The Bank of East Asia Limited

Established franchise in Hong Kong. Prudent underwriting standards and growth strategy. Adequate capital. Weak competitive position and limited presence in China. Loan concentration in the property sector. Below-average core profitability. The stable outlook reflects our expectation that The Bank of East Asia Ltd. (BEA) will maintain its financial and business profile over the next 18-24 months. In our opinion, the bank's adequate capitalization, profitability, and risk management will provide sufficient buffers against any potential negative impact on its credit profile of its expansion strategy in China. We could lower the ratings if BEA's stand-alone credit profile (SACP) deteriorates. This could happen if the bank's asset quality weakens considerably or its capitalization deteriorates substantially such that we expect the risk-adjusted capital

... The stable outlook reflects our expectation that The Bank of East Asia Ltd. (BEA) will maintain its financial and business profile over the next 18-24 months. In our opinion, the bank's adequate capitalization, profitability, and risk management will provide sufficient buffers against any potential negative impact on its credit profile of its expansion strategy in China. We could lower the ratings if BEA's stand-alone credit profile (SACP) deteriorates. This could happen if the bank's asset quality weakens considerably or its capitalization deteriorates substantially such that we expect the risk-adjusted capital (RAC) ratio to fall below 7% for a prolonged period. We could also lower the rating if the "moderately high" likelihood of extraordinary support from the government of Hong Kong to BEA diminishes. We believe rating upside potential is limited over the next 12 months....

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