Fitch affirms UOB's 'AA-' rating with Stable Outlook

Disciplined management, strong balance sheet, and satisfactory earnings behind ratings.

Fitch Ratings on Friday has affirmed United Overseas Bank's (UOB) Long-term foreign-currency Issuer Default Rating (IDR) at 'AA-' with a Stable Outlook, according to a Fitch Ratings report.

UOB's ratings reflect its prudent management, robust balance sheet and satisfactory earnings profile. These factors underpinned the bank's capability to negotiate the difficult economic environment in 2009 relatively unscathed.

Fitch notes that UOB's asset quality held up fairly well as the impact of the downturn was partly mitigated by governments' stimulus packages and accommodative monetary policies; the bank's prudent lending standard is another mitigating factor. As a result, the bank's credit costs were quite modest and were easily covered by earnings.

With an improving macroeconomic backdrop, UOB's gross NPL ratio fell slightly to 2.0% at end-March 2010 from 2.2% at end-2009. Importantly, provisioning risks appear low as its reserves have remained in excess of its non-performing assets (NPAs). However, the weak economic recoveries seen in many major developed countries still pose a threat to Asia.

On balance, UOB's high core Tier 1 capital adequacy ratio (excluding preference shares and hybrids) of 12.8% at end-March 2010 underpins its strong capacity to negotiate unexpected losses in a worst-case scenario. Hence the Rating Outlook continues to be Stable.

UOB was established in 1935 and reported total assets of SGD186bn at end-2009.
Here is the full list of rating actions:

• Long-term foreign currency IDR affirmed at 'AA-'; Outlook Stable;
• Short-term foreign currency IDR affirmed at 'F1+';
• Individual Rating affirmed at 'B';
• Support Rating affirmed at '1';
• Support Rating Floor affirmed at 'A-'; and
• Ratings of preference shares and subordinated Tier 2 notes affirmed at 'A'.