Bank of Communications Issuer Summary

Report date: 2026-05-21
Issuer: Bank of Communications Co., Ltd.
Ticker: BOCOM
Sector: Chinese banking
Primary credit focus: issuer credit, senior debt, non-capital TLAC, Tier 2, preference shares / other capital securities, and risk differences between overseas branch and subsidiary-issued bonds

1. Business Snapshot and Recent Developments

Bank of Communications Co., Ltd. (“BOCOM”) is a large state-owned joint-stock commercial bank centred on Mainland China and is a systemically important issuer within the Chinese banking system, connecting policy implementation, corporate banking, retail banking, payments, money markets, integrated financial subsidiaries and overseas operations. BOCOM was founded in 1908 and was restructured in April 1987, relaunching as China’s first nationwide state-owned joint-stock commercial bank. It listed in Hong Kong in 2005 and in Shanghai in 2007. It is now best viewed as a large and policy-important bank positioned between China’s major state-owned banks and the leading joint-stock banks. The 2025 annual report states that BOCOM is treated as a G-SIB and ranked ninth globally in The Banker’s Tier 1 capital ranking. BOCOM also remained in Category 3 in the domestic systemically important bank list published by the PBOC and NFRA in February 2026.

The starting point for initial coverage is neither to view BOCOM as “risk-free because it is close to the Chinese government” nor to simplify it as “vulnerable because it is exposed to China’s property and household credit problems.” BOCOM’s senior issuer credit is strongly supported by its scale, deposits, state ownership, D-SIB / G-SIB designation, regulatory importance, capital-market access and the likelihood of government support. At the same time, standalone profitability is not high, and NIM has declined. Asset quality also needs to be assessed not only through the headline NPL ratio, but through the breakdown of real estate, wholesale and retail, credit cards, personal business loans, personal consumption, special-mention loans and overdue loans. BOCOM should therefore be positioned as a bank with strong senior issuer credit, but one where standalone earnings capacity and asset quality require ongoing monitoring, and where TLAC, Tier 2, preference shares, overseas branch debt and subsidiary debt need to be analysed separately by ranking and issuer.

At end-2025, the BOCOM group had total assets of RMB15.55tn, customer loans of RMB9.12tn, customer deposits of RMB9.31tn and equity attributable to shareholders of RMB1.27tn. By end-1Q26, total assets had expanded to RMB16.27tn, customer loans to RMB9.44tn and customer deposits to RMB9.69tn. The simple loan-to-deposit ratio was around 98% at end-2025 and around 97.5% at end-1Q26. Loans are therefore funded broadly by deposits, but the structure suggests that credit strength is directly linked to deposit-base stability and deposit-cost management rather than to a very large surplus deposit cushion. BOCOM is not a bank dependent solely on market funding, but it also uses negotiable certificates of deposit, issued bonds, overseas branches, TLAC and capital instruments, making its funding structure more complex than that of a simple deposit-taking bank.

Headline performance was stable in 2025. Net operating income was RMB265.6bn, up 2.05% year on year, and net profit attributable to shareholders was RMB95.6bn, up 2.18% year on year. In 1Q26, net operating income was RMB69.7bn, up 4.89% year on year; profit before tax was RMB29.9bn, up 8.66%; and net profit attributable to shareholders was RMB26.2bn, up 3.11%. Net interest income was RMB45.7bn in 1Q26, up 7.21% year on year, suggesting some short-term improvement in interest-spread income after weakness in 2025.

However, it is too early to read this as a structural earnings improvement. BOCOM’s NIM declined from 1.28% in 2023 to 1.27% in 2024 and 1.20% in 2025, and remained only 1.23% in 1Q26. ROA was 0.63% and ROE was 8.38% in 2025, while annualised ROA and ROE in 1Q26 were 0.66% and 9.07%, respectively. Absolute profit is large for a major Chinese bank, but the profitability buffer cannot be described as thick. In part due to the increase in ordinary shares from the 2025 A-share issuance, ordinary EPS declined year on year in 1Q26. Senior credit stability depends not only on profit growth, but also on capital, liquidity and support expectations.

On capital, the 2025 A-share issuance is important. BOCOM raised approximately RMB120bn in gross proceeds and approximately RMB119.9bn in net proceeds through an A-share issuance to the MOF, CNTC and CDIC. This lifted the core Tier 1 ratio from 10.24% at end-2024 to 11.43% at end-2025. At end-1Q26, the total capital adequacy ratio was 15.61%, the Tier 1 ratio was 12.48% and the core Tier 1 ratio was 11.25%. For issuer credit, this capital strengthening is evidence of BOCOM’s systemic importance and the willingness of state-linked shareholders to provide support. However, the capital increase was shareholder-level support and is not an explicit guarantee by the Chinese government for individual bonds.

The shareholder structure is an important credit support. The end-1Q26 shareholder table showed the MOF holding around 35.01% across A shares and H shares, HSBC holding 16.00% through H shares, and the National Council for Social Security Fund holding 13.05% on the table and 13.75% on a note basis including additional H shares. The MOF is BOCOM’s largest shareholder, and the newly issued shares in 2025 are subject to a long-term lock-up. HSBC’s holding is a source of international history and governance support, but HSBC does not guarantee BOCOM’s debt. BOCOM’s credit support lies less in HSBC’s ownership than in its importance within China’s government and policy-finance system, MOF ownership, D-SIB / G-SIB designation and regulatory oversight.

Operationally, BOCOM provides integrated financial services across corporate banking, personal banking, financial markets and subsidiaries. The 2025 annual report shows around 3.07mn corporate customers, around 205mn retail customers, more than 2,800 domestic business outlets, and 24 overseas branches, subsidiaries and representative offices. Main businesses include deposits, loans, supply-chain finance, payments, trade finance, investment banking, custody, wealth management, cards, private banking and treasury. It also owns subsidiaries engaged in financial leasing, funds, wealth management, trust, insurance, overseas securities and debt-to-equity swap-related businesses. BOCOM’s credit strength is supported less by the competitiveness of any single product than by a system-wide franchise combining its customer base, payment and deposit relationships, policy links and capital-market access.

