S&P shifts China Merchants view

S&P said it changed its outlook for China Merchants Bank Co. Ltd. to developing from positive and affirmed its BBB+ ratings and BB- foreign-currency long-term issue rating on the additional tier-1 non-cumulative offshore preference shares that CMB issued.

The agency also revised the outlooks to developing from positive for the bank’s subsidiaries CMB International Capital Corp. Ltd., CMB Financial Leasing Co. Ltd. and CMB International Leasing Management Ltd.

The developing outlook means the agency could raise, lower or affirm CMB’s ratings over the next two years.

The outlook revision follows CMB reporting that China’s top anti-graft body that answers only to the Chinese Communist Party, the Central Commission for Discipline Inspection and the National Supervisory Commission, is investigating the bank's former president Mr. Tian Huiyu for suspected serious violations of discipline and law, S&P said.

“The investigation could reveal weaknesses in CMB's governance and risk management, although it is currently unclear if the CDIC probe is related to Mr. Tian's tenure as the bank's president. Depending on the nature and degree of any such revelations, we may form a view that the bank's creditworthiness is weaker than our current assessment,” the agency said in a press release.

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