Fitch affirms China Bank at 'BB+'

SINGAPORE: Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) of China Banking Corporation (CBC) at ' BB+'. The Outlook on the IDRs is Negative, reflecting continued pressure over its Standalone Credit Profile due to the coronavirus pandemic. The Philippines' economy is taking a severe blow from the coronavirus pandemic, with GDP contracting by 9.0% in 1H20 (2019: 6.0% growth) to mark the worst deterioration in south-east Asia.

Economic conditions have worsened considerably since our last review in May 2020, and will remain challenging despite our expectation of a rebound in headline growth to 9.0% growth in 2021 from an 8.0% shrinkage in 2020. The banks' financial results in 1H20 were propped up by a debt moratorium and aggressive monetary easing by the central bank, but we believe difficulties lie ahead.

Social distancing measures and prolonged job market weakness for both domestic and overseas Filipino workers - are likely to continue to dampen consumer confidence and curb private consumption in the near term. Extended movement restrictions in the Philippines have also exerted pressure on business cash flows, from micro and small entrepreneurs to corporates in heavily affected sectors like aviation and tourism. The more difficult operating environment will continue to pressure asset quality and earnings.

The Long-Term IDRs of CBC are driven by its Standalone Credit Profile, as indicated in its Viability Rating (VR). The ratings take into consideration its status as a mid-sized bank in the Philippines, adequate funding and liquidity profile, capital buffers which are acceptable albeit lower than average, and longstanding ties with the Chinese Filipino business community which has helped to support its loan quality. -AFP