Credit Rating Report Postal Savings Bank of China Co., Ltd

S&P Ratings (China) Co., Ltd. www.spgchinaratings.cn October 12, 2021

Credit Rating Report

Postal Savings Bank of China Co., Ltd. Issuer Credit Rating*: AAAspc; Outlook: Stable

October 12, 2021

Analysts:

Yifu Wang, CFA, CPA: +86-10-6516-6064; [email protected]

Zheng Li, FRM: +86-10-6516-6067; [email protected]

Xuefei Zou, CPA: +86-10-6516-6065; [email protected]

Contents

Tear Sheet ........................................................................... 2 Rating Summary .................................................................. 3 Macro-Economic and Industry Trends ................................ 4 Business Position ................................................................ 4 Capital and Earnings ........................................................... 9 Risk Position ...................................................................... 13 Funding and Liquidity ........................................................ 16 External Support ............................................................... 19 Appendix 1: Key Financial Data ......................................... 20 Appendix 2: Peer Comparison Data ................................... 21 Appendix 3: Rating History of PSBC .................................. 22

* This rating is an Issuer Credit Rating (ICR). An ICR reflects our view of the senior unsecured credit

rating of an issuer and is not specific to an individual issuance that it may issue.

S&P RATINGS (CHINA) CO., LTD. (SP CHINA) RATINGS ARE ASSIGNED ON A RATING SCALE THAT IS

DISTINCT FROM THE S&P GLOBAL RATING SCALE. AN S&P CHINA RATING MUST NOT BE EQUATED WITH

OR REPRESENTED AS A RATING ON THE S&P GLOBAL RATINGS SCALE.

The credit rating(s) presented in this report is (are) valid from the rating date set out in this report, until

and unless we make any further updates. During this effective period, S&P Ratings (China) Co., Ltd.

shall monitor the credit quality of the rated entity on an ongoing basis, periodic surveillance shall be

conducted at least once on an annual basis. If there are any material credit events, we will conduct ad-

hoc surveillance and publish the surveillance rating outcome promptly.

This document is prepared in both English and Chinese. The English translation is for reference only,

and the Chinese version will prevail in the event of any inconsistency between the English version and

the Chinese version.

https://spgi.sharepoint.cn/sites/Emerald/DocLib1/20.%E9%A1%B9%E7%9B%AE%E6%B5%81%E7%A8%8B%E7%B3%BB%E7%BB%9F/%E9%87%91%E8%9E%8D%E6%9C%BA%E6%9E%84%E7%B1%BB%E9%A1%B9%E7%9B%AE/%E6%B3%B8%E5%B7%9E%E9%93%B6%E8%A1%8C%E8%82%A1%E4%BB%BD%E6%9C%89%E9%99%90%E5%85%AC%E5%8F%B8/FS-IRC-2019-000003/%E5%B7%A5%E4%BD%9C%E6%96%87%E4%BB%B6/0728luzhoubank/www.spgchinaratings.cn

mailto:[email protected]

Credit Rating Report: Postal Savings Bank of China Co., Ltd. October 12, 2021

S&P Ratings (China) Co., Ltd. www.spgchinaratings.cn 2

Tear Sheet

Company Name Rating Type Current Rating Rating Date Outlook/Credit Watch

Postal Savings Bank of China Co., Ltd. Issuer Credit Rating AAAspc October 12, 2021 Stable

t

Rating Snapshot

Anchor bbb+

Business Position +2

Capital and Earnings 0

Risk Position +1

Funding and Liquidity +2

Stand-alone Credit Profile aaspc

Government Support +2

Issuer Credit Rating AAAspc

Outlook Stable

Business Position: PSBC is China’s fifth largest bank by assets, and the fourth largest by retail deposits. Its outlets cover 99% of China’s counties, and its retail customers account for about 45% of China’s total population.

Capital and Earnings: PSBC has sufficient capital and healthy profitability, but the fast growth of its loan book will continue to be capital-intensive. We expect its capital to remain sufficient and consistent with the industry average, and its profitability to improve as COVID-19-related pressure eases.

Risk Position: PSBC’s asset quality metrics remain better than the industry average and its mega bank peers. We believe COVID’s impact on its asset quality is limited. Furthermore, it has a strong reserve buffer to cushion any further asset quality pressure.

Funding and Liquidity: Thanks to its extensive retail deposit network, PSBC has a very solid and sticky retail deposit base, and its use of wholesale funding is very limited. Therefore, its funding and liquidity profile is much better than the industry average.

External Support: We believe that PSBC is extremely likely to receive central government support in times of need, considering its status as a state-owned mega bank, its strong retail franchise, and its important role in providing banking access to rural and remote areas in China.

Note: this chart serves as a hypothetical example of S&P Global (China) Ratings’ rating distribution of financial institutions. Ratings below [AAAspc] can be adjusted by “+” and “-”.

PSBC

[AAAspc] [AAspc] [Aspc] [BBBspc] [BBspc] [Bspc] orLower

PSBC's Relative Issuer Credit Rating Position Among Financial Institutions

In China

Industry Classification: Commercial Bank Company Overview: Postal Savings Bank of China Co., Ltd. (“PSBC”) is one of the six state-owned mega banks in China. It is a leading retail bank in China and plays a very important role in providing banking access to rural and remote areas across the country by using China’s postal network. As of the end of June 2021, it reported total assets of about 12 trillion RMB, ranking fifth among China’s commercial banks.

Economy and Industry Trends: China is recovering from the slowdown in economic growth caused by COVID-19. As consumption growth continues to pick up, there is no sign yet that investment and net exports are flaming out. However, the overall nature of the recovery has been unbalanced. Large parts of the manufacturing sector are operating at or above capacity while other industries such as personal services and tourism are still facing weak demand. Despite potential tailwinds such as a tightening policy environment, we expect full-year economic growth of 8% for 2021 as the economy continues to gradually rotate towards private consumption, a necessary step if growth is to maintain momentum.

We believe that the overall credit outlook for commercial banks in China will remain stable because of on-going government support and the strong economic recovery. China’s commercial banking sector reported stable capital and asset quality metrics in 2020 and the first half of 2021, but we continue to expect pressure on credit cost and profitability going forward. State-owned mega banks are expected to maintain stable capitalization and resilient profitability, while smaller banks are under more pressure. Therefore, we believe the stand-alone credit profiles of commercial banks are likely to show greater differentiation in the foreseeable future. We believe the overall credit profiles of banking sector will remain stable due to enhanced supervision and strong government support.

