23-I-0038
August 25, 2023

Japan Credit Rating Agency, Ltd. (JCR) announces the following credit rating.

The Bank of East Asia, Limited (security code: -)<Assignment>
Foreign Currency Long-term Issuer Rating:
Outlook:
EMTN Program:
Senior (Preferred) Notes:
Non-Preferred Loss Absorbing Notes :A+
StableA+
A

Rationale(1) The Bank of East Asia, Limited (BEA) is a major Hong Kong bank established in 1918. It is the largest
independent bank in Hong Kong. BEA has its business base in mainland China as well as in Hong
Kong and has deposits totaling more than HKD 700 billion. It has a business alliance involving equity
investments with Japan’s Sumitomo Mitsui Banking Corporation and Spain’s CAIXA, and also has
partnerships with several other Japanese banks. In addition to its personal banking and wholesalebanking businesses, mainly in Hong Kong and mainland China, it also engages in wealthmanagement, treasury markets and other businesses. The rating reflects the Bank's strong businessplatform in Hong Kong and mainland China, stable profitability supported by its customer base, goodliquidity and high capital levels. On the other hand, the rating is constrained by uncertainties
associated with loans for real estate sector. BEA is promoting digitalization while expanding overseas
business. JCR will closely monitor how the Bank will improve its profitability through digitalization andenhance geographic diversification of its earnings through globalization.
(2) BEA’s consolidated assets stood at HKD 883 billion at the end of 2022, making it the fifth largest
among Hong Kong financial groups and the largest among local independent banks. BEA is notdesignated as a D-SIB under the regulations of the Hong Kong Monetary Authority, but as a corebank in Hong Kong, it is considered to be required to have a capital level conforming to those of DSIBs. The Bank has 48 branches in Hong Kong, 42 of which have SupremeGold Centers aimed toserve wealthy customers. In mainland China, it has 30 branches and 34 sub-branches in Beijing,
Shanghai, Shenzhen and other key cities, lending HKD 170 billion in total. It has been reviewing its
branch setup through digitalization, cutting the number of branches by about 20 in recent years. It
also has been focusing on wealth management by increasing the number of salespersons such as
relationship managers and investment consultants for wealthy class, expanding customer support at
SupremeGold Centers. By providing services in line with client needs, the Bank has succeeded in
attracting a stable customer base and establishing a solid business foundation in Hong Kong andmainland China.
(3) Interest income from personal and wholesale banking operations is a major source of the Bank's
profitability. In lending, it focuses on industrial and real estate loans, and is also involved in aircraft
finance, lease and supply chain finance together with the SMBC Group. In addition to wealthmanagement, the Bank is also involved in mortgage loans, credit cards and insurance sales in theretail business. As a result, its net interest margin of 1.65% keeps its profit high among Hong Kongbanks, with fee income also making a good contribution. The growth of expenses has been contained,with its low OHR also contributing to profitability. The Bank’s revenue has made some progress in
geographic diversification, with about 19% of its operating income before provisions coming from the
U.S., U.K., and other Asia Countries and Regions. However, its profitability has been low in recent
years due to disposal of nonperforming loans in mainland China. Enhancement of the quality of loan
assets in China is a challenge facing the Bank. In 2022, while its operating income before provisions
increased on better net interest income brought by higher interest rates and the resultant
improvement in net interest margin, its net income declined 17.6% year on year to HKD 4.3 billion
due to higher credit costs in mainland China and the wholesale segment. The interest rateenvironment keeps improving and JCR believes that even if the Bank's credit costs remain high, they
can be absorbed by earnings and that its performance will be relatively strong in 2023.
(4) The Bank's total assets at the end of 2022 consisted of 61% of customer loans, 17% of investment
securities, 13% of cash and deposits, and 9% of others. Loans outstanding to customers were
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geographically diversified, with Hong Kong accounting for 48%, mainland China for 32% and otherregions for 19%. By industry, the percentage of loans to real estate developers and real estate
investment companies was high in Hong Kong, staying in the 30% range. Its asset quality has
deteriorated as some of its real estate-related loans turned nonperforming. In line with the overall
trend in Hong Kong's banking sector, BEA's NPL ratio at the end of 2022 worsened by 1.3 percentage
points from the previous year to 2.39%. BEA is reducing its exposure as well as restricting new loans
to commercial real estate, and JCR will pay attention to the situation. The fair value reserve forsecurities accounted for 0.6% of Tier 1 at the end of 2022, showing the Bank made valuation gains
even after the rise of interest rates but the amount decreased from that in the past. Its interest raterisk in the banking book (IRRBB) is under control.
(5) The Bank is well-capitalised relative to the size of its risks. Despite a decrease in its capital adequacy
resulting from the repurchase of its shares from a shareholder at a consideration of HKD 2.9 billion
in 2022, its common equity tier 1 (CET1) ratio remained high at 15.8% at the end of the year. Thanks
to increased deposits, its loan-to-deposit ratio stands reasonably high at around 80%. Though funding
from the market is restrained, the Bank’s liquidity remains abundant.
(6) The EMTN Program, subject to the rating, was established on March 7, 2023. The Non-Preferred
Loss Absorbing Notes to be issued under this program are bonds issued by the Bank itself, which will
be subject to loss absorption in the event that a bail-in is triggered by the resolution authority. Basedon its "Rating Methodology for Financial Institutions’ Capital and TLAC Instruments" published on
April 27, 2017, JCR has assigned a rating one notch below the Issuer Rating to the non-preferredloss absorbing notes, given the fact that they have a structure that subordinates their collectability tothat of unsecured general obligations other than such notes. JCR believes there is little need of afurther notch down in view of the distance to loss occurrence. This is based on JCR's assumptionthat no principal reduction or other actions are required of the Non-Preferred Loss Absorbing Notes
except when the bail-in is triggered by the resolution authority.
Atsushi Masuda, Shinya Iwasaki

