Mexico, November 12, 2018 -- Moody´s de México, ("Moody´s") assigned Baa1
and Aa1.mx long-term global local currency and Mexican National
Scale senior unsecured debt ratings to the proposed issuance of Certificados
Bursátiles Bancarios (HSBC 18) by HSBC México, S.A.,
Institución de Banca Múltiple, Grupo Financiero HSBC
(HSBC México, S.A.) (HSBC Mexico). The
outlook on the Baa1 rating is positive.
The issuance will be executed in parallel with the issuance of Certificados
Bursátiles Bancarios HSBC 18D and reopening of the issuance of
Certificados Bursátiles Bancarios HSBC 17-2.
HSBC 17-2 (Baa1 positive outlook in global scale, Aa1.mx
in Mexican National Scale) and HSBC 18D (Baa1 positive outlook in global
scale, Aa1.mx in Mexican National Scale) were originally
rated by Moody´s on 4 September 2017 and 26 October 2018,
respectively. The maximum combined amount of HSBC 18, HSBC
18D, and the reopening of HSBC 17-2 is MXN 10 billion (or
its equivalent in USD).
HSBC 18 will have a maturity of up to three years and a floating coupon.
It is the sixth issuance under the bank's long-term revolving debt
program (Programa Revolvente de Certificados Bursátiles Bancarios
de Largo Plazo) of up to MXN20 billion or its equivalent in other currencies
or inflation indexed units (UDIs), registered in December 2013.
The reopening of HSBC 17-2 will have a maturity of approximately
9 years and a fixed coupon. HSBC 18D will have a maturity of approximately
3 years and a floating coupon.
LIST OF AFFECTED RATINGS
The following ratings were assigned:
HSBC México, S.A., Institución
de Banca Múltiple, Grupo Financiero HSBC (6700)
Up to MXN 10 billion in Certificados Bursátiles Bancarios (HSBC
18)
Long-term global local currency senior unsecured debt rating of
Baa1, positive outlook
Up to MXN 10 billion in Certificados Bursátiles Bancarios (HSBC
18)
Long-term Mexican National Scale senior unsecured debt rating of
Aa1.mx
RATINGS RATIONALE
HSBC Mexico's ratings consider the very high likelihood that the bank
will benefit from extraordinary financial support from its parent,
HSBC Holdings plc (BCA of a2), in an event of stress given the strategic
importance of the Mexican operations. The ratings also consider
the high likelihood that the bank will receive support from the Mexican
government. This reflects the bank's significant 8% market
share of the system's deposits and the risks to the stability of the system
that an unsupported failure of the bank could represent.
In addition, the ratings consider the bank's strong asset quality
as well as its moderate capital and earnings that remain low by Mexican
standards notwithstanding recent improvements.
Strong asset quality is reflected in the bank´s relatively low nonperforming
loan (NPL) ratio which stood at a 2.1% of gross loans as
of September 2018, in line with the system average. Moreover,
the bank´s loan loss reserve represents about 1.7 times NPLs,
providing the bank with solid buffers to absorb expected losses.
Though HSBC Mexico's profitability has steadily increased since 2015,
when the bank registered a net loss, it remains below the system
average. Despite low and relatively inelastic funding costs,
together with improving efficiency and declining credit costs, net
income equaled just 0.7% of total assets during the first
nine months of 2018 on an annualized basis, in line with the bank's
focus on large corporate clients. However, with efficiency
anticipated to continue to improve and credit costs expected to decline
somewhat further, profitability should continue to increase gradually
even once Mexico's high benchmark interest rate starts to decrease.
The bank´s capitalization levels are moderate, with tangible
common equity representing about 10.5% of adjusted risk
weighted assets. Despite rapid capital consumption driven by continued
strong loan growth, Moody´s expects capitalization to remain
relatively stable, supported by recovering earnings generation and
a conservative dividend payout ratio.
HSBC México's Aa1.mx national scale rating (NSR) is the
sole Mexican national scale rating corresponding to its Baa1 global scale
rating.
The positive outlook on HSBC México's long-term global local
currency senior unsecured debt rating of Baa1 considers Moody's expectation
that the bank's financial fundamentals will continue to improve given
the success of the measures taken by the current management team in stabilizing
the bank's franchise, while improving controls and risk management.
WHAT COULD CHANGE THE RATINGS UP OR DOWN
The bank's ratings could be upgraded if HSBC Mexico's profitability continues
to improve and asset quality and capital remain stable. On the
other hand, while there is no downward rating pressure at this time,
the outlook could be stabilized if earnings generation does not recover
as expected, or if asset quality or capital deteriorate.
The long-term Mexican National Scale rating of Aa1.mx indicates
issuers or issues with a very strong creditworthiness relative to other
domestic issuers.
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com.mx
for a copy of this methodology.
The period of time covered in the financial information used to determine
HSBC Mexico, S.A.'s rating is between 1 January 2013
and 30 September 2018 (source: Moody's, as well as issuer's
annual audited and quarterly unaudited financial statements).
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn" country modifier
signifying the relevant country, as in ".za" for South Africa.
For further information on Moody's approach to national scale credit ratings,
please refer to Moody's Credit rating Methodology published in May 2016
entitled "Mapping National Scale Ratings from Global Scale Ratings".
While NSRs have no inherent absolute meaning in terms of default risk
or expected loss, a historical probability of default consistent
with a given NSR can be inferred from the GSR to which it maps back at
that particular point in time. For information on the historical
default rates associated with different global scale rating categories
over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113601.
REGULATORY DISCLOSURES
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's information.
The ratings have been disclosed to the rated entity prior to public dissemination.
A general listing of the sources of information used in the rating process,
and the structure and voting process for the rating committees responsible
for the assignment and monitoring of ratings can be found in the Disclosure
tab in www.moodys.com.mx.
The date of the last Credit Rating Action was 26 October 2018.
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 further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.mx.
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.
In compliance with regulatory requirements, Moody's de Mexico has
been informed that within the two-month period prior to the date
hereof, Fitch México, S.A. de C.V.
has assigned a rating of AAA(mex) on the same securities referred to in
this press release.
This credit rating is subject to upgrade or downgrade based on future
changes in the financial condition of the Issuer/Security, and said
modifications will be made without Moody's de México S.A.
de C.V accepting any liability as a result.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a 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.
Please see Moody's Rating Symbols and Definitions on www.moodys.com.mx
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.mx
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 our website www.moodys.com.mx for further
information.
Please see www.moodys.com.mx for any updates on changes
to the lead rating analyst and to the Moody's legal entity that has issued
the rating.
The ratings issued by Moody's de Mexico are opinions regarding the credit
quality of securities and/or their issuers and not a recommendation to
invest in any such security and/or issuer.
Please see the ratings tab on the issuer/entity page on www.moodys.com.mx
for additional regulatory disclosures for each credit rating.
Georges Hatcherian
Asst Vice President - Analyst
Financial Institutions Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653
