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Fundamental View
AS OF 23 Jun 2022The Export-Import Bank of China (CHEXIM) was founded in 1994 under the direct authority and ownership of the State Council. Its credit standing is based on its role as a quasi-sovereign policy bank that provides financial support for China’s foreign economic, trade and investment development as well as other strategic overseas investments.
CHEXIM is 89%-owned by Buttonwood Investment Holding Company, a wholly-owned investment platform of China’s FX regulator, the State Administration of Foreign Exchange (SAFE), and an 11% stake is held by the Ministry of Finance, making it a wholly-owned, quasi-sovereign entity.
It is rated in line with the Chinese sovereign, at A1/A+/A+, which imputes a very high level of state support in a timely manner if required.
Business Description
AS OF 23 Jun 2022- China's economic reforms began in the late 1970s but it was only in 1994 that the country's large state-owned banks were set on a path of commercialisation. The policy functions of the commercial banks were transferred to three policy banks, namely, China Development Bank (CDB), the Export-Import Bank of China (CHEXIM) and Agricultural Development Bank of China (ADBC).
- CHEXIM's original mandate was to support budding Chinese exporters looking to expand internationally but in recent years its role has expanded to a broader role in financing overseas infrastructure investments and strategic projects such as the Belt and Road Initiative, as well as domestic development projects.
- The quasi-sovereign policy bank has 32 domestic branches, 1 overseas branch in Paris and representative offices in Hong Kong, St. Petersburg (Russia), Northern & Western Africa, and Southern & Eastern Africa. It also has correspondent banking relationships with 1,105 banks in 145 countries and regions. It had over 4,000 employees at end-2021.
- Besides using its own capital, CHEXIM on-lends funds borrowed from foreign governments. CHEXIM takes no credit risk in these on-lending activities, which are off-balance sheet items.
Risk & Catalysts
AS OF 23 Jun 2022As a quasi-sovereign issuer, CHEXIM is rated in line with the Chinese government at A1/A+/A+. Any downgrades in China’s sovereign rating will have a negative impact on its credit ratings.
CHEXIM’s financial disclosure is very thin relative to other banks, and annual reports are much delayed in their publishing. From what is available, it is clear that interest margins and profitability are lower than CDB and other commercial banks even in normal years, and higher credit risks have given rise to material impairment losses as a proportion of PPOP (50-90% of PPOP in normal years). The NPL ratio is not disclosed every year.
CHEXIM was very thinly capitalised up to 2015. However, in July that year, the PBOC injected $45 bn from China’s FX reserves via the State Administration of Foreign Exchange (SAFE), thus improving the equity/assets ratio. The bank does not disclose its current capital ratios.
CHEXIM’s policy role may involve taking on exposures that may lead to financial losses in which case we would expect timely and proactive state support to ensure it remains of sound standing.
Key Metrics
AS OF 23 Jun 2022| RMB bn | FY21 | FY20 | FY19 | FY18 | FY17 |
|---|---|---|---|---|---|
| Pre-Impairment Operating Profit / Average Assets | 0.67% | 0.54% | 0.87% | 1.83% | 0.08% |
| Operating Income/Average Assets | 0.84% | 0.71% | 1.03% | 1.97% | 0.21% |
| Credit Costs | 0.24% | 0.25% | 0.51% | 1.63% | 0.63% |
| Calculated ROA | 0.14% | 0.11% | 0.12% | 0.12% | (0.35%) |
| Calculated ROE | 2.2% | 1.8% | 1.7% | 1.5% | (4.0%) |
| Customer Loans, Net | 4,335 | 3,949 | 3,558 | 3,180 | 2,746 |
| Gross Loans/(Deposits+Bonds) | 108% | 111% | 119% | 119% | 109% |
| Total Equity/Total Assets | 7.0% | 6.3% | 6.9% | 7.3% | 8.3% |
CreditSights View
AS OF 16 May 2012Recommendation Reviewed: May 16, 2012
Recommendation Changed: January 01, 1970
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