Fitch Rates CCB Asia's USD Basel III Tier 2 Notes Final 'A-'

Mon Aug 18, 2014 6:25am EDT

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(The following statement was released by the rating agency) HONG KONG, August 18 (Fitch) Fitch Ratings has assigned China Construction Bank (Asia) Corporation Limited's (CCB Asia; A/Stable) 10-year Basel III-compliant Tier 2 subordinated note a final rating of 'A-'. The assignment of the final rating follows the completion of the bond issuance and receipt of documents conforming to the information previously received. Fitch assigned an expected rating of 'A-(EXP)' to the issue on 6 August 2014. CCB Asia's USD750m Basel III-compliant, direct, unconditional, unsecured and subordinated notes will be issued under its USD5bn MTN programme and carry fixed coupon rates (4.25% in the first five years and the rate on comparable five-year US Treasury securities plus spread in the last five years). The bank will use the proceeds to strengthen its capitalisation for future business growth. The notes will be callable by CCB Asia after five years. The subordinated notes include a non-viability trigger clause and will qualify as Tier 2 capital for the bank under the Banking (Capital) Rules of Hong Kong upon approval from the Hong Kong Monetary Authority (HKMA). Since the notes do not include a non-viability trigger clause under China's Capital Rules for Commercial Banks, the notes do not qualify as capital for the bank's parent China Construction Bank Corporation (CCB; A/Stable) on a consolidated basis. KEY RATING DRIVERS Fitch rates the notes one notch below CCB Asia's IDR of 'A' to reflect their below-average recovery prospect relative to senior unsecured instruments given their subordination and partial write-down feature. For the purposes of rating these notes, the IDR best reflects the risk of CCB Asia triggering a non-viability event. The notes will not be mandatorily written-down in full should CCB Asia become non-viable, but nevertheless they can be written-down in full or in part if the HKMA considers this step necessary to maintain the bank's viability. The use of CCB Asia's and CCB's support-driven IDRs as anchor ratings reflect the agency's view that both entities will ultimately receive support, if needed, from the Chinese authorities, which are the majority owners of CCB. Fitch believes the risk of non-performance by the notes is adequately reflected in the anchor rating and no incremental notching is required. Under Fitch's methodology the instrument does not qualify for any equity credit. RATING SENSITIVITIES Any changes to the ratings of the subordinated notes will be directly correlated to changes in the IDRs of CCB Asia, which in turn will reflect any change in the propensity or ability of CCB to extend extraordinary support in a timely manner. In addition, CCB's IDRs are sensitive to any shift in the Chinese government's propensity or ability to support CCB in a timely manner. The other ratings of CCB Asia are unaffected by this action, and are as follows: Long-Term IDR: 'A'; Outlook Stable Short-Term IDR: 'F1' Support Rating: '1' Contact: Primary Analyst Ivan Lin Associate Director +852 2263 9984 Fitch (Hong Kong) Limited 2801, Tower Two, Lippo Centre 89 Queensway, Hong Kong Secondary Analyst Katie Chen Associate Director +8610 8517 2135 Tertiary Analyst Jonathan Cornish Managing Director +852 2263 9901 Committee Chairperson Mark Young Managing Director +65 6796 7229 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, "Global Financial Institutions Rating Criteria", dated 31 January 2014, and "Assessing and Rating Bank Subordinated and Hybrid Securities", dated 31 January 2014 are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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