China’s fifth largest lender, the Bank of Communications Co. was upgraded today by Moody’s Investment Service after perceived improvements in risk management as well as capital strength.
Bank of Communications Co, also called BoCom, had its rating raised for the first time in three years, with the long-term foreign currency and long-term local currency deposit ratings raised from a Baa1 rating to an A3. A statement from Moody’s also confirmed that the BoCom financial strength assessment was raised from D/Ba2 to D+/Ba1. The outlook for all of the new grades was labeled as “stable” according to the Moody’s statement.
The upgrade followed news that Moody’s may also upgrade the rating for China’s foreign-currency sovereign to that of the fifth highest rating, A1. The move is expected within the next three months. Moody’s said that China’s economic resilience, as well as its ability to absorb the losses from unparalleled lending in 2009 were the main reasons for the potential increase in rating.
In another statement, Moody’s also said that China’s three government-owned lenders, Export-Import Bank of China, China Development Bank Co. and Agricultural Development Bank may also be in line for a ratings upgrade.
In June, BoCom had a Tier1 capital adequacy ratio totaling 8.94 percent, while its capital ratio increased to 12.17 percent after it raised 17.1 billion yuan, rougly $2.6 billion, from a domestic market rights offer.
After the announcement of the ratings increase, BoCom shares rose 2.9 percent in Shanghai trading, where the bank is based, and rose 0.7 percent in the Hong Kong market.
