Nanyang on review after Cinda puts in bid
Rating downgrade for BOCHK unit connected to asset manager's lower issuer rating
Ratings agency Moody's Investors Service put Nanyang Commercial Bank on review for downgrade just a day after China Cinda Asset Management said it had made a bid for the lender owned by Bank of China (Hong Kong).
Nanyang's A1 rating on its deposits was partially based on ownership by BOCHK, Hong Kong's second-largest bank. The potential downgrade was connected to the possibility of less support from the potential new owner, should the deal with Cinda go through.
"The potential change in ownership will likely lead to less support in Nanyang's ratings, given Cinda's lower issuer ratings compared to Bank of China (Hong Kong)," Moody's said.
Cinda on Thursday said its wholly owned Cinda Financial Holdings was the only firm that had made an application to the Beijing Financial Assets Exchange by the August 25 deadline to bid for NCB, which is being sold by BOCHK for an asking price of HK$68 billion.
Cinda was launched by the central government more than 15 years ago to help digest an overload of bad debt in the Chinese banking system, earning it and three other peers the title "bad bank". The firm's primary line of business was still distressed debt management, adding to some concern at Moody's over how the bank would be used.
Nanyang has a baseline credit assessment of Baa1 but that could come under fire if the buyout changed the bank's current business model, Moody's said.