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Moody's Investors Service Inc.

Moody's Affirms Shenzhen Rural Commercial Bank Corp Ltd's Deposit Ratings with Stable Outlook

Strategic Insights

— 2 min read

Shenzhen Rural Commercial Bank Corp Ltd (SZRCB) has maintained its long-term deposit ratings at Baa3 with a stable outlook, according to Moody's Investors Service. This affirmation reflects the bank's steady asset quality, capitalization, profitability, and liquidity over the next 12-18 months, as well as the willingness and capacity of the Government of China (A1 negative) to support the bank during this period. SZRCB's ba1 Baseline Credit Assessment (BCA) and Adjusted BCA reflect the bank's strong capitalization, sound funding structure, and strong liquidity position. However, the unseasoned risks from the bank's rapid loan growth during 2017-2022 and relatively high exposure to the property sector and micro and small enterprises (MSEs) temper these credit strengths.

Key Takeaways:

  • SZRCB maintains its long-term deposit ratings at Baa3 with a stable outlook, reflecting its steady asset quality, capitalization, profitability, and liquidity over the next 12-18 months.
  • The bank's ba1 BCA reflects its strong capitalization, sound funding structure, and strong liquidity position, tempered by unseasoned risks from rapid loan growth and high exposure to the property sector and MSEs.
  • SZRCB's asset quality is challenged by rising asset risk in retail loans, including MSE loans, which accounted for 22% of its gross loans as of the end of 2024.
  • The bank's provision coverage ratio declined to 258.98% at the end of 2024 from 290.29% at the end of 2023, but remains above the sector average.
  • SZRCB's Common Equity Tier-1 (CET1) ratio increased to 13.78% at end-Mar 2025 from 13.42% at end-2024 and 12.56% at end-2023, supported by a slowdown in loan growth and high asset allocation to government bonds.
  • The bank's return on average assets (ROAA) declined to 0.79% in 2024 from 0.87% in 2023, but remains high among its peers.
  • SZRCB has a strong deposit base, with 75% of its assets funded through deposits, and its reliance on market funds is rising due to intense deposit competition in Shenzhen and increased debt issuance.
  • The bank's rating is based on China's Moderate+ Banking System Macro Profile, and its ba1 Adjusted BCA does not incorporate any affiliate support.
  • SZRCB's Preliminary Rating Assessment of deposits is at the same level as its Adjusted BCA, and its Baa3 deposit rating incorporates a one-notch uplift for government support.

Statistics:

  • SZRCB's total assets: RMB817.0 billion (as of 31 December 2024)
  • Shareholders' equity: RMB60.3 billion (as of 31 December 2024)
  • Loan growth: around 9% in 2023 and 2024
  • NPL ratio: 1.11% at the end of 2024, up from 0.99% at the end of 2023 and 0.90% at the end of 2022
  • Property sector exposure: around 10% of gross loans as of year-end 2024
  • MSE loan exposure: 22% of gross loans as of the end of 2024

Sources:

  • Moody's Investors Service (news release)
  • Moody's Ratings (methodology: Banks, published in November 2024)
  • Moody's Ratings (Rating Methodologies page)

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