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Global Credit Research - 16 Dec 2010
Frankfurt am Main, December 16, 2010 -- Moody's Investors Service has today placed on review for possible
downgrade the standalone C- Bank Financial Strength Rating (BFSR) of HSBC
Bank A.S. - Turkey (HSBC-Turkey). At
the same time, Moody's changed to negative from stable the
outlook of the bank's A3 long-term Global Local Currency
(GLC) deposit rating and the Aaa.tr National Scale Rating (NSR).
The rating agency also affirmed HSBC-Turkey's Prime-2
and TR-1 short-term GLC deposit rating and NSR. Foreign
currency deposit rating and its outlook are not affected.
RATINGS RATIONALE
Moody's said that the review for possible downgrade of HSBC-Turkey's
standalone BFSR was triggered by a combination of (i) poor asset quality,
whereby expansion strategies adopted prior to the 2008 global financial
crisis resulted in the current weak asset quality indicators, (ii)
continuing contraction of the bank's market share in loans (since
2006), and in deposits and total assets (since 2007), and
(iii) the bank's moderate profitability and efficiency ratios,
which is likely to experience further negative pressure in 2011 as Moody's
projects lower profitability for the Turkish banking system against the
backdrop of anticipated interest rate hikes and increased competition.
The rating agency also forecasts lower GDP compared to 2010. (Please
refer to Banking System Outlook: Turkey published on 22 November
2010.)
Accordingly, the review of the BFSR will focus on: the bank's
credit origination practices and credit risk appetite; the strategic
position and direction of the HSBC-Turkey franchise; the bank's
profitability on a risk adjusted basis; and the quality of the bank's
revenue stream. In general, Moody's regards revenues
from the retail and asset management franchise as less volatile,
higher quality earning streams. The rating agency therefore will
evaluate the continued evolution of the bank's revenue stream as
the bank develops and grows its franchise in Turkey.
HSBC-Turkey's long-term GLC deposit rating incorporates
parental support from HSBC Holding Plc, (Aa2/Prime-1,
with negative outlook, with a Baseline Credit Assessment (BCA) of
Aa3) which provides two notches of rating uplift to HSBC-Turkey's
GLC deposit rating. This high parental support assumption and the
high rating of the parent compared to that of HSBC-Turkey,
dampens -- to some extent -- the effect of any potential downward
rating movement of the bank's BFSR on its long-term GLC deposit
rating.
However, any downgrade of HSBC-Turkey's BFSR,
will render its GLC deposit rating more susceptible to any movement in
its parent's rating due to the uplift incorporated in this rating.
Given the negative outlook assigned to the parent's rating,
Moody's also assigned a negative outlook to the GLC deposit rating
of HSBC-Turkey. After the ratings review, Moody's
does not anticipate that the supported long-term GLC deposit rating
of HSBC-Turkey will map to a lower short-term GLC deposit
rating and, therefore, Moody's has also affirmed the
bank's Prime-2 short-term GLC deposit rating.
HSBC-Turkey's NSR maps directly from its long-term
GLC deposit rating in the national scale rating for Turkey. As
a result, a change in the bank's long-term GLC deposit
rating to negative from stable also resulted in a rating outlook change
in the bank's NSR of Aaa.tr. Furthermore, affirmation
of the bank's short-term GLC deposit rating resulted in affirmation
of the bank's short-term NSR of TR-1.
The last rating action on HSBC Bank A.S. was implemented
on 7 October 2010, when the outlook on the Ba3 long-term
foreign-currency deposit rating was changed to positive from stable.
The principal methodologies used in rating these issuers are "Bank
Financial Strength Ratings: Global Methodology" published
in February 2007, "Incorporation of Joint-Default Analysis
into Moody's Bank Ratings: A Refined Methodology" published
in March 2007, and "Moody's Guidelines for Rating Bank
Hybrid Securities and Subordinated Debt", published in November
2009. Other methodologies and factors that may have been considered
in the process of rating these issuers can also be found on Moody's
website.
Headquartered in Istanbul, Turkey, HSBC Bank A.S.
had total assets (audited) of TRY13.9 billion (US$9.2
billion) under IFRS at the end of December 2009.
Frankfurt am Main
Arif Bekiroglu
Asst Vice President - Analyst
Financial Institutions Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Frankfurt am Main
Carola Schuler
MD - Banking
Financial Institutions Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's reviews BFSR of HSBC Bank A.S. (Turkey) for possible downgrade
No Related Data.
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