On 9 August, China Banking Regulatory Commission (CBRC)’s official website quoted Moody’s 2006 Outlook for Chinese banking system.

The rating results show that Shanghai Pudong Development Bank(SPDB), Bank of Communications and the China Merchant Bank enjoy relatively higher financial strength among all domestic banks with a D rate. Coming next are Bank of China, China Construction Bank and Everbright Bank with a rating of D-. Industrial and Commercial Bank of China, Shenzhen Development Bank and Guangdong Development Bank get E+ and Agricultural Bank of China gets E.

The weighted average rating for all Chinese banks is E+, the lowest in Moody’s ratings worldwide. Moody’s observes that although many Chinese banks have improved their financial position after introduction of strategic investors, their capital strength, bad loan provision and profitability still stand at low level. Publicly listed banks face agreat pressure of credit expansion. In addition, the tightening policy recently adopted by the Chinese government may result in a higher NPL ratio among the banks. In 2006, the NPL ration (except for written-off loans) of Chinese banks rose by 16.9% over the last year. To change this, the commercial banks have to transform their business model and promote service innovation in order to achieve more diversified income.