Fitch Ratings has affirmed Industrial and Commercial Bank of China Limited, Panama Branch (ICBC Pan) Long- and Short-Term Issuer Default Ratings (IDR) at 'A' and 'F1+', respectively.

Fitch has also affirmed the Long- and Short-Term ex-government support (xgs) ratings at 'BBB(xgs)' and 'F3(xgs)'. The Rating Outlook remains Stable. A full list of rating actions follows at the end of this release.

Key Rating Drivers

Issuer Ratings Equalized with Head Office's Ratings: ICBC Pan's ratings reflect its status as a branch of ICBC. It is part of the same legal entity (ICBC), with which the branch is fully integrated. The agency states that Panama's country risks do not translate in any transfer and convertibility restrictions that would affect deposits and other liabilities booked at the branch.

International Operations: ICBC Pan intends to increase ICBC's footprint in Latin American (LatAm) markets, focusing on selected countries. As of YE 2023, most loan exposures are in Brazil, followed by Peru, Chile, Colombia, Panama, Uruguay, Mexico and Argentina, concentrating in corporate clients of relatively low risk. The branch benefits from synergies generated via client referencing from the four ICBC subsidiaries based in other LatAm jurisdictions. As of YE 2023, its total operating income was USD13.5 million, comparing well below other corporate-focused banks in the Panamanian market.

Good Asset Quality: Fitch expects ICBC Pan's sustain a good asset quality given the robust profile of its clients and despite high debtor concentration. Also, in line with HQ's guidelines, loan loss allowances over impairments would be high and above the Panamanian banking system average.

Concentrations will be high in every respect in the foreseeable future and will only be reduced in the medium to long term; Fitch believes this risk is properly assessed and mitigated by the capital support the branch receives from its Head Office. Fitch does not foresee material changes in the bank's securities portfolio due to the HQ mandate to invest in local sovereign-backed securities. As of YE 2023, total securities comprised around 17% of total assets (2022: 18%).

Low Operating Profitability: Fitch believes that ICBC Pan's profitability metrics will remain relatively low in the predictable future, nevertheless, the entity reached its breakeven point in 2023 and continues to record positive retained earnings. As of YE 2024, operating profit over average total assets was of 0.6%. Once a more mature stage of business development is reached profitability would align with niche corporate banks.

Capitalization Supported by Headquarters: The agency believes the branch will remain well capitalized as its policies indicate that total equity should remain at around 5x over the regulatory minimum of USD10 million. The branch uses profits to keep in compliance with this while using the excess as working capital. As of YE 2023, tangible equity over tangible assets was 2.5%, low compared to stand-alone institutions in the market.

Ample Funding Structure and High Liquidity: ICBC Pan benefits from an adequate number of funding lines from its HQ and subsidiaries based in various jurisdictions plus three credit lines from a local Panamanian bank, and two others from Chinese banks. Deposit taking comes from ICBC's Vietnamese office only and is expected to grow in customers in the short to medium term since filing is still in process. Liquidity remains high, as of YE 2023, liquidity coverage ratio (LCR) stood around 218% while liquid assets represent around 20% of total assets.

Branch xgs Ratings Aligned with ICBC's: The xgs ratings of ICBC Pan are aligned with those of ICBC, which reflects its status as a branch of the latter.

Rating Sensitivities

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

A downgrade of ICBC's IDRs could drive down ICBC Panama Branch's ratings;

A downgrade of Panama's Country Ceiling could have negative impacts in the ICBC Panama Branch's Foreign Currency IDR;

The Long-Term and Short-Term IDRs (xgs) of ICBC Pan would be downgraded if the IDRs (xgs) of Industrial and Commercial Bank of China are downgraded.

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

ICBC Panama Branch's IDRs would mirror any positive change in ICBC's IDRs.

The Long-Term and Short-Term IDRs (xgs) of ICBC Pan would be upgraded if the IDRs (xgs) of Industrial and Commercial Bank of China are upgraded.


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

Public Ratings with Credit Linkage to other ratings

ICBC Pan's ratings are derived from the ratings of its head office Industrial and Commercial Bank of China Limited.

(C) 2024 Electronic News Publishing, source ENP Newswire