance Company Limited, and a moderate level of government
support to CGB, resulting in a two-notch uplift from affiliate
support and a one-notch uplift from government support.
The affirmation of CZBANK's ba3 BCA reflects the challenges it is
facing, especially the effort required to reduce its reliance on
market funding and shadow banking products. While the bank has
slowed the growth of assets, reduced its shadow banking activities
and its reliance on market funding and long-tenor investments,
its deposit franchise remains weak compared with most of its peers and
its exposure to shadow banking activities remains relatively high.
The bank is also expanding its loans at a much faster rate than the system
average, thereby challenging its asset quality and capital position.
Moody's continues to factor in a high level of government support
to CZBANK, resulting in its Ba1 deposit rating benefiting from two
notches of support from the ba3 BCA.
The stable outlooks for the four banks reflect Moody's view that
the government's (and in the case of CGB, its largest shareholder's)
willingness and ability to support them will remain broadly unchanged
over the next 12-18 months, and that these banks' BCAs
will remain appropriately positioned at their current levels during this
period.
Actions on Chinese subsidiaries of international banks
HBCN, HSCN and BTCN have very low exposure to shadow banking activities,
solid capital positions and adequate liquid resources. These features
help the banks' credit profiles as the Chinese banking sector adjusts
to the tighter regulations on shadow banking and interbank activities.
Moody's has upgraded the BCAs by one notch to baa1 for HBCN and
baa3 for HSCN and BTCN. Moody's continues to factor in a
very high level of affiliate support from the parent banks to the three
banks, resulting in uplifts in ratings of long-term deposits:
three notches for HBCN and BTCN; and four notches for HSCN.
The affirmation of FBCN's ba2 BCA after the change of the Macro
Profile for China reflects the challenges the bank faces due to its limited
funding resources and weak profitability. On the other hand,
the bank has shown an improvement in asset quality, a solid capital
ratio despite a decline in 2017, adequate liquid resources,
and a decline in its reliance on market funding. Moody's
continues to factor in a very high level of affiliate support from the
parent bank to FBCN, resulting in its Baa1 deposit rating benefiting
from four notches of support from the ba2 BCA.
The stable outlooks for the four banks reflect Moody's view that
the parent banks' willingness and ability to support them will remain
broadly unchanged over the next 12-18 months, and that these
banks' BCAs will remain appropriately positioned at their current
levels during this period.
WHAT COULD MOVE THE RATING UP/DOWN
The long-term deposit ratings of ABC, BOC, CCB,
ICBC and PSBC are at the same level of the sovereign rating after factoring
in a very high level of government support. Hence, there
could be upward pressure on the deposit ratings should the Chinese government's
capability, as reflected in the Chinese sovereign rating,
to support the banks strengthen.
In addition to ABC, BOC, CCB, ICBC and PSBC, other
banks -- with the exception of the Chinese subsidiaries
of the four international banks -- have ratings incorporating
various levels of government support. There could be upward or
downward pressure on their deposit ratings should the Chinese government's
capability or willingness to support the banks strengthen or weaken.
Furthermore, should the operating environment weaken materially,
for example, if China's economic growth moderates or corporate
financial leverage continues to increase, then there would be negative
pressure on the banks' BCAs.
More bank-specific rating triggers are summarized below.
ABC
The bank's BCA could experience upward pressure if (1) it continues
to show improvements in its asset-quality trends and profitability;
and/or (2) its capital strengthens as a result of the announced private
placement of common shares and sound growth of risk-weighted assets
(RWAs), with an improvement in its tangible common equity (TCE)
capital ratio.
The bank's BCA could experience downward pressure if (1) its asset
quality and profitability weaken materially; and/or (2) its capital
weakens, with a deterioration in the TCE capital ratio because of
a failure to raise capital as planned or excessive growth of RWAs.
BOC
The bank's BCA could experience upward pressure if (1) its asset quality,
as measured by the rate of the formation of problem loans, continues
to improve; (2) its profitability, as measured by the return
on assets, improves; and/or (3) its capital strengthens,
with an improvement in its TCE capital ratio.
The bank's BCA could experience downward pressure if (1) its asset quality
and profitability weaken materially; and/or (2) its capital weakens,
with a deterioration in its TCE capital ratio.
CCB
The bank's BCA could experience upward pressure if (1) its asset quality,
as measured by the rate of formation of problem loans, continues
to improve; (2) its profitability, as measured by the return
on assets, remains resilient; and/or (3) its capital continues
to strengthen, with an improvement in its TCE capital ratio.
The bank's BCA could experience downward pressure if (1) its asset quality
and profitability weaken materially; and/or (2) its capital weakens,
with a deterioration in its TCE capital ratio.
