China Bohai Bank Co. Ltd.

The negative outlook on CBHB reflects our view of a one-in-three chance that the bank's risk position could be worse than the industry average over the next one to two years. This is as more firms default amid property deleveraging and slower economic growth in China. We believe CBHB will maintain its moderate systemic importance to the Chinese banking system over the period. We may lower the rating on CBHB if the bank's asset quality is significantly worse than the industry average for an extended period. In the event our economic risk assessment for China improves, we could still downgrade the bank if its: (1) asset quality is significantly worse than the industry average; (2) risk-adjusted capital (RAC) ratio does

...China Bohai Bank Co. Ltd. (CBHB) faces increased asset quality pressure due to its high real estate and SME concentration. The negative outlook on the bank reflects our view of a one-in-three chance that CBHB's risk position could be worse than the industry average as more firms default amid property deleveraging and slower economic growth in China. Net interest margin (NIM) contraction and elevated credit cost will strain CBHB's profitability. A reduction in real estate loan exposure will continue to put pressure on the bank's NIM. CBHB's credit cost is likely to remain elevated over the next two years as the bank strengthens its loan loss reserve. The bank will maintain its moderate systemic importance to the Chinese banking system. CBHB is not on the list of domestic systemically important banks. But we believe the bank continues to attract government support, given its status as one of the joint-stock banks with nationwide presence. We expect such support to continue over the next one...

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