BEIJING, January 19, 2021 - S&P Global (China) Ratings has assigned its AAA_spc rating to China Construction Bank Corporation(“CCB”)， and the outlook is stable. In addition, S&P Global (China) Ratings has assigned its AAA_spc rating to CCB’s 2021 Special Financial Bond for Micro and Small Enterprise Lending.

We assess CCB’s stand-alone credit profile (“SACP”) as “aa_spc”, five notches higher than the “bbb+” anchor we typically apply to a commercial bank in China. This is to reflect our view of the bank’s very strong business franchise as the second largest bank in China and its very strong funding and liquidity profile built on its massive deposit base.

The issuer credit rating (“ICR”) of “AAA_spc” incorporates a two-notch uplift from our assessment of its SACP of “aa_spc”, reflecting the extremely high likelihood of government support.

As China’s second largest bank, CCB has one of the most extensive domestic banking networks in China, operating over 14,000 branches within China and 33 branches overseas. As of the end of 2019, it had 11.56% and 9.27% market share of loans and deposits, respectively. CCB has a balanced and strong business franchise in corporate and retail banking with a strong edge in infrastructure finance and mortgage lending.

CCB has one of the largest deposit bases among Chinese banks and it has limited use of wholesale funding. As of the end of 2019, 79% of its liabilities were customer deposits, and its use of wholesale funding represented about 18% of its total liabilities, lower than the industry average. It also benefits from “flight to quality” when market liquidity tightens. The bank’s daily average liquidity coverage ratio was 155% in the fourth quarter of 2019, much higher than the minimum regulatory requirement of 100%.

CCB has adequate capitalization and healthy profitability. CCB has the highest regulatory capital adequacy ratios among its mega bank peers. As of the end of June 2020, its reported regulatory tier-1 capital adequacy ratio was 13.88%, 1.10 percentage points higher than the mega bank average and 2.27 percentage points higher than the industry average. Given its status as a global systematically important bank (G-SIB), we expect it to continue to strengthen its capitalization.

The risk profile of the bank’s loan portfolio is consistent with the industry average. Its asset quality has come under pressure from COVID-19. As of the end of June 2020, CCB’s NPL ratio was 1.49%, only 7 bps higher than the end of 2019. We view that the stable asset quality in the first half of 2020 was partially attributable to the lagging effect of NPL recognition, fast growth of new lending and writing off efforts, while we recognize some uncertainty remains over the rapidly increasing MSE loans, the performance of which depends on both the lending standards of the bank and the progress of the economic recovery.

We believe that CCB is extremely likely to receive support from the central government in times of need, considering its status as a state-owned mega bank and its important role in maintaining financial stability in China and providing financing to China’s infrastructure development and other important government initiatives. As of the end of 2019, 57% of CCB’s shares were controlled by Central Huijin Investment Ltd.

We have equalized the credit rating of the financial bond with the ICR of CCB. This bond is issued to grow CCB’s micro and small enterprise (“MSE”) lending business. The principal amount of this bond is RMB 20 billion, and its term is 3 years. The payment obligation of this financial bond is ranked equally with all the general liabilities of the bank that has no liens on, and prior to equity capital settlement of CCB.

Issuer Credit Rating Snapshot：

Anchor：bbb+

    Business Position：+3

    Capital and Earnings：0

    Risk Position：0

    Funding and Liquidity：+2

Stand-alone Credit Profile：aa_spc

Government Support：+2

Issuer Credit Rating：AAA_spc

Outlook/CreditWatch：Stable

Related Research & Commentary:

Credit Rating Report: China Construction Bank Corporation, Sep 18, 2020.

Issue Rating Notice: 2020 China Construction Bank Corporation Special Financial Bond for Micro and Small Enterprise Lending Rated “AAA_spc”, Jan 11, 2021.

Related Methodology and Research:

S&P Global (China) Ratings Financial Institutions Methodology.

General Considerations on Rating Modifiers And Relative Ranking.

Commentary: Understanding S&P Global (China) Ratings Financial Institutions Methodology.

Commentary: Understanding S&P Global (China) Ratings Approach to Support.

Commentary: Understanding S&P Global (China) Ratings General Considerations on Rating Modifiers and Relative Ranking Methodology.

Media Contacts：

Sharon Tang, Beijing, (86)10-6569-2988; sharon.tang@spgchinaratings.cn

Analyst Contacts:

Longtai Chen，Beijing；longtai.chen@spgchinaratings.cn

Yifu Wang, CFA，CPA, Beijing; yifu.wang@spgchinaratings.cn

Cui Cong, Beijing; cong.cui@spgchinaratings.cn

Xuefei Zou, CPA, Beijing; eric.zou@spgchinaratings.cn

(Note: This document is prepared in both English and Chinese. The English translation is for reference only, and the Chinese version will prevail in the event of any inconsistency between the English version and the Chinese version.)

2021年工银金融租赁有限公司金融债券（第一期）（债券通）已完成兑付，该债项不再存续，因此，标普信用评级（中国）有限公司（简称“标普信评“）终止对该债项的信用评级，对该债项的信用等级不再更新。

标普信评此前授予该债券AAA_spc的信用等级；标普信评目前继续维持工银金融租赁有限公司AAA_spc/稳定的主体信用等级。

• 标普信评认为，在未来一年里，工程机械行业仍将面临销量下行压力，国内需求复苏乏力、出口政策不稳定性的相互交织，可能继续抑制行业的复苏势头。我们预计，在这种背景下，企业的盈利能力的弱化、信用销售所带来的坏账损失及担保回购问题，将成为业内企业面临的主要风险。
• 中国工程机械企业的杠杆水平与国际同业龙头相比显著偏高。鉴于工程机械企业所处的强周期行业特性，我们认为，相对较高的杠杆水平可能会使这些企业在行业周期低谷时面临相对脆弱的财务状况。
• 我们的压力测试显示，尽管头部龙头企业同样面临着杠杆相对较高的问题，但徐工集团、中联重科、三一集团、柳工集团、山推股份五家龙头企业流动性在未来一年将保持充足，能承受一定的担保回购增加及盈利波动带来的风险。