Fitch: BOC/PB Ratings Neutral to Small Bank Acquisitions 📈

• Fitch Ratings expects the proposed transfer of state holdings in HDFC and SMIB to BOC and People’s Bank (PB), respectively, will not affect the acquirers’ credit ratings. • This view is underpinned by the targets’ small scale—accounting for only 1%-1.5% of the acquirers’ bank-level assets—and the expectation of necessary capital support from the government. • HDFC and SMIB have relatively low risk densities due to large exposure to zero risk-weighted EPF-backed loans, limiting the incremental risk to the acquirers. • Fitch’s base-case is that the government will inject capital at least equal to the purchase price into BOC and PB to keep their capital ratios unaffected, consistent with past policy support. • Acquirers’ Context: BOC and PB's capital buffers are already constrained by large sovereign exposures, which attract capital deductions (4% for BOC, 2% for PB) compared to private peers. • The acquired banks (HDFC and SMIB) national ratings have been placed on Rating Watch Positive (RWP), reflecting the potential for high support from their new state owners.