Fitch Rates DBS Group Holdings' US Dollar Notes 'AA-(EXP)'

Mon Jul 7, 2014 12:09am EDT

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(The following statement was released by the rating agency) SINGAPORE, July 07 (Fitch) Fitch Ratings has assigned Singapore-based DBS Group Holdings' (DBSH) proposed US dollar-denominated senior unsecured notes an expected rating of 'AA-(EXP)'. The notes will be issued under the joint USD15bn global medium term note (GMTN) programme that the entity shares with its fully-owned subsidiary, DBS Bank Ltd. (DBS Bank; AA-/Stable/F1+). The final rating is subject to the receipt of final documentation conforming to information already received. This is DBSH's first senior unsecured debt issuance. The company intends to use the net proceeds from the issuance for its finance and treasury activities, including the provision of intercompany loans, or other forms of financing, to DBS Bank and its subsidiaries. DBSH is a bank holding company, and fully owns DBS Bank, which is currently its only direct operating subsidiary and its main source of recurring cashflows in the form of dividends. Both entities are assessed to be highly integrated, operate in the same jurisdiction and are supervised by the Monetary Authority of Singapore (MAS) on a group-wide basis. KEY RATING DRIVERS The notes are rated at the same level as DBSH's 'AA-' Long-Term Issuer Default Rating (IDR). This is because the notes constitute direct, unsubordinated and unsecured obligations of DBSH. The notes are structurally subordinated to the liabilities and obligations of DBSH's subsidiaries, including DBS Bank. Nonetheless, the Viability Rating (VR) and IDR of DBSH, which reflect the credit profile of its senior unsecured obligations, are equalised with that of DBS Bank, due to the seamless integration between the two entities, as well as DBSH's straightforward balance sheet and low double leverage ratio of 88% at end-2013. DBSH's leverage may increase with the issuance of senior unsecured debt, but is expected to remain low overall. RATING SENSITIVITIES A change in DBSH's IDR, presently on Stable Outlook, will have an impact on the issue rating. Further, a change in DBS Bank's IDR, presently on Stable Outlook, is likely to have a similar rating impact on DBSH. DBSH's ratings may be notched down from those of DBS Bank if their risk profiles were to diverge, for instance due to a combination or one of the following factors: significant leverage and/or other equity investments at DBSH's standalone balance sheet, onerous banking regulations surrounding capital and/or liquidity flows from DBS Bank to DBSH, or negative developments in the philosophy on banking group resolution. For more details on DBS Bank's rating and credit profile, see "Fitch Affirms DBS, OCBC & UOB at 'AA-' ; Outlook Stable", dated 23 October 2013, DBS Bank's full rating report, dated 22 April 2013 and Fitch's "Financial Institutions 2014 Outlook Compendium", dated 19 February 2014. For more details on DBSH's rating and credit profile, see "Fitch Rates DBS Group Holdings 'AA-' /Stable", dated 1 November 2013. 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' DBS Bank's other ratings are as follows: Long-Term IDR 'AA-', Outlook Stable Short-Term IDR 'F1+' Viability Rating 'aa-' Support Rating '1' Support Rating Floor 'A-' Contact: Primary Analyst Elaine Koh Director, Financial Institutions Tel: +65 6796 7239 Fitch Ratings Singapore Pte Ltd 6 Temasek Boulevard #35-05 Suntec Tower Four Singapore 038986 Secondary Analyst Mikho Irawady Associate Director +65 6796 7230 Committee Chairperson Mark Young Managing Director +65 6796 7229 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, "Global Financial Institutions Rating Criteria", dated 31 January 2014 and "Rating FI Subsidiaries and Holding Companies", dated 10 August 2012, are available at www.fitchratings.com. Related Research "DBS Bank Ltd.", dated 22 April 2013 "Financial Institutions 2014 Outlook Compendium", dated 19 February 2014 Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Rating FI Subsidiaries and Holding Companies here DBS Bank Ltd. here Financial Institutions 2014 Outlook Compendium 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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