BEIJING, October 20, 2020 - S&P Global (China) Ratings today assigned its “AAAspc” issuer credit rating （“ICR”） to Citibank (China) Company Limited （“Citibank (China)”）.The Outlook is stable.
We assess Citibank (China)’s stand-alone credit profile (“SACP”) as “aaspc-”, four notches higher than the “bbb+” anchor we typically apply to a commercial bank in China. This SACP reflects its very strong capital base, good asset quality and superior funding and liquidity profile. we assign an ICR of “AAAspc” to Citibank (China), three notches higher than its SACP of “aaspc-” to reflect the extremely high likelihood of support from its parent bank. Citibank (China), a fully owned subsidiary of Citibank N.A., is an integral part of the global banking network of Citigroup Inc.(“Citi”).
Citibank (China) has a very strong capitalization base, with capital adequacy ratios much higher than the industry average in China. Its profitability is also good mainly due to its low deposit cost, which has led to a healthy NIM. As of the end of 2019, its tier-1 capital adequacy ratio was 19.42%, 7.47 percentage points higher than the industry average of 11.95% and 10.92 percentage points higher than the minimum regulatory requirement of 8.5%.We believe COVID-19 won’t have any significant negative impact on its strong capitalization given its effective risk control.
Citibank (China) takes a prudent approach to risk management. It targets a client base of multinationals, large and mid-sized Chinese enterprises with international business and mid-to-high end retail customers. We believe this target client base has maintained good credit quality despite the pandemic. Citibank (China) had a non-performing loan (“NPL”) ratio of 0.47% as of the end of 2019, much lower than the industry average of 1.86%.
Its funding stability is better than the industry average due to its sticky and stable deposit base, which is built on its strong treasury and trade finance business. It has limited use of wholesale funding because its lending business can be comfortably funded by its deposits. As of the end of 2019, 89% of its total liabilities were customer deposits, and only 6% were wholesale funding. Its asset liquidity profile is also better than the industry average due to its large holding of treasury bonds.
Citibank (China)’s business strength can be attributed to the competitive advantages of its parent. Citi serves clients in more than 160 countries. This superior global network makes it capable of offering clients global-level treasury and trade solutions which are also offered to Citibank (China) clients.
Compared to domestic banks where business growth is mainly driven by lending, Citibank (China) focuses more on promoting cross-selling activities through its group’s global network. As a result, its loan book is relatively small compared to mainstream domestic banks. As of the end of 2019, its gross loan was 66.58 billion RMB, with a national market share of 0.05%.
S&P Global Ratings has assigned an SACP of “a-” and an issuer credit rating of “A+” to Citibank N.A.. Based on the broad relationship observed between the ratings of S&P Global Ratings and S&P Global (China) Ratings, S&P Global (China) Ratings views the issuer credit quality of Citibank N. A. as extremely strong, equivalent to the issuer credit rating of “AAAspc” on our national scale. We believe that Citibank (China) is of critical importance to its parent and its ratings are closely aligned with the issuer credit quality of Citibank N.A.
Rating Score Snapshot
Anchor: bbb+
Business Position: 0
Capital and Earnings: +2
Risk Position: +1
Funding and Liquidity: +1
Stand-alone Credit Profile: aaspc-
Group Support: +3
Issuer Credit Rating: AAAspc
Outlook: Stable
Related Methodologies and Research:
S&P Global (China) Ratings Financial Institutions Methodology, January 31, 2019;
Small but Solid – Foreign Bank Subsidiaries as Niche Players in China’s Banking Sector, February 26, 2020.
Media Contacts:
Sharon Tang, Beijing, (86) 10-6569-2988; sharon.tang@spglobal.com
Analyst Contacts:
Longtai Chen, Beijing; longtai.chen@spgchinaratings.cn
Zheng Li, Beijing; zheng.li@spgchinaratings.cn
Xuefei Zou, CPA, Beijing; eric.zou@spgchinaratings.cn