The rating on Bank of Communications Co. Ltd. (BoCom) reflects the bank's good business profile, which is underpinned by an entrenched domestic franchise, implicit government support, and improving financial performance. The rating also takes into consideration the strong likelihood that BoCom's increasingly close partnership with Hongkong and Shanghai Banking Corp. Ltd. (AA/Positive/A-1+), the bank's second-largest shareholder, will further improve its competitiveness in retail banking and risk management. Counterbalancing factors include the bank's under-tested risk management system, and pressured capitalization and latent credit risks because of aggressive asset and loan growth. BoCom's latent credit risks remain an important rating issue given its rapid loan growth and unseasoned risk management system. The bank's ratio of gross nonperforming assets to gross advances was
