Moody’s downgrades HSBC Mexico

Moody’s Investors Service said it lowered HSBC Mexico, SA’s standalone baseline credit assessment to Ba3 from Baa3 and downgraded the long- and short-term local-currency deposit and senior debt ratings to Baa2/prime-2 from A2/prime-1.

The long-term foreign-currency deposit rating also was downgraded two notches to Baa2.

The outlook is stable.

The agency also said it lowered the adjusted baseline assessment to Baa3 from A2, which led to the downgrade of its subordinated debt rating to Ba1 from A3 and junior subordinated program debt rating to provisional Ba2 from provisional Baa1.

The long-term Mexican National Scale deposit and senior unsecured debt ratings also were downgraded two notches to Aa2.mx and the subordinated and junior subordinated national scale ratings were downgraded to A1.mx and A2.mx, respectively.

Moody’s also lowered the bank’s long- and short-term counterparty risk assessment to Baa1(cr)/prime-2(cr) from A1(cr)/prime-1(cr).

The agency also said it downgraded HSBC Casa de Bolsa, SA de CV’s issuer ratings to Baa3/prime-3 from A2/prime-1 and long-term Mexican national scale rating by one notch to Aa3.mx.

The downgrades conclude a review that began in April, Moody’s said.

The downgrades consider the heightened transition and execution risks stemming from management’s ambitious growth strategy, coupled with the bank’s slow progress in improving its sluggish profitability, the agency said.

Though profitability returned to positive net income in the first quarter of 2016, earnings remain weak and will continue to constrain the bank’s capacity to bolster its relatively limited capital levels, Moody’s said.

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