Singapore, October 10, 2012 -- Moody's Investors Service has affirmed Oversea-Chinese Banking Corporation's (OCBC) ratings. All the ratings carry stable outlooks.

The list of affirmed ratings are detailed below.

RATINGS RATIONALE

OCBC is a very strong credit with its B/aa3 standalone bank financial strength rating, among the highest assigned to any financial institution globally. This rating is driven by the bank's relatively traditional banking and dominant insurance businesses in its leading markets of Singapore and Malaysia, and strong balance sheet, including healthy asset quality, ample liquidity, and relatively consistent earnings. In particular, the bank has impressive capital strength by global standards, with a large capacity to absorb loss even under Moody's highly adverse stress scenario.

In addition, Moody's assesses the likelihood of systemic support for OCBC in the event of a crisis to be very high, based on its significance in the domestic banking system. Therefore, the global local currency (GLC) deposit rating of Aa1 benefits from 2 notches of uplift from the aa3 standalone rating.

By definition, Moody's Aa ratings imply a very high certainty of outcome and, as such, are sensitive to relatively small increases in risk, which highlights some of the challenges that the bank may face over time.

As part of its strategy, OCBC intends to pursue greater Asian expansion, particularly in Malaysia, Indonesia and greater China, an ambition that is aligned with its Singapore and large regional competitors. While Moody's acknowledges the benefits of diversification, high growth emerging markets do carry higher risks. Consequently, a change in the bank's risk profile such that its creditworthiness is no longer consistent with its high standalone rating could exert downward pressure on ratings.

Presently, OCBC's regional exposure is moderate at 32% of loans and 16% of pre-tax income when excluding its operations in Malaysia, which Moody's views as being akin to a home market for OCBC. OCBC has operated in Malaysia for over eight decades and its subsidiary enjoys a 4% share of system deposits.

Nonetheless, the bank's loan growth since 2010 has been rapid with rates in its regional operations outpacing those of the domestic operations. As fast credit expansion is often a leading indicator of eventual stress, Moody's will monitor the situation with expectations that the credit quality of these new loans will be sustained.

For the time being, however, Moody's observes that most of this expansion has been in housing loans, a traditional area of strength for the bank, as well as in trade finance, due to opportunities opened up by the retreat of European banks in Asia.

For trade finance, the majority of the transactions are USD denominated, thereby pushing OCBC's USD loan to deposit ratio (LDR) well above the 100% level although it has recently fallen. Although the high USD LDR is partially mitigated by OCBC raising foreign currency funds in the wholesale markets, there is little scope at this rating level for any funding or refinancing uncertainty in the event of a global liquidity crunch.

WHAT COULD DRIVE THE RATINGS DOWN/UP

OCBC's ratings are already among the highest globally and they must capture the cyclical risks inherent to the business of banking, even for the strongest banks. They are therefore unlikely to be upgraded.

The ratings could be downgraded if: (i) the bank's overall risk profile increased significantly as a result of aggressive expansion into higher-risk markets or sizeable acquisitions without sufficient funding to maintain its strong capital ratios. A core Tier 1 ratio materially weaker than the 11.1% reported in June 2012 could be negative for the rating; (ii) asset quality deteriorated such that the capital cushion after incorporating potential losses fell below the levels for similarly rated banks in the aa3 standalone rating band. A non-performing loans ratio greater than 2.0% would be a negative rating factor; (iii) the funding structure, particularly in foreign currency, shifts to an increasing reliance on wholesale sources and that are short-term in nature; or (iv) the bank grew its capital market activities in such a way that it could cause a significant increase in earnings volatility.

The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

OCBC, headquartered in Singapore, had assets of SGD288.6 billion as of June 2012. It is the second largest financial group by assets in the country.

The following ratings -- which carry stable outlooks -- were affirmed:

- Standalone bank financial strength of B which maps to a baseline credit assessment of aa3

- Long-term/short-term foreign currency deposit: Aa1/P-1

- Long-term foreign currency senior unsecured debt: Aa1

- Foreign currency commercial paper: Prime-1

- Foreign currency senior unsecured MTN: (P)Aa1/(P)P-1

- Foreign currency subordinated MTN: (P)Aa2

- Junior subordinated MTN: (P)A1

- Preference Shares Class B, Class E, Class G and Class M: A3(hyb)

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

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