Moody’s raises outlook of ABC financial vigor
Moody’s Investors Service yesterday raised the outlook on the financial strength rating of Agricultural Bank of China to “positive” from “stable” after the lender secured a US$19 billion government capital injection.
This rating upgrade follows the State Council’s approval for the bank’s restructuring which prepares the way for its eventual listing, Moody’s said. The bank is rated “E” — the second lowest level — by the rating firm.
The Beijing-based bank received a capital injection of US$19 billion from an arm of the China Investment Corporation, the country’s sovereign wealth fund.
The lender is also allowed to shed its 800 billion (US$117 billion) of non-performing loans from its balance sheet at face value.
“The change in outlook on the bank’s financial strength rating reflects the fact that the pending restructuring will raise the bank’s economic solvency,” said Richard Lung, a Moody’s senior analyst. “In particular, the transfer of most of the bank’s bad loans to a new fund will reduce the need for it to continue relying on external support.”
But it ”remains to be seen wether this proposed bailout will set it on the path to become a stronger financial entity,” Lung said.
The bank is the third largest lender in the country with U$892 billion in assets as at the end of 2007. It is the last of the country’s state-owned big four banks to embark on a listing path.
The bank’s role is particularly important in rural areas as it focuses heavily on the agricultural sector.
Tags: ABC, Agricultural-Bank-of-China, bank, China Financial