Bulletin: Higher Loan Impairments Could Test BEA Ratings

HONG KONG (S&P Global Ratings) June 17, 2019--S&P Global Ratings said today that The Bank of East Asia Limited (BEA) has solid capital buffers to withstand inherent risk in the bank's property portfolio, particularly in China. BEA's controlled risk appetite--as evidenced by its moderate growth in overall exposures in recent years--will also support the ratings on the bank (A-/Stable/A-2). That said, the ratings could come under pressure if BEA's credit costs rise sharply or loan quality deteriorates more severely than the respective industry averages in Hong Kong and China. BEA indicated on June 13, 2019, that its profit for the first half of 2019 will decline significantly, compared with the same period in 2018. This is due to an estimated

...June 17, 2019 HONG KONG (S&P Global Ratings) June 17, 2019--S&P Global Ratings said today that The Bank of East Asia Limited (BEA) has solid capital buffers to withstand inherent risk in the bank's property portfolio, particularly in China. BEA's controlled risk appetite--as evidenced by its moderate growth in overall exposures in recent years--will also support the ratings on the bank (A-/Stable/A-2). That said, the ratings could come under pressure if BEA's credit costs rise sharply or loan quality deteriorates more severely than the respective industry averages in Hong Kong and China. BEA indicated on June 13, 2019, that its profit for the first half of 2019 will decline significantly, compared with the same period in 2018. This is due to an estimated Hong Kong dollar (HK$) 2.5 billion-HK$3 billion post-tax impairment of the bank's four legacy commercial real estate loans. The impairment losses for the group stood at HK$1.6 billion for the full year 2018. These loans are of nominal value...

Bulletin