4/4/2018/Fitch Ratings

Fitch Ratings has assigned an expected ‘A(EXP)’ rating to Bank of China Ltd.’s (BOC, A/Stable) proposed long-term senior unsecured notes to be issued under its medium-term note (MTN) programme. The bank plans to issue various notes denominated in US dollars, Australian dollars, British pound, and euros from its branches in Singapore, Sydney, London, and Luxembourg with fixed and floating rates.

The notes will be issued under BOC’s USD40 billion MTN programme and will be traded on the Hong Kong Stock Exchange, London Stock Exchange and Luxembourg Stock Exchange.

Fitch first rated BOC’s MTN programme ‘A’/’F1’ on 9 December 2013, which was subsequently affirmed on 23 May 2017. The programme’s size was increased from USD30 billion to USD40 billion in April 2018 to meet the bank’s funding needs. The programme rating is not affected by the increase in size as the gain is small relative to BOC’s total assets.

The proceeds will be used for general corporate purposes. The maturity structure will be finalised upon settlement. The final rating is contingent upon the receipt of final documents conforming to the information already received.

KEY RATING DRIVERS
The branches in Singapore, London, Sydney, and Luxembourg are part of the same legal entity as BOC. Therefore, the notes to be issued under the MTN programme represent BOC’s direct, unconditional, unsecured and unsubordinated obligations and are rated in line with its Long-Term Issuer Default Rating (IDR) of ‘A’/Stable. The bank’s IDR is underpinned by the agency’s expectations of an extremely high probability of support from the Chinese sovereign (A+/Stable) in the event of stress.

RATING SENSITIVITIES
Any change to the proposed notes’ rating will be correlated directly with changes in BOC’s IDR, which will in turn reflect any shift in the perceived willingness or ability of the government to support the bank in a full and timely manner.