Rating Action: ICBC Financial Leasing Co., Ltd. Assigned “AAA” Rating; Outlook Stable
On July 11, 2019, S&P Global (China) Ratings assigned its “AAA” issuer credit rating to ICBC Financial Leasing Co., Ltd.(ICBCFL). The Outlook is stable.
ICBCFL is a leading financial leasing company in China, with operations in the aviation, shipping and equipment segments. It’s wholly owned by China’s largest commercial bank – ICBC, and one of the bank’s largest non-bank subsidiaries.
We view ICBCFL as a core subsidiary of ICBC. We believe its operations constitute an integral part in the parent group’s efforts to provide a full package of financial services to its corporate clients, with leases being an important supplement to traditional loans. The products and services ICBCFL offers provide unique value to ICBC’s key clients in areas such as aviation, shipping, energy, transportation and infrastructure, in our view.
The “AAA” rating incorporates a four-notch uplift from our assessment of ICBCFL’s stand-alone credit profile (SACP). This is to reflect our view of the company’s critical importance to ICBC and the bank’s extremely low credit risk.
We expect ICBCFL’s ratings will be closely aligned with the credit quality of the parent bank. Besides ongoing support to the company’s daily operations, the bank has a regulatory obligation to provide extraordinary support to ICBCFL in any event of financial distress.
We assess ICBCFL’s stand-alone credit profile as “a+”, five notches above the “bbb-” anchor we typically apply to a regulated financial leasing company in China. This reflects our view of its strengths compared to an average sector player.
We believe ICBCFL has adequate capitalization to support its business development and meet regulatory requirements, benefiting from capital injections from its parent. The company maintains healthy profitability despite of sensitivity to interest rate and credit risks.
ICBCFL has aligned itself with ICBC in terms of risk culture and daily risk management practices.
We expect ICBCFL’s strong business position and its standing as a bank subsidiary will likely ensure easy funding, low refinancing risk and adequate liquidity, despite of a significant maturity mismatch between the company’s assets and liabilities.
Outlook
The stable outlook reflects our view that ICBCFL will likely sustain its current credit profile. We believe the company will remain a core subsidiary of ICBC and maintain stable business and financial profiles at least over the next two years.
Rating Score Snapshot
Initial Anchor: bb+
Adjusted Anchor: bbb-
Business position: +2
Capital and Earnings: +1
Risk position: +1
Funding and Liquidity: +1
Stand-alone Credit Profile: a+
Group support: +4
Issuer credit rating: AAA
Outlook: Stable
Related Methodologies and Research
S&P Global (China) Ratings Financial Institutions Methodology;
S&P Global (China) Ratings General Considerations On Rating Modifiers And Relative Ranking;
Understanding SP Global (China) Ratings Financial Institutions Methodology;
Understanding SP Global (China) Ratings Approach To Support;
Media Contacts:
Michelle Lei, Beijing, (86) 10-6569-2961; michelle.lei@spgchinaratings.cn
Chris Davis, Hong Kong, (852) 2533-3511; chris.g.davis@spglobal.com
Analyst Contacts:
Ying Li, CFA, FRM, Beijing;ying.li@spgchinaratings.cn
Longtai Chen, Beijing; longtai.chen@spgchinaratings.cn
Zheng Li, Beijing; zheng.li@spgchinaratings.cn
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