China CITIC Bank International is showcasing a robust ability to weather the ongoing challenges in Hong Kong’s sluggish property market, as reported by Moody’s. The bank is expected to uphold its solid asset quality, strong capital base, and excellent liquidity throughout the next 12 to 18 months.
Property Development Exposure
At the close of 2024, the bank’s exposure to property development and investment in Hong Kong represented 13% of its total gross loans. Fortunately, these loans are considered low-risk due to the strong profiles of the borrowers and conservative loan-to-value ratios. This strategic positioning could provide breathability in unavoidable market fluctuations.
Improved Loan Metrics
Moody’s highlights that the bank has actively reduced its exposure to mainland Chinese developers, which has been bolstered by enhanced provisioning. The impaired loan ratio also showed improvement, dropping from 2.3% in 2023 to 2.1% in 2024.
Solid Capitalization and Liquidity
Capitalization remains robust, backed by moderate internal capital generation alongside controlled growth in risk-weighted assets. With a liquidity coverage ratio of 200% in Q1 2025—well above the regulatory minimum of 100%—the bank’s liquidity position appears to be nothing short of impressive, like an Olympic gymnast.
Deposit Growth and Profitability Outlook
Total deposits for the bank surged by 9% in 2024, with current and savings account deposits climbing to 27% of total deposits, up from 25% the previous year. However, profitability in 2025 may face headwinds as the narrowing net interest margin (NIM)—which slipped slightly to 1.79% in 2024—will likely exert pressure on earnings. Nevertheless, the bank expects some relief from increased fee and commission income.
Financial Resilience and Future Prospects
While CITIC Bank International leans moderately on wholesale funding, its overall liquidity framework indicates resiliency. Steady deposit growth complemented by high-quality liquid assets has fortified the bank’s financial health. The bank continues to rely significantly on its parent company, CITIC Bank, and Moody’s foresees continued indirect support from the Chinese government, albeit not universally across all liability classes.
An analysis of Loss Given Failure reveals a low to moderate risk across most liabilities. However, the recent redemption of US$500 million in Tier 2 subordinated debt has heightened the potential severity of losses for some instruments.
Questions & Answers
What percentage of gross loans does the bank have exposed to property development in Hong Kong?
At the end of 2024, China CITIC Bank International’s exposure to property development and investment in Hong Kong accounted for 13% of its gross loans.
How did the bank’s impaired loan ratio change in 2024?
The impaired loan ratio improved to 2.1% in 2024, a decrease from the 2.3% reported in the previous year.
What is the outlook for the bank’s profitability in 2025?
Profitability is anticipated to be pressured in 2025 due to a narrowing net interest margin, although increased fee and commission income may provide some relief.
