Moody's Investors Service has today affirmed China Construction Bank (Asia) Limited's (CCB Asia) long-term and short-term deposit ratings at A2/P-1. The agency has also affirmed the bank's bank financial strength rating (BFSR) at C, which translates into a baseline credit assessment (BCA) of a3. At the same time, Moody's has assigned (P)A2/(P)P-1 long-term and short-term senior unsecured ratings to the bank's USD 3 billion Medium-Term Note Program, and affirmed the bank's long-term and short-term certificate of deposit program ratings at (P)A2/(P)P-1. The outlook on the bank's long-term bank deposit ratings and senior unsecured program rating are stable, while the outlook on the BFSR remains negative. CCB Asia's standalone BFSR/BCA of C/a3 reflect its strong capitalization and good asset quality metrics. At the same time, they also take into account the bank's growing Mainland exposures, rapid balance sheet growth, and relatively high reliance on wholesale funding and funds from its parent China Construction Bank . CCB Asia's A2 deposit rating incorporates expected strong support from its sole parent China Construction Bank . The bank's senior unsecured and short-term MTN program ratings are aligned with its long-term and short-term deposit ratings. CCB Asia has acquired a significant portion of the assets of its parent's Hong Kong branch in the second half of 2013, and has integrated all of the parent's Hong Kong -based staff. The parent has injected HKD22 billion of new equity capital to bolster CCB Asia's capitalization, and has provided HKD115 billion in loans to help the bank fund the purchased assets. The bulk of the acquired assets consist of short-maturity trade bills that are guaranteed by either the parent or third party Mainland Chinese banks, rendering them interbank exposures to the parent and other Chinese banks. The bank continues to maintain sound capitalization following the acquisition of assets from the parent's Hong Kong branch, thanks to the parent's equity capital injection. The recourse to the parent and other banks on the acquired trade bills also render their credit risks manageable. Nevertheless, Moody's maintains negative outlook on the bank's BFSR, given the likelihood that CCB Asia, as the group's main operating platform in Hong Kong , will report above-peer average balance sheet growth going forward. The bank will likely rely more heavily on wholesale funding and parental funding support than its Hong Kong peers going forward, given its expected strong growth and its relatively modest retail deposit gathering franchise. The bank is also likely to increase its direct exposures to Mainland borrowers going forward, given Mainland corporates' expanding operations in Hong Kong and increasing overseas trade and investment activities. Further increase in loans to Mainland customers in the bank's asset mix will render the bank more susceptible to potential adverse developments in the Mainland economy and Mainland corporates' financial health. The senior unsecured notes to be issued under the MTN program constitute the issuer's direct, unsubordinated, unconditional and unsecured obligations. Nevertheless, the program rating does not apply to any individual notes issued under the programme. Ratings on individual notes issued under the programme will be subject to Moody's satisfactory review of the terms and conditions set forth in the final base and supplementary offering circular, and the pricing supplements of the notes to be issued.
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