Fitch Rates UOB's Basel III Tier 1 Capital Securities Final 'BBB'
OREANDA-NEWS. Fitch Ratings has assigned Singapore-based United Overseas Bank Limited's (UOB) SGD750m 4% 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 10 May 2016.
The securities are intended to qualify as Additional Tier 1 capital securities of the bank under the Basel III regime.
KEY RATING DRIVERS
The securities are rated five notches below UOB's 'aa-' Viability Rating, comprising two notches for loss severity and three notches for non-performance risk, in accordance with Fitch's Global Bank Rating Criteria.
The loss severity is high in view of the securities' deep subordination status. In the event of any winding-up proceeding, holders of these securities and all other Additional Tier 1 securities of UOB will rank ahead of claims of only UOB's ordinary shareholders, and will rank below the bank's senior creditors, including covered bondholders and depositors, and holders of Tier 2 capital securities of the bank, in priority of claims.
The securities are also subject to write-off at a point of non-viability as determined by the Monetary Authority of Singapore (MAS). The amount to be written off will be as much as is required for the bank to cease to be non-viable, as determined by UOB in consultation with MAS, or as directed by MAS, up to the full principal and dividend amount on the securities. The full principal and dividend amount must be written off ahead of any write-off of UOB's Basel III Tier 2 securities.
Non-performance risk arises from UOB's and MAS's unrestricted discretion in cancelling any periodic distribution on the proposed securities. UOB will also not be obliged to pay any distribution if it is prevented from doing so under Singapore banking regulations or other requirements of the MAS. Distribution on the securities would otherwise be made semi-annually at a fixed rate, based on the prevailing principal amount, subject to reset on the applicable reset dates.
RATING SENSITIVITIES
A change in UOB's Viability Rating will impact the securities' rating as that is the anchor rating off which the securities are notched down.
For more details on UOB's ratings and credit profile, see "Fitch Affirms Major Singaporean Banks at 'AA-'; Outlook Stable" dated 14 August 2015 and its rating report dated 27 October 2015, available at www.fitchratings.com
UOB's other ratings are as follows:
Long-Term Issuer Default Rating 'AA-'; Outlook Stable
Short-Term Issuer Default Rating 'F1+'
Viability Rating 'aa-'
Support Rating '1'
Support Rating Floor 'A-'
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