China Bank gets higher credit rating

Capital Intelligence Ltd. (CI), a Cyprus-based credit rating agency, has upgraded the financial strength rating from "BB-" to "BB+" of the China Banking Corp. (China Bank).

The rating was attributed to China Bank’s "improved profitability, higher coverage ratio (ratio of loan loss reserves to non-performing loans or NPLs), high level of liquidity and solid capital adequacy."

The foreign currency long and short-term ratings of BB- and B, respectively, were also maintained. The outlook was rated negative, at par with sovereign ratings.

China Bank was one of only two banks whose financial strength ratings were upgraded.

In its rating rationale, CI noted that "China Bank has always been run professionally, although in a more conservative manner than its peers. The bank over the past few years has retained the majority of its gains from securities in order to build a strong capital base, " according to CI analysts Arthur Kwan and Rory Keelan in their report dated January 2006.

They added: "From 2004, China Bank has started to expand more aggressively in the markets which it already has good niches. It focuses on lending to the middle market (particularly the Filipino Chinese) and to consumers. The loan book has shown a more rapid rate of growth recently. The bank has a high percentage of low-cost deposits and with their higher lending this has further increased the already high interest differential. Fees and commission income has also improved as increasing emphasis has been put on insurance and wealth management products. Asset quality is satisfactory by Philippines standards and the provision coverage ratio has improved further as a result of further write-offs. Liquidity remains comfortable."

China Bank reported one of the highest loan loss coverage ratios at 92.31 percent from 82.03. Its revenues grew 21 percent to P12.88 billion bolstered by improved net interest margins, as well as significant contributions from asset disposals and trust operations.

It sustained its record income levels for the fourth straight year with a net income of P3.04 billion in 2005, 11.19 percent more than the previous year’s P2.72 billion. Its cost-to-income ratio of 46.77 percent is among the best in the industry.

China Bank operates 141 branches and 209 ATMs nationwide. China Bank offers a complete suite of products and services such as deposits, international banking, trust and investment management services, loans and credit facilities, cash management, remittance, and more.

China Bank recently launched a powerful and comprehensive Internet and mobile banking platform, China Bank Online; it also opened the China Bank Online Center at the ground floor of China Bank’s head office in Makati. Visit www.chinabank.ph for more information on China Bank’s other products and services.

Capital Intelligence Ltd. is a credit rating agency specializing in the analysis and ratings of counterparty credit risk of financial institutions.