RatingIssuer: The Bank of East Asia, Limited<Assignment>

Foreign Currency Long-term Issuer Rating: A+
Outlook: Stable
Program Name:
U.S.$6,000,000,000 Medium Term Note Programme
Maximum Issuable Amount: Equivalent of USD 6 billion
Date of Program Established: March 7, 2023
Status:(Senior (Preferred) notes) Unsecured and unsubordinated debts ranking
pari passu with other unsecured and unsubordinated debts(Non-Preferred Loss Absorbing notes) Unsecured and unsubordinateddebts ranking subsequent in right of payment to, and of, all claims of all
unsubordinated creditors of the Issuer (including its depositors) only
Credit Enhancement:
NA
Covenants:(Senior (Preferred) notes) Negative Pledge and Cross Default Clauses
Rating:A+ for Senior (Preferred) notes; A for Non-Preferred Loss Absorbing notes

Rating Assignment Date: August 24, 2023
The assumptions for the credit ratings and the definitions of the rating symbols are published as "Types of Credit Ratings and Definitionsof Rating Symbols" (January 6, 2014) in Information about JCR Ratings on JCR's website (https://www.jcr.co.jp/en/).
Outline of the rating methodology is shown as "JCR's Rating Methodology" (November 7, 2014), "Banks" (October 1, 2021)"Rating Methodology for Financial Groups’ Holding Companies and Group Companies" (September 1, 2022) and "Rating
Methodology for Financial Institutions’ Capital and TLAC Instruments" (April 27, 2017) in Information about JCR Ratings on
JCR's website (https://www.jcr.co.jp/en/).
The rating stakeholder participated in the rating process of the aforementioned credit ratings.
A program rating is assigned to evaluate the creditworthiness of a program. The credit standing of an individual note issued
under the program may be regarded as the same as that of the rated program. However, JCR does not consider the credit
standing of the individual note as the same as that of the program, in the cases where the principal and interest payments of
the individual note rely on the credit standing of a third party rather than the issuer of the program and notes (e.g. credit linked
notes and exchangeable notes). JCR usually does not assign a rating to the individual note issued under the program, unlessthe issuer solicits a rating.

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Japan Credit Rating Agency, Ltd.
Jiji Press Building, 5-15-8 Ginza, Chuo-ku, Tokyo 104-0061, Japan
Tel. +81 3 3544 7013, Fax. +81 3 3544 7026
Information herein has been obtained by JCR from the issuers and other sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error as well as other factors,
JCR makes no representation or warranty, express or implied, as to accuracy, results, adequacy, timeliness, completeness or merchantability, or fitness for any particular purpose, with respect to any suchinformation, and is not responsible for any errors or omissions, or for results obtained from the use of such information. Under no circumstances will JCR be liable for any special, indirect, incidental orconsequential damages of any kind caused by the use of any such information, including but not limited to, lost opportunity or lost money, whether in contract, tort, strict liability or otherwise, and whether
such damages are foreseeable or unforeseeable. JCR's ratings and credit assessments are statements of JCR's current and comprehensive opinion regarding redemption possibility, etc. of financial obligations
assumed by the issuers or financial products, and not statements of opinion regarding any risk other than credit risk, such as market liquidity risk or price fluctuation risk. JCR's ratings and credit assessments
are statements of opinion, and not statements of fact as to credit risk decisions or recommendations regarding decisions to purchase, sell or hold any securities such as individual bonds or commercial paper.
The ratings and credit assessments may be changed, suspended or withdrawn as a result of changes in or unavailability of information as well as other factors. JCR receives a rating fee paid by issuers for
conducting rating services in principle. JCR retains all rights pertaining to this document, including JCR's rating data. Any reproduction, adaptation, alteration, etc. of this document, including such rating
data, is prohibited, whether or not wholly or partly, without prior consent of JCR.
JCR is registered as a "Nationally Recognized Statistical Rating Organization" with the U.S. Securities and Exchange Commission with respect to the following four classes. (1) Financial institutions, brokers
and dealers, (2) Insurance Companies, (3) Corporate Issuers, (4) Issuers of government securities, municipal securities and foreign government securities.
JCR publishes its press releases regarding the rating actions both in Japanese and in English on the same day. In case that it takes time to translate rating rationale, JCR may publicize the summary version,
which will be replaced by the full translated version within three business days. (Regarding Structured Finance products, JCR only publicize the summary version in English.)

