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Fitch Affirms CMB Leasing, CMB International Leasing at 'BBB'; Outlook Stable
May 8, 2017 / 5:26 AM / 6 months ago

Fitch Affirms CMB Leasing, CMB International Leasing at 'BBB'; Outlook Stable

(The following statement was released by the rating agency) TAIPEI, May 08 (Fitch) Fitch Ratings has today affirmed the Long-Term Issuer Default Ratings (IDR) of CMB Financial Leasing Co., Ltd. (CMB Leasing) and CMB International Leasing Management Limited (CMB International Leasing) at 'BBB'. The Outlooks on the ratings are Stable. Shanghai-based CMB Leasing, a wholly owned subsidiary of China Merchants Bank (CMB, BBB/Stable), provides equipment, shipping, and aviation leasing services. CMB International Leasing functions as the exclusive operating and treasury platform for the overseas business of CMB Leasing. In September 2016, the group changed the ownership structure of CMB International Leasing and made it a subsidiary under CMB Leasing through CMB Aviation and Shipping Financial Leasing in Shanghai Free Trade Zone. CMB is the seventh-largest commercial bank in China with total assets of CNY5.9 trillion at end-2016. KEY RATING DRIVERS CMB LEASING CMB Leasing's IDR is underpinned by our view of an extremely high probability of support from CMB given its strategic importance and close linkage to CMB as a core subsidiary. The company's leasing business complements its parent's commercial banking services, as Chinese banks are not allowed to provide leasing products directly to its clients. CMB Leasing leverages CMB's strong customer base and network to expand its leasing business. CMB has strong managerial and operational control over CMB Leasing. CMB Leasing's board of directors and senior managers are all appointed by CMB, and thus its operations, strategy, and risk management are highly integrated with those of its parent. CMB has a track record of providing ordinary support to CMB Leasing, and is required to provide capital and liquidity support should the need arise according to the articles of association of CMB Leasing and the China Banking Regulatory Commission's regulations on financial leasing companies. CMB Leasing still accounted for less than 3% of CMB's assets at end-2016 despite strong growth in recent years. CMB's Long-Term IDR of 'BBB' is driven by Fitch's high expectations the bank will receive the support from the Chinese government (A+/Stable) in the event of stress given its ownership structure and market position. Fitch expects sovereign support to be passed down to CMB Leasing through CMB in times of stress, given its role as a core subsidiary and close linkage with the parent. The Stable Outlook reflects our expectation that CMB Leasing's strategic role as a core subsidiary and its close operational integration with the parent will not change materially in the medium term. The Outlook is consistent with the Stable Outlook on the ratings of CMB and the Stable Outlook of China's sovereign rating. CMB INTERNATIONAL LEASING The ratings on CMB International Leasing reflect our assessment of an extremely high probability of support from CMB Leasing and CMB. CMB International Leasing is highly integrated into CMB Leasing's operation and is an important platform for CMB Leasing's overseas expansion. A default by CMB International Leasing would create significant reputational risks for CMB Leasing and its parent, CMB. RATING SENSITIVITIES CMB LEASING, CMB INTERNATIONAL LEASING Any signs of a decrease in the probability of support for CMB Leasing from its parent, CMB, would lead to a downgrade of the company's ratings. This could result from any weakening in the linkage between CMB Leasing and its parent. Any change in CMB's rating that reflects a shift in the perceived willingness or ability of China's government to support the bank in a full and timely manner is likely to affect CMB Leasing's rating in the same magnitude. The ratings on CMB International Leasing are directly correlated to any material change in the willingness or ability of CMB Leasing to provide support, if required. Likewise, any material change in the perceived willingness or ability of China's government to support CMB and CMB Leasing in a full and timely manner would affect the ratings on the issuer. Contact: Primary Analyst Shirley Hsu Associate Director +886 2 8175 7606 Fitch Australia Pty Ltd, Taiwan Branch Suite 1306, 13/F 205 Tun Hwa North Road Taipei 105, Taiwan Secondary Analyst Katie Chen Director +886 2 8175 7614 Committee Chairperson Mark Young Managing Director +65 6796 7229 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Non-Bank Financial Institutions Rating Criteria (pub. 10 Mar 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. 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