Singapore, February 27, 2019 -- Moody's Investors Service has affirmed all the ratings of Standard Chartered
PLC (SCPLC) and Standard Chartered Bank (SCB), after the announcement
by Standard Chartered Group on 26 February 2019 of a group restructuring.
At the same time, Moody's has downgraded SCB's Baseline
Credit Assessment (BCA) to baa2 from baa1, while affirming its adjusted
BCA at baa1.
In addition, Moody's has assigned a notional BCA of baa1 to
SCPLC.
The outlook on all ratings, where applicable, is stable.
A full list of the ratings affected can be found at the end of this press
release.
RATINGS RATIONALE
On 26 February 2019, Standard Chartered Group (the group) announced
a plan to change the legal structure of how the group is organized.
SCB is currently the primary operating entity of the group, while
SCPLC is the ultimate holding company of the group. Under the announced
plan, Standard Chartered Bank (Hong Kong) Limited (SCBHK) will be
held directly by SCPLC.
In addition, the group's subsidiaries in Korea, China and
Taiwan will be restructured under SCBHK. By contrast, under
the current arrangement, SCB holds all of these subsidiaries.
Notional BCA of baa1 assigned to SCPLC
The planned restructuring changes the legal structure of the group and
does not cause any material changes in the underlying group operations,
including how the group is managed. The notional BCA of SCPLC,
which is the BCA of the group evaluated as a single consolidated entity,
is therefore the same as the previously published BCA of SCB of baa1.
BCA of SCB downgraded to baa2 from baa1
Moody's has downgraded SCB's BCA by one notch to baa2 because
under the proposed structure, SCBHK will no longer be jointly owned
by SCB (51%) and SCPLC (49%), and will instead be
fully owned by SCPLC.
SCBHK's credit profile is stronger than that of the overall group.
The change in ownership structure therefore results in SCB's standalone
credit profile — and in turn its BCA — becoming weaker.
On a pro forma basis, Moody's estimates that the change in
ownership will weaken SCB's credit metrics. In particular,
four of the five financial profile factors — asset quality,
capital, profitability and funding -- will be weaker.
Adjusted BCA of SCB affirmed at baa1
The adjusted BCA of SCB is affirmed at baa1, because it benefits
from one notch of affiliate support from the group.
SCB, post restructuring, will continue to represent a critical
part of the group, accounting for around 60% of the overall
group assets. As such, Moody's expects SCB to enjoy
a very high level of affiliate support, leading to a one notch uplift
from its BCA.
Instruments ratings of SCPLC, and instrument ratings and CRR of
SCB affirmed
The instrument level ratings of SCPLC, and the instrument level
ratings and CRR of SCB are based on Moody's Advanced Loss Given Failure
(LGF) analysis.
The resolution perimeter for arriving at the ratings of SCPLC and SCB
consists of the assets of SCPLC and SCB on a standalone basis.
The advanced LGF analysis factors in the forward looking issuance plan
of the group, as well the downstreaming of internal loss absorbing
capital to its subsidiaries.
Based on this LGF analysis, the notching output of the LGF model
is in line with the current level of notching in SCPLC's and SCB's
published ratings. With the notional adjusted BCA of SCPLC being
at the same level as the current adjusted BCA of SCB, all supported
ratings are affirmed at current levels.
What Could Change the Ratings Up/Down
Moody's could raise the BCA of SCPLC and SCB if the group's
and bank's profitability were to significantly increase from current
levels.
However, Moody's could downgrade SCPLC's and SCB's BCA
if the group's and bank's asset quality were to materially
deteriorate once again. Moody's could also downgrade the
BCA if profitability falls to 2016 levels, without the prospect
of a swift recovery.
A change in SCPLC's BCA would likely affect all the ratings assigned to
SCB and SCPLC. In addition, Moody's could downgrade
SCPLC's senior debt ratings, and SCB's deposit and senior debt ratings
if the volume of junior instruments outstanding decreases significantly,
reducing the amount of loss protection available to more senior instruments.
In addition, if the proposed transaction is not completed,
Moody's could upgrade SCB's BCA.
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Standard Chartered PLC (SCPLC) is a global bank headquartered in London,
with total assets of $688.7 billion at 31 December 2018.
Standard Chartered Bank (SCB) is the principal operating entity of Standard
Chartered PLC.
List of affected ratings/assessments:
Standard Chartered PLC
- Local and Foreign currency senior unsecured long-term
debt affirmed at A2; outlook maintained at stable
- Foreign currency senior unsecured long-term MTN program
affirmed at (P)A2
- Foreign currency senior unsecured shelf program rating affirmed
at (P)A2
- Local and foreign currency subordinated debt affirmed at Baa2
- Foreign currency subordinated MTN program affirmed at (P)Baa2
- Local and foreign currency junior subordinated debt affirmed
at Baa3(hyb)
- Local and foreign currency non-cumulative preference shares
affirmed at Ba1(hyb)
- BCA of baa1 assigned
- Adjusted BCA of baa1 assigned
- Outlook is maintained at stable
Standard Chartered Bank
- BCA downgraded to baa2 from baa1
- Adjusted BCA affirmed at baa1
- Long-term CR Assessment affirmed at A1(cr)
- Local and foreign currency long-term deposits affirmed
at A1; outlook maintained at stable
- Foreign currency long-term deposit notes/CD program affirmed
at A1
- Local and foreign currency senior unsecured long-term
debt affirmed at A1; outlook maintained at stable
- Foreign currency senior unsecured long-term MTN program
affirmed at (P)A1
- Foreign currency subordinated debt affirmed at Baa2
- Foreign currency subordinated MTN program affirmed at (P)Baa2
- Local currency junior subordinated debt affirmed at Baa3(hyb)
- Local and foreign currency short-term deposits affirmed
at P-1
- Foreign currency short-term Deposit Note/CD program affirmed
at P-1
- Foreign currency short-term MTN program affirmed at (P)P-1
- Short-term CR Assessment affirmed at P-1(cr)
- Local currency and foreign currency long-term Counterparty
Risk Ratings affirmed at A1
- Local currency and foreign currency short-term Counterparty
Risk Ratings affirmed at P-1
- Outlook is maintained at stable
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Srikanth Vadlamani
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
