Moody's affirms Citic Ka Wah

Moody's Investors Service said it confirmed Citic Ka Wah Bank Ltd.'s D+ bank financial strength and Baa2/P-3 long-term/short-term deposit ratings, CKWB's Baa3 backed subordinate (foreign) debt rating and CKWH-UTS Ltd.'s Baa3 backed junior subordinated (foreign) debt rating.

This concludes the review for possible upgrade announced on Sept. 15.

The outlook is stable.

The rating confirmation reflects Citic Ka Wah's adequate capital and liquidity levels and improved asset quality, the agency said. Although its impaired loans ratio fell to 3.05% in June 2005 from over 6% in June 2002, it remains above the local peer average of 1.06%.

Further, the company recently strengthened its management through its hiring of a number of banking professionals with extensive international experience, and the bank receives moderate support from its majority owner Citic, which is in turn directly controlled by China's State Council.

Despite improvements, it will take some time for Citic Ka Wah to achieve sustainable improvements in earnings, the agency said. Core profitability has fallen in the past few years, and net interest margin has also declined considerably, although it is in line with the trend for its small bank peers in Hong Kong.

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