Moody's affirms ratings of HSBC Bank Malaysia, revises outlook to stable

KUALA LUMPUR: Moody's Investors Service has affirmed HSBC Bank Malaysia Bhd's long-term A1 local currency and A3 foreign currency deposit ratings, and its short-term P-1/P-2 local and  foreign currency deposit ratings.

The ratings agency said on Thursday it also affirmed the bank's baseline credit assessment (BCA) and adjusted BCA of baa1/a1, and its A1(cr)/P-1(cr) counterparty risk assessments (CRA).

It pointed out these rating actions follow the downgrade of its parent bank, The Hongkong and Shanghai Banking Corp. Ltd (HBAP, Aa3 stable, a1) on Wednesday. 

The parent bank's long-term senior unsecured ratings were downgraded to Aa3 from Aa2, while its adjusted BCA was downgraded to a1 from aa3. 

“The outlook on HSBC Malaysia's ratings is revised to stable from negative,” it said.

In its rationale, Moody's said it affirmed HSBC Malaysia's ratings and assessments despite the downgrade of HBAP's adjusted BCA to a1 from aa3, which Moody's uses as an anchor when
 assessing rating uplifts related to affiliate support. 

As a result, Moody's continues to incorporate three notches of affiliate support uplift into the A1 local currency deposit rating and a1 adjusted BCA of HSBC Malaysia, given Moody's assessment of a very high likelihood of support from HBAP.

“When determining affiliate support and related rating uplift for HSBC Malaysia, Moody's has taken into account the strong financial, operational, and management linkages between the subsidiary and the parent bank, and the fact that HBAP considers Malaysia as one of its priority markets in Asia-Pacific.

“The affirmation of the baa1 BCA reflects HSBC Malaysia's solid liquidity profile, its good deposit franchise and favourable funding structure, with a low reliance on market sensitive funding sources. 

"The bank's sound capital buffer and ongoing access to capital from its parent provides good loss absorption capacity.

“HSBC Malaysia's a1 adjusted BCA, A3/P-2 foreign currency deposit ratings, A1/P-1 local currency deposit ratings, and A1(cr)/P-1(cr) CRA were affirmed because its baa1 BCA was affirmed, and affiliate support remains very high.

Moody's said HSBC Malaysia's A3 foreign currency deposit rating is capped by the A3 foreign currency deposit ceiling for Malaysia (A3 stable).

The stable outlook on HSBC Malaysia's ratings mirrors the stable outlook on HBAP's ratings.