Fitch Rates China Everbright Bank Hong Kong Branch's USD Notes Final 'BBB'

Fitch Ratings has assigned a final rating of 'BBB' to China Everbright Bank Company Limited's (CEB, BBB/Stable/bb-) USD400 million senior unsecured fixed-rate notes due 2026 issued by China Everbright Bank Co., Ltd., Hong Kong Branch (CEB Hong Kong Branch) under its USD5 billion medium-term note (MTN) programme.

The notes are listed on the Hong Kong Stock Exchange. The proceeds will be used to support CEB Hong Kong Branch's general funding needs. The final rating is in line with the expected rating assigned on 22 February 2023, and follows the receipt of documents conforming to information previously received.

Key Rating Drivers

CEB Hong Kong Branch is part of the same legal entity as CEB. Therefore, the notes to be issued under the MTN programme will represent CEB's direct, unconditional, unsecured and unsubordinated obligations and are rated in line with its Long-Term Issuer Default Rating (IDR), which is underpinned by Fitch's expectations of a high probability of support from the Chinese sovereign (A+/Stable) in the event of stress.

CEB Hong Kong Branch was established in 2013 and is a fully licensed bank in Hong Kong. It is the first and largest overseas branch of CEB. CEB provides credit facilities to CEB Hong Kong Branch to support the branch's liquidity needs.

Rating Sensitivities

Factors that could, individually or collectively, lead to negative rating action/downgrade:

The rating of the notes would be downgraded if CEB's IDR is downgraded.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

The rating of the notes would be upgraded if CEB's IDR is upgraded.

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579

Date of Relevant Committee

13 October 2022

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

The rating of the notes is directly linked with CEB's IDR.

ESG CONSIDERATIONS

CEB has an ESG Relevance Score of '4' for Financial Transparency, as there are structural issues around financial transparency and disclosure. These are not captured in headline performance metrics in China and affect our assessment of the operating environment and financial profile. CEB, like other mid-tier banks, remains more exposed to this risk relative to state banks because of its larger exposure to wealth management products and entrusted investments stemming from the use of off-balance-sheet transactions. This has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.