Bank of Communications Co. Ltd. And Subsidiaries

The stable outlook on BoCom reflects our expectation that the bank will maintain its asset quality in line with peers' over the next two years. The bank is also likely to maintain adequate capitalization and liquidity during the period. We may upgrade BoCom if we estimate the bank's RAC ratio will stay above 10% or if we assess BoCom's asset quality is significantly better than peers'. We view these scenarios as remote in the next couple of years. We would also raise the ratings on BoCom if we upgrade China or if the likelihood of extraordinary government support to the bank increases. We may downgrade BoCom if we lower our assessment of the bank's stand-alone credit profile (SACP) by two

...Bank of Communications Ltd. (BoCom) has adequate capitalization to weather China's property downturn and economic slowdown. By our projections, BoCom's asset impairment charges (a gauge of provisioning costs) will remain in the 1.1%-1.15% range in 2022, largely around 2020-2021 levels, reflecting China's weakening economic conditions. This, together with pressure from multiple cuts in China's loan prime rate, could dent BoCom's profitability. Having said this, lower deposit costs may partially offset these pressures on profitability. Our projected risk-adjusted capital (RAC) ratio of 7.1%-7.4% over the next two years remains well above the downgrade threshold of 5%. BoCom's megabank status and diversified business lines underpin its strong market position. BoCom's strategy of becoming the "leading bank in the Yangtze River Delta" will solidify its customer base, supporting its long-term growth. We expect profit contribution from the region will continue to increase over the next few years....

Full Report