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Moody's revises outlook on Bank of Nanjing, affirms ratings

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Moody's revises outlook on Bank of Nanjing, affirms ratings

Moody's revised its outlook on Bank of Nanjing Co. Ltd. to stable from negative, while affirming the lender's ratings.

The rating agency said in a Dec. 1 report that it affirmed the bank's long- and short-term deposit ratings at Baa3 and P-3, respectively, and its counterparty risk assessment at Baa3(cr)/P-3(cr). The baseline credit assessment and adjusted BCA were affirmed at "ba2."

Moody's said the ratings affirmation is driven by stabilization of the bank's asset quality since the second half of 2016; expected improvements in capital levels, based on its proposed private placement; and a relatively stable liquidity profile. Under the proposed share sale, the bank seeks to raise 14 billion Chinese yuan to replenish its core Tier 1 capital.

The affirmation also takes into account Moody's assumption of a high level of government support for the bank when needed.

The rating agency further noted that Bank of Nanjing's rapid loan growth in the previous two years has exposed it to unseasoned risks. Its liquidity management is also challenged by its large exposure to investments in loans and receivables, and off-balance-sheet wealth management products, while its profitability will be strained by increasing interbank funding costs and pressures on non-interest income.

As of Dec. 1, US$1 was equivalent to 6.62 Chinese yuan.