PRESS RELEASE: Fitch Affirms HSBC Mexico's IDR at 'A-' & Individual Rating at 'C'; Outlook Stable

21st Jun 2010 21:57

The following is a press release from Fitch Ratings: Fitch Ratings-Monterrey/New York-21 June 2010: Fitch Ratings has affirmed HSBC Mexico's (HSBCM) ratings as follows: HSBCM: --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'; --Individual rating at 'C'; --Support rating at '1'; --Long-term national-scale rating at 'AAA(mex)'; --Short-term national-scale rating at 'F1+(mex)'; --National-scale rating for local senior unsecured debt issues at 'AAA(mex)'; --National-scale rating for local subordinated debt issues at 'AAA(mex)'. The Rating Outlook is Stable. HSBCM's support rating and IDRs reflect the potential support from its ultimate parent, HSBC Holdings plc (HSBC; long-term IDR of 'AA' with a Stable Outlook by Fitch). In Fitch's view, there is a high probability that support from HSBC would be forthcoming, should it be required. In turn, the individual rating is underpinned by its recently strengthened loss absorption capacity, strong franchise and sound liquidity, which Fitch considers partially mitigate its currently weak, although slowly improving, asset quality and core profitability metrics. The bank's support rating and IDRs will likely remain driven by sovereign and/or country ceiling considerations, unless the propensity/capacity of HSBC to provide support eventually changes, which Fitch considers presently very unlikely. In turn, the Individual rating could be pressured downward if the bank fails to restore comfortable profitability and asset quality dynamics within a timeframe that prevents material depletion of its currently adequate loss absorption cushion. Historically driven by sound margins and ample banking fees, HSBCM's performance has weakened since 2008, due to the hefty provisions that followed an aggressive expansion into retail lending. Problem loans that arose recently were concentrated on the retail portfolio, especially in credit cards. The bank's corrective actions were aggressive, but these are gradually proving effective in terms of asset quality metrics, although charge-offs remain high. HSBCM's delinquency ratio continues underperforming its peer average. HSBCM has access to a broadly diversified and stable customer deposit base. The cushion of total liquid assets is also ample, while the loans/deposits ratio remained at a sound 70% at 1Q'10. The bank's current capital position is strong, but Fitch considers that restoring its internal capacity to generate capital is a chief challenge. HSBCM was Mexico's fifth largest bank by assets and deposits and sixth by loans, with market shares of 8%, 10% and 8%, respectively, at 1Q'10. It has a strong franchise in customer deposits, while the asset side is more orientated towards commercial loans. Applicable criteria available on Fitch's website at 'www.fitchratings.com': --'Global Financial Institutions Rating Criteria', dated Dec. 29, 2009. Contact: Alejandro Garcia, CFA +5281-8399-9146 or Rene Ibarra +5281-8399-9143, Monterrey, Mexico. Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: [email protected]. Additional information is available at 'www.fitchratings.com'. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. (END) Dow Jones Newswires June 21, 2010 16:57 ET (20:57 GMT)