RPT-Fitch rates DBS Group Holdings' basel III tier 1 securities final 'BBB'
(Repeat for additional subscribers)
Dec 3 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Singapore-based DBS Group Holdings Ltd's (DBSH) SGD805m 4.7% Basel III-compliant non-cumulative non-convertible perpetual capital securities a final rating of 'BBB'.
This follows the completion of the securities issue, as well as the receipt of final documents conforming to information previously received. The final rating is the same as the expected rating assigned on 6 November 2013.
KEY RATING DRIVERS
The securities are rated five notches below DBSH's 'aa-' Viability Rating (VR), comprising two notches for loss severity and three notches for non-performance risk, in accordance with Fitch's criteria.
The loss-severity risk is high in view of the securities' deep subordination status. The securities - together with other Tier 1 capital securities - rank ahead of claims from only DBSH's ordinary shareholders, and rank below all senior creditors and holders of subordinated notes of the company.
Non-performance risk arises from the fact that DBSH and the Monetary Authority of Singapore have unrestricted discretion in cancelling any periodic distribution on the proposed securities. Absent of any cancellation, distribution is to be made semi-annually at a fixed rate, based on the prevailing principal amount.
The securities are eligible to be included as Tier 1 capital under the Basel III capital standards, and qualify for equity credit at 50%, based on Fitch's criteria.
The rating on the securities is sensitive to a change in DBSH's VR. DBSH has the same VR as its wholly owned subsidiary, DBS Bank Ltd (DBS Bank; AA-/Stable/F1+), reflecting the seamless linkages between both entities, and a low leverage prospect at DBSH over the near to medium term. Hence, a change in DBS Bank's VR is likely to have a similar rating impact on DBSH.
Meanwhile, DBSH's VR may be notched down from that of DBS Bank if their risk profiles diverge. This may arise due to one or a combination of the following factors: significant leverage and/or equity investments on DBSH's standalone balance sheet; onerous banking regulations surrounding capital and/or liquidity flows from DBS Bank to DBSH; or developments in the local authorities' philosophy on banking-group resolution.
Fitch believes that DBSH's importance to its operating bank subsidiaries is likely to be reinforced over time considering that the goal is for DBSH to be the main entity within the banking group that issues loss-absorbing capital instruments.
For more details on DBSH's ratings and credit profile, see "Fitch Rates DBS Group Holdings 'AA-'/Stable", dated 1 November 2013, available at www.fitchratings.com.
DBSH's other ratings are as follows:
- Long-Term IDR 'AA-'; Outlook Stable
- Short-Term IDR 'F1+'
- Viability Rating 'aa-'
- Support Rating '5'
- Support Rating Floor 'No Floor'
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