Nanyang Commercial Bank Limited (NANYAN)

Based on public financials, this report views NCB’s current credit strength as bank credit supported by substantial deposits, liquidity, and regulatory capital. Looking only at the 2025 results, the credit direction has stabilised modestly due to improvement in asset quality and higher capital ratios, but this is not a strong improvement phase because profitability remains thin and Mainland China property risk persists. The probability of a sharp change in credit strength over a short period is not high, but if Mainland China property, Hong Kong property, parental support expectations, and rating agency views deteriorate at the same time, price reactions could be larger, especially for subordinated and capital instruments. The original external rating reports have not been obtained for this report, and this paragraph does not indicate any rating symbol.

For senior debt, if emphasis is placed on NCB’s deposit base, low loan-to-deposit ratio, LCR/NSFR, and CET1 ratio, the issuer has a reasonable degree of resilience in terms of continuity. Profit did not grow significantly in 2025, but the classified or impaired loan ratio improved and capital ratios rose, so the results do not materially shift the near-term credit view in a negative direction. Rather, the results confirm that asset quality, which deteriorated in 2024, recovered to some extent in 2025.

However, it would be dangerous to simplify NCB as “safe because the parent is state-owned”. Parental support expectation is an important credit support factor, but it is not a legal guarantee and does not replace the asset quality and profitability of the issuer itself. In particular, for capital instruments that may be equivalent to Tier 2 or AT1, the risks of loss absorption and skipped calls remain even if the issuer continues to operate. The same credit view applied to senior debt should not be transferred directly to capital instruments.