NIM to offset China CITIC Bank elevated credit costs: Moody’s

The reopening of mainland China will drive sales of wealth management and insurance products.

China CITIC Bank is expected to keep a stable financial profile in the next 12 to 18 months due to its strong liquidity, Moody’s said in a report.

This could alleviate the pressure from moderate asset quality and weak profitability.

In terms of profitability, Moody's expects CITIC Bank International to maintain a relatively stable performance, with a return on average assets at the 0.5% level in 2023. 

This will be supported by wider net interest margins and growth in non-interest income, which will help offset the elevated credit costs. 

The bank's net interest margins will benefit from an improvement in loan yields that outpaces the increase in deposit costs. 

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Furthermore, the reopening of mainland China will drive sales of wealth management and insurance products.

The bank's junior capital instruments provide protection, keeping expected losses for deposits low in case of failure. 

Additionally, the bank's strategic significance to its parent company, CITIC Bank, will remain unchanged.

Moody's anticipates the bank will face continued pressure on its asset quality due to its exposure to mainland property developers. 

This has led to a weakened impaired loan ratio, increasing from 0.9% at the end of 2021 to 1.7% at the end of 2022.