DIFC, March 17, 2009 -- Moody's Investors Service has today 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 said 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.
The principal methodologies used in rating HBME are "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", March 2007 and "Bank Financial Strength Ratings: Global Methodology", February 2007, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory.
Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory.
Incorporated in Jersey, Channel Islands, HBME is one of the oldest (and leading) international banks operating in the Middle East. It operates through a network of 44 branches throughout UAE, Oman, Bahrain, Qatar, Kuwait, Jordan, Lebanon, Pakistan, and Palestine. It offers a full range of banking services in the Middle East. HBME reported total assets of US$37.153 billion and total equity of US$2.366 billion under IFRS as at year-end 2007. (The bank does not publish interim financial statements.)
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DIFC
John Tofarides
Analyst
Financial Institutions Group
Moody's Middle East Ltd.
Telephone: +971-44-01-9536
Limassol
Mardig Haladjian
General Manager
Financial Institutions Group
Moody's Investors Service Cyprus Limited
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© Press Release 2009
