Shanghai Commercial Bank Limited (SHCMBK)

Based on the confirmed materials, the current credit quality level is that senior issuer credit has resilience as an investment-grade bank, but the bank should not be viewed as a low-risk bank like Hong Kong’s top-tier institutions. It should be assessed cautiously as a mid-sized bank with US CRE and Hong Kong commercial real estate exposure. The credit direction is stable in terms of capital, liquidity, and deposits, but asset quality cannot yet be said to have entered an improvement phase. Overall, the direction is stable to slightly cautious. Given a CET1 ratio of 27.3%, a total capital ratio of 30.4%, a loan-to-deposit ratio of 39.3%, and an average LMR of 79.7%, the probability of rapid issuer credit deterioration is not high. However, if additional deterioration appears simultaneously in US CRE and Hong Kong commercial real estate, the view would need to be lowered.

The credit is supported by customer deposits, a low loan-to-deposit ratio, high CET1, and strong liquidity. Shanghai Commercial Bank has real estate-related stress, but it is a deposit-taking bank, not a market-funded real estate finance company. The published LTD, LMR, and CFR are strong. However, deposit concentration and currency-by-currency liquidity have not been confirmed, and CET1 does not eliminate the ultimate losses on Stage 3 exposures.

The largest constraint is asset quality. The impaired loan ratio rose to 5.76% in 2025, and US Stage 3 increased to HK$2.56bn. The company itself also discusses CRE concentration risk at its US branches and weakness in Hong Kong’s commercial real estate market. The improvement in Stage 3 in Hong Kong and mainland China is positive, but overall asset quality deteriorated because of US CRE. Therefore, even if mainland China property problems ease, it is necessary to confirm whether the centre of credit risk is shifting toward the United States and Hong Kong.