In summary, from 2025 to 1Q26, BOCOM maintained its scale and systemic importance, expanded loans and deposits, strengthened capital and kept the headline NPL ratio broadly stable. At the same time, NIM remains low, net profit growth is in the low single digits, ordinary EPS was diluted, the NPL ratio edged up to 1.30% in 1Q26, and allowance coverage declined from 208.38% at end-2025 to 202.80%. Issuer credit is strong, but the points on which investors can take comfort and the points requiring ongoing monitoring are clearly distinct.

2. Industry Position and Franchise Strength

BOCOM’s franchise is smaller than China’s major state-owned banks, but very large relative to the joint-stock banks. As a large state-owned commercial bank after the so-called Big Four — ICBC, CCB, Agricultural Bank of China and Bank of China — it spans corporate banking, personal banking, government-related projects, the Shanghai international financial centre, inclusive finance, trade finance, technology finance, and high-net-worth / wealth management. In terms of scale alone, it is below the Big Four. However, its nationwide branch network, deposit base, policy role and D-SIB / G-SIB designation are clearly different from those of ordinary regional banks or small and mid-sized joint-stock banks.

In analysing credit in the Chinese banking sector, it is necessary to consider not only an issuer’s “market share,” but also whether it is difficult to replace within the financial system, whether regulators prioritise its stability, how much confidence it can maintain in the event of deposit outflows, and whether there is a meaningful likelihood of capital reinforcement or liquidity provision. BOCOM has total assets of more than RMB15tn, customer deposits of more than RMB9tn, more than 2,800 domestic outlets, over 3mn corporate customers and more than 200mn retail customers. This alone indicates high systemic importance. In addition, BOCOM is a domestic D-SIB in Category 3, and the annual report also discloses G-SIB assessment indicators. It is better viewed not as an ordinary private commercial bank, but as a bank embedded in financial-system stability and policy implementation.

BOCOM’s domestic business is linked to policy-priority areas. The 2025 annual report identifies inclusive finance, trade finance, technology finance and wealth management as strategic priorities, and states its support for the real economy, advanced manufacturing, green sectors, science and technology, public welfare, consumption, regional coordination and the development of Shanghai as a financial centre. This is both credit positive and credit negative. On the positive side, it shows that BOCOM is an implementing entity for national policy finance and an issuer that the government and regulators consider important for financial stability. On the negative side, part of its lending may be influenced not only by purely commercial risk-return considerations, but also by policy-driven credit supply, low interest rates, long tenors, macroeconomic support and local government / infrastructure-related lending.

BOCOM’s Shanghai base is another feature. Shanghai is one of China’s centres for financial markets, the bond market, RMB internationalisation, capital-market reform, free-trade zones and cross-border finance. BOCOM’s Shanghai presence is a natural strength for money markets, treasury, payments, corporate banking and capital-market-related business. However, this strength does not eliminate credit risk. Strength in financial markets and corporate finance is beneficial for funding, customer relationships and policy connectivity, but also links the bank to interest-rate risk, market risk, corporate credit, commercial real estate, local-government-related exposure and cross-border regulation.

The deposit franchise is the most important substantive support for BOCOM’s senior credit. Customer deposits were RMB9.31tn at end-2025, up RMB507.5bn or 5.77% from end-2024. They increased further by 4.06% to RMB9.69tn at end-1Q26. In the 1Q breakdown, corporate deposits accounted for around 54.57% and personal deposits for around 43.86%, while demand deposits accounted for 30.29% and time deposits for 68.14%. The deposit base supports stable funding, but the high share of time deposits affects deposit costs and NIM. In the Chinese banking sector, deposit competition, terming-out of deposits, falling lending rates and policy-driven rate cuts can easily overlap, structurally suppressing BOCOM’s NIM.

The breadth of the customer base is a credit strength. A scale of 3.07mn corporate customers and 205mn retail customers enables relationships across payments, payroll, consumption, corporate treasury, supply chains, asset management, cards, insurance, leasing, trusts and wealth management. A bank’s credit strength depends not only on loan assets, but also on how much of customers’ funding circulation it controls. A bank that can comprehensively handle customer deposits, payments, cash management, lending, investment products, cards and insurance is better placed to maintain funding stickiness and diversify revenue sources.

At the same time, BOCOM’s franchise is one tier smaller than the Big Four and its profitability is not particularly strong. Its 2025 ROA of 0.63%, ROE of 8.38% and NIM of 1.20% suggest a bank protected by systemic importance, deposits, capital, allowances and support expectations, rather than a bank that absorbs large credit risk through thick earnings. This distinction is important in credit analysis. For senior bonds, support expectations and systemic importance are major supports. For subordinated securities, standalone earnings capacity and internal capital generation matter more.

The overseas and subsidiary franchise should also be viewed separately. BOCOM has overseas branches, subsidiaries and representative offices, and also owns subsidiaries in financial leasing, wealth management, trust, insurance, overseas securities and other areas. However, the parent bank, overseas branches, financial leasing subsidiaries and other group companies are not the same credit. For branch-issued bonds, governing law, tax, local regulation and currency liquidity need to be checked. For subsidiary bonds, investors need to confirm whether there is a parent guarantee or support agreement.

In one sentence, BOCOM’s industry position is that it is “not as large as the Big Four, but a large state-owned bank that is indispensable to the Chinese banking system.” For senior credit, this position provides very strong support. For investors, however, it is necessary to consider both support expectations close to those for the Big Four and weaker profitability, scale and market ranking than the Big Four. BOCOM has strong beta to the Chinese banking sector and is closely tied to sovereign support and regulatory stability.

