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Announcement:

Moody's affirms OCBC on its acquisition of ING Asia Private Bank

19 Oct 2009

Singapore, October 19, 2009 -- Moody's Investors Service has affirmed the Aa1/Prime-1 deposit and all other ratings of Oversea-Chinese Banking Corporation (OCBC) after it announced its plan to purchase Singapore-based ING Asia Private Bank and its affiliates (IAPB) for US$1.46 billion.

The ratings affirmed include OCBC's B bank financial strength rating (BFSR), Aa1/Prime-1 bank deposits, Aa2 subordinated and junior subordinated debt, and Aa3 preference shares. The full list of ratings may be found below.

The outlook for the bank's BFSR and long-term ratings remains negative and that for its short-term ratings remains stable, both of which are in line with those of its Singapore bank peers.

"Moody's affirmation reflects the expectation that OCBC's financial fundamentals would remain robust after the acquisition, as well as the potential for improved business diversification and higher fee income. On the other hand, it also recognizes the challenges associated with managing IAPB, a private-banking business," says Christine Kuo, a Moody's Vice President and Senior Analyst.

The purchase is expected to lower OCBC's capital adequacy ratio (CAR) by an estimated 1.5%, but pro-forma Tier 1 CAR and total CAR would remain robust at 13.9% and 14.4%, respectively.

At the same time, an important factor underpinning OCBC's current ratings is its strong capital adequacy. If the bank continues to pursue acquisitions that reduce its capital strength significantly, its ratings could be negatively impacted.

The bank's intention to pay for IAPB in cash is also not expected to unduly pressure liquidity. Moody's notes that OCBC's liquid assets -- as a percentage of total assets -- were a comfortable 23.5% at end-June 2009.

Moody's recognizes that OCBC's expanded private banking business could bring benefits in business diversification and higher fee income. Moody's also notes that the relationship and brand-driven nature of the business could pose challenges in terms of integrating the transaction, staff, and customer retention and branding, although some of these concerns would be mitigated by OCBC's large and stable core banking business.

OCBC's plan to purchase IAPB is consistent with its strategy of enhancing its position in the wealth management business, and would propel it into the ranks of the top five private banks in Singapore in terms of assets under management.

The deal, to be completed by year-end, will add US$15.8 billion of assets to OCBC's private banking assets under management. It will also add 150 relationship managers to its 50, and over 5,000 private banking clients to its 2,500.

The last rating action with regard to Singapore banks, including OCBC, was taken on 20 April 2009, when the outlook for their BFSRs and long-term deposit and debt ratings was revised to negative from stable. The negative outlook reflects the fact that the deepening global economic downturn could have a profound impact on their asset quality and earnings. The outlook for their short-term deposit and debt ratings of Prime-1 was not affected and remains stable.

The principal methodologies used in rating the bank were "Bank Financial Strength Ratings: Global Methodology" (February 2007) and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology" (March 2007). These methodologies are available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Rating Methodologies sub-directory on Moody's website.

OCBC Bank is headquartered in Singapore and reported consolidated group assets of S$183 billion (US$131 billion) at end-June 2009. OCBC was Singapore's third largest bank ranked by banking assets.

The following ratings have been affirmed with a negative outlook:

Oversea-Chinese Banking Corporation: BFSR of B, long-term bank deposits (local and foreign currency) of Aa1, subordinate and junior subordinate debts (local and foreign currency) of Aa2, preference shares (local currency) of Aa3.

OCBC Capital Corporation: preference Shares (OCBC backed) of Aa3

OCBC Capital Corporation (2008): preference Shares (OCBC backed) of Aa3

The following ratings have been affirmed with a stable outlook:

Oversea-Chinese Banking Corporation: short-term bank deposits (local and foreign currency) of Prime-1 and commercial paper (foreign currency) of Prime-1.

Singapore
Christine S. Kuo
Vice President - Senior Analyst
Financial Institutions Group
Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (65) 6398-8308

Singapore
Beatrice Woo
VP - Senior Credit Officer
Financial Institutions Group
Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (65) 6398-8308

Moody's affirms OCBC on its acquisition of ING Asia Private Bank
No Related Data.
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