ICBC
The bank's BCA could experience upward pressure if (1) its asset quality,
as measured by the rate of formation of problem loans, continues
to improve; (2) its profitability, as measured by the return
on assets, remains resilient; and/or (3) its capital continues
to strengthen, with an improvement in its TCE capital ratio.
The bank's BCA could experience downward pressure if (1) its asset quality
and profitability weaken materially; and/or (2) its capital weakens,
with a deterioration in its TCE capital ratio.
PSBC
The bank's BCA could experience upward pressure if (1) its asset quality,
as measured by the rate of formation of problem loans, remains healthy
as its rapidly growing loan portfolio seasons; and/or (2) its capital
strengthens, as a result of its A-share listing and the sound
growth of its risk-weighted assets (RWAs), with an improvement
in its TCE capital ratio.
PSBC's long-term deposit rating could be downgraded if China
Post Group significantly dilutes its stake in the bank. The bank's
BCA could also experience downward pressure if (1) its asset quality deteriorates,
owing to operational risks; (2) profitability weakens materially;
and/or (3) its capital weakens, with a deterioration in its TCE
capital ratio because of a failure to raise capital as planned or excessive
growth of RWAs.
BoCom
The bank's BCA could experience upward pressure if (1) its funding
profile improves, with its market funds/tangible banking assets
ratio declining to below 25%; (2) its profitability,
as measured by return on assets, improves; and/or (3) its asset
quality, capital and liquid resources ratios remain stable.
The bank's BCA could experience downward pressure if (1) its reliance
on market funds increases rapidly; and/or (2) asset quality,
profitability and capitalization weaken materially.
CMB
The bank's BCA could experience upward pressure if its asset quality
and capitalization continue to improve while profitability and liquidity
remain resilient.
The bank's BCA could experience downward pressure if (1) its asset
quality and profitability weaken; (2) its capital weakens materially
because of rapid asset growth; (3) its reliance on market funding
increases; and/or (4) its off-balance sheet wealth-management
product exposures impact negatively on its liquidity position.
CIB
The bank's BCA could experience upward pressure if (1) its funding structure
improves significantly; (2) its asset quality, as measured
by the rate of formation of problem loans, and profitability,
as measured by return on assets, remain resilient; and/or (3)
its capital strengthens, with an improvement in its TCE capital
ratio.
The bank's BCA could experience downward pressure if (1) its asset
quality, capitalization and profitability weaken materially;
and/or (2) its funding structure deteriorates.
BOSC
The bank's BCA could experience upward pressure if (1) its asset
quality, as measured by the rate of formation of problem loans,
remains healthy; (2) its capital position remains robust while profitability
strengthens; and/or (3) its liquidity profile improves.
The bank's BCA could experience downward pressure if (1) its asset
quality deteriorates; (2) its capital position weakens owing to rapid
asset growth; and/or (3) its reliance on market funding increases.
BONB
The bank's BCA could experience upward pressure if (1) its asset
quality, as measured by the rate of formation of problem loans,
remains healthy; (2) its capital position remains robust while profitability
strengthens; and/or (3) its liquidity profile improves.
The bank's BCA could experience downward pressure if (1) its asset
quality deteriorates; (2) its capital position weakens owing to rapid
asset growth; and/or (3) its reliance on market funding increases.
BOSZ
The bank's BCA could experience upward pressure if (1) its asset
quality, as measured by the rate of formation of problem loans,
and profitability, as measured by return on assets, remain
resilient; and/or (2) its capital strengthens, with an improvement
in its TCE capital ratio.
The bank's BCA could experience downward pressure if (1) its asset
quality deteriorates; (2) its capital position weakens owing to rapid
asset growth; and/or (3) its reliance on market funding increases.
PAB
The bank's BCA and deposit rating could experience upward pressure
if the bank's (1) asset quality, as measured by new problem loan
formation, and profitability, as measured by return on average
assets, remain resilient; and/or (2) capital strengthens.
The bank's deposit ratings incorporate a very high level of parental support.
Consequently, any weakening in the parent's capacity to provide
support to the bank or a decrease in the bank's strategic importance to
the parent would put negative pressure on the bank's ratings.
The bank's BCA and deposit ratings could also experience downward
pressure if (1) its asset-quality deteriorates; (2) its capital
position weakens owing to rapid asset growth; and/or (3) its reliance
on wholesale funding increases.
CITICB
The bank's BCA could experience upward pressure if (1) its asset quality,
as measured by the rate of formation of problem loans, remains healthy
while its asset mix adjusts to the regulatory reform of the shadow banking
and interbank activities; (2) its profitability, as measured
by the return on assets, remains resilient; (3) its capital
strengthens, as a result of capital-raising and restrained
growth of RWAs, with an improvement in it TCE capital ratio;
and/or (4) its reliance on market funding continues to decrease,
with an improvement in its market funds/tangible banking assets ratio.
