New York, August 05, 2015 -- Moody's Investors Service has today placed on review for downgrade HSBC
Bank Brasil S.A. -- Banco Múltiplo's (HSBC Brasil)
long- and short-term global local currency deposit ratings
of A2 and Prime 1, the long-term foreign currency senior
unsecured debt rating of Baa1, and the (P)Baa1 long-term
foreign currency senior unsecured debt rating assigned to GMTN Program.
Moody's also placed on review for downgrade the a2 Adjusted Baseline
Credit Assessment (BCA), as well as the long- and short-term
counterparty risk assessments of A1(cr) and Prime-1(cr).
At the same time, Moody's affirmed HSBC Brasil's long-
and short-term foreign currency deposit ratings of Baa2 and Prime-2,
the Brazilian national scale deposit ratings of Aaa.br and BR-1,
and the short-term foreign currency senior unsecured debt rating,
assigned to GMTN Program, of (P)Prime 2. The standalone BCA
of baa3 remains unchanged.
The rating review follows HSBC Holdings Plc's announcement that
it reached an agreement to sell HSBC Brasil to Banco Bradesco S.A,
subject to regulatory approval.
At the same time, Moody's affirmed all ratings assigned to
Banco Bradesco S.A. (Bradesco), including the bank's
long-term global local and foreign currency deposits ratings of
Baa2 and Prime-2, the foreign currency senior unsecured ratings
of Baa2, and the long and short-term Brazilian national scale
deposit ratings of Aaa.br and BR-1. We are also affirming
açll ratings assigned to Banco Bradesco S.A. Grand
Cayman Branch. Banco Bradesco's baseline credit assessment of baa2
and the Counterparty Risk Assessment of Baa1(cr)/Prime-2(cr) assigned
to both Banco Bradesco and Banco Bradesco Cayman Branch remain unchanged.
The ratings assigned to Bradesco have a negative outlook, in line
with the outlook on Brazil's sovereign bond rating of Baa2.
The following assessments and ratings of HSBC Brasil were placed on review
for downgrade:
Adjusted baseline credit assessment of a2
Global local-currency deposit ratings of A2 and Prime-1;
Long-term foreign currency senior unsecured debt rating of Baa1;
Long-term foreign currency senior unsecured debt rating,
assigned to GMTN Program, of (P)Baa1.
Long-term counterparty risk assessment of A1(cr)
Short-term counterparty risk assessment of Prime-1(cr)
The following ratings of HSBC Brasil were affirmed:
Foreign-currency deposit ratings of Baa2, with negative outlook;
Short-term foreign currency deposit rating of Prime-2
Short-term foreign currency senior unsecured debt rating,
assigned to GMTN Program, of (P)Prime-2;
Brazilian national scale deposit ratings of Aaa.br and BR-1.
The following ratings of Banco Bradesco S.A. were affirmed:
Global local currency deposit ratings of Baa2, with negative outlook;
Global local currency short-term deposit rating of Prime-2
Foreign currency deposit ratings of Baa2, with negative outlook;
Foreign currency short-term deposit rating of Prime-2
Long-term foreign currency senior unsecured MTN rating of (P)Baa2;
Brazilian national scale deposit ratings of Aaa.br and of BR-1.
The following ratings assigned to Banco Bradesco S.A. Grand
Cayman Branch were affirmed:
Long-term foreign currency senior unsecured MTN rating of (P)Baa2;
Long-term foreign currency senior unsecured debt rating of Baa2,
with negative outlook;
Foreign currency subordinated unsecured debt rating of Baa3.
RATINGS RATIONALE
HSBC BRASIL
The review for downgrade on the local currency deposit rating will consider
the implications that the proposed transaction holds for the level of
parental support that is incorporated in HSBC Brasil's ratings,
both before and after the transaction closes. In the short-term,
the review will consider whether the announcement may indicate a reduction
in the willingness of the HSBC Holdings' to provide support to its
Brazilian subsidiary, should this prove necessary. Moody's
has historically viewed the likelihood that HSBC Holdings will provide
support as very high, which translates to four notches of uplift
to the HSBC Brasil's Adjusted BCA from its standalone credit assessment.
The review also reflects the likely future ratings implications of the
change in the ownership of HSBC Brasil that will take place when the bank
is acquired by Banco Bradesco. Once the sale is completed,
HSBC Brasil will no longer benefit from parent support provided by HSBC
Holdings (A1 stable). When the transaction closes, the bank's
obligations will be assumed directly by Bradesco (Baa2 negative;
baa2 BCA) and thus, ratings will be affected accordingly.
Under any scenario, HSBC Brasil's debt and deposit ratings
are likely to experience a multi-notch downgrade upon consummation
of the transaction.