Credit Highlights: As one of China’s six state-owned mega banks, PSBC is one of the country’s leading retail banks. It is China’s fifth largest bank in terms of both assets and deposits, and the fourth largest in terms of retail deposits. It has a unique “directly-operated outlets and agency outlets” arrangement with China Post Group, and it covers 99% of China’s counties. The bank’s asset quality metrics are better than those of its mega bank peers and the industry average. Its solid and sticky retail deposit base makes the bank’s funding structure more stable than the industry average. PSBC is indirectly owned by the central government through its parent China Post Group, which is 90% owned by China’s Ministry of Finance. We believe the possibility of PSBC receiving central government support in times of stress is extremely high.

Key Metrics of PSBC 2017 2018 2019 2020 2021.06

Total assets (bil) 9,013 9,516 10,217 11,353 12,217

Customer deposits (bil) 8,063 8,627 9,314 10,358 10,914

Net income (bil) 48 52 61 64 41

Reported regulatory capital adequacy ratio (%)

12.51 13.76 13.52 13.88 14.32

Reported Return on average equity (%) 13.07 12.31 13.10 11.84 13.30

Non-performing loans ratio (%) 0.75 0.86 0.86 0.88 0.83

Reserve coverage ratio (%) 324.77 346.80 389.45 408.06 421.33

Customer deposits/total liabilities (%) 93.96 95.43 96.30 96.98 95.18

Source: PSBC, collected and adjusted by S&P Global (China) Ratings.

Cash and Balances with Central Bank

11%

Customer Loans49%

Credit to FIs5%

Financial Investments

34%

Other Assets1%

Asset Breakdown as of the End of 2020

Customer Deposits

97%

Wholesale Funding

2%

Other Liabilities

1%

Liability Breakdown as of the End of 2020

Peer Group Comparison (The peer group is the six state-owned mega banks in China, including PSBC, ICBC, CCB, ABC, BOC and BoCom.)

(2018-2020 three-year average) PSBC Max Min Average Asset-weighted

average Median

Total assets (bil) 10,362 30,385 10,045 20,683 23,586 23,855

Customer deposits (bil) 9,433 23,174 6,158 15,363 17,515 17,278

Net income (bil) 59 310 59 187 221 205

Reported regulatory capital adequacy ratio (%) 13.72 17.26 13.72 15.61 15.97 15.77

Return on average equity (%) 11.36 12.69 10.19 11.53 11.76 11.54

Non-performing loans ratio (%) 0.87 1.55 0.87 1.39 1.44 1.50

Reserve coverage ratio (%) 381.43 381.43 162.92 232.37 221.92 200.90

Customer deposits/total liabilities (%) 96.24 96.24 66.54 80.76 80.85 81.07

Note: Public data of peer banks, collected and adjusted by S&P Global (China) Ratings.




Rating Summary

Company Name Rating Type Current Rating Rating Date Outlook/CreditWatch

Postal Savings Bank of China Co., Ltd. Issuer Credit Rating AAAspc October 12, 2021 Stable

Stand-alone Credit

Profile (SACP) aaspc + External Support +2 Issuer Credit Rating (ICR)

Anchor bbb+

Government Support +2

AAAspc / Stable

Business Position +2

Capital & Earnings 0

Risk Position +1

Funding & Liquidity +2

Holistic Adjustment 0

Credit Highlights

Strengths Weaknesses

It is of critical importance to the central government, and extremely likely to receive government support in times of stress.

It has a relative short track record of loan lending business compared to peers, and its lending business franchise is smaller than other mega banks.

Taking advantage of China’s postal network, PSBC is a leading retail deposit taker in China and thus enjoys a retail deposit-dominated funding structure which is significantly more stable than the industry average.

Its operational cost is higher than the industry average because it maintains an extensive network in rural and remote areas.

Its asset quality metrics are the best among its mega bank peers and better than the industry average.

Rating Outlook The stable outlook reflects our expectation that PSBC’s business operations and financial strength will remain stable over the next two years or beyond. We also anticipate that its critical importance to the central government will remain stable.

Downside Scenario: We may consider lowering its issuer credit rating (“ICR”) if we believe that the bank’s importance to the central government has declined, which is highly unlikely in our view. We may also consider lowering its stand-alone credit profile (“SACP”) if the bank fails to effectively manage the credit risk of its lending business, resulting in a significant deterioration of asset quality metrics, or if its capital adequacy ratios can no longer meet minimum regulatory requirements and there is no plausible plan for immediate and effective remediation.

Upside Scenario: We may consider raising its SACP if its capital adequacy ratios rise significantly above the industry average and its management is committed to maintaining its capitalization high on a sustainable basis.

Related Methodologies, Models & Research Methodology Applied:

― S&P Global (China) Ratings Financial Institutions Methodology.

― S&P Global (China) Ratings General Considerations on Rating Modifiers and Relative Ranking.

Model Applied: None.


https://www.spgchinaratings.cn/criteria/financial-institutions_en

https://www.spgchinaratings.cn/criteria/commentary_general-considerations-on-rating-modifiers-and-relative-ranking



Considering the economic risk and industry risk faced by China’s commercial banking industry, we typically apply an anchor of “bbb+” to commercial banks in China.

PSBC is China’s fifth largest commercial bank by assets, and the fourth largest by retail deposits.

It has the most extensive retail deposit-taking network in rural and remote areas, covering 99% of Chinese counties.

We apply a two-notch upward adjustment for its business position to reflect its large asset size and very strong franchise in retail banking.

Anchor

Macro-Economic and Industry Trends

China is recovering from the slowdown in economic growth caused by COVID-19. As consumption growth continues to pick up, there is no sign yet that investment and net exports are flaming out. However, the overall nature of the recovery has been unbalanced. Large parts of the manufacturing sector are operating at or above capacity while other industries such as personal services and tourism are still facing weak demand. Despite potential tailwinds such as a tightening policy environment, we expect full-year economic growth of 8% for 2021 as the economy continues to gradually rotate towards private consumption, a necessary step if growth is to maintain momentum.

We believe that the overall credit outlook for commercial banks in China will remain stable because of on-going government support and the strong economic recovery. China’s commercial banking sector reported stable capital and asset quality metrics in 2020 and the first half of 2021, but we continue to expect pressure on credit cost and profitability going forward. State-owned mega banks are expected to maintain stable capitalization and resilient profitability, while smaller banks are under more pressure. Therefore, we believe the stand-alone credit profiles of commercial banks are likely to show greater differentiation in the foreseeable future. We believe the overall credit profiles of banking sector will remain stable due to enhanced supervision and strong government support.

