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Rating Action:

Moody's downgrades HSBC Private Bank to A1 and withdraws public ratings

07 Mar 2013

Issuer rating of HSBC Private Banking Holdings downgraded to A2 and withdrawn

Frankfurt am Main, March 07, 2013 -- Moody's Investors Service has today downgraded the long-term bank deposit and issuer ratings of HSBC Private Bank (Suisse) SA (HSBC PB) to A1 from Aa3, prompted by the lowering of the bank financial strength rating (BFSR) to C+, equivalent to a baseline credit assessment (BCA) of a2, from B/aa3. The lowering of the BCA reflects continued profitability pressure for its international on- and off-shore private banking and wealth-management franchise, amongst other factors. The bank's Prime-1 short-term deposit ratings were affirmed.

Consequently, Moody's downgraded the long-term issuer rating of HSBC Private Banking Holdings (Suisse) SA (HSBC PBH), the principal holding company for HSBC Group's private banking business, to A2 from A1. This is one notch below HSBC PB's A1 deposit and issuer ratings, in accordance with the rating agency's general approach to rating a holding company's unsubordinated financial obligations.

All ratings carry a stable outlook.

Subsequent to today's rating actions, Moody's will immediately withdraw all ratings of HSBC PB and HSBC PBH for its own business reasons. Please refer to the Moody's Investors Service's Policy for Withdrawal of Credit Ratings, available on its website, www.moodys.com.

RATINGS RATIONALE

--- STANDALONE CREDIT ASSESSMENT OF HSBC PB

The lowering of HSBC PB's BCA to a2 reflects Moody's view that the bank's private banking franchise is under continued pressure given (1) a weaker growth profile of assets under management compared with other global private banks; (2) declining revenues and gross margins from lower client-risk appetite, related trading activities and net interest income; (3) operating expense pressures, partly resulting from a strong Swiss franc; and (4) heightened litigation risk from ongoing investigations. In Moody's view, all these factors have materially and sustainably affected HSBC PB's earnings generation capacity, exerting pressure on its standalone credit strength, as reflected in a reported pre-tax margin that declined to around 31% during H1 2012 from 47% in 2009.

With around CHF166 billion in client assets as of end-December 2011, Moody's continues to consider HSBC PB as one of the strongest Swiss private banking and wealth management franchises. This view is supported by the bank's earnings capacity, which still ranks high amongst its Swiss private banking peers. Moreover, HSBC PB's ratings benefit from its intrinsically low balance-sheet risk profile, its sizeable deposit base and a strong global franchise and brand name as a member of HSBC group.

--- LONG-TERM RATINGS OF HSBC PB

The one-notch downgrade of HSBC PB's deposit and issuer ratings to A1 follows the lowering of its BCA and incorporates Moody's expectation that parental support from HSBC Holdings plc (Aa3, negative) would be highly likely, if it is ever required. This results in one-notch of rating uplift from parental support to HSBC PB's A1 deposit and issuer ratings from its a2 BCA. The ratings do not incorporate any systemic support.

--- LONG-TERM RATINGS OF HSBC PBH

The one-notch downgrade of HSBC PBH's deposit and issuer ratings to A2 follows the downgrade of HSBC PB's long-term ratings, reflecting Moody's unchanged assumptions regarding the holding's structural subordination to its main operating entity, HSBC PB. Similar to other non-operational holding companies, HSBC PBH's capacity of honoring its liabilities might be constrained by how much HSBC PB may be able, and allowed, to pay out in the form of dividends, capital, interest or principal to its parent company so that creditors of the holding company are structurally subordinated to the bank's creditors.

LIST OF AFFECTED RATINGS

Ratings of HSBC PB affected by today's rating action are as follows:

- Standalone BFSR downgraded to C+, stable outlook from B, negative

- Long-term issuer rating downgraded to A1, stable outlook from Aa3, stable

- Long-term bank deposits downgraded to A1, stable outlook from Aa3, stable

- Short-term bank deposits affirmed at Prime-1

Ratings of HSBC PBH affected by today's rating action are as follows:

- Long-term issuer rating: A2, stable outlook from A1, stable

All of HSBC PB's and HSBC PBH's ratings will be withdrawn at the current rating levels.

PRINCIPAL METHODOLOGIES

The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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 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 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 rating action, and whose ratings may change as a result of this 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.

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.

Swen Metzler
Vice President - Senior Analyst
Financial Institutions Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades HSBC Private Bank to A1 and withdraws public ratings
No Related Data.
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