3. Segment Assessment

BOCOM’s business is easiest to understand by dividing it into corporate banking, personal banking, treasury, and other subsidiaries / integrated finance. In 2025, segment net operating income was RMB133.1bn for corporate banking, RMB96.7bn for personal banking, RMB34.6bn for treasury and RMB1.2bn for others. Profit before tax was RMB60.7bn for corporate banking, RMB12.9bn for personal banking, RMB29.4bn for treasury and RMB0.8bn for others. Corporate banking is the core source of revenue and profit; personal banking supports the customer base and deposits while bearing a large credit-cost burden; and treasury plays a role in funding deployment, liquidity and market-related revenue.

Corporate banking is the segment that most directly demonstrates BOCOM’s systemic importance. At end-2025, corporate loans were RMB6.04tn, accounting for 66.25% of total loans, with an NPL ratio of 1.19%. Corporate banking is widely diversified across manufacturing, transportation / warehousing / postal services, leasing and commercial services, real estate, public utilities, power / heat / gas / water, wholesale and retail, construction, finance, education / science / culture / public health, mining, information and communications, and other sectors. BOCOM is a bank that supports corporate payments, working capital, supply chains, trade finance, infrastructure and policy-priority industries, and it is deeply embedded in China’s overall credit cycle.

The most important constraint within corporate loans is real estate. At end-2025, loans to the real estate sector were RMB515.3bn, or 5.65% of total loans, which appears manageable based on the balance ratio alone. However, NPLs were RMB21.7bn and the NPL ratio was 4.20%, clearly high among major corporate sectors. The adjustment in China’s property sector is not large enough to immediately undermine BOCOM’s senior credit, but in a low-NIM environment it erodes the earnings buffer through credit costs and pressure on collateral values. BOCOM’s real estate risk can spill over indirectly not only through loans to developers, but also through construction, wholesale and retail, commercial services, local-government-related borrowers and residential mortgages.

Among other corporate sectors, the NPL ratios of 2.77% in wholesale and retail and 10.43% in accommodation and catering also merit attention. Accommodation and catering has a small balance of RMB37.9bn, so the impact on the overall system is limited, but the high ratio indicates weakness among SMEs and service-sector borrowers. Wholesale and retail has a balance of RMB364.9bn and is linked to consumption, logistics, inventories and private-enterprise liquidity, making credit costs more likely to emerge in a weak economy. Manufacturing loans were RMB1.20tn with an NPL ratio of 1.38%. This sector may grow as a policy-priority area, but investors still need to monitor exports, overcapacity, technology competition, industrial subsidies and weak private investment.

Transportation / warehousing / postal services, power / heat / gas / water, and public utilities are highly public in nature and demonstrate BOCOM’s policy connectivity. At end-2025, transportation / warehousing / postal services loans were RMB1.04tn with an NPL ratio of 0.31%; power / heat / gas / water loans were RMB462.5bn with an NPL ratio of 0.20%; and water conservancy / environment / public utilities loans were RMB453.6bn with an NPL ratio of 0.42%. These sectors have low NPL ratios, but they are linked to local-government-related entities, regulated tariffs, long-term funding, capital consumption and policy-oriented lending terms. The issue is not that low NPL ratios mean no risk, but that the credit profile depends on the payment capacity of the government and public sectors and on policy support.

Personal banking covers the deposit base, cards, mortgages, consumer loans, personal business loans and wealth management. At end-2025, personal loans were RMB2.84tn, accounting for 31.07% of total loans, with an NPL ratio of 1.58%. This was higher than the 1.19% NPL ratio for corporate loans, and segment credit impairment losses in personal banking were RMB33.7bn in 2025, exceeding the RMB22.1bn for corporate banking. Personal banking is a source of customer relationships and deposits for BOCOM, but it is an important constraint in terms of credit cost.

Mortgages are the largest component of personal banking. At end-2025, mortgages were RMB1.44tn, accounting for 15.81% of total loans, with an NPL ratio of 1.01%. The mortgage NPL ratio is lower than the NPL ratio for corporate lending to the real estate sector, but it is closely linked to weakness in China’s housing market, income prospects, employment, home prices, prepayments and collateral values. BOCOM’s mortgage share is not extremely high, but the absolute amount is large. Even a modest increase in mortgage credit costs would erode earnings absorption capacity for a low-NIM bank.

Credit cards, personal business loans and consumer loans are more immediately affected by the economy, employment and SMEs. At end-2025, credit card loans were RMB531.3bn with an NPL ratio of 2.68%; personal business loans were RMB462.3bn with an NPL ratio of 1.94%; and other personal consumer loans were RMB399.0bn with an NPL ratio of 1.77%. Credit cards in particular are a concentrated area of risk within retail, with a special-mention loan ratio of 4.21% and an overdue ratio of 5.09%. These exposures are not large enough to suddenly undermine senior credit, but given BOCOM’s low profitability, higher credit costs can easily depress ROA / ROE.

The treasury segment is responsible for liquidity, investments, interest-rate risk, regulatory capital and earnings supplementation. In 2025, treasury net operating income was RMB34.6bn and profit before tax was RMB29.4bn, with a credit impairment reversal of RMB1.2bn. At end-1Q26, financial investments included FVTPL investments of RMB707.9bn, amortised-cost investments of RMB2.79tn and FVOCI investments of RMB1.14tn, making the total large. As a large state-owned bank, government bonds, policy bank bonds and high-quality liquid assets support LCR and NSFR. At the same time, the interest-rate environment, accounting classification, valuation gains and losses, bond portfolio duration and the quality of the liquidity buffer influence earnings quality in a period of margin compression.

