Dah Sing Bank shows solid capitalisation, funding and liquidity: Moody’s

The bank has a stable outlook due to its capability to maintain strong credit profiles, including solid capitalisation, funding, and liquidity.

Hong Kong’s Dah Sing Bank will improve asset quality and profitability in the next 12-18 months amidst steady economic recovery in Hong Kong, mainland China, and Macau, according to Moody’s.

The credit rating agency said the bank has a stable outlook due to its capability to maintain strong credit profiles, including solid capitalisation, funding, and liquidity.

The bank's impaired loan ratio rose to 1.8% by the end of 2022 from 0.9% in 2021, primarily due to impaired loans from Chinese real estate developers.

However, Moody's anticipates an improvement in the bank's asset quality as Hong Kong's economy recovers. This is because the bank has a significant amount of lending to small and medium-sized enterprises (SMEs) and unsecured consumer loans in Hong Kong, which are more influenced by economic fluctuations.

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Despite challenging global economic prospects, the bank has maintained satisfactory capital adequacy in recent years by restraining its asset and business expansion.

As of the end of 2022, its consolidated tangible common equity (TCE) to risk-weighted assets (RWA) stood at 16.7%, slightly higher than the 16.5% in 2021 and 16.3% in 2020.

Moody's anticipates modest growth in RWA over the next 12-18 months as loan growth in the mid to low single-digit percentage range is expected due to the recovery of economic growth in Hong Kong and Macau.

Dah Sing Bank demonstrates strong liquidity and a limited dependence on confidence-sensitive wholesale funding. However, its deposit market share in Hong Kong is relatively small, standing at around 1.3% as of the end of 2022, compared to other Hong Kong banks rated by Moody's.

Moody's foresees no significant deterioration in Dah Sing Bank's liquidity and funding from its current levels.

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