Considering the economic risk and industry risk faced by China’s commercial banking industry, we apply an anchor of “bbb+” to PSBC.

Stand-alone Credit Profile

PSBC is one of China’s six state-owned mega banks. It is a leading retail bank in China and has a very important role in providing banking access to rural and remote areas by leveraging its extensive network. As of the end of June 2021, it reported total assets of 12 trillion RMB, ranking fifth among China’s commercial banks.

PSBC is indirectly owned by the central government of China through its parent group, China Post Group, which owned 67.37% of the bank as of the end of June 2021. China Post Group is 90% owned by the Ministry of Finance.

Business Position

Because of its unique network arrangement of “directly-operated outlets and agency outlets”, PSBC has the country’s most extensive networks, covering 99% of Chinese counties. Agency outlets with financial licenses are postal offices operated by China Post Group, which provide part of banking services on behalf of PSBC. As of the end of June 2021, PSBC had 7,888 directly-operated outlets and 31,747 agency outlets, and nearly 70% of its deposits are collected in county and rural areas.




Chart 1

PSBC’s Has the Most Extensive Networks in China Peer Comparison: Outlet Network as of End of 2020

Note: We consider the other five state-owned mega banks as the peers of PSBC, including Industrial and Commercial Bank of China Limited (“ICBC”), China Construction Bank Corporation (“CCB”), Agricultural Bank of China Limited (“ABC”), Bank of China Limited (“BOC”), and Bank of Communications Co., Ltd. (“BoCom”).

Sources: Public data of peer banks, collected and adjusted by S&P Global (China) Ratings.

Thanks to its unique network, PSBC has a very strong retail deposit franchise with a retail customer base of about 630 million people, representing more than 45% of China’s total population. The bank provides retail banking services in rural and remote areas where banking competition is much weaker than in urban areas. As of the end of June 2021, it had retail deposits of about 9.6 trillion RMB, accounting for 88% of its total deposits, making it the fourth largest retail deposit taker in China after ABC, ICBC and CCB. Built on its strong retail franchise, the bank also excels in asset management business. As of the end of June 2021, the bank managed non-principal guaranteed wealth management products (“WMPs”) of about 1 trillion RMB.

Table 1

Sources: PSBC, industry data released by CBIRC and PBOC, collected and adjusted by S&P Global (China) Ratings.

Compared with its very large retail deposit business, PSBC has a relatively small lending business, which was established in 2008. As of the end of June 2021, the bank had a net loan book of 5.98 trillion RMB and a loan-to-deposit ratio of 57%, significantly lower than the average of 82% for the five other mega banks.

As the youngest mega bank in China with a large retail deposit base and relatively low loan-to-deposit ratio, PSBC’s lending business has seen faster growth than its peers.

0

10,000

20,000

30,000

40,000

PSBC ICBC CCB ABC BOC BoCom

Proprietary Branches and Outlets Agency Outlets

PSBC -- Market Share

(%) 2017 2018 2019 2020 2021.06

Total assets /total assets of China’s commercial banking industry

4.58 4.53 4.27 4.27 4.34

Gross customer loans/total loans of China’s commercial banking industry

3.71 3.87 3.84 3.89 3.90

Customer deposits/total deposits of China’s commercial banking industry

4.76 4.73 4.70 4.74 4.68

Retail deposits/total domestic retail deposits of China’s commercial banking industry

10.52 10.31 9.96 9.73 9.48




Its loan book increased by 15% in 2020, higher than the average mega bank loan book growth of 11%.

PSBC’s lending business focuses on very large enterprises, micro and small enterprises (“MSE”), and retail clients. As of the end of June 2021, about 57% of its loans were retail loans, and 14% micro-financing loans. The bank’s large enterprise clients are typically very large SOEs controlled by the central government and leading players in important sectors.

Chart 2

PSBC Is China’s Fifth Largest Commercial Bank by Asset Size Peer Comparison: Total Asset Breakdown as of End of 2020 and Return on Average Assets in 2020

Note: Return on average assets =net income/ [(total assets at the beginning of the year +total assets at the end of the year)/2].


PSBC has a large investment portfolio. As of the end of June 2021, its financial investment portfolio accounted for 33% of its total assets. In addition, its ample funding sources make it one of the largest and most active players in China’s interbank market for interbank lending and borrowing.

The bank’s main business is traditional deposit taking and lending, and its operating income is dominated by interest income. In the first half of 2021, its net fees and commissions income accounted for 7% of operating income, lower than the average of 16% for the five other mega banks. We don’t necessarily view the lack of non-interest income as credit negative, as its strong franchise in traditional commercial banking can sustain a stable income flow in the foreseeable future. In addition, PSBC has been placing a strategic emphasis on developing its non-interest income businesses. In the first half of 2021, PSBC’s net fees and commission income increased by 38% compared to the same period of 2020.

PSBC has recently published its 14th Five-year Plan outline which reiterates its strategic positioning as a leading retail banking franchise with priority given to digitalization and wealth management business. Its subsidiaries are integral parts of its business strategy. It has a wealth management subsidiary and a consumer finance subsidiary, and it is also preparing to set up an online banking subsidiary.

0.0

0.4

0.8

1.2

0

10,000

20,000

30,000

40,000


(%)

(bil.

)

Net Customer Loans Financial InvestmentsCash and Balances with Central Bank Credit to other Financial InstitutionsOther Assets Return on Average Assets (Right Axis)




Table 2

Major Subsidiaries of PSBC

PSBC Wealth Management Co., Ltd.

PSBC Wealth Management was established in late 2019, with a registered capital of 8 billion RMB. It is 100% owned by PSBC. As of the end of June 2021, the subsidiary had total assets of 10.24 billion RMB and equity of 9.63 billion RMB and recorded a net profit of 447 million RMB for the first half of 2021.

PSBC Consumer Finance Co., Ltd.

PSBC Consumer Finance was established in late 2015, with a registered capital of 3 billion RMB, and the bank holds 70.50% of its shares. As of the end of June 2021, PSBC Consumer Finance had total assets of 36.56 billion RMB and equity of 4.51 billion RMB and recorded a net profit of 791 million RMB for the first half of 2021.

YOU+ BANK

PSBC has got regulatory approval to set up an online banking subsidiary which it calls YOU+ BANK. This banking subsidiary will focus on serving the rural sector and small businesses. It will play an important role in its parent’s strategy in inclusive finance and rural revitalization.

