The ratings on Bank of East Asia Ltd. (BEA) reflect the bank's strong market position, good liquidity, capital strength, manageable asset quality and adequate profitability. BEA's financial parameters, except for capitalization, are unlikely to be materially affected by the proposed cash acquisition of First Pacific Bank Ltd. While post-acquisition capitalization, after deducting goodwill, will decline, it will remain adequate given the bank's expected risk profile. BEA, as Hong Kong's third-largest locally incorporated bank, has a strong market position and a good funding profile. Capitalization, as measured by adjusted common equity (defined as equity less goodwill and revaluation reserves) to assets, has traditionally been robust—recorded as 9.9% at June 2000. Both asset quality and profitability improved in 2000. Nonperforming loans (NPLs),
