RPT-Fitch Affirms HSBC France at 'AA-'; Outlook Stable
Dec 6 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed HSBC France (HSBC FR)'s Long-term Issuer Default Rating (IDR) at 'AA-' with a Stable Outlook and its Viability Rating (VR) at 'bbb+'. A full list of rating actions is at the end of this rating action commentary.
KEY RATING DRIVERS AND SENSITIVITIES - IDRS AND SUPPORT RATING
HSBC FR's IDRs are equalised with those of HSBC Bank plc (AA-/Stable), which is in turn owned by HSBC Holdings plc (HSBC; AA-/Stable), reflecting Fitch's opinion that HSBC FR is a core subsidiary of HSBC. Fitch believes that there would be an extremely high probability that HSBC would support HSBC FR, through HSBC Bank plc, if required. The Stable Outlook reflects that on HSBC.
Fitch's views HSBC FR as core to the group's international banking strategy, in light of which default of HSBC FR would have significant reputational issues for HSBC. HSBC FR is fully integrated in the group's risk management, strategic direction, business model, funding and liquidity policies. HSBC's European trading and market-making platform in euro-denominated sovereign bonds, as well as euro-denominated interest rate derivatives are centrally booked and managed in HSBC FR. The French bank is also the group's banking platform for large French corporate clients and has a meaningful domestic retail presence. IT systems, controls and procedures are fully integrated with those of the group.
HSBC FR's IDRs would be expected to move in line with those of HSBC. HSBC FR's Long-Term IDR could be notched down if Fitch considered that its core importance to the group was likely to diminish, tighter national regulations led to weaker integration or capital and liquidity across the group became less fungible.
KEY RATING DRIVERS AND SENSITIVITIES - VR
HSBC FR's VR reflects its ample liquidity, diversified funding base, solid capital ratios, healthy asset quality and that it is part of HSBC. It also takes into account the bank's volatile operating profitability and the high concentration in its corporate loan portfolio. The bank is addressing the weaker profitability of its retail banking division by implementing a strict cost-control and sustainable savings plan.
The bank's VR would be sensitive to any weakening of its solid capitalisation and liquidity. HSBC FR's VR would benefit if significant and lasting improvements in the profitability of HSBC FR's retail business led to less reliance on volatile capital markets revenues, and if concentration in the loan book decreased, which Fitch views as unlikely to happen in the near term. In this context, HSBC FR's profitability is sensitive to developments in euro financial markets.
The rating actions are as follows:
Long-term IDR affirmed at 'AA-'; Outlook Stable
Short-term IDR affirmed at 'F1+'
Viability Rating: affirmed at 'bbb+'
Support Rating: affirmed at '1'
Senior unsecured notes: affirmed at 'AA-'
Commercial paper: affirmed at 'F1+'
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