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Fitch Rates Dah Sing Bank's USD Basel III Subordinated Notes Final 'BBB'
January 24, 2014 / 1:36 AM / 4 years ago

Fitch Rates Dah Sing Bank's USD Basel III Subordinated Notes Final 'BBB'

(The following statement was released by the rating agency) HONG KONG, January 23 (Fitch) Fitch Ratings has assigned Hong Kong-based Dah Sing Bank's (DSB; BBB+/Stable) USD225m Basel III-compliant Tier 2 subordinated notes a final rating of ‘BBB’. The notes represent direct, unsecured, and subordinated obligations of the bank. They carry a fixed coupon of 5.25% up to the call date, after which the coupon will be reset. The notes are callable after five years and are due in January 2024. They qualify for full inclusion in DSB’s Tier 2 capital and are not subject to regulatory phase-out, unlike existing subordinated debt without non-viability clauses. KEY RATING DRIVERS In line with its criteria, Fitch rates the notes one notch below DSB’s Viability Rating (VR) of ‘bbb+’ to reflect their below-average recovery prospect relative to senior unsecured instruments given their subordination and their partial write-down feature. The notes could be written down in full or in part if the Hong Kong Monetary Authority considers this step necessary to maintain the bank's viability. They have been notched from the bank’s VR (that is, the anchor rating) as Fitch believes that the bank’s intrinsic financial strength adequately captures the non-viability risk. Under Fitch’s methodology the instrument does not qualify for any equity credit. RATING SENSITIVITIES Any changes to DSB’s VR would impact the issue’s rating. The VR is sensitive to Fitch’s assessment of risk appetite and underwriting standards. The rating would be downgraded if the bank expands potentially riskier Chinese exposure or increases the concentration in unsecured personal lending and commercial property without balancing the higher risk by adequate profitability, capital and liquidity. An upgrade for the VR is unlikely given the lack of pricing power, the portfolio concentration and high reliance on equity-accounted profits from Bank of Chongqing. The other ratings of DSB are unaffected and are as follows: Long-Term Foreign Currency Issuer Default Rating (IDR): 'BBB+'; Outlook Stable Short-Term Foreign Currency IDR: 'F2' Viability Rating: 'bbb+' Support Rating: '3' Support Rating Floor: 'BB' Senior unsecured debt: 'BBB+' Lower Tier 2 subordinated debt without non-viability clauses: 'BBB' Perpetual junior subordinated debt without non-viability clauses: 'BB+' Contact: Primary Analyst Chikako Horiuchi Director +852 2263 9924 Fitch (Hong Kong) Limited 2801, Tower Two, Lippo Centre 89 Queensway, Hong Kong Secondary Analyst Jin Hur, CA Analyst +852 2263 9944 Committee Chairperson Mark Young Managing Director +65 6796 7229 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, "Global Financial Institutions Rating Criteria", dated 15 August 2012, and "Assessing and Rating Bank Subordinated and Hybrid Securities", dated 12 December 2012, 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 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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