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Fitch Assigns United Overseas Bank (China) 'A+' Rating; Outlook Stable
June 8, 2015 / 7:58 AM / 3 years ago

Fitch Assigns United Overseas Bank (China) 'A+' Rating; Outlook Stable

(The following statement was released by the rating agency) HONG KONG/SHANGHAI, June 08 (Fitch) Fitch Ratings has assigned Shanghai-based United Overseas Bank (China) Ltd. (UOBC) a Long-Term Issuer Default Rating (IDR) of 'A+' and a Short-Term IDR of 'F1'. The Outlook is Stable. In addition, a Support Rating (SR) of '1' is also assigned. UOBC is a wholly owned subsidiary of Singapore-based United Overseas Bank (UOB; AA-/Stable). Fitch classifies UOBC as a strategically important subsidiary of UOB, due to strong integration with the parent and its key role in the group's expansion strategy in Greater China. As such, there is an extremely high probability of support from the parent, if needed. The agency has not assigned Viability Ratings to UOBC as its intrinsic strength is subject to its operational and financial integration with the parent. KEY RATING DRIVERS UOBC plays an important role in UOB's strategy of strengthening its franchise in the Greater China region. Fitch believes Greater China is a strategically important market for UOB. The contribution of UOB's Greater China operations has increased steadily, and represented 13% of the group's loans at end-2014 and 8% of profits before tax in 2014, consistent with rising trade and investment flows between China and Southeast Asia. Fitch expects the profit contribution from Greater China to increase in the coming years. Although UOBC's profit contribution to the group was less than 1% in 2014, it is active in referrals to the group. In particular, UOBC works closely with the group's Singapore and Hong Kong branches to provide financial services to Chinese corporates seeking to invest in Southeast Asia. UOBC has operational autonomy to make its own credit decisions, but the parent has strong influence through representation on UOBC's board of directors and secondments of senior executives. As a result, UOBC and UOB are highly integrated in terms of strategy, risk appetite, and business generation; with the parent having oversight over UOBC's operations and key metrics, including measures of liquidity. UOB has a history of providing ordinary support to UOBC, including customer referrals, as well as other operational and system support. The parent bank also provides the majority of UOBC's foreign-currency funding. UOB's ongoing commitment to UOBC is underlined by its investment in a new UOB-branded headquarters in Shanghai's financial district. UOBC shares its parent's brand and has grown organically from a UOB branch, and a default by UOBC would constitute significant reputational risk to UOB that could undermine its franchise. UOBC grew out of a representative office set up by UOB in 1984. It was among the first batch of foreign lenders in China to be locally incorporated in 2007, and has grown its presence to more than 10 branches and sub-branches in mainland China. The bank's net profit after tax was CNY132m (USD22m) in 2014 and total assets were CNY49bn (USD8bn) at end-2014. RATING SENSITIVITIES UOBC's SR, and in turn its IDR, are sensitive to any change in Fitch's assessment of either UOB's propensity or ability to extend extraordinary support in a timely manner. Any change in UOB's IDR is likely to lead to similar rating action on UOBC, subject to China's Country Ceiling which is currently at 'A+' and may limit ratings upside for UOBC. Contacts: Primary Analyst Grace Wu Senior Director +852 2263 9919 Fitch (Hong Kong) Limited 2801, Tower Two Lippo Centre 89 Queensway, Hong Kong Secondary Analyst Jack Yuan Associate Director +86 21 5097 3038 Committee Chairperson James Watson Managing Director +7 495 956 6657 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 Bank Rating Criteria (pub. 20 Mar 2015) here Additional Disclosures Solicitation Status here <a href="https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context =2&detail=31">Endorsement Policy 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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