Sources: PSBC, collected by S&P Global (China) Ratings.

Table 3

PSBC -- Business Position

2017 2018 2019 2020 2021.06

Total assets (bil) 9,013 9,516 10,217 11,353 12,217

Year-over-year growth of total assets (%)

9.04 5.59 7.36 11.12 Not

applicable

Gross customer loans (bil) 3,630 4,277 4,974 5,716 6,192

Year-over-year growth of gross customer loans (%)

20.58 17.82 16.30 14.92 Not

applicable


Year-over-year growth of customer deposits (%)

10.65 7.00 7.96 11.21 Not

applicable

Operating income (bil) 225 261 277 286 158

Year-over-year growth of operating income (%)

18.94 16.22 6.06 3.39 Not

applicable

Net income (bil) 48 52 61 64 41

Year-over-year growth of net income (%)

19.94 9.80 16.52 5.38 Not

applicable

Net fees and commissions income/operating income (%)

5.67 4.80 5.28 5.76 7.25

Note: Since 2020, PSBC has reclassified its fee income from credit card installment, related numbers for 2018 and 2019 have been restated.

Sources: PSBC, collected and adjusted by S&P Global (China) Ratings.




Table 4

Note 1: We have chosen the other five state-owned mega banks in China, including ICBC, CCB, ABC, BOC and BoCom, as the peers of PSBC, for peer comparison purpose. The weights for the asset-weighted average calculation are the three-year average of total assets of these banks from 2018 to 2020. Therefore, the weights of PSBC, ICBC, CCB, ABC, BOC and BoCom are 8.35%, 24.48%, 20.63%, 20.06%, 18.38% and 8.10% respectively.

Note 2: Since 2020, PSBC has reclassified its fee income from credit card installment, related numbers for 2018 and 2019 have been restated.


Peer Comparison -- Business Position

(2018-2020 three-year avg.)

PSBC

Peer Group

Max Min Average Asset-

weighted average

Median

Total assets (bil) 10,362 30,385 10,045 20,683 23,586 23,855

Year-over-year growth of total assets (%)

8.02 8.93 5.79 7.91 8.19 8.19

Gross customer loans (bil)

4,989 16,935 4,989 11,486 13,218 13,247

Year-over-year growth of customer loans (%)

16.35 16.35 8.51 10.80 10.38 9.33

Customer deposits (bil)

9,433 23,174 6,158 15,363 17,515 17,278

Year-over-year growth of customer deposits (%)

8.72 8.72 6.03 7.80 7.95 8.00

Operating income (bil)

275 837 230 536 618 584

Year-over-year growth of operating income (%)

8.56 8.56 5.41 7.07 6.80 6.90

Net income (bil) 59 310 59 187 221 205

Year-over-year growth of net income (%)

10.56 10.56 3.40 4.89 4.28 3.92

Net fees and commissions income/operating income (%)

5.28 18.82 5.28 13.94 14.47 15.50




In our view, PSBC has adequate capitalization and healthy profitability.

Meanwhile, the fast growth of its loan book will continue to be capital-intensive.

Its capital position is expected to be in line with the industry average. There is no notching adjustment for capital and earnings.

Capital and Earnings

In our opinion, PSBC’s capitalization is consistent with the industry average. Its reported regulatory tier-1 capital adequacy ratio was 12.35% as of the end of June 2021, comfortably above the minimum regulatory requirement of 8.5%, and 44 bps higher than the industry average.

Chart 3

PSBC’s Capitalization is Comparable with Industry Average Ratio Distribution: Reported Regulatory Tier-1 Capital Adequacy Ratio of Major Chinese Banks as of End of 2020

Sources: Public information of banks, collected and adjusted by S&P Global (China) Ratings.

In recent quarters, PSBC’s capitalization has been improving due to its issuance of perpetual bonds and private placement of its equity. In the first half year of 2021, the bank carried out a private placement of 30 billion RMB and issued perpetual bonds worth 30 billion RMB. We expect it to issue more hybrid instruments going forward.

Chart 4

PSBC’s Capitalization is Improving Peer Comparison: Reported Tier-1 Capital Adequacy Ratio

Note: PSBC’s reported regulatory capital ratios are the lowest among the six mega banks, but we believe this difference is partly attributable to different regulatory capital calculation methods. PSBC uses the standard approach for risk-weighted asset calculation while the five other mega banks use their own internal models to determine risk weighting. This makes it harder to compare the capital adequacy ratios of the mega banks.

Sources: CBIRC, public data of peer banks, collected and adjusted by S&P Global (China) Ratings.

PSBC

0

50

100

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 >20

Num

ber

of B

anks

Reported Regulatory Tier-1 Capital Adequacy Ratio (%)

8.5

12.5

16.5

PSBC IndustryAverage

ICBC CCB ABC BOC BoCom

(%)

2020/6/30 2020/9/30 2020/12/31 2021/3/31 2021/6/30




Although PSBC’s capital consumption is expected to remain intensive as it continues to expand its loan book, we believe it can maintain adequate capitalization given its good asset and earning quality, strong earning capacity, access to both the A-share and H-share markets and its plans to issue more hybrid bonds.

Table 5

PSBC -- Capital Adequacy Forecast by S&P Global (China) Ratings

2019A 2020A 2021E 2022F

Total risk-weighted assets (bil) 4,970 5,651 6,370 7,029

- Credit risk (bil) 4,582 5,194 5,888 6,505

- Market risk (bil) 53 95 87 94

- Operational risk (bil) 335 363 395 430

Tier-1 capital (bil) 540 670 754 873

Tier-1 capital adequacy ratio forecast (%)

12 12

Note: As of the end of June 2021, PSBC’s WMPs reached 936 billion RMB, of which the net-value products accounted for 53%. As it strives to comply with the “New Asset Management Rules”, the implicit capital consumption of its off-balance sheet WMP is decreasing. We do not expect this issue to have any significant impact on the bank’s overall capitalization.

S&P Global (China) Ratings’ base case assumptions include: 1. The compound growth rate of assets between 2020 and 2022 is 9%; 2. By the end of 2022, the non-performing loan (“NPL”) ratio is about 1% and reserve coverage ratio is about 400%, and annual credit cost (loan provisioning/average gross customer loans) will be around 1%; 3.NIM will be about 2.4%; 4. Cost-to-income ratio remains above 55%; 5. Annual dividend payout ratio stays about 30%; 6. return on average equity will be above 10% in 2021 and 2022; 7. We assume the bank issues perpetual bond worth 30 billion RMB in 2022.

