China Bank credit rating upgraded

Credit rating agency Capital Intelligence (CI), upgraded the financial strength credit rating of China Banking Corp. (China Bank) from BB+ to BBB. It also upgraded the bank’s outlook from “negative” to “stable”.

The rating change was China Bank’s second rating upgrade in two years, from BB- to BB+ in January 2006.

The CI report, dated December 2007, explained that the upgrade to BBB- was given based on China Bank’s “good asset quality, comfortable liquidity, and high profitability.” It added that “asset quality remains good with a high loan-loss coverage ratio,” while “capital adequacy remains solid following the adoption of Basel II standards.”

Total assets in 2006 exceeded P155 billion and total deposits reached over P125 billion. Net income in 2006 reached a record P3.5 billion.

The positive ratings were underpinned by China Bank’s sustained loan growth and profitability, solid capital adequacy, stable asset quality, and larger branch network following the acquisition of Manila Banking Corp.

The upgrade from CI follows the recent affirmation of Fitch Ratings of its National Rating of AA-, one of the best ratings in the industry.

According to the CI report, “through prudent and professional management, China Bank has accumulated significant capital.”

At the end of 2006, China Bank’s capital stood at almost P25 billion, with a robust capital adequacy ratio (CAR) of 23.68 percent. The bank is the fifth largest bank in the Philippines in terms of capital.

The report also cited China Bank’s aggressive move to expand its branch network to maintain market share amidst stiff competition, referring to the 30 domestic branches to be opened and the acquisition of Manila Bank which will further boost the branch count by 75. The report stated “CI expects China Bank’s profit to pick up higher growth when the additional branches become operational.”

The report further noted the bank’s strategy of expanding into new business — remittances, bancassurance and private banking — to broaden the sources of revenues leading to improved stability and profitability. CI alluded to China Bank’s increased efforts to tie up with more remittance centers and exchange houses worldwide, the Bank’s joint venture with insurance giant Manulife, and the recently-established Private Banking Group to handle the bank’s affluent clients.

China Bank provides a wide range of banking services through its almost 200 branches and over 250 ATMs nationwide.