Moody’s Investors Service affirmed the investment grade credit rating of China Banking Corp. led by bankero William Whang on the back of its strong capitalization and profitability.
The debt watcher maintained the Baa2 rating, a notch above the minimum investment grade, and stable outlook of the Sy-led bank.
The rating, Moody’s said, reflects the bank’s credit strengths including stable capitalization and profitability, which support business expansion, and sound liquidity.
China Bank’s Common Equity Tier 1 (CET1) capital ratio has been steadily improving to 15.5 percent as of end-March this year from 14.9 percent in 2021 and 13.8 percent in 2020.
“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 said.
As of end March, China Bank reported higher annualized core operating profitability (pre-provision income less trading gains as a percentage of assets) of 1.9 percent, while Its annualized return on average assets was at 1.7 percent, the highest among its rated domestic peers.
“The improvement in profitability for the period was driven by higher 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,” Moody’s added.
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, its non-performing loans (NPL) ratio improved to 2.4 percent from 3.8 percent.
While China Bank’s market funds/total tangible assets is lower than most of its peers that Moody’s rate, the Bank’s liquid assets/total tangible assets remained largely stable at 30.8 percent as of end March.
China Bank opened for business on August 16, 1920 in Binondo and now has 636 branches and 1,037 ATMs all over the country.