Fitch Downgrades HSBC USA Inc.'s L-T IDR to 'AA-'; Outlook Revised to Stable

  Fitch Downgrades HSBC USA Inc.'s L-T IDR to 'AA-'; Outlook Revised to Stable

Business Wire

NEW YORK -- December 07, 2012

Fitch Ratings has downgraded HSBC USA Inc.'s (HUSI) long-term Issuer Default
Ratings (IDR) to 'AA-' from 'AA'. The Rating Outlook has been revised to
Stable from Negative. A complete list of ratings follows at the end of this
release.

RATING DRIVERS AND SENSITIVITIES - VRs and IDRs

The downgrade of the long-term IDR is in conjunction with the downgrade of
HSBC Holdings plc (HSBC) (please see release 'Fitch Downgrades HSBC to 'AA-';
Outlook Stable' dated Dec. 7, 2012). HUSI's IDRs are supported by HSBC,
primarily reflecting its core operations to the HSBC Group. As such, HUSI's
IDRs will move in tandem with HSBC. The 'a-' Viability Rating (VR) is
unaffected by this action.

Fitch believes HUSI will record a relative weak return on assets in the medium
term due to a sub-par net interest margin and elevated operational costs
resulting from regulatory reviews. Fitch believes HUSI's regulatory issues
will continue to plague the company in the medium term.

Asset quality has seen deterioration as the residential loan book continues to
be a drag on the overall portfolio. Any significant deterioration in earnings
and/or asset quality could put further pressure on HUSI's VR.

HUSI's VR is supported by its strong risk-adjusted capital levels and robust
liquidity. Although tangible capital levels have eroded over the last several
quarters, HUSI continues to maintain a Fitch Core Capital Ratio of almost 13%,
as the company continues to de-risk its balance sheet.

RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING

Fitch considers HUSI to be a core operating entity of the HSBC Group, and as
such considers institutional support from its ultimate parent to be extremely
high. In determining HUSI's importance, Fitch viewed HUSI's strategic
initiatives to be in line with those of its parent, potential for disposal
from its parent to be extremely limited and reputational risk to HSBC
resulting from default by HUSI to be high.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and hybrid capital instruments issued by HUSI are notched
down from the IDR. The ratings of subordinated debt and hybrid securities are
typically sensitive to any change in the bank's VR. However, given the high
level of institutional support, issue ratings are notched from HUSI's IDR as
support from the parent is presumed.

HOLDING COMPANY RATING DRIVERS AND SENSITIVITIES

HUSI has a bank holding company (BHC) structure with the bank, HSBC Bank USA
(HBUS), as the main subsidiary. HBUS is considered core to its parent holding
company supporting equalized ratings between bank subsidiary and BHC. IDRs and
VRs are equalized with those of its operating companies and banks reflecting
HUSI's role as the bank holding company, which is mandated in the U.S. to act
as a source of strength for its bank subsidiaries.

SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES

HUSI and HBUS factor in a high probability of support from their respective
parent institutions. Fitch considers support to be strong given the high level
of integration, brand, management and financial and reputational incentives to
avoid subsidiary defaults.

Fitch has taken the following rating actions:

HSBC USA Inc.
--Long-term IDR downgraded to 'AA-' from 'AA'; Outlook revised to Stable from
Negative;
--Short-term IDR affirmed at 'F1+';
--Support Rating affirmed at '1';
--Commercial paper affirmed at 'F1+'
--Preferred stock downgraded to 'BBB+' from 'A-';
--Senior debt downgraded to 'AA-' from 'AA';
--Subordinated debt downgraded to 'A+' from 'AA-.

HSBC Bank USA, National Association
--Long-term IDR to 'AA-' from 'AA'; Outlook revised to Stable from Negative;
--Short-term IDR affirmed at 'F1+';
--Support Rating affirmed at '1';
--Long-term deposits downgraded to 'AA' from 'AA+';
--Market linked deposits downgraded to 'AAemr' from 'AA+emr';
--Senior debt downgraded to 'AA-' from 'AA';
--Short-term deposits affirmed at 'F1+';
--Subordinated debt downgraded to 'A+' from 'AA-'.

Republic New York Corporation
--Subordinated debt downgraded to 'A+' from 'AA-'.

Republic New York Capital I
--Preferred stock downgraded to 'BBB+' from 'A-'.

HSBC Americas Capital Trust I
--Preferred stock downgraded to 'BBB+' from 'A-'.

HSBC Americas Capital Trust II
--Preferred stock downgraded to 'BBB+' from 'A-'.

Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'Risk Radar' (Oct. 15, 2012);
--'Treatment of Unrealized Losses in U.S. Bank Capital Rule Proposal
(Pro-Cyclical Capital Policy to Create Greater Capital Volatility for Banks)'
(Aug. 7, 2012);
--'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 5,
2012).

Applicable Criteria and Related Research:
Rating FI Subsidiaries and Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209
Risk Radar October 2012
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=691996
Treatment of Unrealized Losses in U.S. Bank Capital Rule Proposal
(Pro-Cyclical Capital Policy to Create Greater Capital Volatility for Banks)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685638
Assessing and Rating Bank Subordinated and Hybrid Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695542
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

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Contact:

Fitch Ratings
Primary Analyst:
Christopher Wolfe, +1-212-908-0771
Managing Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Sarim Khan, +1-312-368-5459
Associate Director
or
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Managing Director
or
Media Relations:
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brian.bertsch@fitchratings.com
 
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