Because HSBC Brasil will maintain its standalone franchise until the deal
is completed, its BCA of baa3 is not affected by this rating action.
The bank's BCA continues to reflect its low nonperforming loan ratio,
substantial loan loss reserves, and high level of liquid resources;
although it is also challenged by poor profitability, low adjusted
capitalization levels as measured by Moody's ratio of Tangible Common
Equity to Risk-Weighted Assets, and large volume of market
funding used to meet the Group's internal liquidity requirements.
BANCO BRADESCO
In affirming Bradesco's ratings and maintaining unchanged the baa2
BCA, Moody's acknowledges the positive implications of the
transaction for Bradesco's franchise. According to the presentation
held by Bradesco's management on August 30,2 015, Bradesco's
market shares of deposits and assets will increase by 310 basis points
and 220 basis points, respectively, reinforcing its position
as Brazil's second largest privately-owned bank. This
acquisition also adds an important costs and revenues synergies and a
high-income client base and provides Bradesco important cross-selling
advantages as the bank leverages new business from it wide banking and
insurance platforms, increasing future fee-based earnings
generation opportunities.
However, the transaction will also result in an expected decline
in capitalization of nearly 300 basis pointsaccording to estimates provided
by Bradesco, resulting from the high amount of goodwill that the
bank will record as a result of the acquisition based on the 1.8x
tangible book value paid for HSBC Brazilian operations. This will
reduce common equity Tier 1 ratio to 10%, still above the
minimum 7%, but which, however, does not consider
the countercyclical buffers that will be required by 2018. While
Bradesco's strong earnings generation, which will be enhanced
by this transaction, and moderate loan growth expected for the next
two years should help it to replenish its capital in the coming years,
these efforts will continue to be challenged by Brazil's deteriorating
operating environment.
The negative outlook on Bradesco's BCA of baa2 and global deposit
and senior debt ratings of Baa2 also consider the negative outlook of
the sovereign rating. Consequently, should the sovereign
be downgraded, Bradesco is likely to be downgraded as well,
even if it is able to fully replenish capitalization to current levels.
LAST RATING ACTION
Moody's took its last rating action on HSBC Bank Brazil on 11 May 2015,
when the rating agency downgraded its standalone BCA to baa3 from baa2,
downgraded its Adjusted BCA to a2 from a1, and downgraded the long-term
global local currency deposit ratings to A2. This action was taken
in view of the conclusion of the rating review announced following the
implementation of the new Banks methodology in March 2015.
The last rating action on Banco Bradesco S.A. was on 11
May 2015 when Moody's downgraded its standalone BCA to baa2 from
baa1, downgraded its long-term local currency deposit rating
to Baa2 from Baa1, and the foreign currency senior unsecured debt
rating to Baa2 from Baa1. At the same time, the bank's
global short-term deposit ratings were affirmed at Prime-2
as well as its Brazilian long-term and short-term national
scale deposit ratings of Aaa.br and BR-1. This action
was taken in view of the conclusion of the rating review announced following
the implementation of the new Banks methodology in March 2015.
The outlook on the banks' global ratings is negative, in line
with the negative outlook on the Baa2 sovereign bond rating outlook.
The last rating action on Banco Bradesco S.A. Grand Cayman
Branch was on 11 May 2015 when Moody's downgraded its long-term
foreign currency senior unsecured debt rating to Baa2 from Baa3,
and its foreign currency subordinated debt rating to Baa3 from Baa2.
Both ratings remained on negative outlook in line with the negative on
Banco Bradesco S.A.'s ratings, which are aligned
to the sovereign bond rating outlook.
METHODOLOGY USED
The principal methodology used in these ratings was Banks published in
March 2015. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
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 June 2014 entitled "Mapping Moody's National
Scale Ratings to Global Scale Ratings".
HSBC Bank Brasil S.A. -- Banco Multiplo is headquartered
in São Paulo, Brazil, and had total assets of BRL168
billion ($63 billion) and total equity of BRL9.7 billion
($3.7 million) as of 31 December 2014.
Banco Bradesco S.A. is headquartered in São Paulo,
Brazil and had total consolidated assets of BRL1,029.8 billion
($331.5 billion) and equity of BRL87 billion ($28
billion) as of 30 June 2015.
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.
The following information supplements Disclosure 10 ("Information
Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J)
of SEC Rule 17g-7") in the regulatory disclosures made at
the ratings tab on the issuer/entity page on www.moodys.com
for each credit rating:
Moody's was not paid for services other than determining a credit
rating in the most recently ended fiscal year by the person that paid
Moody's to determine this credit rating.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
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.
Alexandre Albuquerque
Asst Vice President - Analyst
Financial Institutions Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300
M. Celina Vansetti
MD - Banking
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's reviews down HSBC Brasil's deposit rating; affirms Bradesco's ratings
