ICBC's HK equity shot positive for bank and leasing arm

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A recent move by growing aviation financier, Industrial and Commercial Bank of China, to inject $784 million of new equity into its wholly-owned Hong Kong subsidiary, Industrial and Commercial Bank of China (Asia), is credit positive, says Moody's Investors Service.

The step will increase ICBC Asia's equity by 30% and increase its equity-to-asset ratio to 9.8% from 7.5%, which is "higher than many of its peers".

The move is also good news for ICBC Leasing, which indicated in an interview with CAO this year that, in addition to other options, it would source funds from ICBC's domestic and overseas branches to finance new deliveries.

The capital injection follows a year of ICBC Asia posting strong credit growth of 26% in 2010 and comes after ICBC bought, in December 2010, the 27% interest in ICBC Asia it didn't already own.

"We expect ICBC Asia to continue reporting strong credit growth in 2011 and beyond, owing to a rapid increase in trade finance and other loans to mainland Chinese corporate borrowers, many of which were acquired through referrals from its parent," says Moody's.