Subsidiaries and integrated finance broaden BOCOM’s franchise, but also require analytical separation for investors. BOCOM owns subsidiaries in financial leasing, funds, wealth management, trust, insurance, overseas securities and debt-to-equity swap-related businesses. These expand revenue sources through customer relationships, fees, asset management, investment banking, leasing assets and insurance products. However, subsidiary debt does not necessarily have the same credit profile as the parent bank. Investors need to confirm the issuer, guarantees, keepwells, liquidity support, regulatory capital treatment and position in resolution. In particular, subsidiaries such as Bank of Communications Financial Leasing should be distinguished from the senior credit of the BOCOM parent, even if the relationship with the parent is strong.

The main loan categories and NPL ratios at end-2025 were as follows.

Source: 2025 Annual Report.

The conclusion of the segment assessment is that corporate banking is the pillar of systemic importance and earnings; personal banking is both a customer-base support and the main source of credit-cost pressure; treasury provides liquidity and earnings supplementation; and subsidiaries support the integrated financial franchise. For subordinated securities and subsidiary debt, segment-level profitability, credit cost, capital consumption and the legal separation of issuers become more important.

4. Financial Profile and Analysis

BOCOM’s financial profile consists of a very large balance sheet, stable deposits, low but stable earnings, a headline-stable NPL ratio, sufficient though not exceptionally thick capital, and liquidity above regulatory requirements. Based on the 2025 and 1Q26 numbers, there is no visible short-term senior credit concern for BOCOM. At the same time, ROA, ROE and NIM are low, and earnings-based loss absorption cannot be described as very strong. BOCOM’s credit strength is supported not only by internal profit generation, but also significantly by scale, deposits, allowances, capital-market access and government support expectations.

Balance-sheet growth has continued. Total assets were RMB15.55tn at end-2025, up 4.35% from end-2024. Customer loans were RMB9.12tn, up 6.64%, and customer deposits were RMB9.31tn, up 5.77%. At end-1Q26, total assets were RMB16.27tn, customer loans were RMB9.44tn and customer deposits were RMB9.69tn. In 1Q alone, total assets increased by 4.66%, loans by 3.52% and deposits by 4.06%. This demonstrates franchise continuity, but also puts pressure on RWA and capital ratios. The total capital adequacy ratio at end-1Q26 declined to 15.61% from 15.96% at end-2025, confirming that growth consumes capital.

On earnings, 2025 net interest income was RMB173.1bn, up 1.91% year on year; net fee and commission income was RMB38.2bn, up 3.44%; and net operating income was RMB265.6bn, up 2.05%. Profit before tax was RMB103.8bn and net profit attributable to shareholders was RMB95.6bn, representing modest year-on-year growth. In 1Q26, net interest income rose 7.21% year on year, net operating income rose 4.89% and profit before tax rose 8.66%, showing headline improvement. However, 1Q is one quarter of unaudited data and may vary depending on full-year loan repricing, deposit costs, bond investment income and credit costs.

NIM is the most important monitoring item. BOCOM’s NIM declined from 1.28% in 2023 to 1.27% in 2024 and 1.20% in 2025. In 1Q26, it was 1.23%, described as flat year on year, but the low-1.2% level itself is low. Low NIM reflects the broader Chinese banking-sector combination of falling lending rates, mortgage repricing, policy-support lending, deposit terming-out, deposit competition and a low-rate environment. BOCOM can maintain absolute profit because of its scale, but its margin buffer for absorbing the same NPLs and credit costs is thin.

ROA and ROE are also important in reading BOCOM’s credit profile. ROA was 0.63% and ROE was 8.38% in 2025, down from 0.65% and 9.08% in 2024. Annualised ROA and ROE in 1Q26 were 0.66% and 9.07%, respectively, showing a short-term recovery, but this is not a high-profitability bank. For senior credit, low profitability can be offset by systemic importance and capital. However, for securities closer to loss absorption or regulatory discretion, such as AT1, preference shares, Tier 2 and non-capital TLAC, low profitability carries more weight. Investors assessing BOCOM’s subordinated securities should not simply view them as safe because the issuer is close to senior-grade credit.

Cost efficiency is relatively stable. The cost-to-income ratio was 29.30% in 2025, improving from 29.90% in 2024. It was also 27.58% in 1Q26, down 2.82 percentage points year on year. This indicates that BOCOM can control expenses to some extent. However, in a low-NIM environment, cost reductions alone cannot materially improve profitability. Bank costs contain many fixed elements, including branches, personnel, IT, risk management, compliance, regulatory response and digitalisation investment. Improved cost efficiency is positive, but it is not the main driver of credit strength.

Credit cost is one of the items that can most affect BOCOM’s profitability. Credit impairment losses were RMB54.5bn in 2025, up from RMB52.6bn in 2024. Asset impairment losses were RMB14.2bn in 1Q26, of which loan credit impairment losses were RMB13.5bn, up 9.30% year on year. This indicates that the 1Q profit improvement did not rely only on lower credit costs, while pressure from loan growth and asset quality remains. Even if the NPL ratio is stable, credit costs can rise with a lag if special-mention loans, overdue loans, forborne loans, collateral values and retail delinquencies deteriorate as leading indicators.

Headline asset quality is stable. NPLs were RMB117.0bn at end-2025, with an NPL ratio of 1.28%, down slightly from 1.31% at end-2024. Special-mention loans were RMB150.8bn, or 1.65%. Allowance coverage was 208.38%, and the loan-loss reserve ratio was around 2.7%, which looks sufficient on headline numbers. At end-1Q26, NPLs increased to RMB122.5bn, the NPL ratio rose 0.02 percentage points to 1.30%, and allowance coverage declined 5.58 percentage points to 202.80%. These moves are modest in themselves, but they should not be overlooked in a low-NIM environment.

