Fitch Ratings has affirmed Industrial and Commercial Bank of China (Macau) Limited's (ICBC Macau) Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'A' with a Stable Outlook.

A full list of rating actions is at the end of the commentary.

KEY RATING DRIVERS

IDRS AND SUPPORT RATING

ICBC Macau's IDRs are equalised with those of Industrial and Commercial Bank of China Limited (ICBC: A/Stable/bb+), which has an 89.3% stake in ICBC Macau. The Support Rating of '1' reflects our expectation there is an extremely high probability of support from ICBC to ICBC Macau, as a default by ICBC Macau would constitute huge reputational risk for ICBC in light of the subsidiary's high strategic and business integration as well as their shared branding. ICBC's ability to provide support is underpinned by its IDR, which is in turn driven by Fitch's view of an extremely high probability of extraordinary support from the Chinese sovereign (A+/Stable) given ICBC's systemic importance, and that the state support would be extended to ICBC Macau through ICBC, if needed.

ICBC Macau plays an important role in ICBC's greater China strategy and assists the parent's customers in their business transactions with Portuguese-speaking countries in terms of asset management and offshore Chinese yuan-related businesses. Developments in China's Greater Bay Area should further strengthen ICBC Macau's strategic role and allow more collaboration with other group entities. ICBC Macau's management team also manages ICBC's Macao branch, which began operations in 1H20, reflecting a high level of integration and strategy with the parent as well as its subsidiaries.

Fitch does not assign a Viability Rating to ICBC Macau as the bank's operations and risks are tightly controlled by ICBC and it benefits significantly from the parent's franchise.

SUBORDINATED DEBT

ICBC Macau's subordinated debt is rated two notches below its IDR to reflect high loss severity relative to senior unsecured debt - per Fitch's criteria. The use of ICBC Macau's support-driven IDR as the anchor rating reflects Fitch's assessment that support from ICBC, and ultimately from the Chinese authorities, would be made available to the notes if needed. The support will neutralise the non-performance risk of the notes, as reflected in the anchor rating, and hence no incremental notching is required. The notes do not have triggers that would result in coupon deferral.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

IDRS AND SUPPORT RATING

An upgrade of ICBC's IDR could lead to similar positive rating action on ICBC Macau's IDR, provided we believe there is no reduced propensity to support ICBC Macau.

The Support Rating of '1' is the highest Fitch assigns and cannot be upgraded.

SUBORDINATED DEBT

The subordinated notes' rating is sensitive to changes in ICBC Macau's Long-Term IDR, from which it is notched. Therefore, an upgrade of ICBC Macau's Long-Term IDR, which would be led by an upgrade in the parent's IDR, would lead to an upgrade of the subordinated notes' rating.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

IDRS AND SUPPORT RATING

ICBC Macau's Long-Term IDR will be downgraded if there is a downgrade of ICBC's IDR or if Fitch's perception of institutional support from ICBC, and the Chinese sovereign's ability and propensity to support ICBC and its subsidiary, are significantly weakened. Our view of ICBC's propensity to support ICBC Macau could be negatively affected if the Macao bank's role in the parent's operations were to weaken significantly, such that a default by the subsidiary would pose a lower risk of damaging the parent's reputation. This could arise, for example, from a reduction in shareholding to well below 75%.

SUBORDINATED DEBT

A downgrade of ICBC Macau's Long-Term IDR would lead to a downgrade of the subordinated notes' rating.

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit [https://www.fitchratings.com/site/re/10111579]

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS

The ratings of ICBC Macau are driven by our view of the likelihood of support from ICBC.

RATING ACTIONS

ENTITY/DEBT	RATING		PRIOR
Industrial and Commercial Bank of China (Macau) Limited	LT IDR	A 	Affirmed		A
ST IDR	F1+ 	Affirmed		F1+
Support	1 	Affirmed		1

subordinated

LT	BBB+ 	Affirmed		BBB+

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

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