MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has today affirmed the international and national-scale ratings of the Mexican bank HSBC Mexico, as well as the national-scale ratings of its local brokerage unit, HSBC Casa de Bolsa. A full list of rating actions follows at the end of this release.
HSBC Mexico's support rating and issuer default ratings (IDRs) have been affirmed due to the strong propensity of its ultimate parent, HSBC Holdings plc (rated 'AA' with a Negative Outlook by Fitch) to provide support to HSBC Mexico, if this were needed. In Fitch's opinion, Mexico is a priority growth market for HSBC Holdings, and HSBC Mexico is an strategically important subsidiary, which explains why HSBC Mexico's 'A' rated local currency IDR is the highest among any Mexican bank rated by Fitch in Mexico. HSBC Mexico's 'A-' foreign currency IDR is capped by Mexico's country ceiling. The Stable Outlook on the IDRs reflects the cushion arising from the relatively high rating of its parent.
Given Fitch's perception of HSBC Mexico's strategic importance to the group, its IDRs could be as close as one notch below HSBC Holdings' IDR, although HSBC Mexico's IDRs are also limited by sovereign and/or country ceiling considerations. A potential upgrade of Mexico's sovereign rating could positively affect HSBC Mexico's IDRs if the parent is still rated significantly above the sovereign. Conversely, a downgrade of two or more notches in HSBC Holding's IDRs could negatively affect HSBC Mexico's rating and/or rating Outlook.
The viability rating (VR) has been affirmed as the bank has sustained its major strengths, namely its sound funding and liquidity profile, and robust franchise. While asset quality has been a concern in the past few years, credit costs are rapidly declining and converging toward both pre-crisis levels and peers' averages, and aligned with Fitch previous expectations. Also, profitability and internal capital generation are improving as well, a trend that Fitch expects HSBC will sustain and further strengthen.
Its VR could be negatively affected if the bank fails to sustain recent improvements in asset quality and profitability metrics. In turn, it could eventually be upgraded if the bank sustains its robust funding and liquidity profile, while recording earnings and capital metrics closer to peers. In Fitch's view, the VR could be upgraded if HSBC Mexico achieves and sustains Operating ROAA ratios higher than 1% and a Fitch Core Capital ratio above 12%.
HSBC Mexico's national-scale ratings were affirmed at 'AAA(mex)' and 'F1+(mex)', since its IDRs are above those of the sovereign, and national-scale ratings are relative rankings of creditworthiness within a certain jurisdiction. HSBC Casa de Bolsa is perceived by Fitch as a strategically important affiliate of HSBC Mexico and fully integrated to 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 aligned to the bank's ratings. These ratings could only 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.
The ratings of HSBC Mexico's subordinated debt reflect Fitch's opinion that support from HSBC holdings, if needed, would extend to any outstanding debt in the local market, in order to prevent negative effects in its reputational risk and overall funding costs. Coupled with the relatively high IDR of HSBC Holdings, the subordinated debt rating is equal to that of HSBC Mexico's senior unsecured debt. Given Fitch's criteria for rating bank hybrids and the non-performance risk of these securities, the subordinated debt rating could be affected by any downgrade of HSBC Holdings' viability rating, even before such downgrade could affect the national-scale issuer and senior debt ratings, and/or the IDRs of HSBC Mexico.
Fitch affirms the following ratings:
HSBC Mexico, SA:
--Long-term Issuer Default Rating (IDR) at 'A-';
--Short-term IDR at 'F1';
--Long-term local currency IDR at 'A';
--Short-term local currency IDR at 'F1';
--Viability Rating at 'bbb';
--Support Rating at '1';
--Long-term National-scale Rating at 'AAA(mex)';
--Short-term National-scale Rating at 'F1+(mex)';
--Long-term National-scale Rating for Local Senior Unsecured Debt Issues at 'AAA(mex)';
--Long-term National-scale Rating for Local Subordinated Debt Issues at 'AAA(mex)'.
The Rating Outlook is Stable.
HSBC Casa de Bolsa, SA de CV:
--Long-term National-scale Rating at 'AAA(mex)';
--Short-term National-scale Rating at 'F1+(mex)';
The Rating Outlook is Stable.
Additional information is available at '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. 16, 2011);
--'Rating Financial Institutions Above the Local Currency Sovereign Rating' (Dec. 20, 2011);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'Rating Bank Regulatory Capital and Similar Securities' (Dec. 15, 2011);
--'Treatment of Hybrids in Bank Capital Analysis' (July 09, 2012);
--'Securities Firms Criteria' (Aug. 16, 2011);
--'National Ratings Criteria' (Jan. 19, 2011).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171
Rating Financial Institutions Above the Local Currency Sovereign Rating
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=657925
Rating FI Subsidiaries and Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209
Rating Bank Regulatory Capital and Similar Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656371
Treatment of Hybrids in Bank Capital Analysis
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682453
Securities Firms Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649173
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
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