Moody's Investors Service has assigned an A1 long-term issuer and deposit rating and a Prime-1 short-term issuer and deposit rating to Bank of China (New Zealand) Limited (BOCNZ), the New Zealand subsidiary of Bank of China Limited (BOC, A1 stable) .
This is the first time that Moody's has assigned ratings to BOCNZ. The outlook on the ratings is stable.
"The A1 rating is in line with BOC's foreign-currency senior unsecured debt rating and reflects the unconditional and irrevocable guarantee that will be provided by BOC, covering all unsubordinated debt obligations of BOCNZ," says Daniel Yu, a Moody's Assistant Vice President and Analyst.
BOCNZ is a fully owned subsidiary of BOC. It offers both retail and commercial services, but focusing on trade finance, and in particular on customers with trade linkages between China and New Zealand. Moody's expects BOCNZ to leverage off its parent's existing customer base and strength in trade finance.
BOC's A1 rating reflects the bank's excellent franchise, diversified international businesses, and good financial position among its peers in China.
On the other hand, BOC's asset quality has weakened, as its borrowers have been negatively affected by slower economic growth in China.
BOC's long-term deposit rating of A1 incorporates a four-notch uplift from its baa2 standalone credit profile, owing to Moody's assumption of a very high probability of support from the Chinese government (Aa3 stable) in the event of financial distress, given BOC's status as one of China's big four banks.
Given the alignment of their ratings, any change in the rating of BOC is likely to be reflected in the rating of BOCNZ.
The cross sector methodology, Rating Transactions Based on the Credit Substitution Approach: Letter of Credit backed, Insured and Guaranteed Debts published in March 2013 was used in this rating.
The principal methodology used in this rating was Global Banks published in July 2014. Please see the Credit Policy page on www.moodys.com for a copy of the methodology.
Bank of China (New Zealand) Limited is headquartered in Auckland, New Zealand. It commenced operating as a registered bank on 21 November 2014.
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