Fitch Rates United Overseas Bank (Thai)'s Basel III Tier 2 THB Notes at 'AA(tha)'

KEY RATING DRIVERS
The subordinated debentures are rated two notches below UOBT's National Long-Term Rating to reflect higher loss-severity risk relative to senior unsecured notes. The notes do not incorporate going-concern loss absorption, and hence there is no additional notching for non-performance risk. The rating approach is consistent with the baseline notching in Fitch's rating criteria.

The key terms and conditions of the notes are in line with local standards for the issuance of bank Tier 2 notes. The non-viability trigger is defined as emergency capital assistance from the central bank or any other empowered government agency.

UOBT's ratings are driven by Fitch's expectations of extraordinary support from the bank's Singapore-based parent, United Overseas Bank Limited (UOB, AA-/Negative/aa-). The Thai subsidiary plays a key and long-standing role in the group's regional growth aspirations in south-east Asia. There are clear branding linkages with the parent, as well as marketing synergies and operational integration.

For further details on UOBT's key rating drivers and sensitivities, please refer to "Fitch Affirms United Overseas Bank Thai at 'A-' and 'AAA(tha)'; Outlook Stable", published on 27 April 2022.

RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade of UOBT's National Long-Term Rating would lead to a downgrade of the Tier 2 notes.

There may be negative rating action on the bank's ratings if there were very substantial changes to UOB's ability to support UOBT. For example, the parent's international scale rating would have to be downgraded by multiple notches before there would be any impact on UOBT's National Long-Term Rating.

There may also be negative rating action from a large reduction in the linkages between UOBT and UOB, which would mean a lower likelihood of shareholder support. This may be indicated by a decline in UOB's shareholding in UOBT to below 75%, combined with reduced management control and strategic ties. However, Fitch does not expect such changes in support propensity to occur in the medium term.

Factors that could, individually or collectively, lead to positive rating action/upgrade:
The anchor rating for the subordinated notes, the National Long-Term Rating, is at the top end of the scale. There could be potential upside to the subordinated notes if Fitch re-assesses that loss severity upon non-performance would not be poor, and would hence warrant a gap of one notch with the anchor rating, rather than two notches. However, Fitch does not expect any changes in the near term.

DATE OF RELEVANT COMMITTEE
27 April 2022

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
UOBT's National Ratings are driven by parent UOB's ratings.

Additional information is available on www.fitchratings.com

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