Small Banks' Credit Rating Shows Polarization, Capital Strength Becomes the Main Driver for Upgrades, while Downgraded Banks Share Common Problems
According to incomplete statistics from Blue Whale News, nearly 10 small banks have received credit rating upgrades, with many of them entering the AAA highest rating sequence. However, there are also multiple banks that have been downgraded, showing a polarized situation in small bank credit ratings.
Blue Whale News reported on August 7th (Reporter: Jin Lei) that in recent two months, multiple reports on small bank credit ratings have been released. According to Blue Whale News' incomplete statistics, nearly 10 small banks have received credit rating upgrades, with many of them entering the AAA highest rating sequence. However, there are also multiple banks that have been downgraded, showing a polarized situation in small bank credit ratings.
Under the background of promoting reform and innovation for small financial institutions, some small banks face high asset risks, poor profitability, and other issues, making "reduction and improvement" a trend for small bank development.
Capital strength becomes the main driver for upgrades
Looking at the reasons for the upgrades, it is generally benefited from completing capital increase or receiving local government support to strengthen capital resources, as well as regional economic development factors.
Among the banks that received upgrades, Hankou Bank and Qinhuangdao Bank both completed capital increases last year. Dayun Bank increased its capital by 4.5 billion yuan through profit conversion, while Wuhan Agricultural Commercial Bank was approved to issue up to 7.71 billion shares of directed stocks.
A report from Dadi International on Qinhuangdao Bank noted that the bank's credit rating is expected to be upgraded due to its important influence on regional economic and social development as well as financial market operations, which may receive local government support in the future.
The joint credit rating report by United Credit Rating believes that Hankou Bank's capital increase and expansion of shares have further improved the proportion of state-owned shareholders, enhancing their willingness to support the bank's main business development and providing certain advantages in client channels and other areas.
Shaoxing Bank completed a significant share transfer last year, with its state-owned shareholders' stake increasing from 57.47% to 66.94%. Its capital structure has been further optimized, and its credit rating was upgraded to AAA. Shaoxing City Government will steadily increase the city's bank's state-owned stake while actively seeking provincial government special bond funds.
After Sichuan Bank acquired a 40.92% stake in Changjiang Commercial Bank, the latter's credit rating was also upgraded. The bank may gain strong support in sharing client resources, enhancing its market image, and building brand effects, which may further improve its competitiveness.
CSCG gave Jiangsu Changjiang Commercial Bank a credit rating report, stating that the bank's loan assets are dispersed, with overall asset quality good; net interest margin is high, and cost-income ratio continues to decline, indicating strong profitability. The proportion of deposit and time deposits has continuously increased, reducing liquidity control pressure.
United Credit Rating upgraded Wuhan Agricultural Commercial Bank's credit rating to AAA. The report notes that the bank has a favorable development space for its operating region, with a continued increase in its market share, and its credit business maintains a good development trend.
Downgraded reasons share common characteristics, "reduction and improvement" becomes a trend
At the same time, there are also multiple agricultural commercial banks that have been downgraded.
Recently, CSCG downgraded Chongde Agricultural Commercial Bank's credit rating from AA- to A+, while its subordinated debt rating was lowered from A+ to A. The main factors for this downgrade include a significant increase in non-performing loan rates, attention to category loans, overdue loans, and defective loans that occupy a high proportion of assets, resulting in pressure on asset quality; secondly, profitability has sharply declined; lastly, the bank's capital adequacy ratio is lower than regulatory requirements, with capital replenishment pressure.
Excluding Chongde Agricultural Commercial Bank, Yujiang Agricultural Commercial Bank and Huaxi Agricultural Commercial Bank have also been downgraded by rating agencies in recent years. These downgraded banks share common problems, such as declining asset quality, poor profitability, etc.