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I n f o r m at i o n D i s c l o s u r e F o r mJapan Credit Rating Agency, Ltd.

Disclosure Required by Paragraph (a)(1)(ii) of Rule 17g-7

1

Issuer:The Bank of East Asia, Limited

Rating Publication
Date:

August 25, 2023

The Symbol, Number, or Score in the Rating Scale used to Denote Credit Rating Categories andNotches and, the Identity of the Obligor or the Identity and a Description of the Security or Money
Market Instrument as Required by Paragraph (a)(1)(ii)(A) of Rule 17g-7
Please see the news release. If the credit rating is a private rating, please see the report for private
rating.

2

The version of the procedure or methodology used to determine the credit rating; as Required by
Paragraph (a)(1)(ii)(B) of Rule 17g-7
Please see the news release. If the credit rating is a private rating, please see the report for private
rating.

3

The Main Assumptions and Principles used in Constructing the Procedures and Methodologies used
to Determine the Credit Rating as Required by Paragraph (a)(1)(ii)(C) of Rule 17g-7
The credit rating methodology assumes, in principle, to be applied to assess the likelihood of a given
debt payment in light of its issuer’s condition and business environment, etc. in the relevant future.
There is certain limitation, however, in the time horizon that the rating foresees.
The credit rating methodology assumes, in principle, that the factors posted in the below areparticularly important for such likelihood to be determined, and that the rating determination is madeby evaluating each of them not only quantitatively but also employing qualitative analyses.

A) Business Bases
The likelihood of a given debt payment is highly conditional to its issuer’s business bases - how they
can be maintained/ expanded into the future and thereby secure earnings and cash flows in adequacy
and in a sustainable way.
B) Financial Grounds and Asset Quality
The likelihood of debt payment is highly dependent on the degree of the issuer’s indebtedness and loss
absorption capacity in terms of equity capital. Also notable is that a financial institution might see asignificant loss of financial grounds as a result of changes in value of the assets under its possession.
C) Liquidity Positions
The likelihood of debt payment is highly dependent on the adequacy of the issuer’s cash and othersources of repayment (liquidity positions).

1/5D) Related Parties’ Status and Stance of Support/ Assistance for the Issuer
The likelihood of debt payment is affected one way or the other by the issuer’s related parties such as
parent company, subsidiary, guarantor, and the government of the issuer’s business domicile, etc. - bytheir own conditions and/ or position of support/ assistance for the issuer.
E) Order of Seniority in Debt Payment
The likelihood of debt payment can be different between given debts of the same issuer. The likelihoodof debt payment for an individual debt is dependent on the issuer’s discretion, and/ or its rank relative
to other debts of the same issuer in the order of seniority in principal/ interest payment which isdetermined by design as financial product or by laws, etc.

4

The Potential Limitations of the Credit Rating as Required by Paragraph (a)(1)(ii)(D) of Rule 17g-7
The credit rating herewith presented by JCR is its summary opinion with regard to the likelihood ofgiven debt payment and hence not necessarily a perfect representation of such likelihood. The credit
rating is not intended to estimate the probability of default or the loss on given default, either.
The objective of the credit rating herewith presented does not include any concerns other than thelikelihood of debt payment, such as risks of price changes, market liquidity, etc.
The credit rating herewith presented is necessary to be reviewed along with possible changes of theissuer of rated objects in its business performance and/ or circumstances which include regulatoryenvironment, and hence subject to possible alteration.

