Fitch Ratings has downgraded the
The subordinated notes' rating was placed UCO on
Fitch's updated criteria reflect continuing developments in bank resolution, notably developments in bank resolution plans, the build-up of bail-in debt buffers that protect more senior creditors and their implications for default risk and recovery prospects for different senior and junior liability classes.
KEY RATING DRIVERS
The one-notch downgrade of ICBC Macau's subordinated notes, which had previously been notched once from the issuer's Long-Term Issuer Default Rating (IDR) of 'A', reflects the change in Fitch's baseline notching for loss severity to two notches, from one, for these types of debt instruments due to their subordinated status.
ICBC Macau's IDRs are equalised with that of its parent,
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:
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:
A downgrade of ICBC Macau's Long-Term IDR would lead to a downgrade of the subordinated notes' rating. This could be triggered if ICBC's IDR is downgraded or if Fitch's perception of institutional support from ICBC and the Chinese sovereign's ability and propensity to support ICBC and its subsidiary is significantly weakened.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions 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 '
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 support-driven ratings of ICBC Macau are driven by our view of the likelihood of support from ICBC.
RATING ACTIONS
ENTITY/DEBT RATING PRIOR
subordinated
LT BBB+ Downgrade A-
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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