TEXT-Fitch affirms HSBC Mexico, and brokerage unit ratings

Wed Aug 15, 2012 12:50pm EDT

Aug 15 - 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
Rating Financial Institutions Above the Local Currency Sovereign Rating
Rating FI Subsidiaries and Holding Companies
Rating Bank Regulatory Capital and Similar Securities
Treatment of Hybrids in Bank Capital Analysis
Securities Firms Criteria
National Ratings Criteria
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