Bank of China Ltd.

The stable outlook reflects our view that the bank can maintain its credit profile over the next two years. Our view is underpinned by BOC's very strong business position and adequate capitalization, as well as its strong funding and liquidity profile. The outlook on BOC also reflects the outlook on the sovereign credit rating on China. In our view, the likelihood of extraordinary government support remains extremely high for BOC in a distress scenario. We could downgrade BOC if we lower the sovereign rating on China by one notch and our assessment of the bank's SACP deteriorates over the next two years. We could lower the SACP if: BOC's capitalization weakens significantly as a result of aggressive growth, such that

...Bank of China Ltd.'s (BOC) credit risk is manageable despite pressures from COVID-19 and the property sector. Controlled credit expansion, a diversified portfolio, and a focus on large borrowers support the bank's credit quality. These strengths mitigate the pressures from the resurgence of COVID-19 in the mainland, and rising defaults in China's property sector. An uncertain external environment could also slow overseas expansion. Stimulative economic policies and traction in BOC's wealth-management business will support revenue growth. Loan growth in the mainland is likely to remain strong this year. This will offset renewed pressure on net interest margin (NIM) from lower lending rates. Potential pressure to reduce fees for businesses hit by the pandemic could impact fee growth. But the bank's growing retail assets under management, which have exceeded Chinese renminbi (RMB) 11 trillion, will cushion the slowdown. The likelihood of government support remains extremely high. Our assessment...

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