S&P AFFIRMS RATINGS ON HK BANKS, OUTLOOKS TO NEGATIVE
TOKYO, March 22 /PRNewswire/ -- Standard & Poor's today affirmed its ratings on the following Hong Kong financial institutions: Dao Heng Bank Ltd., International Bank of Asia, GE Capital Finance Ltd., and Hong Kong & Shanghai Banking Corp. The outlooks on the long-term ratings of the first three banks were revised to "negative" from "stable". Hong Kong & Shanghai Banking's short-term rating, for which an outlook is not applicable, is not affected (please see ratings list below).
The outlook revisions reflect a more difficult operating environment resulting from a slowdown in Hong Kong's economy and heightened systemic risks in the local market. The general market trend is likely to adversely affect the financial performances of all banks within the system, though to varying degrees. Increased volatility in the local property and stock markets, rising unemployment, higher debt-servicing costs, and a subdued retail sector have negative implications for the banking system's asset quality and profitability over the near term. Rapid loan growth and sharp rises in asset prices have further increased the banks' vulnerability to an economic slowdown. In addition, the pricing structure of local banks exposes them to changes in the spread between the prime rate and HIBOR. This was particularly evident in the fourth quarter of 1997, when the banks experienced negative spreads. Standard & Poor's expects most banks will report satisfactory profit growth for 1997, primarily as a result of robust market conditions during the first six months; pressures experienced by the banks in the latter part of the year are not likely to be fully reflected.
Over the near term, a more challenging operating environment is likely to dampen the performance of financial institutions in Hong Kong. Standard & Poor's expects the banks' past strong profits and earnings retention as well as their high levels of capital to cushion the anticipated downturn. Nevertheless, a prolonged economic deceleration, a precipitous drop in property prices, further tightening of liquidity, renewed interest-rate volatility, and diminished market confidence could lead to a downward revision in the banks' ratings, Standard & Poor's said.
RATINGS AFFIRMED; OUTLOOKS REVISED TO FROM Dao Heng Bank Ltd. Counterparty credit rtg BBB+/Negative/A-2 BBB+/Stable/A-2 CDs BBB+/A-2 BBB+/A-2 Sub debt BBB BBB International Bank of Asia Counterparty credit rtg BBB/Negative/A-3 BBB/Stable/A-3 CDs BBB/A-3 BBB/A-3 GE Capital Finance Ltd. Counterparty credit rtg A+/Negative/A-1 A+/Stable/A-1 CDs A+/A-1 A+/A-1 Sr unsecd A+ A+ Sub debt A A Hongkong & Shanghai Banking Corp. Counterparty credit rtg --/--/A-1+ --/--/A-1+ CDs --/A-1+ --/A-1+
SOURCE Standard & Poor's Rating Services
-0- 03/22/98 /CONTACT: Wayne K Gee of Standard & Poor's, New York, 212-208-1683/ /Web site: http://www.ratings.standardpoor.com/ CO: Dao Heng Bank Ltd; International Bank of Asia; GE Capital Finance Ltd.;
Hongkong & Shanghai Banking Corp. ST: IN: FIN SU: RTG
-0- (PRN) Mar/22/1998 22:59
EOS (PRN) Mar/22/98 22:59 86 â -0- (PRN) Mar/22/98 23:14