Moody’s Investors Service affirmed China Banking Corporation’s (China Bank) credit rating on the back of its strong capitalization and profitability. Deposit and issuer credit ratings remained at Baa2, a notch above the minimum investment grade, with stable outlook.
The international credit watcher cited stable capitalization and profitability, which support business expansion, and sound liquidity as China Bank’s credit strengths.
China Bank’s Common Equity Tier 1 (CET1) capital ratio has been steadily improving: from 13.8 percent in 2020, to 14.9 percent in 2021, and to 15.5 percent as of end-March 2022.
“The improvement in the bank’s capital since 2019 has been higher than the average of its peers, reflecting a combination of low loan growth from the pre-pandemic level in 2019 and increased profitability,” Moody’s noted in its report.
As of end-March 2022, the bank reported higher annualized core operating profitability (pre-provision income less trading gains as a percentage of assets) of 1.9 percent. Its annualized return on average assets was at 1.7 percent, the highest among its rated domestic peers.
Meanwhile, Moody’s cited asset quality risks resulting from the concentrated loan book and a modest funding profile, with a relatively high share of corporate deposits, as the bank’s credit challenges.
The business loans segment, which is less susceptible to economic disruptions, comprised 80.1 percent of China Bank’s gross loans. As of end-March 2022, its non-performing loans (NPL) ratio improved to 2.4 percent year-on-year from 3.8 percent.
