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Fitch Affirms ICBC Standard Bank Plc at 'BBB+'; Outlook Stable
January 6, 2017 / 4:53 PM / a year ago

Fitch Affirms ICBC Standard Bank Plc at 'BBB+'; Outlook Stable

(The following statement was released by the rating agency) LONDON, January 06 (Fitch) Fitch Ratings has affirmed ICBC Standard Bank plc's (ICBC SB) Long-Term Issuer Default Rating (IDR) at 'BBB+'. The Outlook is Stable. A full list of rating actions is at the end of this rating action commentary. In addition, Fitch has assigned a Derivative Counterparty Rating (DCR) to ICBC SB as part of its roll-out of DCRs to significant derivative counterparties in western Europe and the US. DCRs are issuer ratings and express Fitch's view of banks' relative vulnerability to default under derivative contracts with third-party, non-government counterparties. KEY RATING DRIVERS IDRS, DERIVATIVE COUNTERPARTY RATING, SUPPORT RATING, SENIOR AND SUBORDINATED DEBT ICBC SB's IDRs, Support Rating, senior and subordinated debt ratings reflect Fitch's view of a high probability that support would be provided to the bank by its 60% shareholder, Industrial and Commercial Bank of China Ltd (ICBC) (A/Stable/bb), in case of need. ICBC's ability to provide such support is indicated by the bank's IDR, which in turn is driven by Fitch's opinion that the Chinese authorities would very likely support it in the event of stress, and that such state support would also include ICBC SB. ICBC is China's largest bank and is one of the global systemically important banks. We also believe that ICBC would have a strong propensity to support its UK subsidiary, based on our view that any support would likely be manageable for ICBC as ICBC SB is small compared with its parent; the high reputational risk ICBC would face internationally if it allowed ICBC SB to default; the strategic importance of IBCB SB's business and markets; as well as the statements it has made in support of its subsidiary. On the other hand, Fitch sees few synergies between the bank and its majority shareholder and operational integration is still limited. Combined with the continued presence of Standard Bank Group (BBB-/F3/bbb-) as a large shareholder, this has resulted in the two-notch difference between ICBC's IDR and ICBC SB's Long-Term IDR and senior debt rating. ICBC SB's Tier 2 debt is notched off three times from ICBC's IDR, with one extra notch from the senior debt reflecting loss severity. A DCR has been assigned to ICBC SB due to its significant derivatives activity. The DCR is at the same level as the Long-Term IDR because derivative counterparties have no definitive preferential status over other senior obligations in a resolution scenario. Fitch does not assign a VR to ICBC SB, as the bank does not have a meaningful standalone franchise that could exist without the ownership of the parent. RATING SENSITIVITIES IDRS, DERIVATIVE COUNTERPARTY RATING, SUPPORT, SENIOR AND SUBORDINATED DEBT The IDRs, DCR, subordinated debt and Support Ratings are sensitive to a change in Fitch's view of ICBC SB's strategic importance to ICBC or a change in the parent's propensity or ability to provide support. Our view on its ability is fully described in "Fitch Affirms China's 5 State Banks at 'A'"; dated 2 June 2016 at Our view on propensity to support could change favourably should integration between ICBC and ICBC SB strengthen or if synergies between the UK bank and its Chinese parent increase. The ratings of subordinated debt are also sensitive to changes in our view of its relative loss severity risk profile. The rating actions are as follows: Long-Term IDR affirmed at 'BBB+'; Outlook Stable Short-Term IDR affirmed at 'F2' Support Rating affirmed at '2' Derivative Counterparty Rating: assigned at 'BBB+(dcr)' Global medium-term note programme for senior unsecured debt: long-term and short-term ratings affirmed at 'BBB+'/'F2' Subordinated debt (ISIN: XS0470473231) affirmed at 'BBB' Contact: Primary Analyst Claudia Nelson Senior Director +44 20 3530 1191 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Joanna Drobnik, CFA Director +44 20 3530 1318 Committee Chairperson Bjorn Norrman Senior Director +44 20 3530 1330 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1017276 Solicitation Status here 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. 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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