Fitch Affirms HSBC Bank Panama's IDR at 'A'
NEW YORK -- January 23, 2013
Fitch Ratings has affirmed HSBC Bank (Panama), S.A.'s (HBPA) Long-term Issuer
Default Rating (IDR) at 'A', and Viability Rating (VR) at 'bbb'. The Rating
Outlook is Stable. A complete list of the rating actions follows at the end of
KEY RATING DRIVERS
HBPA's IDRs and support rating are driven by the support it would receive form
its parent, HSBC Holdings plc., should it be required. Support should be
forthcoming for HBPA given its key role within HSBC's regional strategy and
significant growth prospects. The bank is considered by Fitch as Strategically
Important to HSBC. This classification is based on Fitch's assessment of the
role of HSBC Panama in HSBC's strategy as a regional hub for funding and
lending in dollars, the reputational risk resulting from the shared franchise
and commercial name, the high level of management integration, and the capital
and funding facilities provided by its ultimate parent. HSBC is rated 'AA-' by
Fitch Ratings, with a Stable Outlook.
HBPA VR reflects its sound franchise, ample funding and liquidity, good asset
quality, improving operating environment and growing regional role. Fitch's
view of HBPA's intrinsic creditworthiness is tempered by the bank's moderate
performance and lower than average capital/reserves cushion.
The Outlook is Stable. Changes in the bank's IDRs are contingent on its
parent's rating actions. HBPA's IDRs could be as high as two notches below the
parent's. There is limited upside potential for HBPA's IDRs, since these are
already at Panama's Country Ceiling. However, any potential downgrade of the
parent will affect HBPA's IDRs in the same magnitude, since these ratings are
already two notches below the parent's, which is the maximum uplift in Fitch's
opinion. HBPA's support rating could only be affected by a highly unlikely
multi-notch downgrade of its parent's IDRs.
HBPA's VR could be pressured if performance declines, asset quality
deteriorates, reserve coverage weakens, or capital ratios deteriorate. More
specifically, HBPA's VR could be downgraded if its Fitch Core Capital to
Weighted Assets and/or Tangible Common Equity to Tangible Assets ratios fall
below 10% or 8%, respectively; and/or if operating ROAA is less than 0.7%.
There is limited upside potential in the near future for HBPA's VR.
HBPA is one of the largest banks in Panama and has the size, resources, and
know-how to exploit the multiple business opportunities that arise in the
local market. The sale of the Central American operations did not affect
Having a dominant position in Panama and a strong first name, HBPA enjoys a
wide, low cost and quite stable deposit base that fully funds its loan
portfolio. In addition, the bank holds a good liquidity cushion.
HBPA's asset quality remains good, albeit NPL portfolio is not fully covered
by reserves. The bank's reserves coverage is below historic average and
compares poorly to what similarly rated banks have; this is in part mitigated
by the bank's sound credit and risk management policies and the high level of
collateral. Asset quality should improve given the sale of the Central
American operations, generally riskier, and the favourable economic prospects
HBPA is consolidating as a hub for regional funding and lending in dollars,
operating in a dollarized, stable economy with ample access to dollar funding
and sizable balance sheet; this explains a significant part of its loans
growth since 2008.
HBPA's performance lags behind that of regional players in the same rating
category. Financial performance is moderate, albeit improving, due to modest
margins, better efficiency ratios, and moderate loan loss provisions (mostly
from the Central American operations).
HBPA's capital is below average when compared to some regional players; this
is the result of a centralized capital management policy that has a proven
track record of stepping in to cover unexpected losses and to restore capital
whenever the need arises. In Fitch's opinion, there is a high probability that
HSBC could inject fresh capital, should it be required.
HSBC Bank (Panama), S.A. (HBPA) was incorporated in 1972. HBPA is 100%
controlled by HSBC and is the third largest bank in Panama in terms of assets,
with a market share of 8.42% as of September 2012 (excluding the Central
American and Colombian operations). The bank serves consumer, middle market,
and corporate customers through a network of 46 branches and 263 ATMs in
Before December 2012, HBPA consolidated the operations of HSBC in El Salvador,
Costa Rica, and Honduras that accounted assets for $4,324.3 million and net
income for $32.6 million as of June 2012. Currently, HBPA consolidates the
operations of HSBC in Colombia; however, in May 2012 agreed to sell them to
the Colombian Banco GNB Sudameris, S.A. The sale is expected to be completed
in the first half of 2013, once approved by local regulators.
Fitch has affirmed HBPA's ratings as follows:
--Long-term IDR at 'A'; Outlook Stable;
--Short-term IDR at 'F1';
--Viability Rating at 'bbb';
--Support Rating at '1'.
--National Long Term Rating at 'AAA(pan)'; Outlook Stable;
--National Short Term Rating at 'F1+(pan)'.
Additional information is available on 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);
--'National Ratings Criteria' (Jan. 19, 2011);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 5,
Applicable Criteria and Related Research:
National Ratings Criteria
Rating FI Subsidiaries and Holding Companies
Global Financial Institutions Rating Criteria
Assessing and Rating Bank Subordinated and Hybrid Securities
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