Fitch Takes Rating Actions on HSBC's Latin American Subsidiaries

MONTERREY, Mexico & NEW YORK--()--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)'.

Additional information is available on www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);

--'National Ratings Criteria' (Jan. 19, 2011);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);

--'Rating Financial Institutions Above the Local Currency Sovereign Rating' (Dec. 20, 2011);

--'Assessing and Rating Bank Subordinated and Hybrid Securities ' (Dec. 5, 2012);

--'Treatment of Hybrids in Bank Capital Analysis' (July 09, 2012);

--'Securities Firms Criteria' (Aug. 15, 2012).

Applicable Criteria and Related Research:

Securities Firms Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686137

Assessing and Rating Bank Subordinated and Hybrid Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695542

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Rating Financial Institutions Above the Local Currency Sovereign Rating

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=657925

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Contacts

Fitch Ratings
Primary Analyst (HSBC Mexico and HSBC Casa de Bolsa)
Alejandro Garcia, CFA
Senior Director
+52 (81) 8399-9146
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612, Monterrey, N.L. Mexico.
or
Primary Analyst (HSBC Bank (Chile))
Santiago Gallo
Director
+54-11-5235-8137
Fitch Argentina Calificadora de Riesgo S.A.
Sarmiento 663 - piso 7 - C1041AAM
Buenos Aires, Argentina
or
Primary Analyst (HSBC Bank (Panama))
Diego Alcazar
Director
+1 212 908-0396
or
Secondary Analyst (HSBC Mexico and HSBC Casa de Bolsa)
Monica Ibarra (Analista Secundario)
Director
+52 (81) 8399-9150
or
Secondary Analyst (HSBC Bank (Chile))
Eduardo Santibanez
Director
+56-2-499-33-07
or
Secondary Analyst ((HSBC Bank (Panama))
Carmen Matamoros
Associate Director
+503 2516-6612
or
Committee Chairperson
Peter Shaw
Managing Director
+1 212 908-0553
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst (HSBC Mexico and HSBC Casa de Bolsa)
Alejandro Garcia, CFA
Senior Director
+52 (81) 8399-9146
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612, Monterrey, N.L. Mexico.
or
Primary Analyst (HSBC Bank (Chile))
Santiago Gallo
Director
+54-11-5235-8137
Fitch Argentina Calificadora de Riesgo S.A.
Sarmiento 663 - piso 7 - C1041AAM
Buenos Aires, Argentina
or
Primary Analyst (HSBC Bank (Panama))
Diego Alcazar
Director
+1 212 908-0396
or
Secondary Analyst (HSBC Mexico and HSBC Casa de Bolsa)
Monica Ibarra (Analista Secundario)
Director
+52 (81) 8399-9150
or
Secondary Analyst (HSBC Bank (Chile))
Eduardo Santibanez
Director
+56-2-499-33-07
or
Secondary Analyst ((HSBC Bank (Panama))
Carmen Matamoros
Associate Director
+503 2516-6612
or
Committee Chairperson
Peter Shaw
Managing Director
+1 212 908-0553
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com