Moody’s affirms rating of Baa2 for China Bank

INTERNATIONAL credit watcher Moody’s Investors Service recently announced that it has affirmed the credit rating of China Banking Corp. (China Bank) on the back of the lender’s strong capitalization and profitability.

According to Moody’s, the bank’s deposit and issuer credit ratings remain at Baa2, a notch above the minimum investment grade, with stable outlook.

A stable outlook means there is no expected change in the rating, whether upgrade or downgrade, in the policy horizon or in 12 months to 18 months.

Moody’s cited the bank’s 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 rose 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. “The improvement in profitability for the period was driven by higher NIM (net interest margin), which increased to 4.3 percent for the three months that ended March 2022 from 4.2 percent a year earlier. The improvement in NIM was largely because of the low interest and easy liquidity environment, which led to a significant reduction in funding costs,” the Moody’s report stated.