Moody's Investors Service has affirmed the investment grade credit rating, with stable outlook, of China Banking Corporation (China Bank) on the back of the Bank’s strong capitalization, profitability, and liquidity amid the COVID-19 pandemic.
In its September 3, 2021 report, Moody’s maintained China Bank’s long-term counterparty risk and long-term deposit ratings of Baa2, a notch above the minimum investment grade and at par with the country’s credit rating.
The global debt watcher also viewed the Bank’s risk management as commensurate with its risk appetite.
The ratings include a one-notch uplift for government support, based on Moody’s expectation that the Philippine government will likely provide support for China Bank's depositors and senior unsecured creditors if needed.
This assessment reflects the Bank's significance to the Philippine banking system.
According to Moody's, China Bank’s credit strengths are its stable capitalization and profitability, which support business expansion, and its healthy liquidity.
It also cited as credit challenges the risks to asset quality on account of the economic shock caused by the coronavirus and the Bank’s modest funding profile, with a relatively high share of corporate deposits.
In the first half of 2021, China Bank posted a 39 percent growth in net income to P7.3 billion even as it continued to build up its loan loss provisions.
Its total equity rose 12 percent to P110 billion, sustaining strong capital ratios of 15.1 percent total Capital Adequacy Ratio (CAR) and 14.2 percent Common Equity Tier 1 (CET1).
Assets stood at P1 trillion, with P596 billion in gross loans and P827 billion in deposits, underscored by a 27 percent increase in current and savings account (CASA) deposits to P517 billion.
China Bank's CASA deposits have been growing at 17 percent compound annual growth rate (CAGR) since 2015