5

Information on the Uncertainty of the Credit Rating as Required by Paragraph (a)(1)(ii)(E) of Rule
17g-7
The information used for the determination of credit rating as herewith presented is obtained by JCR
from the issuer of rated objects and other sources that JCR trusts in terms of accuracy and reliability
but possibly contains errors due to human, non-human or other causes. Consequently, the credit rating
determined on the grounds of such information does not constitute, explicitly or implicitly, any
representation or warrant of JCR on the information itself or any consequences of its use in terms ofaccuracy, relevance, timeliness, wholeness, market value, or usefulness for any specific purposes.

6

Use of Due Diligence Services of a Third Party in Taking the Rating Action as Required by Paragraph(a)(1)(ii)(F) of Rule 17g-7
There is no use of any third-party due diligence service in the determination of the credit ratingherewith presented.

7

Use of Servicer or Remittance Reports to Conduct Surveillance of the Credit Rating Required by
Paragraph (a)(1)(ii)(G) of Rule 17g-7
There is no use of any servicer or remittance report to conduct surveillance of the credit rating herewithpresented.

8

The Types of Data Relied Upon for the Purpose of Determining the Credit Rating as Required by
Paragraph (a)(1)(ii)(H) of Rule17g-7

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The information posted in the below, which includes data, is used for the determination of the credit
rating herewith presented.
A) Audited financial statements presented by the rating stakeholders
B) Explanations of business performance, management plans, etc. presented by the rating stakeholders
C) Documentation of the rated financial product presented by the rating stakeholders

9Overall assessment of the Quality of Information Available and Considered in Determining theCredit Rating as Required by Paragraph (a)(1)(ii)(l) of Rule 17g-7
JCR holds its basic policies for securing the quality of information as a base of due diligence for thedetermination of credit ratings. The information used as a base for the determination of credit ratingherewith presented satisfies such policies, which include the audit by an independent auditor, thewarranty made by the issuer, the publication by the issuer, some independent media or, otherwise, JCR
analyst’s scrutiny, etc.
JCR sees no particular weakness in the quality of information used for the determination of the credit
rating herewith presented as compared to the information used in other cases of the credit rating forcomparable issuers or ratable objects.
If the credit rating is an Indication, please see the report for Indication.

10 Information Relating to Conflicts of Interest as Required by Paragraph (a)(1)(ii)(J) of Rule 17g-7
JCR receives payment of compensation for the determination of the credit rating herewith presented
from either one of those parties who are issuer, underwriter, depositor or sponsor.
JCR did not receive in the last fiscal year in the past payment of compensation from the same party forany kind of JCR’s service other than the determination of public or private credit rating, such as one
in the ancillary business.

or Measure of the Potential Volatility of the Credit Rating as Required by Paragraph
11 Explanation(a)(1)(ii)(K) of Rule 17g-7
A) Business Bases
The credit rating is subject to alteration if there is improvement or deterioration of the issuer’s businessbases, since its revenue, etc. may improve or deteriorate by the change in its business management
policies, clients’ preferences, competitive situation, or a technological innovation. The resultant
alteration of the credit rating is usually by a notch, with possibility of a few notches if and when thechange in the business bases is large.
B) Financial Grounds and Asset Quality
The credit rating is subject to alteration if the issuer increases/ decreases its debt/ capital or vice versa
and thereby makes its individual debt payment liability less or more bearable and its loss absorption
capacity into the future decreased or increased. Also, the changes in the quality of asset under theissuer’s holding may affect the credit rating, since such changes could raise or lower the likelihood of
future loss of the issuer’s financial grounds. The resultant alteration of the credit rating is usually by anotch, with possibility of a few notches if and when the change in the financial grounds and/ or asset
quality is large.
C) Liquidity Positions
The credit rating is subject to alteration if there is a change in the issuer’s financial management policy
or in the relations with fund procurement sources and the change thereby makes its liquidity positions

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improve or deteriorate. The resultant alteration of the credit rating is usually by a notch, with possibilityof a few notches if and when the change is large.

