New York, May 17, 2012 -- The following release represents Moody's Investors Service's summary credit
opinion on HSBC USA Inc. and includes certain regulatory disclosures
regarding its ratings. This release does not constitute any change
in Moody's ratings or rating rationale for HSBC USA Inc.
Moody's current ratings on HSBC USA Inc. and its affiliates are:
Senior Unsecured (domestic currency) ratings of A1, on review for
downgrade
Senior Unsecured MTN Program (domestic currency) ratings of (P)A1,
on review for downgrade
Subordinate (domestic currency) ratings of A2, on review for downgrade
Preferred Stock Non-cumulative (domestic currency) ratings of Baa1,
on review for downgrade (hyb)
Commercial Paper (domestic currency) ratings of P-1, on review
for downgrade
HSBC Bank USA, N.A.
Long Term Issuer Rating ratings of Aa3, on review for downgrade
Senior Unsecured (domestic and foreign currency) ratings of Aa3,
on review for downgrade
Senior Unsecured Bank Note Program (domestic currency) ratings of (P)Aa3,
on review for downgrade
Long Term Bank Deposits (domestic currency) ratings of Aa3, on review
for downgrade
Long Term Deposit Note/CD Program (domestic currency) ratings of Aa3,
on review for downgrade
Long Term Other Senior Obligations ratings of Aa3, on review for
downgrade
Bank Financial Strength ratings of C
Subordinate Bank Note Program (domestic currency) ratings of (P)A1,
on review for downgrade
Subordinate (domestic currency) ratings of A1, on review for downgrade
Short Term Bank Note Program (domestic currency) ratings of (P)P-1
Short Term Bank Deposits (domestic currency) ratings of P-1
Short Term Other Senior Obligations ratings of P-1
RATING RATIONALE
Moody's assigns a standalone bank financial strength rating (BFSR)
of C to HSBC Bank USA, N.A., the bank subsidiary
of HSBC USA Inc. HSBC USA Inc. is the intermediate holding
company that houses the US banking operations of the HSBC group.
(HSBC USA Inc. and its subsidiaries are referred to hereafter as
'HSBC USA'.)
The C standalone BFSR maps to a3 on the long-term scale,
which would be HSBC Bank USA, N.A.'s deposit
and senior debt rating in the absence of our expectation of parental support
should the bank need it. We assume that there is a very high probability
that HSBC USA would receive support from its ultimate parent, HSBC
Holdings plc (senior unsecured at Aa2). The HSBC group's
US operations have enjoyed a high profile position within the organization
due to their strategic importance to the global franchise, and HSBC
USA constitutes a significant part of those operations. In addition,
parental support for HSBC USA has been demonstrated in recent years in
the form of periodic capital contributions. The incorporation of
this support assumption currently results in a three-notch lift
to HSBC USA's long-term ratings. Therefore,
the bank's deposit and senior debt rating is Aa3, and the
holding company's senior debt rating is one notch lower (due to
structural subordination) at A1.
On February 15, 2012, we placed the ratings of HSBC Holdings
plc, including its standalone rating, on review for downgrade
given the ongoing challenges faced by European banks and firms with global
capital markets operations. As a result, we subsequently
placed the long-term supported ratings of HSBC Bank USA and the
long- and short-term supported ratings of HSBC USA Inc.
on review for downgrade. This rating action primarily reflects
the potential adverse effects of any weakening of HSBC Holdings plc's
capacity and/or willingness to support its US subsidiaries.
HSBC USA's standalone rating reflects its solid franchise,
which is supported by the key role the bank plays in the delivery of products
and services to the HSBC group's global consumer and wholesale clients.
The US strategy is to leverage the group's strong global brand name
and attract internationally-active clients. The standalone
rating also reflects HSBC USA's good capital position and its sound
liquidity profile, which is underpinned by a good deposit market
position in the New York metro area and the extended maturity profile
of its bank-level wholesale borrowings. The standalone rating
also incorporates HSBC USA's weakened financial fundamentals,
which have trailed those of most similarly-rated US banks in recent
years due to elevated credit costs across its commercial and consumer
loan portfolios, volatility in its Global Banking and Markets (GBM)
segment, a weaker net interest margin, and heightened operating
expenses.
Rating Outlook
On February 22, we placed the long-term supported ratings
of HSBC Bank USA and the long- and short-term ratings of
HSBC USA Inc. on review for downgrade. The outlook on HSBC
Bank USA's standalone BFSR is negative.
What Could Change the Rating - Up
We see little likelihood of an upgrade given the review for downgrade
on the company's supported ratings and the negative outlook on the
bank's standalone rating.
What Could Change the Rating - Down
A downgrade of the ultimate parent's standalone rating and/or a
reduction in our expectation of parental support would likely result in
a downgrade of HSBC USA's supported ratings. Significant
deterioration in the company's profitability and/or asset quality
metrics could lead to negative rating pressure on the bank's standalone
rating.
The methodologies used in these ratings were Bank Financial Strength Ratings:
Global Methodology published in February 2007, and Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: Global
Methodology published in March 2012. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare each of the ratings are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information, and
confidential and proprietary Moody's Analytics information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings 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.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%)
and for (B) further information regarding certain affiliations that may
exist between directors of MCO and rated entities as well as (C) the names
of entities that hold ratings from MIS that have also publicly reported
to the SEC an ownership interest in MCO of more than 5%.
A member of the board of directors of this rated entity may also be a
member of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has
issued the rating.
Joseph Pucella
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Franklyn Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Disclosures on Credit Rating of HSBC USA Inc.