The bank's deposit rating could be downgraded if CITIC Group Corporation
(A3 negative) significantly dilutes its stake in the bank. The
bank's BCA could experience downward pressure if (1) its asset quality
and profitability weaken materially; (2) its capital weakens,
with a deterioration in its TCE capital ratio; and/or (3) its reliance
on market funding increases, with a deterioration in its market
funds/tangible banking assets ratio.
CEB
The bank's BCA could experience upward pressure if (1) its asset quality,
as measured by the rate of formation of problem loans, remains healthy,
while its asset mix adjusts to the regulatory reform of shadow banking
and interbank activities; (2) its profitability, as measured
by the return on assets, remains resilient; (3) its capital
strengthens, as a result of restrained growth in risk-weighted
assets (RWAs), with an improvement in its TCE capital ratio;
and/or (4) its reliance on market funding continues to decrease,
with an improvement in its market funds/tangible banking assets ratio.
The bank's deposit rating could be downgraded if China Everbright
Group significantly dilutes its stake in the bank. The bank's BCA
could experience downward pressure if (1) its asset quality and profitability
weaken materially; (2) its capital weakens, with a deterioration
in its TCE capital ratio; and/or (3) its reliance on market funding
increases, with a deterioration in its market funds/tangible banking
assets ratio.
BONJ
The bank's BCA could experience upward pressure if (1) its asset
quality, as measured by the rate of formation of problem loans,
and profitability, as measured by the return on assets, remain
resilient; (2) its capital position strengthens materially;
and/or (3) its liquidity profile remains stable.
The bank's BCA could experience downward pressure if (1) its solvency
or liquidity indicators weaken while adjusting to tighter regulations
on shadow banking and interbank activities; (2) its asset quality
and profitability weaken materially; (3) its RWAs grow fast and lead
to a weaker capital position; and/or (4) its liquidity condition
deteriorates.
SPDB
The bank's BCA could experience upward pressure if (1) its asset
quality, as measured by the rate of formation of problem loans,
improves; (2) its profitability, as measured by the return
on assets, remains resilient; (3) its capital further strengthens,
as a result of capital-raising and sound growth of RWAs,
with an improvement in its TCE capital ratio; and/or (4) its reliance
on market funding decreases, with an improvement in its market funds/tangible
banking assets ratio.
The bank's BCA could experience downward pressure if (1) its asset
quality deteriorates; (2) its capital position weakens owing to rapid
asset growth; and/or (3) its reliance on market funding increases.
GZRCB
The bank's BCA could experience upward pressure if (1) its asset
quality, as measured by the rate of formation of problem loans,
and profitability, as measured by the return on assets, improve;
and/or (2) capital strengthens, with an improvement in its TCE capital
ratio.
The bank's BCA could experience downward pressure if (1) its asset
quality and profitability weaken materially; and/or (2) its capital
position weakens.
CGB
The bank's deposit rating incorporates a high level of affiliate
support. Consequently, an increase in the bank's strategic
importance to the China Life Group could exert upward pressure on its
ratings. The bank's BCA could experience upward pressure
if its asset quality, profitability and funding profile improve
while its capital position strengthens.
A reduction in the bank's strategic importance to the China Life
Group could pressure downward the bank's ratings. The bank's
BCA could experience downward pressure if (1) its asset quality,
as measured by the rate of formation of problem loans, deteriorates;
(2) its capital position weakens owing to rapid asset growth; and/or
(3) its reliance on market funding continues to increase.
CZBANK
The bank's BCA could experience upward pressure if (1) its asset
quality remains stable while profitability improves; (2) its capital
position strengthens with RWA growth slowing to around 15%;
and/or (3) its deposit base continues to grow and the maturity profiles
of its funding and investments are better aligned.
The bank's BCA could experience downward pressure if (1) its asset
quality, profitability and capital weaken materially; and/or
(2) its liquidity position deteriorates significantly.
HBCN
The bank's deposit rating incorporates a very high level of parental
support. Hence, the bank's ratings could be upgraded
if the parent's BCA is upgraded. The bank's BCA could
experience upward pressure if its asset quality, profitability,
and capital position improve further.
The bank's deposit rating could be downgraded if its parent's
rating is downgraded. The bank's BCA could experience downward
pressure if (1) its asset quality and profitability weaken materially;
and/or (2) its capital position weakens significantly.
HSCN
The bank's deposit rating incorporates a very high level of parental
support. Hence, the bank's ratings could be upgraded
if the parent's BCA is upgraded. The bank's BCA could
experience upward pressure if (1) its funding structure improves,
with solid growth in core deposits; (2) its profitability,
as measured by the return on assets, improves; and/or (3) its
asset quality and capital adequacy improve further.
The bank's deposit rating could be downgraded if its parent's
rating is downgraded. The bank's BCA could experience downward
pressure if (1) its funding structure, as measured by market funds/tangible
banking assets, deteriorates; (2) its asset quality and profitability
weaken materially; and/or (3) its capital position weakens significantly.
