Moody’s Investor Services revised its rating outlook for HSBC China from «stable» to «negative», citing a difficult operating environment amidst Hong Kong protests as a primary driver.
Both HSBC China and its subsidiary Hang Seng Bank – a major retail lender in Hong Kong – faced the same rating outlook downgrade following the same move to its parent earlier this week. HSBC China and Hang Seng Bank’s long-term foreign and local currency issuers and deposit ratings remained at A1 with bad loan ratios at just 0.5 percent and 0.2 percent, respectively in the first half of 2019.
It noted that the latter assets enjoyed a «very high level of affiliate support from the parent in times of need, and are aligned with the parent’s baseline credit assessment (BCA)».
«Therefore, any changes in the parent’s ability to provide support to the bank, as reflected by a change in the parent’s BCA, could negatively impact the bank,» Moody’s added.
Hong Kong Protests
According to the bank, the primary driver behind the outlook revision is due to headwinds from both Hong Kong and the broader Asian operating environment which could damage profitability.
«Recurring protests in Hong Kong are undermining consumption and inbound tourism. Meanwhile, elevated trade tensions between the US and mainland China have led to increased economic uncertainty in the region,» Moody’s explained. «Both developments will put pressure on the bank’s asset quality and profitability, and weigh negatively on Moody’s assessment of the bank’s BCA.»
Moody’s move mirrors that of credit rating agency rival S&P’s which in early November expressed concerns about implementation challenges in a challenging external environment.
