Fitch Affirms HSBC's Rating Despite Recent Cuts On Other Banks

Credit rating agency Fitch Ratings on Monday affirmed HSBC Holdings PLC's (HBC) Double-A credit rating and its stable outlook, highlighting the bank's resilience despite a recent raft of other banks being downgraded by ratings agencies.

The affirmations reflect "HSBC's geographically diversified business model, management's generally low risk appetite, conservative liquidity and funding positions of the group's local franchises and its solid capitalization," Fitch said.

"These traits have served HSBC well for many years and provide the group with a solid base to weather the weaker global economic outlook and continuing market turbulence."

"In particular, Fitch expects the group to maintain a cautious approach to its capitalisation and liquidity profile at a time when earnings are likely to be susceptible to weaker demand and deteriorating economic trends in several of its major markets," it said.

Last week, Moody's Corp. cut its ratings on the long-term debt of three large French banks, citing deteriorating liquidity.

Moody's cut its ratings on the long-term debt of BNP Paribas SA (BNP.FR) and Credit Agricole SA (ACA.FR) by one notch to Aa3, and cut Societe Generale SA's (GLE.FR) long-term debt rating by one notch to A1.

Late last month, Fitch lowered the credit ratings on three Portuguese banks following an earlier decision to downgrade the sovereign to below investment grade.

Fitch downgraded Caixa Geral de Depositos, Banco Comercial Portugues (BCP.LB) and Banco BPI (BPI.LB) by one notch to BB+ from BBB-, warning that any further cut to the sovereign would trigger further downgrades to the banks. The rating action on the banks was a direct consequence of Portugal's sovereign downgrade, Fitch said then.

Despite the affirmation on HSBC's ratings, Fitch warned that downside risks could arise should there be higher-than-expected losses in its U.S.-based HSBC Finance Corp.'s run-off portfolios, a sharp increase in credit or market risks arising from the euro-zone crisis or if the Hong Kong subsidiary, Hong Kong and Shanghai Banking Corp., becomes "more vulnerable to deterioration from external pressures relative to similarly rated peers."

Early last month, HSBC said bad debts have soared to their highest quarterly level since 2009 as cash-strapped U.S. homeowners stopped making mortgage payments. Bad loans were also on the rise in Hong Kong, Brazil and the Middle East.

The third-quarter's loan impairment charges of $3.89 billion was up 38% from the second quarter, and 24% from the third quarter of 2010.

HSBC shares closed Monday down 3.2% at 488 pence as most U.K. financial stocks were sharply lower.

- By Vladimir Guevarra, Dow Jones Newswires. Tel. [phone], [e-mail]