Fitch rates Bank of Communications (Hong Kong) notes BB+

Fitch Ratings said it assigned Bank of Communications (Hong Kong) Ltd.'s proposed dollar-denominated non-cumulative perpetual capital securities an expected rating of BB+. The proposed securities are expected to qualify as the bank's Basel III additional tier 1 capital and the proceeds will be used to add to the bank's capital base and fund its business development.

“For BocomHK, we believe Bank of Communications Co., Ltd. (Bocom/A/Stable) is likely to extend support to BocomHK's hybrid securities given the subsidiary's important role in the group and high operational integration with its parent – the latter contributing to Fitch not assigning a viability rating to BocomHK. Bocom's IDR is, in turn, underpinned by expectations of timely support from the Chinese government (A+/Stable), given the bank's high systemic importance and the state being the largest shareholder,” Fitch said in a press release.

An instrument's rating is capped at the equivalent rating of an instrument issued by the source of support, and the rating is capped at BB+ for issuers with support rating floors in the A or BBB category. Thus, this caps the rating for BocomHK's AT1 securities at BB+, given Bocom's sovereign-support driven IDR and support rating floor of A, Fitch said.

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