Fitch Places HSBC's Panamanian Subsidiaries on Rating Watch Negative
NEW YORK & SAN SALVADOR, El Salvador -- February 26, 2013
Fitch Ratings has placed the following HSBC Panamanian subsidiaries' ratings
on Rating Watch Negative (see the full list of ratings affected at the end of
--HSBC Bank (Panama), S.A.'s Issuer Default Ratings (IDRs), Support rating,
and National ratings;
--HSBC Seguros (Panama), S.A. y Subsidiarias' Long-Term National Insurer
Financial Strength (IFS) rating.
The ratings were placed on Negative Watch following the announcement of HSBC's
agreement to sell these operations to the Colombian Bancolombia, S.A.
(Bancolombia) for a total consideration of US$2.1 billion. The transaction is
subject to regulatory and other approvals and is expected to be completed in
the third quarter of 2013.
A Negative Rating Watch indicates that there is a heightened probability of a
potential downgrade once the transaction is completed. The Negative Watch
reflects that after the transaction is completed, the sold entities would no
longer receive potential support from its current ultimate parent (HSBC
Holding plc, rated 'AA-' with a Stable Outlook by Fitch). The Rating Watch
will be resolved once the transaction is completed and Fitch assesses the
potential support that Bancolombia could provide to its future subsidiaries
and the individual strengths of the Panamanian entities.
HSBC BANK (PANAMA), S.A.
Once the transaction is completed, HSBC Panama's IDRs could be downgraded to
the level of its Viability Rating (VR, currently at 'bbb'). In addition, Fitch
expects this bank to be considered core for Bancolombia; therefore, it is
unlikely that HSBC Panama's IDRs would eventually be downgraded below
Bancolombia's IDRs. In turn, the bank's Support rating will likely be
downgraded, as Bancolombia's ability to support its subsidiaries is in Fitch's
view relatively weaker than HSBC's, and it could be downgraded to '2' upon
completion of the transaction. The bank's national ratings are also likely to
be downgraded. Fitch expects that the resulting long-term National rating
would be in the 'AA' category and the short-term National rating in the 'F1'
HSBC Panama's VR was affirmed. It reflects the bank's strong market position,
ample funding and liquidity, and good asset quality. Fitch's view of HSBC
Panama's intrinsic creditworthiness is tempered by the bank's moderate
performance and lower than average capital/reserves cushion.
HSBC Panama's VR could be pressured if performance declines, asset quality
deteriorates, reserve coverage weakens, or capital ratios deteriorate. More
specifically, HSBC Panama'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 HSBC Panama's
HSBC SEGUROS (PANAMA), S.A. y Subsidiarias
After the sale completion, Fitch considers that the company would no longer
count on the support of its current ultimate shareholder. This would have an
impact on the company's actual rating, which would no longer be considered
with a 'group' approach and will be based on its standalone financial
strength. Fitch expects that the resulting long-term national IFS would be in
the 'AA' category.
HSBC Seguros (Panama) ratings reflect the good performance and adequate
liquidity and capitalization position that have been recorded in recent years,
which are the result of its outstanding capacity to generate internal capital
and the conservative practices related to dividend distribution. In addition,
the agency considers the extensive reinsurance protection, which limits the
company's exposure per individual risk and per catastrophic event. The latter
factors will likely determine the final ratings of the entity upon conclusion
of its sale to Bancolombia.
Fitch has placed the following ratings on Rating Watch Negative:
HSBC Bank (Panama), S.A.
--Long-term IDR 'A';
--Short-term IDR 'F1';
--Support Rating '1'.
--Long-Term National Rating 'AAA(pan)';
--Short-Term National Rating 'F1+(pan)'.
HSBC Seguros (Panama), S.A. y Subsidiarias
--Long-Term National IFS 'AAA(pan)'.
Fitch has affirmed the following rating:
HSBC Bank (Panama), S.A.
--VR at 'bbb'.
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);
--'Insurance Rating Methodology' (Jan. 11, 2013).
Applicable Criteria and Related Research
Insurance Rating Methodology -- Amended
National Ratings Criteria
Global Financial Institutions Rating Criteria
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Primary Analyst (HSBC Bank (Panama), S.A.):
Diego Alcazar, +1-212-908-0396
Fitch Ratings, Inc.
One State Street Plaza
New York, NY - 10004
Primary Analyst (HSBC Seguros (Panama), S.A.):
Maria Jose Arango, +503 2516 6620
Fitch Centroamerica, S.A.
Edificio Plaza Crista, Tercer Nivel
San Salvador, El Salvador
Secondary Analyst (HSBC Bank (Panama), S.A.):
Carmen Matamoros, +503 2516 6612
Secondary Analyst (HSBC Seguros (Panama), S.A.):
Eduardo Recinos, +503 2516 6606
Alejandro Garcia, CFA, +52 81 8399-9146
Elizabeth Fogerty, +1-212-908-0526
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