Moody's Affirms Nanyang Commercial Bank's Long-term Deposit Ratings, Changes Outlook to Stable

Strategic Insights -

Nanyang Commercial Bank, Ltd. has been a subsidiary of China Cinda Asset Management Co., Ltd. (Cinda AMC) since 2022. The bank's long-term and short-term foreign currency and local currency deposit ratings have been affirmed at Baa1/P-2 by Moody's Investors Service. The ratings action follows the change in outlook to stable from negative for the ultimate parent, Cinda AMC. Moody's has reassessed the indirect support from the Government of China through Cinda AMC, increasing it to moderate from low, which has led to the change in outlook for NYCB's deposit ratings. The bank's baa2 Baseline Credit Assessment (BCA) and Adjusted BCA remain unchanged.

Key Takeaways:

  • Moody's has affirmed Nanyang Commercial Bank's long-term and short-term deposit ratings at Baa1/P-2, with a stable outlook.
  • The bank's baa2 Baseline Credit Assessment (BCA) and Adjusted BCA have been affirmed.
  • The stable outlook reflects Moody's expectation that indirect Chinese government support through Cinda AMC can mitigate downward pressure on the bank's baa2 BCA.
  • Nanyang Commercial Bank's improved and good capitalization and solid liquidity will provide a buffer against asset quality and profitability pressure.
  • The bank's impaired loan ratio increased to 2.81% as of year-end 2024, mostly related to mainland property exposures.
  • Moody's expects NYCB's asset quality to face ongoing pressure over the next 12-18 months due to property exposures to mainland China and Hong Kong.
  • The bank's Hong Kong CRE exposure faces elevated asset risk due to the deterioration in borrowers' debt servicing capacity under the challenging property sector environment.
  • Nanyang Commercial Bank's capitalization is expected to remain good over the next 12-18 months, supported by soft risk-weighted assets growth in 2025.
  • The bank's moderate profitability will be strained by an expected narrower net interest margin (NIM) and elevated credit costs over the next 12-18 months.

Statistics:

  • Impaired loan ratio: 2.81% as of year-end 2024 (up from 2.32% as of year-end 2023)
  • Asset impaired loans: $8.1 billion as of year-end 2024
  • Cash: $21.5 billion as of year-end 2024
  • Depositor concentration: 59% of total deposits as of year-end 2024
  • Wholesale funding reliance: moderate
  • Retail deposits: 59% of total deposits as of year-end 2024 (up from 50% as of year-end 2023)

Sources:

  • Moody's Ratings, 2024, "Nanyang Commercial Bank, Ltd."
  • Moody's Investors Service, 2024, "China Cinda Asset Management Co., Ltd."