Fitch Rates OCBC's Basel III Tier 2 Notes 'A+(EXP)'/RWN

Wed Apr 9, 2014 2:29am EDT

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(The following statement was released by the rating agency) SINGAPORE/HONG KONG, April 09 (Fitch) Fitch Ratings has assigned Singapore-based Oversea-Chinese Banking Corp's (OCBC) proposed US dollar-denominated Basel III-compliant Tier 2 capital securities an expected rating of 'A+(EXP)', on Rating Watch Negative (RWN). The final rating is subject to the receipt of final documentation conforming to information already received. KEY RATING DRIVERS The Basel III-compliant Tier 2 securities are rated one notch below OCBC's Viability Rating (VR) of 'aa-'/RWN to reflect their below-average loss-severity risk due to their partial rather than mandatory full write-off feature. The notes contain a non-viability clause and rank subordinated to senior unsecured instruments. The Monetary Authority of Singapore (MAS) has sole discretion in determining if OCBC is non-viable, and if it does so, the securities may be written-down in full or in part to the extent determined by OCBC, which Fitch expects to be in conjunction with what MAS considers necessary to restore the viability of the bank. The write-off can be effected in full even if it is not sufficient for the trigger event to cease to continue. There are no write-back features on the securities. No additional notching has been ascribed to non-performance risk as Fitch regards it minimal relative to the VR assigned. The instruments will not qualify for equity credit under Fitch's criteria. Upon the occurrence of any winding-up proceedings, holders of these securities - and all Tier 2 securities of OCBC - will rank below the bank's senior creditors, including depositors, but above the bank's ordinary shareholders and holders of additional Tier 1 capital securities in priority of claims. RATING SENSITIVITIES A change in OCBC's VR, presently on RWN, will have an impact on the securities rating. The RWN reflects OCBC's planned acquisition of Hong Kong's Wing Hang Bank Limited (A-/Rating Watch Positive) and also applies to OCBC's Long-Term and Short-Term Issuer Default Ratings (see "Fitch Places OCBC on Watch Negative on Wing Hang Bank Takeover Plan", dated 2 April 2014). Established in 1932, OCBC is a Singapore-based listed bank with reported total assets of SGD338bn at end-2013. For more details on OCBC's ratings and credit profile, see OCBC's full rating report, dated 2 May 2013, available at www.fitchratings.com. OCBC's other ratings are as follows: Long-Term IDR 'AA-'; on RWN Short-Term IDR 'F1+'; on RWN Viability Rating 'aa-'; on RWN Support Rating '1' Support Rating Floor 'A-' Contacts: Primary Analyst Mikho Irawady Associate Director +65 6796 7230 Fitch Ratings Singapore PTE Ltd 6 Temasek Boulevard #35-05 Suntec Tower Four Singapore 038986 Secondary Analyst Ambreesh Srivastava Senior Director +65 6796 7218 Committee Chairperson Sabine Bauer Senior Director +852 2263 9966 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, "Global Financial Institutions Rating Criteria", dated 31 January 2014, and "Assessing and Rating Bank Subordinated and Hybrid Securities", dated 31 January 2014, are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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