Note: A-actual; E-expected; F-forecast.

Sources: PSBC, S&P Global (China) Ratings.

Thanks to its low-cost sticky retail deposit funding base, the net interest margin (“NIM”) of PSBC is above the industry average. In the first half of 2021, it reported a NIM of 2.37%, 0.31 percentage points higher than the industry average and 0.43 percentage points higher than the average for the other five mega banks.

Chart 5

PSBC’s NIM Is Above the Industry Average Ratio Distribution: Net Interest Margin of Major Chinese Banks in 2020


PSBC’s NIM has come under pressure in recent years, but we expect relatively stable NIM going forward. Due to COVID-19, the government required banks to reduce

PSBC

0

30

60

<0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 2.2 2.4 2.6 2.8 3 3.2 3.4 3.6 3.8 4 >4

Num

ber

of B

anks

NIM (%)




lending costs for the real economy, causing downward interest yield pressure. In 2020, PSBC’s reported NIM was 2.42%, representing a drop of 11 bps compared to 2019. It further declined to 2.37% in the first half of 2021. Nevertheless, we expect its NIM to remain relatively stable going forward thanks to its rising loan-to-deposit ratio and its ability to manage deposit cost.

Chart 6

PSBC Maintains Above-Average NIM among Mega Banks Peer Comparison: Net Interest Margin


We expect PSBC to maintain healthy and robust profitability thanks to its stable asset quality performance and strong reserve buffer. In the first half of 2021, its provisioning as a percentage of pre-provision operating profits declined to 39% from 43% in 2020. Its average credit cost measured as loan provisioning/average gross loans was about 1% from 2018 to 2020. Given the strong reserve buffer established in recent years, we don’t expect any significant increase in provisioning cost going forward.

Based on its operation pattern of “directly-operated outlets and agency outlets”, PSBC pays the agency fee to China Post Group, leading to a high cost-to-income ratio, which was 52% in the first half of 2021, higher than the industry average of 28% and the average of 24% for the other five mega banks.

PSBC generates better-than-average ROE thanks to its stronger NIM and higher leverage. In the first half year of 2021, its reported ROE was 13.3%, higher than the industry average of 10.4% and the average of 12.1% for the other five mega banks.

1.2

1.7

2.2

2.7

3.2

2013 2014 2015 2016 2017 2018 2019 2020 2021H1

(%)





Chart 7

PSBC Reported the Highest ROE among Mega Banks in the First Half of 2021 Peer Comparison: Reported ROE and Cost-to-Income Ratio in 2021 H1

Sources: CBIRC, public data of peer banks, collected and adjusted by S&P Global (China) Ratings.

Table 6

Note 1: Return on average assets =net income/ [(total assets at the beginning of the year +total assets at the end of the year)/2].



Table 7

0

7

14


ICBC CCB ABC BOC BoCom0

30

60

(%)

(%)

Reported ROE Cost-to-Income Ratio (Right Axis)

PSBC -- Capital and Earnings

2017 2018 2019 2020 2021.06


12.51 13.76 13.52 13.88 14.32

Reported regulatory tier-1 capital adequacy ratio (%)

9.67 10.88 10.87 11.86 12.35

Reported net interest margin (%) 2.40 2.69 2.53 2.42 2.37

Cost-to-income ratio (%) 61.57 56.41 56.57 57.88 51.51

Asset provisioning/pre-provision operating profits (%)

31.75 49.69 47.03 42.66 39.21

Loan provisioning/average gross customer loans (%)

0.64 1.09 1.03 0.98 Not

applicable

Return on average assets (%) 0.55 0.57 0.62 0.60 Not

applicable

Reported return on equity (%) 13.07 12.31 13.10 11.84 13.30

Peer Comparison -- Capital and Earnings

(2018-2020 three-year avg.) PSBC

Peer Group


weighted average

Median


13.72 17.26 13.72 15.61 15.97 15.77

Reported tier-1 capital 11.20 14.44 11.20 12.93 13.22 12.70




PSBC’s asset quality metrics are better than the industry average and its mega bank peers.

Its loan book is exposed to the credit risk of MSEs, but we expect it to maintain good asset quality metrics in the next 24 months.

Therefore, there is a one-notch upward adjustment for its risk position.

Note 1: The peer group includes the six state-owned mega banks. Note 2: Net Interest Margin (NIM) adjusted by S&P Global (China) Ratings = adjusted interest income/ [(interest-bearing assets at the beginning of the year + interest-bearing assets at the end of the year)/2]. Note 3: Return on average assets =net income/ [(total assets at the beginning of the year +total assets at the end of the year)/2]. Note 4: Return on average equity =net income/ [(total equity at the beginning of the year +total equity at the end of the year)/2]. Note 5: Since 2020, PSBC has reclassified its fee income from credit card installment, related numbers for 2018 and 2019 have been restated. Source: Public data of peer banks, collected and adjusted by S&P Global (China) Ratings.

Risk Position

Although COVID-19 had a major impact on the economy in 2020, PSBC continues to outperform the industry in terms of asset quality. As of the end of June 2021, its reported NPL ratio was 0.83%, down by 5 bps from the end of 2020; its combined NPL + SML ratio was 1.31%, 11 bps lower compared to the end of 2020, significantly lower than the industry average of 4.12% and the average of 3.34% for the five other mega banks.

Chart 8

PSBC’s Asset Quality Continues to Outperform the Industry Ratio Distribution: (NPL+SML) Ratio of Major Chinese Banks as of End of 2020

Source: Public information of banks, collected and adjusted by S&P Global (China) Ratings.

We believe that PSBC has a disciplined and prudent approach to loan classification. As of the end of June 2021, its ratio of NPL/loans 90+ days past due (“DPD”) was 1.55X, and it classified all loans 60+ DPD as NPL, and 95% of loans 30+ DPD as NPL.