The composition of asset quality clarifies the credit issues. The NPL ratio was 1.19% for corporate loans but 1.58% for personal loans. The special-mention ratio for personal loans was 1.69% and the overdue ratio was 2.56%, higher than the 1.00% overdue ratio for corporate loans. The credit card special-mention ratio was 4.21% and the overdue ratio was 5.09%, a clear weak point within retail. The mortgage NPL ratio of 1.01% is also an item to monitor in light of future income, employment and home prices.

Even if the NPL ratio is stable, leading indicators need to be watched. At end-2025, overdue loans were RMB133.0bn, with an overdue ratio of 1.46%, up RMB14.9bn and 0.08 percentage points from the prior year-end. Overdue loans more than 90 days were RMB96.6bn, restructured loans were RMB77.2bn, and restructured loans more than three months overdue were RMB14.0bn. For a low-NIM bank, the earnings impact is material if these migrate with a lag into NPL recognition or credit impairment, making them as important as the headline NPL ratio.

Capital was materially supported by the 2025 A-share issuance. At end-2025, net capital was RMB1.59tn, core Tier 1 capital was RMB1.14tn and RWA was RMB9.96tn. The total capital adequacy ratio of 15.96%, Tier 1 ratio of 12.70% and core Tier 1 ratio of 11.43% were comfortably above regulatory requirements. Given that the core Tier 1 ratio was 10.24% at end-2024, the 2025 capital increase was clearly credit positive. However, at end-1Q26, the total capital adequacy ratio declined to 15.61%, the Tier 1 ratio to 12.48% and the core Tier 1 ratio to 11.25%. As long as growth continues, the balance between internal capital generation and external capital / TLAC issuance needs to be monitored.

Liquidity is above regulatory requirements. The liquidity ratio was 75.88% at end-2025, up from 73.34% at end-2024. The daily average LCR in 4Q25 was 123.02%, and the quarter-end NSFR was 110.38%. These are above regulatory minimums and do not indicate short-term liquidity concerns. However, BOCOM’s LCR / NSFR may not necessarily be exceptionally thick among China’s top large banks, and they are sensitive to deposit composition, negotiable certificates of deposit, issued bonds, overseas branches, foreign-currency liquidity, TLAC issuance and interest-rate market movements. Liquidity is a strength, but not unlimited.

From an investor perspective, the important factors for BOCOM’s senior bonds are the large absolute profit base, stable NPL ratio, allowance coverage, capital strengthening, deposit growth, LCR / NSFR headroom and support expectations as a large state-owned bank. Constraints are low NIM, declining ROA / ROE, retail credit costs, real estate NPLs, the small rise in the 1Q NPL ratio, dilution of capital ratios through growth, and the loss-absorbing nature of subordinated securities. Senior credit looks stable, but this is not a bank whose high credit strength can be explained by standalone profitability alone.

5. Structural Considerations for Bondholders

In investing in BOCOM bonds, investors must separate claim, ranking, loss absorption, regulatory treatment, and branch / subsidiary differences, even when the issuer name appears similar. The strength of senior issuer credit does not give the same risk profile to all BOCOM-related securities. Because initial coverage has not reviewed security-specific final terms, this report does not make security-level investment judgments, but instead organises the structural framework for analysis.

First, ordinary senior debt and deposits of the BOCOM parent are the centre of issuer credit. Its status as a large state-owned bank, D-SIB / G-SIB designation, MOF as the largest shareholder, large deposit base, regulatory supervision and capital-market access are strong supports for senior debt. External ratings from Fitch and S&P, at least as far as can be confirmed through public search, are also high and incorporate government support and systemic importance. However, even senior bonds are not explicitly guaranteed by the Chinese government. Investors are assessing the issuer’s payment capacity and support expectations, not holding the same rights as sovereign bonds.

Second, for overseas branch-issued bonds, investors need to check the branch location, governing law, payment currency, tax, sanctions, settlement and local regulation. BOCOM may issue in offshore markets through branches such as the Hong Kong branch. Branch bonds are typically close to head-office bank debt as an analytical subject, but practical recovery and payment risk for investors may be affected by the issuing branch, governing law, settlement system, local regulation and foreign-currency liquidity. For short-term securities and foreign-currency securities in particular, investors should look not only at consolidated RMB liquidity, but also at foreign-currency and offshore market access.

Third, non-capital TLAC bonds need to be viewed in the context of resolution and loss absorption, even if they appear close to ordinary senior credit. BOCOM has issued domestic TLAC non-capital bonds since 2024. The 2025 annual report shows RMB30bn outstanding for 2024 TLAC Non-Capital Bond 01 and a total outstanding balance of RMB100bn for 2025 TLAC Non-Capital Bonds 01A / 01B / 02A / 02B / 03A / 03B. Even if TLAC non-capital bonds rank above capital securities, their purpose is to meet total loss-absorbing capacity requirements in resolution, and they should not be assessed in the same way as ordinary operating liabilities. Legal ranking, loss-absorption conditions, regulatory discretion, principal write-down / conversion, payment suspension and the resolution regime need to be checked.

Fourth, Tier 2 capital bonds have clear loss-absorbing features. The 2025 annual report shows RMB213.0bn outstanding for Tier 2 bonds and RMB4.8bn for subordinated bonds, and explains that Tier 2 instruments have principal write-down features upon the occurrence of regulatory triggers. Separately from BOCOM being a strong issuer in a going-concern environment, these instruments may suffer principal losses in circumstances close to PONV, regulatory intervention, capital inadequacy or resolution. Tier 2 investors should not transfer senior support expectations directly to subordinated securities.

