Fitch affirms five Chinese state-owned commercial banks

Fitch Ratings said it affirmed the long-term foreign-currency issuer default ratings of China's large state-owned commercial banks with stable outlooks as well as the banks' support rating floors, reflecting continued strong expectations that state support would be forthcoming in the event of stress. All of the banks continue to possess 1 support ratings, the highest level on Fitch's scale of 1 to 5.

Industrial & Commercial Bank of China, China Construction Bank, Bank of China and Agricultural Bank of China have A long-term foreign-currency issuer default ratings and A support rating floors, and Bank of Communications has an A- long-term foreign-currency issuer default rating and an A- support rating floor.

The agency said China's state banks compare favorably with their smaller domestic peers on many parameters. In Fitch's view, their solid deposit franchises are their greatest strength, with the five banks accounting for upwards of 70% of total retail deposits. In addition, state banks tend to possess lower credit risk, hold fewer off-balance-sheet contingent liabilities and have more liquid securities and interbank portfolios, the agency said.

Funding and liquidity recently have been the areas most under pressure across the sector as deposit growth slows and liquid assets further dwindle, Fitch said. While state banks' strong deposit franchises have helped cushion this deterioration, the agency said even these institutions are reporting historically thin cash buffers.

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