March 1, 2012 / 6:26 PM / 6 years ago

TEXT-Fitch revises HSBC USA outlook to negative

 (The following statement was released by the rating agency)	
 March 1 - Fitch Ratings has affirmed HSBC USA Inc's (HUSI) long-term
Issuer Default Ratings (IDR) of 'AA' and Viability Rating (VR) of 'a-'. The
Ratings Outlook has been revised to Negative in conjunction with the Outlook
revision of HSBC Holdings plc (HSBC) (please see release 'Fitch Affirms
HSBC at 'AA'; Outlook Revised To Negative'; March 1, 2012). The affirmation of
HUSI's IDRs primarily reflects its ownership by and strategic importance to
HSBC. With that, HUSI's IDR's would move in tandem with those of HSBC. A
complete list of ratings follows at the end of this release.	
	
The affirmation of HUSI's VR reflects its more focused business model as it 	
executes on strategic initiatives, solid capital levels and robust liquidity. It	
also reflects modest improvements in asset quality. These rating strengths are 	
tempered by HUSI comparatively weak operating performance in 2011 offset by some	
unfavorable factors, such as a continued drag in HUSI's residential loan 	
portfolio and operational deficiencies noted as part of regulatory reviews. 	
Fitch believes HUSI management is proactive in addressing the noted weaknesses 	
through various loan modification programs and elevated resource allocation 	
towards operations. 	
	
HUSI initiated a change in strategic direction during FY 2011, with an increased	
focused on boosting international connectivity in key U.S. markets, a renewed 	
focus on cost-cutting initiatives, and managed divestitures from select markets.	
The primary purpose of the strategic change is to better align HUSI with the 	
global HSBC brand name. Although execution of the strategy is ongoing, Fitch 	
believes these changes will allow HUSI to focus more clearly on its core 	
customer base of US-based international corporate and private clients, while 	
transforming its U.S. operations into a leaner bank. While the sale of its Cards	
business to Capital One and upstate New York branch network to First Niagara 	
Bank is pending completion, Fitch expects that these remain on track. 	
	
HUSI has been able to grow its balance sheet, particularly its commercial loan 	
portfolio. Additionally, the commercial loan portfolio has also noted overall 	
improvement in asset quality, as key credit metrics, such as delinquency and net	
charge-off ratios continue to improve. Excluding the planned dispositions, 	
HUSI's balance sheet grew 17% since YE2010. 	
	
HUSI's balance sheet continues to be highly liquid, with cash (including 	
deposits with banks), investment portfolio and loan portfolio, accounting for 	
almost 60% of the balance sheet. HUSI management continues to maintain strong 	
capital levels. The Tier 1 Capital ratio, which stood at 12.40% at September 30,	
2011, is comparatively high while Fitch Core Capital (FCC) was 11.61% for the 	
noted time period and 13.3% on a pro-forma basis. 	
	
Additionally, Fitch has applied its updated global criteria with regards to 	
rating bank regulatory capital (subordinated and hybrid debt) which has resulted	
in the downgrades and removal from Rating Watch Negative of HUSI preferred stock	
instruments. In applying the criteria, Fitch has notched these instruments from 	
HUSI IDR, as support for from HSBC is presumed. 	
	
Fitch affirms and downgrades the following ratings as indicated:	
	
HSBC USA Inc.	
	
--Long-term IDR at `AA'; Negative Outlook	
	
--Short-term IDR at `F1+';	
	
--Viability Rating at 'a-'	
	
--Support Rating at '1';	
	
--Commercial Paper at 'F1+'	
	
--Preferred Stock downgraded to 'A-' from 'A+' and removed from Rating Watch 	
Negative; 	
	
--Senior Debt at 'AA'	
	
--Subordinated Debt at 'AA-'	
	
--Short Term debt guaranteed by FDIC under TLGP at 'F1+'. 	
	
HSBC Bank USA, National Association.	
	
--Long-term IDR at `AA';	
	
--Short-term IDR at `F1+';	
	
--Viability Rating at 'a-'	
	
--Support Rating at '1';	
	
--Long-term Deposits at 'AA+'	
	
--Market Lined Deposits at 'AA+emr'	
	
--Senior Debt at 'AA'	
	
--Short-term Deposits at 'F1+'	
	
--Subordinated Debt at 'AA-'.	
	
 	
	
Republic New York Corporation	
	
--Subordinated Debt at 'AA-'.	
	
Republic New York Capital I	
	
--Preferred Stock downgraded to 'A-' from 'A+' and removed from Rating Watch 	
Negative.	
	
HSBC Americas Capital Trust I	
	
--Preferred Stock downgraded to 'A-' from 'A+' and removed from Rating Watch 	
Negative.	
	
HSBC Americas Capital Trust II	
	
--Preferred Stock downgraded to 'A-' from 'A+' and removed from Rating Watch 	
Negative.	
	
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. 16, 2010);	
	
--'Fitch Core Capital: The Primary Measure of Bank Capitalisation' (Jan. 19, 	
2012);	
	
--'Rating Bank Regulatory Capital Securities' (Dec. 15, 2011).	
	
Applicable Criteria and Related Research: 	
	
Global Financial Institutions Rating Criteria	
	
here	
	
Fitch Core Capital: The Primary Measure of Bank Capitalisatihere	
	
Rating Bank Regulatory Capital and Similar Securities	
	
here	
	
	
 (New York Ratings Team)	
 

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