S&P assigns Orient Securities BBB-

S&P said it assigned its BBB- long-term issuer credit rating to Orient Securities Co. Ltd. The outlook is stable.

The rating on Orient Securities reflect the company’s top decile position in China’s fragmented securities industry. They also mirror Orient Securities’ strong capital and low leverage. The company’s high appetite for proprietary trading relative to peers tempers these strengths. “That said, recent efforts to lower risk limits have brought Orient Securities a step closer to its rated peers,” said S&P in a press release.

The agency views Orient Securities as a government-related entity with a moderate likelihood of receiving extraordinary financial support from the Shanghai municipal government if needed.

Orient Securities’ earnings have been weakening over the past three years. The company’s earnings buffer, which measures earnings’ capacity to absorb long-term average credit losses, decreased to negative 0.1% in 2018 from 0.7% in 2016. This indicates slightly insufficient earnings to meet potential losses in the long run.

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