Fifth, preference shares and other capital securities involve dividend cancellation, loss absorption, regulatory discretion, call risk, reinvestment risk and price volatility. At end-2025, equity attributable to the parent included RMB45.0bn attributable to preference shareholders and RMB81.5bn attributable to perpetual bond holders. For capital securities, the issuer’s high likelihood of survival and the investor’s certainty of receiving coupons or dividends are not the same thing. In a scenario where regulators stabilise the banking system, senior debt protection and loss absorption by subordinated securities can occur at the same time.

Sixth, subsidiary debt is not BOCOM parent debt. Subsidiaries in financial leasing, trust, insurance, wealth management and overseas securities are part of the BOCOM group and may carry expectations of commercial and strategic support. However, unless there is a parent guarantee, investors’ claim is against the subsidiary. Issuers such as Bank of Communications Financial Leasing need to be assessed individually in terms of their relationship with the parent, strength of support, regulatory treatment, asset risk and external ratings. It would be dangerous to determine subsidiary bond risk solely from the strong senior credit of the BOCOM parent.

The most important structural conclusion is that BOCOM’s senior issuer credit is strong, but senior ratings alone are insufficient for assessing spreads on subordinated securities and subsidiary debt. BOCOM credit analysis only becomes meaningful after decomposing issuer, branch, subsidiary, ranking, loss-absorption provisions, currency, governing law and regulatory discretion.

6. Capital Structure, Liquidity and Funding

BOCOM’s capital structure consists of ordinary share capital, retained earnings, preference shares, Tier 2, non-capital TLAC, issued bonds, negotiable certificates of deposit and customer deposits. The most important credit supports are ordinary equity capital and deposits. The 2025 A-share issuance increased ordinary equity capital and improved the core Tier 1 ratio. TLAC and Tier 2 issuance in the capital markets is important for meeting regulatory requirements, but because these instruments are subordinated and loss-absorbing, investors cannot treat them as ordinary funding.

At end-2025, capital consisted of net capital of RMB1.59tn, core Tier 1 capital of RMB1.14tn and RWA of RMB9.96tn. The total capital adequacy ratio was 15.96%, the Tier 1 ratio was 12.70% and the core Tier 1 ratio was 11.43%. At end-2024, the total capital adequacy ratio had been 16.02%, the Tier 1 ratio 12.11% and the core Tier 1 ratio 10.24%. Thus, while the total capital adequacy ratio declined slightly in 2025, the core Tier 1 ratio improved significantly. This reflected the A-share issuance improving the quality of Tier 1 capital.

At end-1Q26, the total capital adequacy ratio was 15.61%, the Tier 1 ratio was 12.48% and the core Tier 1 ratio was 11.25%. Given the growth in total assets and loans in 1Q, the modest decline in capital ratios is natural. No capital shortfall is visible at the time of initial coverage, but capital headroom may vary depending on future loan growth, policy-driven credit supply, credit costs, real estate and retail risks, dividends, TLAC requirements, RWA calculation and regulatory changes. For BOCOM’s senior credit, what matters is not only the capital ratio itself, but whether there is systemic support to strengthen ordinary equity capital if needed. The 2025 A-share issuance to the MOF and others is a strong signal on this point.

In terms of capital quality, the increase in core Tier 1 is particularly important. Tier 2 and preference shares support the total capital adequacy ratio, but their loss-absorption ranking is after ordinary equity or below ordinary debt. For investors in senior bonds, capital securities are positive as a loss-absorption buffer. Conversely, for investors in Tier 2 or preference shares, the investor itself is part of the loss-absorption buffer. When looking at BOCOM’s capital structure, it is necessary to distinguish between “support for the bank as a whole” and “risk for the investor in the specific security.”

Liquidity is generally sound. The daily average LCR in 4Q25 was 123.02%, and the quarter-end NSFR was 110.38%. The liquidity ratio was 75.88%, improving from 73.34% at end-2024 and 64.92% at end-2023. High-quality liquid assets include cash, central-bank reserves available under stress and eligible bonds. BOCOM’s large customer deposits, investment in government bonds and policy bank bonds, and central-bank access are important liquidity supports.

However, the liquidity cushion is not necessarily always very thick relative to other large state-owned banks. LCR of 123% and NSFR of 110% are above regulatory requirements, but they do not indicate unlimited shock resistance. At end-1Q26, BOCOM had customer deposits of RMB9.69tn, negotiable certificates of deposit of RMB1.37tn and issued bonds of RMB655.7bn. Market-funding access is a strength, but during market stress, rollover costs, foreign-currency funding, investor demand, branch issuance and the timing of TLAC issuance can become issues. Senior bond investors would want to check not only consolidated LCR, but also currency-specific and jurisdiction-specific liquidity.

The composition of customer deposits is also important. Deposits were RMB9.69tn at end-1Q26, with corporate deposits accounting for 54.57% and personal deposits for 43.86%. Demand deposits accounted for 30.29% and time deposits for 68.14%. A high time-deposit ratio can help reduce outflow risk, but it also makes deposit costs slower to fall and can pressure NIM. In the Chinese banking sector, even when deposit rates are adjusted and policy rates decline, customer-acquisition competition and terming-out can delay cost reductions. BOCOM’s NIM decline is also related to this deposit structure.

Issued bonds and TLAC will become increasingly important in the future capital and liability structure. The 2025 annual report shows an ending balance of RMB454.4bn for issued bonds, RMB213.0bn for Tier 2 bonds and RMB4.8bn for subordinated bonds. TLAC non-capital bond issuance also increased in 2024 and 2025, with RMB100bn of outstanding balance shown for 2025 issuance alone. For BOCOM as a G-SIB, meeting TLAC requirements is unavoidable from a regulatory perspective. This thickens the loss-absorption buffer for senior creditors, but for investors in TLAC bonds themselves it means loss-absorption risk in resolution.

BOCOM’s funding structure is supported by its deposit base, relationship with regulators, domestic and international market access, and D-SIB / G-SIB designation. At the same time, NIM compression, deposit costs, capital consumption from loan growth, foreign-currency and overseas-branch funding, TLAC issuance needs and loss-absorption risk in subordinated securities remain.

