TEXT-S&P summary: Oversea-Chinese Banking Corp. Ltd.

(The following statement was released by the rating agency)

Nov 22 -

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Summary analysis -- Oversea-Chinese Banking Corp. Ltd. ------------ 22-Nov-2012

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CREDIT RATING: AA-/Stable/A-1+ Country: Singapore

Primary SIC: Commercial banks,

nec

Mult. CUSIP6: 690333

Mult. CUSIP6: 69033C

Mult. CUSIP6: 69033D

Mult. CUSIP6: 69033Q

Mult. CUSIP6: 69033R

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Credit Rating History:

Local currency Foreign currency

01-Dec-2011 AA-/A-1+ AA-/A-1+

02-Aug-2004 A+/A-1 A+/A-1

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Ratings Score Snapshot

Issuer Credit Rating AA-/Stable/A-1+

SACP a

Anchor bbb+

Business Position Strong (+1)

Capital and Earnings Adequate (0)

Risk Position Adequate (0)

Funding and Liquidity Above Average

and Strong (+1)

Support +2

GRE Support 0

Group Support 0

Sovereign Support +2

Additional Factors 0

Outlook

The stable outlook on OCBC reflects our belief that the bank will maintain its high systemic

importance in Singapore and that its SACP will stay within the 'a' category over the next one to

two years. The outlook also reflects the outlook on the sovereign credit rating on Singapore.

We could downgrade OCBC if: (1) we lower the sovereign credit rating on Singapore; (2) we no

longer believe OCBC has high systemic importance in Singapore; or (3) the bank's SACP declines

by two notches. We could lower OCBC's SACP if the bank's risk-adjusted capital ratio is likely

to decline below 7% due to aggressive expansion, particularly in higher risk emerging markets;

or if the bank's asset quality declines substantially.

A positive rating action is unlikely in the next one to two years. We could raise the rating

if the bank significantly strengthens its capitalization and business position, such that we

raise the SACP by two notches.

Rationale

Standard & Poor's Ratings Services bases its ratings on Oversea-Chinese Banking Corp. Ltd.

(OCBC) on the bank's "strong" business position, "adequate" capital and earnings, "adequate"

risk position, "above-average" funding, and "strong" liquidity, as our criteria define those

terms. The bank's stand-alone credit profile (SACP) is 'a'. The issuer credit rating on OCBC is

two notches higher than the SACP, reflecting the bank's high systemic importance in Singapore

and our view of a high likelihood of support from the government of Singapore (unsolicited

ratings AAA/Stable/A-1+; axAAA/axA-1+).

Our 'bbb+' anchor for OCBC draws on our Banking Industry Country Risk Assessment methodology

and our view of the economic and industry risks in the countries where the bank operates. The

economic risk score of '4' is based on the weighted average of OCBC's private-sector loans to

nonbanks in each country in which it operates. As of Sept. 30, 2012, Singapore accounts for

about 53% of such loans, Malaysia about 16%, with other Asia locations and the rest of the world

accounting for the rest. Our economic risk assessment of Singapore reflects the sovereign's high

income, and diverse and resilient economy. However, we believe some potential imbalances are

building up in the property sector. OCBC's industry risk score of '2' benefits from Singapore's

well-developed institutional framework, prudent banking practices, and stable funding support of

core customer deposits.

OCBC maintains a superior competitive position in the markets in which it operates, which

supports our assessment of its business position. The bank has a strong franchise as the

second-largest domestic bank in Singapore, with a market share of about 15% of system loans and

17% of deposits. OCBC's presence in private banking and insurance through Bank of Singapore Ltd.

and Great Eastern Holdings (both not rated), respectively, complements its traditional

strength as a commercial bank in its core domestic market. We expect OCBC to maintain its stable

revenue streams from its core businesses despite the increasingly challenging macroeconomic

conditions in Asia. We also believe that OCBC will continue to diversify geographically to

offset domestic margin pressures.

We expect OCBC's risk-adjusted capital ratio to stay above 7% over the next two years. This

is based on the assumption that loan growth will be in the mid- to high-single digit range and

that the bank's profit generation and retention will keep pace with the growth. In our view, the

bank's net interest margin will remain under pressure; however increased contributions from its

private banking and fee-related business lines will offset the risk. Our expectation is also

based on our view that OCBC will maintain a reasonable dividend payout and continue to maintain

capital buffers.

Our assessment of OCBC's risk position reflects our view of the bank's straightforward

commercial banking business model. In our view, OCBC will continue to pursue measured expansion

in emerging markets, such as China and Indonesia, which are inherently more risky. However, we

expect OCBC's asset quality to remain sound due to a combination of prudent credit risk

management and stability in the bank's key markets of Singapore and Malaysia.

OCBC's large, stable retail deposit base and established franchise in Singapore underpin its

funding profile. The bank benefited from deposit inflows during periods of financial turmoil,

when smaller foreign banks were scaling back and losing deposit share. In addition, we assess

OCBC's liquidity as strong because of the bank's rich pool of liquid assets. OCBC's retail

customer funded model reduces the need for short-term wholesale funding and supports our view.

Related Criteria And Research

-- Hong Kong And Singapore Banks' Credit Quality Can Withstand A Mild Recession In Europe,

May 17, 2012

-- Banking Industry Country Risk Assessment: Singapore, March 16, 2012

-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011

-- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011

Source: http://news.yahoo.com/text-p-summary-oversea-chinese-banking-corp-ltd-073439700--sector.html

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