An important reason for PSBC’s good asset quality metrics is its large lending exposure to retail customers (particularly mortgage customers) and very strong SOEs. The asset quality of such loan exposures has remained good during the pandemic. The bank’s credit exposure to MSEs, which are more vulnerable to COVID-19 and other

PSBC

0

40

80

<0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 >20

Num

ber

of B

anks

NPL+SML Ratio (%)

adequacy ratio (%)

Net Interest Margin adjusted by S&P Global (China) Ratings (%)

2.44 2.44 1.49 2.03 2.06 2.13

Cost-to-income ratio (%) 56.95 56.95 23.16 31.90 29.02 28.06


46.46 46.46 30.67 36.12 34.63 35.02


1.03 1.06 0.83 0.99 0.99 1.01

Return on average assets (%) 0.59 1.09 0.59 0.89 0.94 0.90





external shocks, may put asset quality pressure on PSBC. As of the end of 2020, its MSE loan portfolio accounted for 14.0% of its loan book and its MSE NPL ratio was around 2%.

We believe COVID-19’s impact on its asset quality is limited. Although the government has allowed forbearance measures to be extended to the end of 2021, most of PSBC’s COVID-affected clients have resumed debt servicing. As of the end of March 2021, only a small proportion of its loan book is still under forbearance measures.

PSBC’s credit exposure to the real estate industry has generally good asset quality. As of the end of June 2021, the bank’s mortgage lending portfolio accounted for 33% of its loan book, with an NPL ratio of 0.46%; its loans to the real estate development sector only accounted for 2.1% of its total loans, with an NPL ratio of 0.01%. Although several private real estate companies face liquidity pressure in 2021, we believe the volatility in the credit quality of real estate industry will have no significant negative impact on the overall asset quality of PSBC.

Thanks to strong asset quality metrics and prudent provisioning policies, PSBC’s reserve coverage of bad debts is better than its peers. We believe it is well positioned to absorb any further asset quality impact from the pandemic. As of the end of June 2021, its loan loss reserves were 421% of its non-performing loans, and 266% of its NPLs + SMLs, representing improvements of 13 and 12 percent points compared to the end of 2020 respectively.

Chart 9

PSBC Keeps Improving its Reserve Buffer Against Bad Debts PSBC: Asset Quality and Reserve Coverage Ratios


0

150

300

450

0

30

60

90

(%)

(bil.

RM

B)

Special Mention Loans

Non-performing Loans

Reserve Coverage Ratio(Right Axis)

Loan Loss Reserves/ (Non-performing+SpecialMention Loans) (Right Axis)




Chart 10

Strong Reserve Buffer Will Cushion PSBC from Further Asset Quality Pressure Peer Comparison: Asset Quality and Reserve Coverage as of End of June 2021

Source: CBIRC, public data of peer banks, collected and adjusted by S&P Global (China) Ratings.

We believe the credit risk of PSBC’s large investment portfolio is manageable. As of the end of June 2021, about 81.4% of its investment portfolio was bonds issued by governments and financial institutions. In addition, about 86% of its investment portfolio is bonds, so its exposure to non-standardized fixed income products is limited.

Table 8


Table 9

0

150

300

450

0

1

2

3


ICBC CCB ABC BOC BoCom

(%)

(%)

NPL Ratio SML Ratio Reserve Coverage Ratio (Right Axis)

PSBC -- Risk Position

2017 2018 2019 2020 2021.06

Non-performing loan ratio (%) 0.75 0.86 0.86 0.88 0.83

(Non- performing loans + special mention loans)/gross customer loans (%)

1.43 1.49 1.52 1.42 1.31

Overdue loans/gross customer loans (%) 0.97 0.99 1.03 0.80 0.89

Loan loss reserves/gross customer loans (%)

2.44 2.99 3.35 3.60 3.49


Loan loss reserves/ (non-performing loans + special mention loans) (%)

170.78 201.08 220.84 253.95 266.18

Peer Comparison -- Risk Position


Peer Group


weighted average

Median

Non-performing loan ratio (%)

0.87 1.55 0.87 1.39 1.44 1.50

(Non- performing loans + special mention loans)/gross

1.48 4.38 1.48 3.52 3.79 3.80




PSBC has a very solid and sticky retail deposit base in China, and its funding structure is dominated by retail deposits. Its funding and liquidity profiles are significantly better than the industry average.

Therefore, there is a two-notch uplift for funding and liquidity.

Note: The peer group includes the six state-owned mega banks.

Source: Public data of peer banks, collected and adjusted by S&P Global (China) Ratings.

Funding and Liquidity

In our opinion, PSBC has a very stable funding structure thanks to its large sticky retail deposit base, and the stability of its funding structure is significantly better than the industry average. Retail deposits are its dominant funding source. As of the end of June 2021, 95% of its liabilities were customer deposits, and 88% of its deposits were retail deposits. Its use of wholesale funding was less than 4% of its total liabilities, significantly lower than its mega bank peers and the industry average level.

Chart 11

PSBC’s Large and Sticky Retail Deposit Base Contributes to Its Very Stable Funding Structure Ratio Distribution: Retail Deposits/Customer Deposits of Major Chinese Banks as of End of 2020


PSBC

0

10

20

30

40

50

<5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 >90

Num

ber

of B

anks

Retail Deposits/Customer Deposits (%)

customer loans (%)

Overdue loans/gross customer loans (%)

0.94 1.70 0.94 1.39 1.41 1.46

Loan loss reserves/gross customer loans (%)

3.31 4.05 2.51 3.07 3.11 3.00


Loan loss reserves/ (non-performing loans + special mention loans) (%)

225.29 225.29 68.12 102.12 90.30 72.04




Chart 12

PSBC Has Very Limited Use of Wholesale Funding Ratio Distribution: Customer Deposits/Total Liabilities of Major Chinese Banks as of End of 2020


Chart 13

Compared to Peers, PSBC’s Funding Structure Is Dominated by Sticky Retail Deposits Peer Comparison: Funding Structure as of End of 2020


Because of its low loan-to-deposit ratio and large bond investment portfolio, the bank’s overall asset structure has a better liquidity profile than the industry average. As of the end of June 2021, its loan portfolio represented 49% of its assets, while 23% of its assets were invested in government bonds and policy bank bonds, which have good liquidity.

PSBC has the best liquidity metrics among its peers. As of the end of June 2021, the bank’s net stable funding ratio was 161%, higher than the average of 123% for the other five mega banks; its liquidity coverage ratio was 261%, significantly higher than the average of 126% for the other five mega banks.

PSBC

0

20

40

60

80

<35 40 45 50 55 60 65 70 75 80 85 90 95 >95

Num

ber

of B

anks

Customer Deposits/Total Liabilities (%)

0

20

40

60

80

100


(%)

Wholesale Funding/Total Liabilities Retail Deposits/Total Liabilities

Customer Deposits/Total Liabilities




PSBC is assigned an SACP of aaspc, five notches higher than its anchor of bbb+. Its SACP reflects its very strong business franchise as a leading retail bank in China, good asset quality, and very strong funding and liquidity profile.