7. Rating Agency View

BOCOM’s external ratings reflect both the likelihood of government support as a large Chinese bank and its standalone credit strength. In this initial coverage, Fitch and S&P were checked only through public search snippets, and the full rating-agency reports were not obtained. Public snippets indicate that Fitch affirmed BOCOM’s Long-Term IDR at A with a Stable Outlook in May 2025. A September 2025 snippet on short-term notes issued by the Hong Kong branch showed a Long-Term IDR of A / Stable, Short-Term IDR of F1+, Shareholder Support Rating of a and Viability Rating of bbb-. An S&P snippet from February 2025 stated that BOCOM and its subsidiaries’ long-term / short-term issuer ratings were affirmed at A- / A-2 with a Stable Outlook.

The important point in reading the ratings is that the issuer rating is not determined solely by standalone earnings capacity. Fitch’s snippet-level VR of bbb- suggests that BOCOM’s standalone credit strength is assessed below its government-support-inclusive Long-Term IDR of A. This is consistent with BOCOM’s financial profile, which includes low NIM, not particularly strong ROA / ROE, and real estate and retail credit risk. However, because this report has not directly reviewed the rating text, it does not make definitive statements on the rating agencies’ detailed notching or sensitivities.

This is positive for senior bonds. The likelihood that Chinese authorities would allow a large state-owned D-SIB / G-SIB such as BOCOM to fail in a disorderly manner is low, and systemic importance strongly supports issuer credit. The MOF’s presence as a major shareholder, its participation in the 2025 A-share subscription, PBOC/NFRA D-SIB designation and international treatment as a G-SIB are all factors that rating agencies are likely to consider when assessing support probability. For senior bond investors, BOCOM is a credit closely linked to China’s sovereign, regulators and financial-stability policy.

At the same time, rating support does not protect all securities equally. Tier 2, preference shares, other capital instruments and non-capital TLAC may be required to absorb losses in a resolution or PONV context. Rating agencies also typically do not notch senior bonds and subordinated securities in the same way. Even for a bank with strong government support, investors in capital securities cannot assume that they will avoid losses. When using BOCOM’s external ratings, investors need to distinguish issuer ratings, deposit ratings, senior unsecured ratings, TLAC ratings, Tier 2 ratings and preference share ratings.

For Moody’s, this work did not directly verify primary rating materials for the parent BOCOM. Search results existed for subsidiaries and related issuers, but this report does not make a definitive statement on the parent’s Moody’s ratings. In future updates, the parent bank’s long-term deposit / issuer ratings, BCA, government-support uplift and outlook should be checked through BOCOM’s official IR materials, Moody’s, or a reliable ratings list. Initial coverage is based mainly on Fitch and S&P public information, company disclosures and regulatory importance.

The conclusion of the ratings section is that BOCOM’s senior issuer credit is supported by government support and systemic importance, while senior issuer ratings alone should not be used to measure investment risk in subordinated securities or subsidiary debt.

8. Credit Positioning

BOCOM’s credit positioning should be separated between senior bonds and subordinated securities. For senior issuer credit, the MOF’s position as a major shareholder, D-SIB / G-SIB designation, more than RMB15tn of total assets, more than RMB9tn of customer deposits, the track record of capital strengthening and liquidity above regulatory requirements are strong supports. The likelihood that Chinese authorities would resolve a large state-owned bank such as BOCOM in a disorderly manner is low, and senior credit is closely linked to China’s sovereign, regulators and financial-stability policy.

At the same time, BOCOM is not a high-profitability bank. Its 2025 ROA of 0.63%, ROE of 8.38% and NIM of 1.20% indicate a bank supported by systemic importance, capital, deposits and support expectations rather than a bank that absorbs credit losses through thick earnings. A strict relative comparison with the Big Four would require a separate peer table, but at least on a standalone basis, BOCOM’s profitability is not the main factor explaining the strength of its senior credit.

TLAC bonds, Tier 2, preference shares and other capital securities should be treated more cautiously than senior bonds. BOCOM’s systemic importance increases the stability of senior debt, but it is also a reason why subordinated securities may be required to absorb losses in resolution or capital reconstruction. For subsidiary debt, it is also necessary to distinguish parent support expectations from contractual guarantees. BOCOM’s senior credit is strong, but for subordinated securities, branch bonds and subsidiary bonds, investors should read the issuer, ranking, currency, governing law and loss-absorption provisions individually.

9. Key Credit Strengths and Constraints

The main strengths are: (1) systemic importance as a domestic D-SIB Category 3 bank and G-SIB; (2) customer deposits of RMB9.69tn at end-1Q26; (3) strengthened core Tier 1 capital through the 2025 A-share issuance; (4) headline asset quality represented by an NPL ratio of 1.28% and allowance coverage of 208.38% at end-2025; and (5) liquidity above regulatory requirements, with LCR of 123.02% and NSFR of 110.38%. These are clear supports for senior issuer credit.

The main constraints are: (1) low profitability, with 2025 NIM of 1.20%, ROA of 0.63% and ROE of 8.38%; (2) real estate and retail credit pressure visible in the real estate sector NPL ratio of 4.20%, credit card NPL ratio of 2.68% and credit card overdue ratio of 5.09%; (3) constraints on profitability and capital consumption from policy lending; (4) structural complexity across the parent, branches, TLAC, Tier 2, preference shares and subsidiary debt; and (5) dependence on the Chinese sovereign and regulatory support environment. BOCOM is a strong bank, but it is not a fully independent private credit; it is part of China’s system credit.

