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Fitch Assigns Standard Chartered Bank (China) 'A' Rating; Outlook Stable
June 28, 2017 / 1:58 AM / 2 months ago

Fitch Assigns Standard Chartered Bank (China) 'A' Rating; Outlook Stable

(The following statement was released by the rating agency) HONG KONG, June 27 (Fitch) Fitch Ratings has assigned Shanghai-based Standard Chartered Bank (China) Limited (SCB China) a Long-Term Issuer-Default Rating (IDR) of 'A' and a Short-Term IDR of 'F1'. The Outlook is Stable. A Support Rating (SR) of '1' has also been assigned. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS IDRS AND SR The ratings assigned reflect Fitch's view of the strong ability and propensity of its parent, UK-based Standard Chartered PLC (SC; A+/Stable/a) and its main operating subsidiary Standard Chartered Bank (SCB; A+/Stable/a), to extend timely and extraordinary support to its wholly owned subsidiary in China, if required. The IDR on SCB China aligns with the Viability Rating (VR) of SCB on the basis of shared businesses, strategic priorities, risk appetite, management and brand identity. The Long-Term IDRs and senior debt ratings of SC and SCB are one notch above their VRs because we believe the risk of default on senior obligations, as measured by the Long-Term IDRs, is lower than the risk of the entities failing, as measured by their VRs. This is because of the presence of a significant junior debt buffer. The uplift does not apply to SCB China as the bank does not benefit from similar buffers. Fitch expects SCB China to continue to play a key role in supporting SC's strategy due to its long-established history, relationships and branch network in mainland China. The bank, which has grown organically from a branch of the UK-based parent, works closely with its parent to attract inbound businesses from multinational corporates operating in China and to support Chinese corporates seeking to go global. SCB China's focus on growing Chinese sectors such as technology and biotech, small and medium-sized enterprises and affluent retail clients, and investing in digital capabilities are integral to SC's priorities in China. Fitch believes that a default by SC's China subsidiary would constitute a significant reputational risk to SC that could undermine its franchise in China and damage its global reputation as a network bank. We believe SC has a strong ability to support SCB China, considering the small size of the China subsidiary (4% of SC's assets at end-2016) and SC's strong capitalization and solid liquidity profile. SCB China accounted for 5% of SC's total revenue, 4% of gross customer loans and 5% of total customer deposits at end-2016. SCB China's integration with SC in terms of asset and liability management primarily stems from it placing excess liquidity with the parent bank and other SC entities (end-2016: net placement of CNY7.8 billion). The China subsidiary is mainly deposit-funded with loans only accounting for 34.5% of assets at end-2016. Fitch does not assign a VR to SCB China as its strategy and operations are closely aligned with those of its parent. In addition, SCB China's access to funding significantly benefits from its association with SC as the majority of its deposits stems from SC's network customers. The Stable Outlook of the bank mirrors that of its parent. RATING SENSITIVITIES IDRS AND SR SCB China's IDR and SR are sensitive to Fitch's assumptions about the ability or propensity of SC to extend extraordinary support in a timely manner. A decline in SCB China's relevance for SC's strategy would be negative for the rating. Any change in SC's VR is likely to lead to similar rating action on SCB China, subject to China's Country Ceiling which is currently at 'A+'. The rating actions are as follows: Long-Term Foreign Currency IDR at 'A'; Outlook Stable Short-Term Foreign Currency IDR at 'F1' Support Rating at '1' Contact: Primary Analyst Veronica Lau Director +852 2263 9924 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central Hong Kong Secondary Analyst Sabine Bauer Senior Director +852 2263 9966 Committee Chairperson Tim Roche +61 2 8256 0310 Senior Director Date of Relevant Rating Committee: 23 June 2017 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 Bank Rating Criteria (pub. 25 Nov 2016) 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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. 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Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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