The rating on The Bank of East Asia, Limited (BEA) reflects the bank's solid domestic franchise in Hong Kong, sound liquidity profile, and satisfactory capitalization. It also reflects the bank's geographically diversified income sources. Moderating factors include growing latent credit risks and pressured core earnings. 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's continuous expansion in China provides opportunities for growth. China accounted for 37.2% of its total loan book at the end of 2008, whereas Hong Kong accounted for 48.6%. BEA's asset quality remains sound, with its ratio of impaired loans to gross loans consistently below
