The ratings on The Bank of East Asia, Limited (BEA) reflect the bank's solid domestic franchise in Hong Kong and its rapid but careful expansion in China. They also reflect the bank's improved asset quality, satisfactory liquidity, and sound capitalization. Moderating factors include growing latent credit risks and pressured profitability. BEA has a solid and defendable franchise in Hong Kong, where it is the fifth-largest domestically incorporated bank, but is small relative to the dominant banks in the system. The bank has been the forerunner among midsize banks in the territory in terms of diversifying business into overseas markets. Its Hong Kong book accounted for only 62.6% of its total advances at the end of June 2007. BEA incorporated a
