New | China’s CITIC Securities and offshore arm downgraded by S&P on negative outlook
Declining credit profile by CITIC more than offsets possible government support, analysts say
Standard & Poor’s Ratings Services downgraded CITIC Securities and its core subsidiary CITIC Securities International because a police investigation of senior executives and a regulatory probe into the firm’s compliance practices “has significantly undermined” the business of both firms.
It is the first time S&P placed a “negative outlook” over CITIC and its overseas core unit CSI, after mainland Chinese authorities opened a probe into the company.
“The unexpected senior management reshuffle and the revealed gap in compliance practises among CITICs’ top managers suggest significant challenges for its business operations. These factors constrain the company’s otherwise very strong business position,” said the S&P report.
“In addition, CITIC may be liable to regulatory fines and sanctions if the Chinese authorities find the company to be partially responsible for any wrongdoings of the senior managers in police custody.”
“The negative outlook for the next 24 months reflects our view that heightened industry risk in China’s securities market could still pressurise CITICs’ credit profile. That’s despite the company’s solid capital buffer to cushion rising credit risks in the economy and possible financial fallouts from ongoing regulatory investigations.”
CITIC Securities Co. Ltd. (CITICS) and its core subsidiary CITIC Securities International Co.
Ltd. (CSI) were downgraded to ‘BBB’ from ‘BBB+’ in its long-term issuers’ credit rating.