MOODY'S RAISES RATINGS OF HSBC HOLDINGS PLC (SUBORDINATED TO A2) AND OF ITS SUBSIDIARIES MIDLAND BANK (SENIOR TO Aa2), HSBC AMERICAS INC (SENIOR TO A2), AND MARINE MIDLAND BANK (SENIOR TO A1)
London, 08-26-97 -- Moody's Investors Service raised to A2 from A3 the subordinated debt rating of HSBC Holdings plc (HSBC). Moody's also raised the long-term deposit and senior debt ratings of Midland Bank plc (Midland), a subsidiary of HSBC, to Aa2 from Aa3, the subordinated debt rating to Aa3 from A1, and the bank financial strength rating to B+ from B. Finally, Moody's raised the credit ratings of HSBC Americas, Inc. (HAI), also a subsidiary of HSBC, to A2/Prime-1 for debt, from A3/Prime-2, and of its bank subsidiary, Marine Midland Bank, to A1/Prime-1 for deposits, from A3/Prime-2. Marine Midland's bank financial strength rating was confirmed at C+. The ratings of the Hongkong and Shanghai Banking Corporation (HongkongBank) and its subsidiaries were also confirmed (senior at A3). The outlook for the group's ratings is now stable, Moody's added.
Moody's said that these rating actions reflect the continued improvement in the fundamental performance of the HSBC group, and of its UK and US businesses in particular, as well as the developing geographical breadth of its operations. The ratings also take account of the uncertainties surrounding the outlook for HSBC's core banking franchise in Hong Kong, which remains the group's single largest contributor to earnings.
HSBC is the ultimate holding company of one of the world's largest banking and financial services groups. A large proportion of the group's earnings is generated in Hong Kong and the Asia Pacific region through its ownership of HongkongBank, and where the group is committed to maintaining a significant presence. Following the recent transition of Hong Kong to Chinese sovereignty, Moody's believes that there remain uncertainties as to how the operating environment for banks there will change over the next few years, as well as to the longer-term sustainability of HongkongBank's dominant position in the Hong Kong market. HongKongBank's A3/Prime-1 ratings reflect these factors. Also, in view of the sharp appreciation in Hong Kong asset prices, the Hong Kong banks would be exposed should there be a sharp correction. However, Moody's said that the impact of such an event on HSBC should be tempered by prudent management and sound liquidity, capitalisation and underwriting indicators. Moody's anticipates that group management's emphasis on commercial banking, its relatively conservative acquisition strategy, and the close control exerted over HSBC's many subsidiaries should help to limit undue earnings volatility.
In addition, Moody's noted that the significant improvement in the earnings capacity of Midland, HAI, and other subsidiaries had increased their relative contributions to group earnings. The rating agency added that HSBC's recent initiatives and investments in North and South America should provide additional revenue sources in the medium-term.
There has been a significant and sustainable improvement in Midland's competitive position since its acquisition by HSBC in 1992, Moody's said. During this time, the bank's structure and range of operations have been simplified and the emphasis placed upon restoring its important domestic banking franchise. The arrival of new senior management, as well as the opportunities and resources provided through membership of a large international banking group, have revitalised Midland. The re-engineering of Midland's 1,700-strong UK branch network is now largely complete, and the bank's improved competitiveness has been increasingly reflected in its recovering market shares and good profitability. Moody's added that Midland's enhanced earnings capacity and moderate risk profile should leave it well-positioned to cope with a subsequent cyclical downturn, and to take advantage of opportunities in the competitive United Kingdom financial services markets.
Moody's said that the upgrade of HAI's credit ratings reflected the continued improvement in its fundamental performance, most notably in asset quality, overhead management, and core profitability. HAI also benefits from its ownership by HSBC Holdings, through favorable intercompany pricing and potential capital support.
Primarily through acquisitions, HAI has grown substantially over the past several years. Its first-quarter 1997 transaction -- the cash purchase of a Rochester thrift -- significantly strengthened its regional (upstate New York) franchise. Moreover, the acquisition should have a positive effect on HAI's already impressive overhead ratios. On the other hand, the merger caused a decline in capital ratios and an increase in double leverage. Moody's added that although loan quality has improved, HAI's ratios remain somewhat below peer averages.
The following ratings were raised:
HSBC Holdings Plc -- the subordinated debt rating to A2, from A3.
HSBC Finance Nederland B.V. -- the guaranteed subordinated debt rating to A2, from A3.
Midland Bank Plc -- the bank deposit and senior long-term debt ratings to Aa2, from Aa3; the subordinated debt rating to Aa3, from A1; the bank financial strength rating to B+, from B; and the preferred stock rating to "a1" from "a2".
Midland American Capital Corp -- long-term debt, guaranteed on a subordinated basis, to Aa3 from A1.
Midland International Financial Services B.V. -- long-term debt, guaranteed on a subordinated basis, to Aa3 from A1.
HSBC Americas, Inc. -- medium-term note program, senior from A3 to A2; subordinated debt, from Baa1 to A3; preferred stock, from "a3" to "a2"; and the company's rating for commercial paper from Prime-2 to Prime-1.
Marine Midland Bank -- ratings of the bank for long-term deposits and other senior and counterparty obligations, from A3 to A1; and the rating of the bank for short-term deposits and other senior obligations, from Prime-2 to Prime-1; and subordinated debt, from Baa1 to A2. The BFSR, at C+ was confirmed.
HSBC Americas Capital Trust I -- preferred stock from "a3" to "a2".
The following ratings were confirmed:
Banco Bamerindus do Brasil SA -- the B1 senior long-term debt rating.
HSBC Bamerindus -- the B2/Not-Prime bank deposit ratings, the B1 senior long-term debt rating, and the E+ bank financial strength rating.
Hongkong and Shanghai Banking Corp. Ltd -- the A3/Prime-1 bank deposit ratings, the B bank financial strength rating; the A2 domestic currency senior debt rating; the A3 domestic currency subordinated debt rating; the Baa1 foreign currency subordinated debt rating.
Hong Kong Bank of Australia -- guaranteed long-term debt at A3.
Hongkong Bank of Canada -- the guaranteed commercial paper rating at Prime-1.
HSBC Holdings plc, headquartered in London, is the ultimate holding company of the HSBC group, which had consolidated total assets of approximately œ 275 billion (US$ 458 billion) at June 30, 1997. Midland Bank plc, also headquartered in London, had total assets of approximately œ 106 billion (US$ 176 billion) at June 30, 1997. HSBC Americas, Inc., headquartered in Buffalo, New York, had total assets of approximately $33 billion at June 30, 1997. The HongkongBank Group, headquartered in Hong Kong, had total assets of approximately HK$1,432 billion (US$ 186 billion ) at June 30, 1997.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY'S CREDIT RATINGS,
ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
MOODY'S CREDIT RATINGS,
ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.