Moody's Investors Service today downgraded the long-term deposit rating of HSBC Private Bank (Suisse) SA to Aa3 from Aa2 and placed a negative outlook on its B bank financial strength rating (BFSR). Moody's also downgraded the deposit ratings of HSBC Private Banking Holdings (Suisse) to A1 from Aa3. The P-1 short-term ratings were affirmed. The outlook on both entities' deposit ratings is stable. The downgrade of HSBC Private Bank's deposit rating follows the rating action on HSBC Holdings on 9 March 2009; specifically Moody's reassessment of the parent's intrinsic financial strength, which is imputed into HSBC Private Bank's deposit rating. In addition, the negative outlook on HSBC Private Bank's B BFSR reflects Moody's expectation that the private banking sector will face a challenging environment going forward, characterized by: (i) adverse market conditions affecting the valuation of managed assets; (ii) the expected continued de-leveraging of clients and move towards less complex and lower-fee-generating products, which in turn will adversely affect margins; and (iii) increased regulatory pressure on the jurisdictions in which the bank operates. Moody's downgrade of HSBC Private Banking Holdings (Suisse) follows the downgrade of the operating entity and the rating agency's unchanged assumptions regarding its structural subordination to the operating company. HSBC Private Bank's B BFSR, which translates to an unsupported baseline credit assessment of Aa3, continues to reflect the entity's strong private banking franchise and multi-shoring capabilities, its intrinsically low risk profile, its strong financial performance and the benefits of ownership by HSBC Holdings in terms of franchise value, liquidity and risk management. However, the rating also reflects the bank's revenue dependence on the markets' performance and its exposure to the business risks inherent to private banking such as reputational and legal risk. Moody's assesses a high probability of support for HSBC Private Bank from its parent, HSBC Holdings, based on its close integration and strategic role in HSBC's private banking activities, and the bank also benefits from a low level of systemic support. However, its long-term deposit rating does not receive any uplift from the BCA's current level of Aa3 as a result of this support assumption. HSBC Private Bank (Suisse) SA is domiciled in Geneva, Switzerland. The bank recorded net income of CHF685 million (EUR 461 million) in 2008. Assets under management were CHF153 million (EUR103 million) and total balance sheet assets amounted to CHF76.4 billion (EUR51.6 billion) at the end of the year.
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