Issuer rating of HSBC Private Banking Holdings downgraded to A2 and withdrawn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