Chart 14

PSBC Has the Best Liquidity Metrics among Mega Banks Peer Comparison: Liquidity Related Ratios as of End of 2020


Table 10

Note: Wholesale funding=borrowing from central government + borrowing and deposits from other financial institutions+ financial assets sold for repurchase + transactional monetary liabilities + bonds payable.


Table 11

Peer Comparison -- Funding and Liquidity


Peer Group


weighted average

Median

Customer loans/customer deposits (%) 52.72 86.55 52.72 74.45 75.39 77.04


Wholesale funding /total liabilities (%) 2.84 31.22 2.84 16.91 16.64 16.59

Retail deposits/customer deposits (%) 87.41 87.41 32.09 52.52 50.68 46.93

Liquidity coverage ratio (%) 231.22 231.22 121.68 148.28 140.85 131.27

Net stable funding ratio (%) 164.20 164.20 111.01 130.31 128.60 127.27

Note: The peer group includes the six state-owned mega banks.


0

50

100

150

200

250


(%)

Reported Liquidity Coverage Ratio Reported Net Stable Funding Ratio

Reported Liquidity Ratio

PSBC – Funding and Liquidity

2017 2018 2019 2020 2021.06

Customer loans/customer deposits (%) 45.02 49.57 53.41 55.19 56.74


Wholesale funding /total liabilities (%) 4.13 3.62 2.78 2.11 3.84

Retail deposits/customer deposits (%) 85.10 86.56 87.86 87.81 87.56

Liquidity coverage ratio (%) 145.79 225.20 233.84 234.61 260.52

Net stable funding ratio (%) Not

available 163.91 166.28 162.41 160.82




We believe that as one of the six state-owned mega banks in China, PSBC is of critical importance to the central government for its role in maintaining financial and social stability in China.

The extremely high likelihood of government support results in a two-notch uplift from its SACP of aaspc and therefore we assign an ICR of AAAspc to PSBC.

Issuer Credit Rating

External Support

As one of the six state-owned mega banks, we believe PSBC is of critical importance to the central government for its role in maintaining financial and social stability in China.

We believe that PSBC has a unique role in providing basic financial services to China’s rural and remote areas, and it is very important for the central government’s goals of achieving financial inclusiveness and rural revitalization. The bank has about 630 million retail clients, representing 45% of the total Chinese population, and its services cover 99% of China’s counties.

In our view, the central government’s indirect ownership of PSBC through China Post Group is long-term and strategic. China Post Group held 67.37% of the bank’s equity as of the end of June 2021. China Post Group is 90% owned by the Ministry of Finance of China with the rest 10% owned by National Council for Social Security Fund of China. And it’s entrusted by the central government with providing universal postal services in China. The bank accounted for most of the group’s total assets. If PSBC gets into stress, we expect extraordinary support to directly come from the central government instead of the parent group, because the bank is critically important to the government.

Overall, we believe that the likelihood of PSBC receiving extraordinary government support is extremely high, due to its very large size and important social role. Therefore, we assign an ICR of AAAspc to PSBC, representing a two-notch uplift from its SACP of aaspc.




Appendix 1: Key Financial Data

PSBC -- Key Financial Data

2017 2018 2019 2020 2021.06

Business Position

Total assets (bil) 9,013 9,516 10,217 11,353 12,217

Gross customer loans (bil) 3,630 4,277 4,974 5,716 6,192


Total equity (bil) 431 475 545 673 750

Operating income (bil) 225 261 277 286 158

Net income (bil) 48 52 61 64 41

Total assets /total assets of China’s commercial banking industry (%)

4.58 4.53 4.27 4.27 4.34

Customer loans/total loans of China’s commercial banking industry (%)

3.71 3.87 3.84 3.89 3.90

Customer deposits/total deposits of China’s commercial banking industry (%)

4.76 4.73 4.70 4.74 4.68


Reported regulatory capital adequacy ratio (%) 12.51 13.76 13.52 13.88 14.32

Reported regulatory tier-1 capital adequacy ratio (%) 9.67 10.88 10.87 11.86 12.35

Reported net interest margin (%) 2.40 2.69 2.53 2.42 2.37

Asset provisioning/pre-provision operating profits (%) 31.75 49.69 47.03 42.66 39.21

Loan provisioning/average gross customer loans (%) 0.64 1.09 1.03 0.98 Not

applicable

Cost-to-income ratio (%) 61.57 56.41 56.57 57.88 51.51

Return on average assets (%) 0.55 0.57 0.62 0.60 Not

applicable

Reported return on equity (%) 13.07 12.31 13.10 11.84 13.30

Risk Position

Non-performing loan ratio (%) 0.75 0.86 0.86 0.88 0.83

(Non-performing loans + special mention loans)/gross customer loans (%)

1.43 1.49 1.52 1.42 1.31

Overdue loans/gross customer loans (%) 0.97 0.99 1.03 0.80 0.89

Loan loss reserve/gross customer loans (%) 2.44 2.99 3.35 3.60 3.49


Loan loss reserve/ (non-performing loans + special mention loans) (%)

170.78 201.08 220.84 253.95 266.18


Customer loans/customer deposits (%) 45.02 49.57 53.41 55.19 56.74


Wholesale funding /total liabilities (%) 4.13 3.62 2.78 2.11 3.84

Retail deposits/customer deposits (%) 85.10 86.56 87.86 87.81 87.56

Liquidity coverage ratio (%) 145.79 225.20 233.84 234.61 260.52

Net stable funding ratio (%) Not

available 163.91 166.28 162.41 160.82

Note1: In our view, PSBC has a clear business model and sound financial management. Therefore, we haven’t conducted any material adjustments to its financial data.

Note 2: Its annual financial reports have been audited by PricewaterhouseCoopers.

Note 3: Return on average assets =net income/ [(total assets at the beginning of the year +total assets at the end of the year)/2].






