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TEXT - Fitch takes rating action on HSBC's Latam units
December 10, 2012 / 7:53 PM / 5 years ago

TEXT - Fitch takes rating action on HSBC's Latam units

Dec 10 - Fitch Ratings has taken various rating actions on the Latin America
subsidiaries of HSBC Holdings plc (HSBC), following the Dec. 7, 2012
downgrade of HSBC's Long-term Issuer Default Rating (IDR) and Viability Rating
(VR). The rating actions on HSBC's Latin American subsidiaries differ across
companies and countries. A complete list of rating actions for each subsidiary
follows at the end of this press release. 

On Dec. 7, 2012, Fitch downgraded HSBC's Long-term IDR to 'AA-' from 'AA'. The 
Rating Outlook was revised to Stable from Negative. The Long-term IDR and VR of 
HSBC were both downgraded as Fitch believes that the risks attached to the 
group's expansion into higher-risk markets, including mainland China and 
intensifying competition in Hong Kong are no longer sufficiently mitigated at 
the HSBC Group level (please refer to 'Fitch Downgrades HSBC to 'AA-'; Outlook 
Stable', dated Dec. 7, 2012, available at www.fitchratings.com).

In Fitch's view, HSBC's ability and propensity to provide support to its Latin 
American subsidiaries remain strong, despite the recent downgrade. Most Latin 
America subsidiaries are considered by Fitch as Strategically Important to HSBC 
as they have built up a regional franchise by focusing mostly on retail and 
corporate banking. 

Fitch has taken rating actions on the following HSBC's subsidiaries:

 

HSBC MEXICO

HSBC Mexico's support rating and IDRs have been affirmed due to the strong 
propensity of its ultimate parent, HSBC, to provide support to HSBC Mexico, if 
this were needed. In Fitch's opinion, HSBC Mexico is a priority growth market 
for HSBC and is a strategically important subsidiary. Therefore, its IDRs could 
be as high as one notch below the parent's. 

Despite the strong potential for support and still high rating of its parent, 
relativities with the sovereign ratings have constrained the uplift for HSBC 
Mexico's IDRs. This explains why HSBC Mexico's 'A' local currency IDR is not 
affected by the recent downgrade of the parent, while the foreign currency IDR 
at 'A-' remains capped by Mexico's country ceiling. HSBC Mexico's national scale
long- and short-term ratings were affirmed at 'AAA(mex)' and 'F1+(mex)', 
respectively, since its IDRs are above those of the sovereign, and 
national-scale ratings are relative rankings of creditworthiness within a 
certain jurisdiction. 

The affirmation of the ratings of HSBC Mexico's subordinated debt reflects 
Fitch's opinion that support from HSBC, if needed, would extend to any 
outstanding debt in the local market, in order to prevent negative effects on 
its reputation and overall funding costs. Given the still relatively high IDR of
HSBC, the subordinated debt rating is equal to that of HSBC Mexico's senior 
unsecured debt. 

Ratings Sensitivities

A potential upgrade of Mexico's sovereign rating could positively affect HSBC 
Mexico's IDRs if the parent remains rated in the 'AA' category. Conversely, 
further downgrades of HSBC Holding's IDRs could potentially negatively affect 
HSBC Mexico's rating and/or Rating Outlook. The national scale ratings could be 
affected by a multi-notch downgrade of HSBC Holdings. 

Given Fitch's criteria for rating bank hybrids and the non-performance risk of 
these securities, the national scale ratings of HSBC Mexico's subordinated debt 
could be affected by further downgrades of HSBC Holdings' Viability Rating, even
before such downgrade could affect the national scale issuer and senior 
unsecured debt ratings, and/or the IDRs of HSBC Mexico. 

HSBC CASA DE BOLSA

HSBC Casa de Bolsa is perceived by Fitch as a core affiliate of HSBC Mexico and 
fully integrated into its operations and franchise. In addition, the local 
holding company of both operating entities, Grupo Financiero HSBC, is legally 
enforced to provide support to its subsidiaries. Therefore, the national scale 
ratings of the brokerage unit are fully aligned with the bank's ratings. 

Ratings Sensitivities

The ratings of HSBC Casa de Bolsa could be negatively affected by a multi-notch 
downgrade of HSBC Holding's IDRs, or a change in the propensity of the latter to
support its Mexican subsidiaries. These ratings will likely remain aligned with 
HSBC Mexico. 

