HSBC Holdings and some of its subsidiaries are likely to see their credit ratings upgraded after the banking giant announced its bid for Republic New York Corp (RNYC), according to two leading US-based ratings agencies.
Moody's Investors Service plans to upgrade the A2 subordinated debt rating of HSBC and the A2 senior debt rating of HSBC Americas, as well as the A1 deposits rating of HSBC Bank USA.
This follows a similar move by rival Standard & Poor's (S&P), which affirmed its A-plus long-term counterparty credit rating on HSBC Holdings and raised the ratings outlook for two subsidiaries to positive from stable.
Moody's said its ratings review would consider the depth and sustainability of HSBC's diversified franchises and income streams after the RNYC acquisition.
HSBC said on Monday it had made an agreed US$10.3 billion bid for RNYC and its Luxembourg-based private banking group Safra Republic Holdings, making it HSBC's single largest acquisition.
Moody's considered the acquisition would increase HSBC's proportion of earnings from Organisation for Economic Co-operation and Development countries, implying the risk from the group's operations in Hong Kong would appear to have been contained.
According to the agency, HSBC's subsidiaries had managed to perform quite well under adverse conditions, while the British-based Midland Bank continued to generate strong and sustainable earnings.
