Fitch affirms HSBC Middle East

Fitch Ratings said it affirmed HSBC Bank Middle East Ltd.'s long-term issuer default rating at AA- with a negative outlook, short-term issuer default rating at F1+, viability rating at bbb+, support rating at 1 and senior debt at AA-/F1+. HBME Sukuk Co. Ltd.'s trust certificate issuance program and $500 million of senior trust certificates were affirmed at AA-.

The agency also placed Oman International Bank's BBB+ long-term issuer default rating, F2 short-term issuer default rating, bb viability rating and 2 support rating on Rating Watch positive and affirmed its support rating floor at BBB+.

The rating actions follow the banks' announcement of a proposed merger between Oman International Bank and HSBC Bank Middle East's branch in Oman.

Fitch believes that HSBC Bank Middle East should be able to conclude the merger with relative ease given its financial strength, regional franchise and existing presence in Oman as well as Oman International Bank's relatively small size.

The agency said that once the merger is concluded, Oman International Bank's long-term issuer default rating will likely be upgraded by more than one notch based on the potential support from HSBC Bank Middle East (ultimately from HSBC Holdings plc).

In addition, Fitch said the Rating Watch positive on Oman International Bank's viability rating reflects the strategic and operational benefits likely to be generated by being part of the HSBC Group as well as the expected improvements in its franchise, corporate governance and balance sheet fundamentals.

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