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10 Jun 2010
DIFC, June 10, 2010 -- Moody's Investors Service has today downgraded the bank financial strength
rating (BSFR) of HSBC Bank Middle East Limited (HBME) to C- from
C and the long-term local and foreign currency deposit ratings
by one notch to A1 from Aa3.
Similarly, the foreign currency senior unsecured debt rating and
the foreign currency subordinated debt rating of HBME under its MTN programme
are downgraded to A1 and A2, from Aa3 and A1, respectively.
The downgrade in HBME's ratings affects the deposit ratings of HSBC
Bank Middle East Limited (UAE Branch) and the senior unsecured trust certificates
rating of HBME Sukuk Company Ltd. All ratings carry a stable outlook.
This rating action concludes the review initiated by Moody's on 15 December
Today's downgrade reflects a weakening in HBME's standalone
strength as a result of ongoing credit issues in the Dubai corporate sector
as well as specific troubled exposures within the Gulf Cooperation Council
area, which have impacted the bank's asset quality metrics.
In addition, retail exposures have also been hit from the economic
slowdown in Dubai. However, the bank maintains good coverage
levels through its conservative provisioning policies, which despite
lowering profitability in 2009, have created buffers to sustain
losses in the future.
Looking forward, the rating agency expects further impairments in
2010, but these can be easily replenished given HBME's strong
core income-generating ability. The bank is expected to
improve its profitability in 2010 and 2011, although increased competition
for deposits in the UAE may exert pressure on funding costs.
The new BFSR of C- maps to a baseline credit assessment (BCA) of
Baa1. The three-notch uplift from this BCA to the A1 long-term
debt and deposit ratings reflects Moody's continued assessment of a very
high probability of support for HBME from its parent in case of need.
HBME is a wholly owned subsidiary of HSBC Holdings plc, registered
in the Channel Islands, with operations in the Middle East.
The current ratings are as follows:
HSBC Bank Middle East Limited
- BFSR: C-
- Long-term deposit ratings: A1
- Short-term deposit ratings: Prime-1
- Long-term senior unsecured notes (foreign): A1
- Long-term subordinated notes (foreign): A2
HSBC Bank Middle East Limited (UAE Branch)
- Long-term deposit ratings: A1
- Short-term deposit ratings: Prime-1
HBME Sukuk Company Ltd
- Senior unsecured trust certificates: A1
The previous rating action on HBME was implemented on 15 December 2009,
when Moody's placed all ratings on review for possible downgrade.
The principal methodologies used in rating this issuer are "Bank Financial
Strength Ratings: Global Methodology", and "Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology", which can be found at www.moodys.com
in the Rating Methodologies subdirectory under the Research & Ratings
tab. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found in the Rating Methodologies
sub-directory on Moody's website.
Headquartered in Dubai, UAE, HSBC Bank Middle East Limited
reported total assets of US$39.17 billion as at 31 December
Financial Institutions Group
Moody's Investors Service Cyprus Limited
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Financial Institutions Group
Moody's Middle East Ltd.
Moody's downgrades HSBC Bank Middle East to A1/C-; stable outlook
No Related Data.
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