(The following statement was released by the rating agency)
SINGAPORE, April 02 (Fitch) Fitch Ratings has placed
Oversea-Chinese Banking Corp's (OCBC) Long-Term and Short-Term
Ratings (IDR), and Viability Rating (VR) on Rating Watch
Negative (RWN). At the
same time, the agency has also affirmed OCBC's '1' Support
Rating (SR) and 'A-'
Support Rating Floor (SRF). A full list of rating actions is at
the end of this
rating action commentary.
KEY RATING DRIVERS AND SENSITIVITIES - VRs and IDRs
The rating actions were taken following OCBC's announcement that
it planned to
acquire the entire issued share capital of Hong Kong-based Wing
Limited (WHB; 'A-'/Rating Watch Positive).
The RWN reflects Fitch's expectations that the acquisition of
WHB will increase
OCBC's exposure to Greater China, where credit and operating
risk is higher than
in OCBC's home market of Singapore. This could potentially lead
in OCBC's credit profile.
The voluntary general offer for WHB by OCBC is still conditional
securing the necessary regulatory approvals, and the final stake
in WHB that
OCBC acquires is dependent on the level of acceptances of the
shareholders in WHB.
An acquisition of this size (100% of WHB will cost SGD6.2bn)
reduce OCBC's core equity Tier 1 ratio. OCBC intends to raise
equity to maintain
prudent capital buffers after the acquisition, but even with the
Fitch expects that OCBC's core equity Tier 1 ratio will likely
be lower than its
Fitch will assess the impact of the acquisition on OCBC's
profile - particularly on its capital levels - as well as OCBC's
exposure to markets of higher credit risk and more volatile
growth Asian markets
after the transaction.
The agency expects to resolve the RWN when further details on
financing plans for the acquisition become available, or if the
voluntary general offer is retracted by OCBC.
KEY RATING DRIVERS AND SENSITIVITIES - SR and SRF
OCBC remains systemically important to Singapore's economy and
as one of only three major domestic banks. The SR and SRF
reflect Fitch's view
of a very high probability of extraordinary state support, if
needed, for OCBC.
The Singapore government's strong ability to extend support is
its 'AAA' ratings.
A change in the ability and propensity of the government to
support would be negative for the SR and SRF. One development
that could lead to
such an outcome is the global initiative to reduce implicit
available to banks.
KEY RATING DRIVERS AND SENSITIVITIES - DEBT RATINGS
The ratings on senior notes and the bank's commercial paper
programme are the
same as OCBC's Long-Term and Short-Term IDRs. This is because
constitute direct, unsubordinated and senior unsecured
obligations of the banks,
and rank equally with all their other unsecured and
A change in the IDRs would affect these issue ratings.
The subordinated Lower Tier 2 notes are rated one notch below
OCBC's 'aa-' VR to
reflect their subordinated status and the absence of any
loss-absorption features. The ratings on the preference shares
are five notches
below the bank's VR, reflecting the presence of subordination
loss-absorption mechanisms. The ratings of these securities are
changes in the VRs.
Wing Hang Bank is Hong Kong's eighth-largest bank, with HKD214bn
assets at end-2013. Meanwhile, OCBC is the second largest of the
banking groups by assets, at SGD338bn (USD267bn).
The list of rating actions is as follows:
Long-Term IDR of 'AA-' placed on RWN
Short-Term IDR of 'F1+' placed on RWN
Viability Rating of 'aa-' placed on RWN
Support Rating affirmed '1'
Support Rating Floor affirmed at 'A-'
Senior unsecured rating of 'AA-' placed on RWN
Rating on commercial paper programme of 'F1+' placed on RWN
Rating on subordinated Lower Tier 2 notes of 'A+' placed on RWN
Rating on preference shares of 'BBB' placed on RWN
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Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234,
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
Securities", dated 31 January 2014, are available at
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Assessing and Rating Bank Subordinated and Hybrid Securities
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