The ratings on Bank of East Asia Ltd. (BEA) reflect the bank's good market position, sound asset quality, and satisfactory capitalization. The ratings also take into account the bank's weakened, but still adequate, core profitability, as well as increased costs from the integration of other banks it has acquired. As with most banks in Hong Kong, BEA's profitability has been affected by rising unemployment and personal bankruptcy rates. As Hong Kong's fourth-largest locally incorporated bank, BEA has a good market position and a satisfactory funding profile. Its capitalization, as measured by adjusted common equity (defined as equity less goodwill and revaluation reserves) to adjusted assets, has traditionally been satisfactory, and stood at 8.11% at the end of 2001. The quality