Appendix 2: Peer Comparison Data

Peer Comparison Data


Peer Group


weighted average

Median

Business Position

Total assets (bil) 10,362 30,385 10,045 20,683 23,586 23,855

Gross customer loans (bil) 4,989 16,935 4,989 11,486 13,218 13,247

Customer deposits (bil) 9,433 23,174 6,158 15,363 17,515 17,278

Total equity (bil) 564 2,649 564 1,686 1,965 1,952

Operating income (bil) 275 837 230 536 618 584

Net income (bil) 59 310 59 187 221 205


Reported regulatory capital adequacy ratio (%) 13.72 17.26 13.72 15.61 15.97 15.77

Reported regulatory tier-1 capital adequacy ratio (%)

11.20 14.44 11.20 12.93 13.22 12.70

Net interest margin adjusted by S&P Global (China) Ratings (%)

2.44 2.44 1.49 2.03 2.06 2.13

Cost-to-income ratio (%) 56.95 56.95 23.16 31.90 29.02 28.06


46.46 46.46 30.67 36.12 34.63 35.02


1.03 1.06 0.83 0.99 0.99 1.01

Return on average assets (%) 0.59 1.09 0.59 0.89 0.94 0.90


Risk Position

Non-performing loan ratio (%) 0.87 1.55 0.87 1.39 1.44 1.50

(Non-performing loans + special mention loans)/gross customer loans (%)

1.48 4.38 1.48 3.52 3.79 3.80

Overdue loans/gross customer loans (%) 0.94 1.70 0.94 1.39 1.41 1.46

Loan loss reserves/gross customer loans (%) 3.31 4.05 2.51 3.07 3.11 3.00


Loan loss reserve/(non-performing loans + special mention loans) (%)

225.29 225.29 68.12 102.12 90.30 72.04


Customer loans/customer deposits (%) 52.72 86.55 52.72 74.45 75.39 77.04


Wholesale funding/total liabilities (%) 2.84 31.22 2.84 16.91 16.64 16.59

Retail deposits/customer deposits (%) 87.41 87.41 32.09 52.52 50.68 46.93

Liquidity coverage ratio (%) 231.22 231.22 121.68 148.28 140.85 131.27

Net stable funding ratio (%) 164.20 164.20 111.01 130.31 128.60 127.27

Note 1: In this report, we have chosen the other five state-owned mega banks, including ICBC, CCB, ABC, BOC and BoCom as the peers of PSBC for peer comparison purpose. The weights for the asset-weighted average calculation are the three-year average of total assets of these six banks from 2018 to 2020. Therefore, the weights of PSBC, ICBC, CCB, ABC, BOC and BoCom are 8.35%, 24.48%, 20.63%, 20.06%, 18.38% and 8.10% respectively. Note 2: Net interest margin adjusted by S&P Global (China) Ratings (%) = Net Interest Income/ [(total interest-bearing assets at the beginning of the year +total interest-bearing assets at the end of the year)/2]. Note 3: Return on average assets =net income/ [(total assets at the beginning of the year +total assets at the end of the year)/2]. Note 4: Return on average equity =net income/ [(total equity at the beginning of the year +total equity at the end of the year)/2]. Note 5: Since 2020, PSBC has reclassified its fee income from credit card installment, related numbers for 2018 and 2019 have been restated. Source: Public data of peer banks, collected and adjusted by S&P Global (China) Ratings.




Appendix 3: Rating History of PSBC

Issuer Credit Ratings By S&P Global (China) Ratings

Ratings Outlook Rating Date Analysts Related Reports

AAAspc Stable 2020-01-03 Ying Li, Yifu Wang, Longtai

Chen, Zheng Li Credit Rating Report: Postal Savings Bank of China Co., Ltd., January 3, 2020

AAAspc Stable 2020-10-09 Yifu Wang, Longtai Chen,

Zheng Li Credit Rating Report: Postal Savings Bank of China Co., Ltd., October 9, 2020

AAAspc Stable 2021-10-12 Yifu Wang, Zheng Li, Xuefei Zou Current Report

Note: these ratings are conducted based on S&P Global (China) Ratings Financial Institutions Methodology, and no quantitative model is used.


https://www.spgchinaratings.cn/ratings/rating-report_psbc_3jan2020_en.pdf

https://www.spgchinaratings.cn/ratings/rating-report_psbc_3jan2020_en.pdf

https://www.spgchinaratings.cn/ratings/rating-report_psbc_9oct2020_en.pdf

https://www.spgchinaratings.cn/ratings/rating-report_psbc_9oct2020_en.pdf

https://www.spgchinaratings.cn/criteria/financial-institutions_en



Copyright © 2021 by S&P Ratings (China) Co., Ltd. All rights reserved.

S&P Ratings (China) Co., Ltd. (“S&P Ratings”) owns the copyright and/or other related intellectual property rights of the abovementioned content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content). No Content may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P Ratings. The Content shall not be used for any unlawful or unauthorized purposes. S&P Ratings and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively "S&P Parties") do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P Ratings' opinions, analyses, forecasts and rating acknowledgment decisions (described below) are not and should not be viewed as recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P Ratings assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and / or clients when making investment and other business decisions. S&P Ratings does not act as a fiduciary or an investment advisor except where registered as such. While S&P Ratings has obtained information from sources it believes to be reliable, S&P Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

S&P RATINGS IS NOT PART OF THE NRSRO. A RATING ISSUED BY S&P RATINGS IS ASSIGNED ON A RATING SCALE SPECIFICALLY FOR USE IN CHINA, AND IS S&P RATINGS' OPINION OF AN OBLIGOR’S OVERALL CREDITWORTHINESS OR CAPACITY TO MEET SPECIFIC FINANCIAL OBLIGATIONS, RELATIVE TO THAT OF OTHER ISSUERS AND ISSUSES WITHIN CHINA ONLY AND PROVIDES A RANK ORDERING OF CREDIT RISK WITHIN CHINA. AN S&P RATINGS' RATING IS NOT A GLOBAL SCALE RATING, AND IS NOT AND SHOULD NOT BE VIEWED, RELIED UPON, OR REPRESENTED AS SUCH. S&P PARTIES ARE NOT RESPONSIBLE FOR ANY LOSSES CAUSED BY USES OF S&P RATINGS' RATINGS IN MANNERS CONTRARY TO THIS PARAGRAPH.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P Ratings reserves the right to assign, withdraw or suspend such acknowledgement at any time and in its sole discretion. S&P Ratings disclaims any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P Ratings keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P Ratings may have information that is not available to other S&P Ratings business units. S&P Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P Ratings may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P Ratings reserves the right to disseminate its opinions and analyses. S&P Ratings' public ratings and analyses are made available on its Web site www.spgchinaratings.cn, and may be distributed through other means, including via S&P Ratings' publications and third-party redistributors.


Documents

Credit Rating Report Postal Savings Bank of China Co., Ltd