- Oops!Something went wrong.Please try again later.
- Oops!Something went wrong.Please try again later.
- Oops!Something went wrong.Please try again later.
- Oops!Something went wrong.Please try again later.
Rating Action: Moody's affirms ICBC Standard Bank Plc's deposit and issuer ratings; upgrades Baseline Credit Assessment
Global Credit Research - 04 Dec 2020
London, 04 December 2020 -- Moody's Investors Service ("Moody's") today affirmed ICBC Standard Bank Plc's (ICBCS's) long- and short-term deposit ratings of Baa3/Prime-3, the bank's long-term issuer rating of Baa3, and its baa2 Adjusted Baseline Credit Assessment (BCA), while upgrading the BCA to ba3 from b1. The Counterparty Risk (CR) Assessments of Baa2 (cr)/Prime-2(cr) and Counterparty Risk Ratings (CRRs) of Baa3/Prime-3 were also affirmed. The outlooks on the bank's long-term deposit and issuer ratings remain stable, in line with the outlook on its 60% owner Industrial & Commercial Bank of China Ltd (ICBC, A1 stable, baa1).
A full list of affected ratings can be found at the end of this press release.
The rating action follows the affirmation of ICBC's rating with stable outlook on November 24, 2020 and reflects ICBCS's improved profitability and the progress it has made in executing its revised strategy.
Moody's upgrade of ICBCS's BCA reflects the bank's return to profitability, moderate asset risk, solid capital and strong liquidity. In 2019, the bank closed its investment banking and equities divisions and two international branches; it has simplified its business model, product offerings and operations to pursue a more focused strategy that increasingly leverages its parent's corporate customer base.
As of June 2020, ICBCS had a Tangible Common Equity over Risk Weighted Assets ratio of 15.9% up from 13.7% in June 2019, which now benefits from the Additional Tier 1 it issued to ICBC in December 2019, as well as first half year profitability, which Moody's expects to continue. Moody's view of moderate asset risk reflects market, credit and operational risks, despite no increase in problem loans year-to-date. ICBCS holds a comfortable level of liquid assets and has low reliance on external third-party market funding and a significant contribution from intragroup funding which substantially reduces refinancing risk.
ICBCS's BCA continues to be constrained by the bank's limited business diversification and its inherent opacity and complexity, like other banking entities with a material reliance on capital markets activities. This is reflected by the unchanged two negative qualitative adjustments incorporated in the BCA relative to the bank's financial profile.
-- ADJUSTED BCA
Moody's affirmation of the baa2 Adjusted BCA reflects the unchanged view of a very high probability of affiliate support from ICBC. Following the one-notch upgrade in the BCA, this results in four notches of uplift, from five previously.
-- DEPOSIT AND ISSUER RATINGS
The affirmations of ICBCS's Baa3/P-3 deposit ratings and its Baa3 long-term issuer ratings reflect the affirmation of the bank's Adjusted BCA and Moody's Advanced Loss Given Failure analysis.
Notwithstanding ICBCS's high intrinsic risk due to its focus on capital markets activities, Moody's believes that its more focused strategy and product offering would lead to lower losses at failure. ICBCS is increasingly integrated with ICBC, shifting from institutional clients towards corporate customers common to the group's franchise, while benefiting from a high level of capital and liquidity support and management oversight from ICBC. These factors would reduce the risk of a rapid loss of franchise value and the risk of employee attrition in the event of the bank's failure. These considerations led Moody's to reduce its assumption of ICBCS's loss rate at failure to 8% of tangible banking assets from 13% previously.
Notwithstanding the above, Moody's analysis indicates that ICBCS's deposits and senior debt are likely to continue to face high loss-given-failure, due to the limited amount of deposits in combination with the absence of externally issued subordinated debt following its maturity in December 2019. This results in a Preliminary Rating Assessment (PRA) of baa3 for both instruments, one notch below the level of the Adjusted BCA.
Given the bank's limited systemic importance, Moody's continues to view the probability of support for ICBCS's senior liabilities from the UK government to be low, resulting in no additional ratings uplift.
The stable outlook on ICBCS's long-term deposit and issuer ratings reflects the stable outlook on ICBC and Moody's expectation that the bank's fundamentals will remain broadly unchanged over the next 18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
ICBCS's BCA could be upgraded because of: (i) higher and more stable earnings and organic capital generation; (ii) a sustained growth in third party diversified funding sources; or (iii) further de-risking of its business model. All ratings and the long-term CR Assessment could also be upgraded if the bank were to issue a significant amount of external debt, reducing their loss-given-failure. Additionally, the long-term CR Assessment and CRRs could be upgraded following a higher sustained level of corporate deposits in its liability structure. An upgrade of the BCA could result in the upgrade of the ratings.
The bank's BCA could be downgraded because of: (i) an increase in risk appetite and / or trading losses; (ii) weaker profitability; and (iii) reduced capital and funding support from ICBC and Standard Bank Group Limited. A lower BCA may not result in a downgrade of all ratings, assuming continued very high affiliate support from ICBC.
LIST OF AFFECTED RATINGS
Issuer: ICBC Standard Bank Plc
....Baseline Credit Assessment, upgraded to ba3 from b1
....Long-term Counterparty Risk Ratings, affirmed Baa3
....Short-term Counterparty Risk Ratings, affirmed P-3
....Long-term Bank Deposits, affirmed Baa3, outlook remains Stable
....Short-term Bank Deposits, affirmed P-3
....Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
....Short-term Counterparty Risk Assessment, affirmed P-2(cr)
....Long-term Issuer Ratings, affirmed Baa3, outlook remains Stable
....Adjusted Baseline Credit Assessment, affirmed baa2
....Senior Unsecured Medium-Term Note Program, affirmed (P)Baa3
..Outlook Action: ....Outlook remains Stable PRINCPIAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Arif Bekiroglu Vice President - Senior Analyst Financial Institutions Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Nicholas Hill MD - Banking Financial Institutions Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY'S CREDIT RATINGS,ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
MOODY'S CREDIT RATINGS,ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.