28th Nov 2019 15:11
(Alliance News) - Moody's Investors Service on Thursday assigned Aa3 definitive long-term deposit and issuer ratings to HSBC UK Bank PLC, along with an a2 standalone baseline credit assessment.
The outlook on the long-term deposit ratings is negative, which the ratings agency said reflects the UK government's Aa2, negative rating.
"Moody's views that the UK's economic and fiscal strength are likely to be weaker going forward, and more susceptible to shocks than previously assumed, and that UK public institutions have weakened, as they have struggled to cope with the magnitude of policy challenges that they currently face, including those that relate to fiscal policy," said Moody's.
HSBC UK Bank PLC is the UK ring-fenced bank of HSBC Holdings PLC, which has a long-term senior unsecured rating of A2, stable. Moody's said the ratings reflect its assessments of HSBC UK's low asset risk, as well as its stable and diverse profit and low market funding levels, as well as its "adequate" liquidity and capital.
Moody's further assigned a counterparty risk assessment of Aa2(cr)/Prime-1(cr) and counterparty risk ratings of Aa2/Prime-1. In addition to this, it assigned a provisional senior unsecured programme rating of (P)Aa3, along with a Prime-1 commercial paper rating and Deposit Note/CD program rating.
The Aa3 long-term deposit rating is reflective of the a2 standalone baseline credit assessment plus two notches of uplift due to Moody's advanced loss given failure analysis.
HSBC UK, as a strategic subsidiary of the HSBC group, has a "very high" level of support from parent HSBC Holdings, Moody's noted, but "does not benefit from support from its parent holding company given the level of its assigned [baseline credit assessment] of a2 in line with the a2 BCA of HSBC Holdings."
"Moody's deems support from the UK Government as moderate for deposits and senior debt classes, in line with other UK ring-fenced banks: this translates into one notch uplift for senior unsecured programme ratings but no uplift for deposit ratings due to their proximity to the UK sovereign rating," said the ratings agency.
Shares in HSBC Holdings were down 1.1% at 578.70 pence in London on Thursday afternoon.
By Anna Farley; [email protected]
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