Bank of China

Dah Sing's credit rating under pressure over payout deal

PUBLISHED : Saturday, 25 July, 2009, 12:00am
UPDATED : Saturday, 25 July, 2009, 12:00am

Standard & Poor's ratings service has put Dah Sing Bank's credit rating on CreditWatch, with negative implications after a group of banks in Hong Kong agreed to a compensation deal to repay Lehman Brothers minibonds investors.

Dah Sing's long-term unsolicited rating is BBB-plus.

The ratings agency said the move reflected its view that Dah Sing's weakened profitability was likely to come under further pressure from potential losses related to its proposed payout for the minibonds.

'Together with an expected deterioration in Dah Sing Bank's loan quality, the proposed repurchases could further undermine Dah Sing's credit profile,' Standard & Poor's said.

Dah Sing Bank estimated its share of the compensation at about HK$464 million.

Standard & Poor's affirmed Bank of China (Hong Kong)'s A-minus long-term rating, despite HK$3.1 billion to be paid in the minibond payout, due to its strong market position, solid capitalisation and good asset quality.

The agency also said the ratings of Bank of East Asia and Fubon Bank (Hong Kong) were not affected by their proposed payout for the minibonds. ICBC (Asia) estimated its compensation payout would cost it HK$88.75 million.