The notes were issued under OCBC's
(GMTN) program and will be listed on the
The notes are on review for downgrade, in line with the review for downgrade on OCBC's long-term ratings.
The Aa1 senior unsecured debt rating is based on OCBC's aa3 baseline credit assessment (BCA) and the very high likelihood of systemic support in the event of a crisis.
OCBC's BCA of aa3 is among the highest assigned to any financial institution globally. This high BCA is driven by the bank's traditional and dominant franchises in banking and insurance in both
By definition, Moody's "aa" BCAs imply very low volatility in results and are therefore sensitive to even small increases in risk, highlighting some of the challenges the ratings may face over time. In particular, many of OCBC's key markets, such as
We believe there is a very high likelihood of systemic support for OCBC if needed, given its significant market share of 17% in SGD deposits and 13% in SGD loans in
Aa1 senior floating rate note rating includes a two-notch uplift from OCBC's aa3 standalone credit assessment.
However, the rating is under review for downgrade following OCBC's announcement that it has made a general offer to acquire 100% of
The review highlights potential execution risk associated with the financing of such a large acquisition. While OCBC will fund the offer consideration through a combination of internal cash and committed lines, we understand that OCBC plans to raise capital for the transaction through a combination of debt and equity. The success of the new capital raising, as well as the composition of the targeted long-term capital structure, is important for OCBC if it is to maintain capitalization on par with similarly rated peers.
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