HSBC BANK (CHILE)

The downgrade of HSBC Bank (Chile)'s Long-term IDR is in conjunction with the 
downgrade of HSBC. HSBC Bank (Chile)'s IDRs are supported by HSBC, primarily 
reflecting its importance to the group. As such, HSBC Bank (Chile) IDRs will 
move in tandem with HSBC's. In Fitch's opinion, HSBC Bank (Chile) is considered 
by Fitch as a subsidiary of limited importance for HSBC, because of its small 
size within the group and in their local market. Therefore its IDRs could be as 
high as two notches below the parent's. Fitch does not maintain a VR on HSBC 
Bank (Chile), as it does not view the company as a stand-alone entity.

HSBC Bank (Chile)'s support rating and national scale ratings were affirmed due 
to expected support from its parent. National scale ratings are relative 
rankings of creditworthiness within a certain jurisdiction.

Ratings Sensitivities

HSBC Bank (Chile)'s IDRs would move in line with those of its parent. The 
national scale ratings could be affected by a downgrade of HSBC.

HSBC BANK (PANAMA)

HSBC Bank (Panama)'s (HSBC Panama) IDRs and national ratings have been affirmed.
HSBC Panama is considered by Fitch as Strategically Important to HSBC. This 
classification is based on Fitch's assessment of the role of HSBC Panama in 
HSBC's strategy as a regional hub for funding and lending in dollars, the 
reputational risk resulting from the shared franchise and commercial name, the 
high level of management integration, and the capital and funding facilities 
provided by its ultimate parent. HSBC Panama's IDRs could be as high as two 
notches below the parent's. The current rating was constrained by Fitch policies
to rate above the sovereign (not more than three notches at the most). After the
downgrade of the parent, HSBC Panama supported IDR of 'A' is aligned with the 
usual notching policy for Strategically Important subsidiaries, and no longer 
constrained by Panama's Country Ceiling.

Ratings Sensitivities

HSBC Panama's current Long-term IDR is aligned with Panama's country ceiling. 
Further downgrades on HSBC's IDR would result in a similar action on the 
Panamanian bank's ratings. 

HSBC BANK (URUGUAY) AND HSBC BANK (ARGENTINA) UNAFFECTED

Fitch currently rates other two bank subsidiaries of HSBC in Latin America: HSBC
Bank (Uruguay) (HSBC Uruguay) and HSBC Bank (Argentina) (HSBC Argentina). Both 
entities were not included in this review given the significant limitations to 
their supported IDR due the relatively low Country Ceiling several categories 
below the rating of HSBC. In the case of HSBC Uruguay (rated 'BBB; on Negative 
Rating Watch; Support Rating 2; 'AAA(ury)'; on Negative Rating Watch;, it's IDR,
Support, and National Scale Ratings were placed on Rating Watch Negative on May 
2012 (please refer to 'Fitch Places HSBC Bank Uruguay on Rating Watch Negative',
dated May 16, 2012) pending the completion of the sale of the bank to the 
Colombian Banco GNB Sudameris. This transaction is expected to be completed 
during the first half of 2013. In the case of HSBC Argentina, its national scale
long-term rating was downgraded to 'AA(arg)' on Nov 30, 2012, due to the recent 
sovereign downgrade (please refer to 'Fitch Takes Actions on Argentina Banks 
after Sovereign Downgrade'; dated Nov. 30, 2012 at www.fitchratings.com).

Fitch has taken the following rating actions: 

HSBC Mexico:
--Long-term IDR affirmed at 'A-'; Outlook Stable;
--Short-term IDR affirmed at 'F1';
--Long-term local currency IDR affirmed at 'A'; Outlook Stable;
--Short-term local currency IDR affirmed at 'F1';
--Support Rating affirmed at '1';
--Long-term national-scale rating affirmed at 'AAA(mex)'; Outlook Stable;
--Short-term national-scale rating affirmed at 'F1+(mex)';
--Long-term national-scale rating for local senior unsecured debt issues 
affirmed at 'AAA(mex)';
--Long-term national-scale rating for local subordinated debt issues affirmed at
'AAA(mex)'.

HSBC Casa de Bolsa:
--Long-term national-scale rating affirmed at 'AAA(mex)'; Outlook Stable;
--Short-term national-scale rating affirmed at 'F1+(mex)';

HSBC Bank Chile
--Long-term foreign and local currency IDR downgraded to 'A' from 'A+'; Outlook 
revised to Stable from Negative;
--Short-term foreign and local currency IDR affirmed at 'F1';
--Long-term national rating affirmed at 'AAA(cl)'; Outlook Stable;
--Short-term national rating affirmed at 'N1+(cl)';
--Support Rating affirmed at '1'.

HSBC Bank (Panama):
--Long-term IDR affirmed at 'A'; Outlook Stable;
--Short-term IDR affirmed at 'F1';
--Support Rating affirmed at '1';
--Long-term national-scale rating affirmed at 'AAA(pan)'; Outlook Stable;
--Short-term national-scale rating affirmed at 'F1+(pan)'.

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