OCBC highlights Australia's significance as Singaporean bank issuance hits record
Issuance by Singaporean banks in the Australian dollar market is already at a record level for a calendar year. The most recent such issuer, OCBC Bank, highlights the strategic importance of its Australian activities and says its links with local investors support its plan to be a regular presence in the market.
OCBC Bank Sydney Branch priced a A$1 billion (US$661.1 million) three-year green bond on 11 May, setting a number of records in the process. The transaction is the largest single-tranche deal by a Singaporean issuer in Australia – United Overseas Bank Sydney Branch printed A$1.5 billion split equally between fixed- and floating-rate notes in March this year – and also takes aggregate Singaporean bank issuance in Australia to a calendar-year record (see chart 1).
Like the other big-three Singaporean banks, OCBC has a strong deposit funding base: 5 per cent year-on-year growth took the bank’s customer deposits to S$367 billion (US$272.5 billion) at the end of Q1 2023 – enough to provide 80 per cent of total funding needs. But it remains open to diversified wholesale funding options including senior and covered-bond formats.
Funding the Australian operation is particularly relevant, and the proceeds of the latest deal are “primarily” earmarked for local usage according to Chin Yee Goh, group chief financial officer at OCBC in Singapore.
“Our presence in a key center like Sydney is important in the execution of our corporate strategy,” she tells KangaNews.
Source: KangaNews 24 May 2023
“We support a wide range of corporations and investors in Australia, by providing them with credit and other banking facilities for their investment and business activities through our Sydney branch.”
The deal found a primarily Asia-based, bank investor base but supported by a complementary domestic bid (see charts 2 and 3). Goh says this latter investor base plays an important role in OCBC’s issuance plans. She explains: “We have always taken a long-term view toward engaging the capital markets. We had good engagement with Australian investors; the continuity in our investor engagement was important and it drove our decision to be a regular issuer in the Australian bond market.”
Source: OCBC Bank May 2023
Source: OCBC Bank May 2023
GREEN AUSTRALIA
OCBC has developed a particular affinity for Australian issuance from its sustainability bond programme. It priced its first two benchmark green bonds in Australia – in 2019 and 2021 – and now has more green bonds than vanilla bonds outstanding in the market (see chart 4).
It has also committed a significant portion of the funding raised to local projects. According to OCBC’s most recent green-bond report – published in August last year – it allocated 37 per cent of the funds raised in its first two Australian dollar green bonds to local assets, with the balance repatriated to Singapore. The large majority – 92 per cent – of funds went to green building projects and the rest to renewable energy.
“OCBC recognises the important role we play in promoting long-term sustainable development of the economies and has a growing portfolio of Australian green projects to support the country’s transition to a low-carbon economy,” Goh says. “In our previous green bond issuances in Australia, the investors had put in a good bid for our bonds and we are of the view that the continuity in the investor engagement was important.”
Source: KangaNews 24 May 2023
The bank’s framework is aligned with the relevant International Capital Market Association principles and the ASEAN Green Bond Standards, as well as having a second-party opinion from Sustainalytics.
It allows OCBC to issue any of green, social and sustainability bonds. However, Goh explains: “OCBC has chosen to focus on the eligible green asset categories such as renewable energy, energy efficiency, pollution prevention and control, clean transportation, sustainable water and water management, climate change adaption and green buildings – as set out in our Sustainability Bond Framework.”