BTCN
The bank's deposit rating incorporates a very high level of parental
support. Hence, the bank's ratings could be upgraded
if the parent's BCA is upgraded. The bank's BCA could
experience upward pressure if it maintains sound financial metrics and
its business diversification improves.
The bank's ratings could be downgraded if its parent's rating
is downgraded. The bank's BCA could experience downward pressure
if (1) its asset quality, as measured by the rate of formation of
problem loans, deteriorates; and/or (2) its capitalization
weakens, with the TCE capital ratio falling below 12%.
FBCN
The bank's deposit rating incorporates a very high level of parental
support. Hence, the bank's ratings could be upgraded
if the parent's BCA is upgraded. The bank's BCA could
experience upward pressure if (1) its asset quality, profitability
and liquidity profile remains stable while its capital position strengthens;
and/or (2) its deposit franchise improves with a lowering of cost of liabilities.
The bank's ratings could be downgraded if the parent's rating
is downgraded. The bank's BCA could experience downward pressure
if (1) its capital position weakens, with the TCE capital ratio
falling below 10%; (2) its asset quality, as measured
by the rate of formation of problem loans, deteriorate; and/or
(3) its net income falls below 0.2% of tangible assets.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
April 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
BANK PROFILES
ABC is a state-owned commercial bank headquartered in Beijing.
It reported total assets of RMB21.0 trillion as of the end of 2017.
The bank is a global systemically important bank, as identified
by the Financial Stability Board.
BOC is a state-owned commercial bank headquartered in Beijing.
It reported total assets of RMB19.5 trillion as of the end of 2017.
The bank is a global systemically important bank, as identified
by the Financial Stability Board.
CCB is a state-owned commercial bank headquartered in Beijing.
It reported total assets of RMB22.1 trillion as of the end of 2017.
The bank is a global systemically important bank, as designated
by the Financial Stability Board.
ICBC is a state-owned commercial bank headquartered in Beijing.
It reported total assets of RMB26.0 trillion as of the end of 2017.
The bank is a global systemically important bank, as designated
by the Financial Stability Board.
PSBC is a state-owned commercial bank headquartered in Beijing.
It reported total assets of RMB9.0 trillion as of the end of 2017.
BoCom is a state-owned commercial bank headquartered in Shanghai.
It reported total assets of RMB9.0 trillion as of the end of 2017.
CMB is a joint-stock commercial bank headquartered in Shenzhen.
It reported total assets of RMB6.3 trillion as of the end of 2017.
CIB is a joint-stock commercial bank headquartered in Fuzhou city,
Fujian province. It reported total assets of RMB6.4 trillion
as of the end of 2017.
BOSC is a city commercial bank headquartered in Shanghai. It reported
total assets of RMB1.8 trillion as of the end of 2017.
BONB is a city commercial bank headquartered in Ningbo city, Zhejiang
province. It reported total assets of RMB1.0 trillion as
of the end of 2017.
BOSZ is a city commercial bank headquartered in Suzhou city, Jiangsu
Province. It reported total assets of RMB284 billion as of the
end of 2017.
PAB is a joint-stock commercial bank headquartered in Shenzhen.
It reported total assets of RMB3.2 trillion as of the end of 2017.
CITICB is a joint-stock commercial bank headquartered in Beijing.
It reported total assets of RMB5.7 trillion as of the end of 2017.
CEB is a joint-stock commercial bank headquartered in Beijing.
It reported total assets of RMB4.1 trillion as of the end of 2017.
BONJ is a city commercial bank headquartered in Nanjing city, Jiangsu
Province. It reported total assets of RMB1.1 trillion as
of the end of 2017.
SPDB is a joint-stock commercial bank headquartered in Shanghai.
It reported total assets of RMB6.1 trillion as of the end of 2017.
GZRCB is a rural commercial bank headquartered in Guangzhou city,
Guangdong Province. It reported total assets of RMB736 billion
as of the end of 2017.
CGB is a joint-stock commercial bank headquartered in Guangzhou
city, Guangdong province. It reported total assets of RMB2.1
trillion as of the end of 2017.
CZBANK is a joint-stock commercial bank headquartered in Hangzhou
city, Zhejiang province. It reported total assets of RMB1.5
trillion as of the end of 2017.
HBCN is headquartered in Shanghai. It reported total assets of
RMB468 billion as of the end of 2017.
HSCN is headquartered in Shanghai. It reported total assets of
RMB98 billion as of the end of 2017.
BTCN is headquartered in Shanghai. It reported total assets of
RMB185 billion as of the end of 2017.
FBCN is headquartered in Shanghai. It reported total assets of
RMB72 billion as of the end of 2017.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113601.
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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
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
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