10. Downside Scenarios and Monitoring Triggers

BOCOM’s senior credit would clearly deteriorate not because of a single metric, but if multiple supports weakened at the same time. The most important downside scenario is one in which deterioration in real estate, retail and SME credit spreads into NPLs, special-mention loans, overdue loans, allowances and credit costs, and the bank is unable to absorb this through earnings because of low NIM.

Specifically, concern should increase if NIM falls below 1.2% and net interest income declines; if the real estate sector NPL ratio of 4.20% or mortgage NPL ratio of 1.01% worsens significantly; if the credit card overdue ratio of 5.09% or personal business loan indicators rise; if the core Tier 1 ratio declines again to the low-10% range; if LCR / NSFR or foreign-currency funding comes under pressure; or if China’s sovereign, government-support assessment, or D-SIB / G-SIB regulatory status deteriorates. In the FY2026 interim, second-quarter and third-quarter results, the key items to check are NIM, net interest income, credit impairment, NPL ratio, special-mention loans, overdue loans, allowance coverage, core Tier 1 ratio, deposit composition, LCR / NSFR, TLAC issuance, shareholder changes at MOF / HSBC / SSF, and rating actions by Fitch / S&P / Moody’s.

11. Credit View and Monitoring Focus

At the time of this report, BOCOM’s senior issuer credit is strong as a large Chinese state-owned bank, but that strength depends on scale, deposits, capital, the MOF as a major shareholder, D-SIB / G-SIB designation and government support expectations, rather than on high profitability. The direction is stable in the short term, but there are gradual downside risks from low NIM, overdue and restructured loans, real estate and retail credit, capital ratios, LCR / NSFR and foreign-currency funding. The likelihood of a sharp change is currently low, but the view should be revisited if weakening sovereign-support assessment, rapid asset-quality deterioration and deposit / foreign-currency liquidity stress coincide.

In conclusion, for senior bonds, investors can place weight on government support expectations and systemic importance. For non-capital TLAC, Tier 2, preference shares, overseas branch debt and subsidiary debt, however, it is necessary to clearly distinguish loss-absorption ranking and issuer differences.

Short Summary & Conclusion

BOCOM is a large Chinese state-owned bank supported by the MOF as a major shareholder, D-SIB / G-SIB designation, a large asset and deposit base, and the 2025 ordinary equity capital strengthening. Its senior issuer credit is strong. At the same time, profitability is not thick, with NIM in the low-1.2% range and ROA in the 0.6% range, and credit costs in real estate, credit cards, personal business loans and consumer loans need to be monitored. For senior bonds, investors can place weight on government support expectations and systemic importance. For non-capital TLAC, Tier 2, preference shares, overseas branch debt and subsidiary debt, investors should assess ranking, loss absorption, issuer, currency and governing law separately.

Sources

Company and Primary Sources

• Bank of Communications, 2025 Annual Report, retrieved through the official annual-report page and FinancialReports PDF mirror: https://www.bankcomm.com/BankCommSite/shtml/jyjr/en/2600223/2600236/2600243/7055039.shtml?channelId=2600236 and https://cdn.financialreports.eu/financialreports/media/filings/50814/2026/RNS/50814_rns_2026-04-27_7aa5f8ad-0ad2-4976-b44f-f7c7bea8405b.pdf
• Bank of Communications, Results Announcement for the First Quarter 2026, dated 2026-04-29: https://cdn.financialreports.eu/financialreports/media/filings/50814/2026/RNS/50814_rns_2026-04-29_2ab550c5-5f0b-4604-a09e-1dc29966df5d.pdf
• Bank of Communications investor announcement list, accessed 2026-05-21: https://www.bankcomm.com/BankCommSite/shtml/jyjr/en/2600223/2600234/list_1.shtml?channelId=2600234
• Bank of Communications Financial Brief page, accessed 2026-05-21: https://www.bankcomm.com/BankCommSite/shtml/jyjr/en/2600223/2600239/list.shtml?channelId=2600239

Rating, Regulatory and Supplementary Sources

• Fitch Ratings, Fitch Affirms Bank of Communications at 'A'; Outlook Stable, 2025-05-16: https://www.fitchratings.com/research/banks/fitch-affirms-bank-of-communications-at-a-outlook-stable-16-05-2025
• Fitch Ratings, Fitch Rates BOCOM Hong Kong Branch's CNY200 Million Short-Term Notes 'F1+', 2025-09-02: https://www.fitchratings.com/research/banks/fitch-rates-bocom-hong-kong-branch-cny200-million-short-term-notes-f1-02-09-2025
• S&P Global Ratings, Bank of Communications 'A-/A-2' Ratings Affirmed On Measured Loan Growth; Outlook Stable, 2025-02-19: https://www.spglobal.com/ratings/es/regulatory/article/-/view/type/HTML/id/3325244
• PBOC / NFRA D-SIB list context, 2025-12-31 search result and BOCOM 2025 Annual Report disclosure: https://www.pbc.gov.cn/goutongjiaoliu/113456/113469/5573699/index.html
• CSPI Ratings, CSPI Ratings Affirms Bank of Communications Co., Ltd. at 'A+'; Outlook Stable, 2025-08-26: https://www.cspi-ratings.com/rating-actions/rating/CSPI-Ratings-Affirms-Bank-of-Communications-Co-Ltd-at-A-Outlook-Stable_20250826091018411.html

Unverified or Pending Items

• Moody's parent Bank of Communications rating, BCA, outlook and support uplift were not directly verified from a primary source in this pass.
• Current Pillar 3 reports were not separately downloaded; capital and liquidity discussion relies on the 2025 annual report, 2026 Q1 results announcement and official financial brief.
• No security-specific final terms, offering circulars, keepwell agreements, guarantees or covenants were reviewed for individual senior, TLAC, Tier 2, preference share, overseas branch or subsidiary instruments.
• Live bond prices, CDS, relative-value spreads and market-implied support assumptions were not checked.