Rating Action: Shanghai Rural Commercial Bank Co., Ltd. Assigned “AAspc-” Rating; Outlook Stable
On January 14, 2020, S&P Global (China) Ratings assigned its “AAspc-” issuer credit rating to Shanghai Rural Commercial Bank Co., Ltd. (“SRCB”). The Outlook is stable.
Based in Shanghai, one of the country’s most developed regions, SRCB is one of the leading rural commercial banks in China. It has a solid market share in Shanghai and an average asset size compared with other major Chinese commercial banks. As of the end of 2018, its deposit and loan market shares in Shanghai were both above 5%; its national market share in terms of total assets was 0.4%.
Thanks to Shanghai’s good credit environment and the bank’s prudent risk management, SRCB has maintained asset quality metrics better than the industry average. The well-developed and diversified local economy in Shanghai has mitigated the concentration risk of this regional bank. Provisioning of SRCB is adequate, which is demonstrated by its high coverage ratio of loss reserves over non-performing and special mention loans.
In our view, the funding structure of SRCB has better stability compared with the industry average, thanks to its solid deposit base and limited use of wholesale funding.
SRCB is a state-owned bank. Shanghai International Group Co., Ltd and its subsidiaries constitute SRCB’s largest shareholder on a consolidated basis. We believe its importance to the Shanghai government is high and its importance to the central government is moderate, therefore, it is highly likely that it would receive support in times of stress.
We assess SRCB’s stand-alone credit profile (“SACP”) as “aspc”, two notches higher than the “bbb+” anchor we typically apply to a commercial bank in China. This is to reflect our view of its better-than-average asset quality and funding structure.
The “AAspc-” issuer credit rating incorporates a two-notch uplift from our assessment of SRCB’s SACP of “aspc”, reflecting the very high likelihood of government support.
Rating Score Snapshot
Anchor: bbb+
Business Position: 0
Capital and Earnings: 0
Risk Position: +1
Funding and Liquidity: +1
Stand-alone Credit Profile: aspc
Government Support: +2
Issuer Credit Rating: AAspc-
Outlook: Stable
Anchor: bbb+
Business Position: 0
Capital and Earnings: 0
Risk Position: +1
Funding and Liquidity: +1
Stand-alone Credit Profile: aspc
Government Support: +2
Issuer Credit Rating: AAspc-
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.
S&P Global (China) Ratings Financial Institutions Methodology;
S&P Global (China) Ratings General Considerations On Rating Modifiers And Relative Ranking.
Media Contacts:
Chris Davis, Hong Kong, (852) 2533-3511; chris.g.davis@spglobal.com
Michelle Lei, Beijing, (86) 10-6569-2961; michelle.lei@spgchinaratings.cn
Analyst Contacts:
Yifu Wang, CFA, Beijing; yifu.wang@spgchinaratings.cn
Xiaohong Chen, CFA, Beijing; xiaohong.chen@spgchinaratings.cn
Xiaochen Luan, CFA, FRM, Beijing; collins.luan@spgchinaratings.cn
Cong Cui, Beijing; cong.cui@spgchinaratings.cn