OREANDA-NEWS. March 30, 2015. Fitch Ratings has assigned China-based Bank of Communications Financial Leasing Co., Ltd. (BOCOM Leasing) a Long-Term Issuer Default Rating (IDR) of 'A' and a Short-Term IDR of 'F1'. The Outlook is Stable.

BOCOM Leasing was established by Bank of Communications Co., Ltd. (BOCOM; A/Stable) in 2007 as its wholly owned leasing arm. The company is among the largest lessors in China with total assets of CNY111bn as of end-3Q14. BOCOM is one of the five state-owned commercial banks in China.

KEY RATING DRIVERS
BOCOM Leasing's Long-Term IDR of 'A' reflects our view of an extremely high probability of support from its parent. Fitch considers BOCOM Leasing to be a core subsidiary of BOCOM due to its strategic importance to BOCOM and high level of integration with the group. As the largest subsidiary of BOCOM by assets and income, BOCOM Leasing receives operational support in terms of funding, management expertise, and customer referrals. A default by BOCOM Leasing will not only cause severe reputational damage to BOCOM, but also disrupt the operation of the parent.

BOCOM has a history of providing financial support to BOCOM Leasing. After injecting capital totalling CNY6bn over three rounds, BOCOM plans to make a further equity investment of CNY1bn in 2015. BOCOM Leasing's articles of association were amended in March 2015, in line with regulatory requirements from the China Banking Regulatory Commission, to add a clause stating that BOCOM would provide liquidity and capital support to the subsidiary should the need arise.

BOCOM's Long-Term IDR of 'A' is driven by support from the Chinese sovereign (A+/Stable). Given BOCOM Leasing's role within BOCOM and its small size relative to the group, we expect sovereign support to be passed down to BOCOM Leasing through BOCOM, if needed. Despite rapid growth in recent years, BOCOM Leasing still accounted for less than 2% of BOCOM's CNY6.2trn assets as of end-3Q14.

RATING SENSITIVITIES
Any signs of a decrease in the probability of support for BOCOM Leasing from its parent may lead to a downgrade of the company's ratings. Examples of such signs include, but are not limited to, a material reduction in the ownership stake held by BOCOM or an adverse shift in the long-term outlook for the leasing company's strategic importance to its parent.

Any change in BOCOM's IDRs, which reflect the perceived willingness or ability of China's government to support the bank in a full and timely manner, would be likely to affect BOCOM Leasing's ratings in the same magnitude.