Moody's places HSBC Bank (China) on review, affirms Hang Seng Bank's ratings

Moody's on March 10 placed HSBC Bank (China) Co. Ltd.'s A1 long-term deposit and long-term issuer ratings, along with its "a1" adjusted baseline credit assessment, Aa3(cr) counterparty risk assessment and Aa3 counterparty risk ratings, on review for downgrade, following a similar action taken on the bank's immediate parent, Hongkong & Shanghai Banking Corp. Ltd.

The rating agency also affirmed the lender's "baa1" baseline credit assessment and its short-term ratings and assessment.

Moody's said the high level of affiliate support from the parent shows that HSBC Bank (China) plays a key role in the group's business expansion in mainland China.

The rating agency expects the lender's asset quality to stay better than its Chinese peers, despite the uneven economic recovery in the country following the COVID-19 pandemic, because of its prudent risk management and strong customer base focusing on large multinational companies, selected state-owned enterprises and retail customers. The lender's strong buffer against asset risks was also considered in the affirmation, Moody's said.

Moody's believes the bank's capital level will remain as one of the strongest among the Chinese banks that it rates. However, profitability is expected to face challenges in the coming 12 to 18 months due to pressure on net interest margins amid a low-interest environment.

Meanwhile, the rating agency also affirmed Hang Seng Bank (China) Ltd.'s A2 long-term deposit ratings, with a stable outlook. The lender's "baa3" baseline credit assessment and "a2" adjusted baseline credit assessment were also affirmed, along with its other ratings and assessments.