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Rating Action:

Moody's upgrades CMB Financial Leasing's long-term rating to A3

 The document has been translated in other languages

30 May 2018

Hong Kong, May 30, 2018 -- Moody's Investors Service has upgraded the long-term issuer rating of CMB Financial Leasing Co., Ltd. (CMB Financial Leasing) to A3 from Baa1, and has affirmed its short-term issuer rating at P-2. The outlook is stable.

At the same time, Moody's has upgraded CMBLEMTN 1 Limited's long-term backed senior unsecured medium term note (MTN) program rating to (P)A3 from (P)Baa1 and its long-term backed senior unsecured note ratings to A3 from Baa1, and has affirmed its short-term senior unsecured MTN program rating at (P)P-2. The outlook is stable.

Moody's has also withdrawn the outlooks on the issuer and instrument ratings of CMB Financial Leasing and its subsidiary for business reasons.

A list of the affected ratings can be found at the end of this press release.

RATINGS RATIONALE

CMB Financial Leasing

Moody's rating actions follow the rating action taken on CMB Financial Leasing's parent, China Merchants Bank Co., Ltd. (CMB, A3 stable). On 30 May 2018, Moody's upgraded CMB's long-term deposit rating to A3 from Baa1, with a stable outlook. For full details on the rating action on CMB, please refer to the press release below:

http://www.moodys.com/viewresearchdoc.aspx?docid=PR_384254

CMB Financial Leasing's long-term issuer rating incorporates a standalone credit profile of ba3 and a six-notch uplift based on affiliate-backed support from CMB. Moody's believes that CMB will provide full support to CMB Financial Leasing in times stress. Therefore, the upgrade of the parent bank's ratings has led to a similar rating action on CMB Financial Leasing.

CMB Financial Leasing is CMB's core leasing platform. CMB provides the subsidiary in turn with comprehensive support in terms of funding, capital, risk management and business development.

CMB Financial Leasing holds strategically important roles in facilitating the businesses of CMB, and its operation is closely integrated with the parent. A failure by the parent to support CMB Financial Leasing would result in significant business, operational and reputational risks for the parent.

In response to the China Banking and Insurance Regulatory Commission's regulation on financial leasing companies, CMB has included a commitment in CMB Financial Leasing's Article of Association to provide liquidity and capital support to the subsidiary in times of stress.

CMB Financial Leasing's standalone credit profile of ba3 takes into account its (1) franchise in China's growing leasing industry; (2) diversified business and geographic segments; and (3) sound financial metrics. Offsetting these credit strengths is the company's reliance on short-term confidence-sensitive wholesale funding to support long-term assets.

CMBLEMTN 1 Limited

CMBLEMTN 1 Limited, incorporated in the British Virgin Islands, is indirectly wholly-owned by CMB Financial Leasing. The upgrade of CMBLEMTN 1's long-term backed senior unsecured MTN program rating to (P)A3 from (P)Baa1 and its long-term backed senior unsecured note ratings to A3 from Baa1 follows the upgrade of CMB Financial Leasing's issuer rating. The ratings of CMBLEMTN 1's MTN program and notes issued under program are in line with CMB Financial Leasing's A3/P-2 issuer ratings, reflecting the unconditional and irrevocable guarantee provided by CMB Financial Leasing. The guarantee represents an unsubordinated and unsecured obligation of CMB Financial Leasing, which ranks pari passu with CMB Financial Leasing's existing and future unsecured and unsubordinated obligations.

CMB Financial Leasing: WHAT COULD MOVE THE RATINGS UP/DOWN

Because CMB Financial Leasing's ratings are aligned with the ratings of its parent, an upgrade of its ratings would require an upgrade of its parent's ratings.

CMB Financial Leasing's standalone credit profile could be raised if the company: (1) maintains good asset quality; (2) reduces the tenor mismatches between its assets and liabilities; and (3) lowers its borrower concentration risk.

Because CMB Financial Leasing's ratings are aligned with the ratings of its parent, a downgrade of the parents ratings would likely result in a downgrade of CMB Financial Leasing's ratings.

Moody's could also downgrade the ratings of CMB Financial Leasing if Moody's observes: (1) a weakening in liquidity and capital support from the parent bank; (2) a decline in the business relationship with and management control of the parent bank; or (3) a significant reduction in the parent bank's stake in the leasing company to below 50.1%.

CMB Financial Leasing's standalone credit profile could be lowered if its: (1) asset quality deteriorates; (2) liquidity and funding positions weaken; or (3) profitability declines.

CMBLEMTN 1 Limited: WHAT COULD MOVE THE RATINGS UP/DOWN

The notes issued by CMBLEMTN 1 under the MTN program are unconditionally and irrevocably guaranteed by CMB Financial Leasing. The factors that can cause CMB Financial Leasing's ratings to be upgraded and downgraded will also drive CMBLEMTN 1's MTN program and note ratings.

The principal methodology used in these ratings was Finance Companies published in December 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

CMB Financial Leasing Co., Ltd. is headquartered in Shanghai. It reported assets of RMB155.7 billion (approximately USD23.9 billion) at the end of 2017.

LIST OF AFFECTED RATINGS

CMB Financial Leasing Co., Ltd.:

• Long-term (local and foreign currency) issuer rating upgraded to A3 from Baa1, withdrawing the stable outlook

• Short-term (local and foreign currency) issuer rating affirmed at P-2

• Outlook maintained at stable

CMBLEMTN 1 Limited:

• Long-term (local currency) senior unsecured MTN upgraded to (P)A3 from (P)Baa1

• Short-term (local currency) senior unsecured MTN affirmed at (P)P-2

• Long-term (local currency) senior unsecured debt rating upgraded to A3 from Baa1, withdrawing the stable outlook

• Outlook maintained at stable

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.

David Yin
Vice President - Senior Analyst
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
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

No Related Data.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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