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DUBAI: Ratings agency Moody’s Investor Service has downgraded HSBC Middle East’s rating by one notch due to the “weakening capacity” of its parent company HSBC Holdings to provide the bank with support.
HSBC Middle East’s long-term deposit rating was downgraded to A3 from A2. It follows the earlier downgrade of HSBC Holdings’ rating to A2 from A1 on Sept. 27.
The parent company’s lower rating reflects the deteriorating operating environments in the bank’s key markets such as the UK and Hong Kong, as well as in other strategic markets such as China, Mexico, Canada and the Middle East, said Moody’s.
HSBC Middle East’s outlook on long-term deposit ratings has been revised upwards to stable from negative, with the rating agency expecting that the financial fundamentals of the bank will remain in line with current levels due to the “supportive operating environment” in the bank’s key markets.
The bank’s adjusted baseline credit assessment (BCA) was downgraded to a3 from a2, and its BCA was affirmed at baa2.
The affirmed rating reflects the bank’s solid margins and profitability as well as good funding and liquidity, said the ratings agency.
These strengths are moderated by the bank’s weak asset quality due to to high levels of credit concentrations, high operating costs and lower capital levels than its regional peers, Moody’s said.