HONG KONG, October 29 (Fitch) Fitch Ratings has assigned Hong Kong - based China
CITIC Bank International Limited's (CNCBI, 'BBB'/Stable) upcoming Basel
III-compliant Tier 2 dated subordinated notes an expected 'BBB-(exp)' rating.
The direct, unsecured and subordinated obligations will be denominated in US
dollars and will be issued under CNCBI's USD2bn medium-term note programme.
CNCBI expects the issue to be up to benchmark size, and it will use the proceeds
to strengthen its capitalisation for future business growth. The notes will be
callable by CNCBI after five years.
The notes include a non-viability clause and will qualify as Tier 2 capital for
the bank under the Banking (Capital) Rules of Hong Kong. The notes do not
qualify as capital for the bank's parent China CITIC Bank (CNCB,
The final rating is contingent on the receipt of the final documents conforming
to information already received.
KEY RATING DRIVERS
Fitch rates the notes one notch below CNCBI's Viability Rating (VR) of 'bbb' to
reflect their below-average recovery prospect relative to senior unsecured
instruments given their subordination and their partial write-down feature. The
notes will not be mandatorily written down in full should CNCBI become
non-viable, but nevertheless they can be written down in full or in part if the
Hong Kong Monetary Authority (HKMA) considers this step necessary to maintain
the bank's viability.
The notes have been notched from the bank's VR (i.e. the anchor rating) as Fitch
currently views the bank's credit strength to be driven by its standalone
financial strength. No additional notching for the non-performance risk is
applied as the agency believes such risk has been already reflected in the VR.
Under Fitch's methodology the instrument would not qualify for any equity
Any changes to CNCBI's VR would impact the issue's rating in the absence of
support from CNCB being factored in. The VR is sensitive to changes in its risk
appetite, particularly with regard to the expansion into China and the degree of
integration with its parent, whose VR is lower than CNCBI's.
If CNCBI's VR is downgraded, then the issue rating could also be sensitive to
changes around Fitch's view of parental and sovereign support, in particular if
there were indications that support from the Chinese authorities to CNCB could
pass through to CNCBI's subordinated notes. Fitch currently classifies CNCBI as
a strategically important subsidiary of CNCB, which prevents its IDR from
falling below 'BBB-' or one notch below the parent's own sovereign
The other ratings of CNCBI are unaffected and are as follows:
Long-term IDR: 'BBB'; Outlook Stable
Short-term IDR: 'F1'
Viability Rating: 'bbb'
Support Rating: '2'
Senior unsecured debt: 'BBB'
Subordinated notes without non-viability clauses: 'BBB-'
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Additional information is available on www.fitchratings.com
Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15
August 2012, and 'Assessing and Rating Bank Subordinated and Hybrid Securities',
dated 12 December 2012, are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria â Effective Aug. 16, 2011 to Aug.
Assessing and Rating Bank Subordinated and Hybrid Securities
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