Fitch Ratings has assigned China Everbright Bank Company Limited's (CEB, BBB+/Stable/bb-) long-term senior unsecured notes issued by China Everbright Bank Co., Ltd., Hong Kong Branch under its USD5 billion medium-term note (MTN) programme a final rating of 'BBB+'.

The rated notes comprise:

USD500 million floating rate notes due 2026

CNY1.5 billion 2.95% notes due 2025

Both notes will be listed on the Hong Kong Stock Exchange. The proceeds will be used for repaying matured overseas debts. The final rating follows the receipt of documents conforming to information previously received.

Key Rating Drivers

CEB's Hong Kong branch is part of the same legal entity as CEB. Therefore, the notes will represent CEB's direct, unconditional, unsecured and unsubordinated obligations. The notes are rated in line with CEB's Long-Term Issuer Default Rating (IDR), which is underpinned by the agency's expectations of a very high probability of support from the Chinese sovereign (A+/Stable) in the event of stress.

CEB's Hong Kong branch was established in 2013 and is a fully licensed bank in Hong Kong. It is the first and largest overseas branch of CEB. CEB provides credit facilities to its Hong Kong branch to support the branch's liquidity needs.

Key rating drivers and sensitivities for CEB's Hong Kong branch can be found in its last full rating action commentary, Fitch Upgrades China Everbright Bank's IDR to 'BBB+'; Outlook Stable, published on 6 September 2023.

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

The rating of the notes would be downgraded if CEB's IDR is downgraded.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

The rating of the notes would be upgraded if CEB's IDR is upgraded.

OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS

Fitch has assigned a senior unsecured long-term rating (xgs) of 'BB-(xgs)' to the notes.

The senior unsecured long-term rating (xgs) is assigned at the level of CEB's Long-Term IDR (xgs), which is aligned with the bank's Viability Rating.

OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

A downgrade of the bank's Long-Term IDR (xgs) would lead to a downgrade of the bank's senior unsecured long-term rating (xgs).

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

An upgrade of the bank's Long-Term IDR (xgs) would lead to an upgrade of the bank's senior unsecured long-term rating (xgs).

Date of Relevant Committee

05 September 2023

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 rating of the notes issued by the Hong Kong branch is directly linked with CEB's IDR.

ESG CONSIDERATIONS

CEB has an ESG Relevance Score of '4' for Financial Transparency as there are still structural issues around financial transparency and disclosure. These are not captured in headline performance metrics in China, and affect our assessment on the operating environment as well as the financial profile. CEB, like other mid-tier banks, remains more exposed to this risk relative to the state banks, due to its larger exposure to wealth-management products and entrusted investments stemming from the use of off-balance-sheet transactions. This has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

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