D) Related Parties’ Status and Stance of Support/ Assistance for the Issuer
The credit rating is subject to alteration if there is a change in the issuer’s parent company or subsidiary,guarantor or other provider of credit enhancement, or the government of the issuer’s business domicile,or other related parties’ own conditions and/ or position of support/ assistance for the issuer, and thechange thereby makes its business bases, financial grounds and/ or liquidity positions improve or
deteriorate, and/ or making the effectiveness of guarantee and other credit enhancement improve or
deteriorate. The resultant alteration of the credit rating is usually a notch, with possibility of a few
notches if and when the change is large.
E) Order of Seniority in Debt Payment and Non-Payment Forgiven by Contract
The credit rating is subject to alteration if there is a change in the rated debt’s status in the order ofseniority relative to other debts caused by the improvement/ deterioration of the issuer’s financial
condition. The resultant alteration of the credit rating is usually a notch, with possibility of a few
notches if and when the change is large. Also, in case of the financial products for which non-payment
of interest/ principal is contractually permissible, the credit rating is subject to alteration if and when
the likelihood of such non-payment is projected to increase or decrease. The resultant alteration of thecredit rating could be by a notch but often as much as a few notches.
F) Rise and Fall in General Economy and Markets
The credit rating is subject to alteration if there is a rise/ fall in the general economy and/ or the markets
inducing the issuer’s revenues/ expenses to increase/ decrease and vice versa, etc. The resultant
alteration of the credit rating is usually by a notch, with possibility of a few notches if and when thechange is exceptionally large.
G) Various Events
The credit rating is subject to alteration on occurrence of various events, such as change in the issuer’s
major shareholders, M&A and other organizational change, accident, violation of the law, litigation,legal/ regulatory change, natural disaster, etc., which are unforeseeable at the time when the credit
rating is determined, causing a significant change on the issuer’s business bases, financial grounds, etc.
The resultant alteration of the credit rating could be by a notch but more often than not as much as afew notches.

12

Information on the Content of the Credit Rating, Including the Historical Performance of the Credit
Rating and the Expected Probability of Default and the Expected Loss in the Event of Default as
Required by Paragraph (a)(1)(ii)(L) of Rule 17g-7
The credit rating herewith presented by JCR is its summary opinion with regard to the likelihood ofgiven debt payment and hence not necessarily a perfect representation of such likelihood. The credit
rating is not intended to estimate the probability of default or the loss on given default, either.
Facts of the probability of default are posted as Form NRSRO Exhibit 1 on the JCR website under the
URL:
https://www.jcr.co.jp/en/service/company/regu/nrsro/on the Sensitivity of the Credit Rating to Assumptions Made as Required by Paragraph
13 Information(a)(1)(ii)(M) of Rule 17g-7
A) Business Bases
The credit rating herewith presented could be changed if and when the assumptions made at the time ofits determination turn out to be inaccurate with regard to the issuer’s business bases and powers ofearning or cash flow generation, etc. The resultant change of the credit rating is most likely by a notch,
as JCR speculates, but possibly as much as a few notches if the development is rapid in improvement or
deterioration of the issuer’s business bases on some drastic change in the operational environments, etc.
B) Financial Grounds and Asset Quality
The credit rating herewith presented could be changed if and when the assumptions made at the time ofits determination turn out to be inaccurate with regard to the issuer’s financial grounds and asset

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quality. The resultant change of the credit rating is most likely by a notch, as JCR speculates, but
possibly as much as a few notches if the development is rapid in improvement or deterioration of theissuer’s financial grounds and/ or asset quality on some drastic change in its business bases.

C) Liquidity Risks
The credit rating herewith presented could be changed if and when the assumptions made at the time ofits determination turn out to be inaccurate with regard to the issuer’s liquidity positions. The resultant
change of the credit rating is most likely by a notch, as JCR speculates, but possibly as much as a few
notches if the development is rapid in improvement or deterioration of the issuer’s liquidity positions
on some drastic change in its financial management policy or relations with fund procurement sources,
etc.
D) Related Parties’ Status and Stance of Support/ Assistance for the Issuer
The credit rating herewith presented could be changed if and when the assumptions made at the time ofits determination turn out to be inaccurate with regard to the issuer’s parent company or subsidiaries,
guarantor or other providers of credit enhancement, the government of the issuer’s business domicile orother related parties’ status and stance of support/ assistance for the issuer. The resultant change of thecredit rating is most likely by a notch, as JCR speculates, but possibly as much as a few notches if there
is a major change on the part of related parties, such as replacement, disappearance, some drastic
improvement/ deterioration of financial grounds/ balances, etc.
E) Rise and Fall in General Economy and Markets
The credit rating herewith presented could be changed if and when the assumptions made at the time ofits determination turn out to be inaccurate with regard to the prospects of general economy and markets.
JCR expects the change should be most likely by a notch but could be as much as a few notches, should
the economy or the markets change so greatly.
on the Representations, Warranties, and Enforcement Mechanisms of an Asset-backed
14 Information
Security as Required by Paragraph (a)(1)(ii)(N) of rule 17g-7
The credit rating herewith presented is not for an ABS product, and hence no relevant issue.

Japan Credit Rating Agency, Ltd.
Jiji Press Building, 5-15-8 Ginza, Chuo-ku, Tokyo 104-0061, Japan
Tel. +81 3 3544 7013, Fax. +81 3 3544 7026

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