Fitch Ratings has assigned an expected rating of 'A(EXP)' to Bank of China Limited's (BOC, A/Negative/bbb) proposed senior unsecured notes to be issued by its Johannesburg branch under its USD40 billion medium-term note (MTN) programme.

The proposed notes will be listed on the Hong Kong Stock Exchange. Net proceeds will be used for general corporate purposes. The issue amount and maturity structure will be finalised on settlement. The final rating is contingent upon the receipt of final documents conforming to the information already received.

Key Rating Drivers

BOC's Johannesburg branch is part of the same legal entity as BOC. Therefore, the proposed notes will represent BOC's direct, unconditional, unsecured and unsubordinated obligations. The notes are rated in line with BOC's Long-Term Issuer Default Rating (IDR). BOC's IDR is underpinned by Fitch's expectations of a very high probability of support from the Chinese sovereign (A+/Negative) in the event of stress. Key rating drivers and sensitivities for BOC can be found at Fitch Affirms Bank of China at 'A'; Outlook Negative.

The 'A(EXP)' rating assigned to the proposed notes is higher than South Africa's 'BB' Country Ceiling, as the notes are underpinned by our expectation of full support from BOC's headquarters, if required. We regard the likelihood of BOC, as a state-owned bank, allowing a default on the notes issued by its Johannesburg branch to be remote, even in the event of transfer and convertibility (T&C) restrictions being imposed on the branch by South African authorities. We believe a default would bring substantial reputational damage to BOC. In addition, the listing on the Hong Kong Stock Exchange could reduce the risk of T&C restrictions impacting the group's ability to pay.

We expect the targeted investor base for these proposed notes to typically be based outside of South Africa, and we are not aware of any meaningful restrictions on how these notes are to be repaid.

We expect BOC to utilise resources from within its global branch network to meet obligations should the Johannesburg branch be unable to do so. BOC's resources outside South Africa are sufficiently large, such that its ability to honour the obligations is commensurate with its propensity to do so. Therefore, our view is that the 'BB' Country Ceiling, which captures T&C risk in South Africa, does not constrain the rating assigned to the notes issued by BOC's Johannesburg branch.

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

The expected rating on the proposed notes would be downgraded if BOC's Long-Term IDR is downgraded. The proposed notes may also be downgraded if we believe there is a reduced propensity or intrinsic ability by BOC to utilise resources from its global branch network to honour obligations due to noteholders in the event of T&C restrictions being imposed.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

The expected rating on the proposed notes would be upgraded if BOC's Long-Term IDR is upgraded.

OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS

We have assigned an expected senior unsecured long-term rating (xgs) of 'BBB (xgs) (EXP)' to the proposed notes, in line with BOC's Long-Term IDR (xgs), which is in turn aligned with the bank's Viability Rating.

OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

A downgrade of the bank's Long-Term IDR (xgs) would lead to a downgrade of the expected senior unsecured long-term rating (xgs).

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

An upgrade of the bank's Long-Term IDR (xgs) would lead to an upgrade of the expected senior unsecured long-term rating (xgs).

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

The ratings on the proposed notes issued by BOC's Johannesburg branch are equalised with BOC's Long-Term IDR and Long-Term IDR (xgs).

ESG Considerations

BOC has an ESG Relevance Score of '4' for Financial Transparency, as there are still structural issues around financial transparency and disclosure. These are not captured in headline performance metrics in China and affect our assessment on the operating environment as well as the financial profile. This negatively affects the bank's credit profile and is relevant to the rating in conjunction with other factors.

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, www.fitchratings.com/topics/esg/products#esg-relevance-scores

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