Moody's assigns Aa1 rating to Bank of Singapore

BOS's long-term/short-term deposit ratings show expectation of full support by parent OCBC should need arises.

Moody's Investors Service has assigned the following first-time ratings with a stable outlook to Bank of Singapore (BOS):

• C- Bank Financial Strength Rating (BFSR)
• Aa1 long-term local and foreign currency deposit rating
• Aa1 long-term local and foreign currency issuer rating
• P-1 short-term local and foreign currency deposit rating
• P-1 short-term local and foreign currency issuer rating

"BOS' Aa1/P-1 long-term/short-term deposit ratings are the same as those of its parent, Oversea-Chinese Banking Corporation (OCBC), reflecting the expectation of full support from OCBC for BOS, if needed," says Christine Kuo, a Moody's Vice-President and Senior Credit Officer.

BOS' long-term/short-term issuer ratings are also Aa1/P-1 as Moody's typically rates a bank's senior unsecured debts the same as its deposits, according to a Moody's report.

The issuer rating is an opinion of an entity's ability to honor its senior unsecured financial obligations.

"BOS' stand-alone financial strength is reflected in its BFSR of C-, which translates into a Baseline Credit Assessment of Baa1, and is underpinned by the bank's small but established franchise in a growing Asian market, as well as its very liquid and well capitalized balance sheet; which is further protected by a conservative appetite for market and credit risk, and proactive risk management," adds Kuo

"However, the rating also considers BOS' lower level of profitability -- in comparison with the bigger global private banks -- due to its smaller scale and the challenges inherent in the private banking business, including client sensitivity to the investment performance of assets under management (AUM), as well as operating, legal, and reputational risks," says Kuo.

BOS, formerly known as ING Asia Private Bank Ltd, was sold to OCBC by ING Bank N.V. in late January 2010. BOS had more than 5,000 clients and a client AUM total of US$15.8 billion when the transaction was announced in October 2009.

OCBC's private banking business is currently in the process of being combined with that of BOS, and this will result in a private bank with more than 7,000 clients and total client AUM of approximately US$23 billion.

OCBC owns all of BOS. It is the sole funding counterparty for BOS and is involved in its risk management. In addition, OCBC has made available its products, infrastructure and support functions to BOS.

BOS is also recognized by the market as a member of the OCBC group, and Moody's believes OCBC has a very strong incentive to support BOS, if needed.

BOS' BFSR could be upgraded on significant improvements in the bank's franchise and profitability, and which would likely be driven by continued growth in client assets. Such clients will need to be supported by sound investment advisory services and sales practices.

On the other hand, the BFSR could be lowered if the bank's current moderate-risk business model changes, or if its risk management capabilities are not consistently upgraded in line with its growing business and the evolving nature of its operating environment, thereby undermining long-term stability in growth and earnings.

BOS' deposit and issuer ratings could be changed if OCBC's deposit ratings are changed. OCBC's long-term/short-term deposit ratings are Aa1/P-1 with a stable outlook.