Fundamental ViewAS OF 18 May 2023
Our credit view on ICBCAS (ratings: A1/A/A) is based on the strong likelihood of state support in the event of distress, given its large size, systemic importance and majority government ownership.
Its systemic importance is enhanced by its status as China’s largest lender, and it plays a key role in financing the country’s economic development.
The Big 4 banks are generally more prudently managed than their more aggressive smaller competitors, but they are also expected to support the real economy in a downturn.
Business DescriptionAS OF 18 May 2023
- With total assets in excess of RMB 42 tn, ICBCAS is the world's largest bank by assets and is classified as a G-SIB with a capital surcharge of 1.5%.
- ICBCAS was originally set up in 1984 to provide loans to China's large state-owned industrial corporations.
- ICBCAS was recapitalised in 2005 with an injection of $15 bn, following which it was listed in Hong Kong and Shanghai in 2006.
- The government owns a majority of ICBCAS's shares through Central Huijin and the Ministry of Finance, which own stakes of 35% and 31% respectively.
- In addition to a strong onshore presence, ICBC has an extensive international network as well.
Risk & CatalystsAS OF 18 May 2023
China’s sovereign ratings (A1/A+/A+) underpin ICBCAS’s credit standing; any deterioration in the sovereign ratings could negatively affect ICBCAS’s ratings.
Asset quality risk remains as China’s economic momentum slows and the property sector remains under stress. Transparency is limited and credit risks are hard to assess in China as these often depend on the government’s willingness to socialise losses.
ICBCAS is managed on commercial terms but the government may call on it to perform “national service” that overrides profitability considerations. Its profitability has recently been impacted by its social duties to support the real economy including stepping up lending at lower rates, but we do not regard such actions as credit-negative as they reflect the close government links that also underpin the bank’s credit standing.
Key MetricsAS OF 18 May 2023
|Total Equity/Total Assets||8.9%||8.7%||9.3%||8.8%||8.5%|
|Loan Deposit Ratio||73%||74%||78%||78%||77%|
CreditSights ViewAS OF 24 May 2023
ICBCAS is the largest bank by assets in the world and has a very strong franchise in China. Its majority government ownership adds to its systemically important status – we view ICBC as a very strong and stable credit. Its profitability has recently been impacted by its social duties to support the real economy including stepping up lending at lower rates, but we do not regard such actions as credit-negative as they reflect the close government links that also underpin the bank’s credit standing. Its 1Q23 operating performance lagged its peers and it is the only Big 5 bank that saw a decline in operating income in 1Q23. Capital ratios remained the highest among Chinese banks.
Recommendation Reviewed: May 24, 2023
Recommendation Changed: July 16, 2021