Moody’s Investors Service has placed under review for possible downgrade the C+ Bank Financial Strength Rating (‘BFSR’) of HSBC Bank Middle East Limited (‘HBME’) – a wholly owned subsidiary of HSBC Holdings plc, registered in the Channel Islands, with operations in the Middle East. The BFSR maps to a Baseline Credit Assessment of A2 and benefits from a three-notch uplift to a long-term global local currency (GLC) deposit rating of Aa2. The Aa2 long-term local currency rating and the foreign currency deposit and debt ratings were also placed under review for possible downgrade.
Moody’s says that the rating action reflects expected asset quality and profitability pressures in the countries that HBME operates. The challenging operating environment in the UAE, which constitutes the largest part (around 70%) of the company’s operations, is regarded as more volatile, and the potential of rising delinquencies in the next 12-18 months is significantly enhanced. Moody’s expects to complete the review in April 2009.
The review will also consider the level of parental support incorporated in the debt ratings, given increasing pressures on the parent’s ratings – as reflected in Moody’s recent rating actions on HSBC Bank plc and HSBC Holdings plc (please see press release dated 9 March 2009).
The following ratings of HSBC Bank Middle East Limited were placed on review for possible downgrade:
– BFSR: C+
– Global Local Currency Deposit Ratings: Aa2
– Foreign Currency Deposit Ratings: Aa2
– Foreign Currency Debt Rating for senior debt obligations: Aa2
– Foreign Currency Debt Rating for subordinated obligations: Aa3
The bank’s Short-Term Local Currency and Foreign Currency Debt and Deposit Ratings remain unchanged at Prime-1.
The following ratings of HSBC Bank Middle East Limited (UAE Branch) were placed on review for possible downgrade:
– Global Local Currency Deposit Ratings: Aa2
– Foreign Currency Deposit Ratings: Aa2
The bank’s Short-Term Local Currency and Foreign Currency Deposit Ratings remain unchanged at Prime-1.
The last rating action on HSBC Bank Middle East Limited was on 6 May 2008, when Moody’s rated the senior debt of HSBC Bank Middle East Limited at Aa2.
D.C.