S&P assigns ‘A’ rating to Hang Seng Bank (China); outlook stable
Standard & Poor’s Ratings Services said that it had assigned its ‘A’ long-term and ‘A-1′ short-term counterparty credit ratings to Hang Seng Bank (China) Limited (Hang Seng China). The outlook is stable.
The ratings primarily reflect the bank’s status as a core subsidiary of its parent, Hang Seng Bank Limited (Hang Seng; AA/Positive/A-1+), and the HSBC Holdings PLC (HSBC; AA-/Positive/A- 1+) group.
“Hang Seng China’s standalone strengths include its good asset quality and sound capitalization. These strengths are underpinned by the benefits the bank receives from its parent group in terms of senior personnel, risk management, and funding,” said Standard & Poor’s credit analyst Judy Kwok-Cheung. “Weak points in the bank’s standalone credit profile include its small market share and marginal profitability.” Operators in China are subject to specific country-related risks–notably a young and rapidly evolving regulatory regime and legal system, and a high degree of government intervention in the economy. Hang Seng China is a core subsidiary of Hang Seng, which itself is a core member of the HSBC group. Hang Seng China plays a pivotal role in implementing Hang Seng’s China strategy, one of its parent’s most important growth strategies. Hang Seng China was recently incorporated to meet eligibility requirements to conduct Chinese renminbi-denominated retail banking in China. Upon incorporation, the assets and liabilities of Hang Seng’s branch network in China were transferred to Hang Seng China. Hang Seng China’s asset quality is good and its capitalization relative to risk is sound. The bank’s loan classification criteria mirror those of its parent and are in line with accepted best practices internationally. We expect the bank’s capitalization to remain above average. Hang Seng China’s profitability, however, lags behind domestic peers’ and is unlikely to improve materially over the medium term, because of significant costs associated with domestic network expansion. –www.theasianbanker.com (May 29 2007)–