(BusinessWire
) Fitch Ratings has today affirmed HSBC Bank Panama’s (HBPA) ratings as follows:
–Foreign currency long-term Issuer Default Rating (IDR) at ‘A-‘;
–Foreign currency short-term IDR at ‘F1’;
–Support rating at ‘1’;
–National long-term rating at ‘AAA’;
–National short-term rating at ‘F1+(pan)’;
–Senior unsecured National rating at ‘AAA(pan)’.
At the same time, Fitch has upgraded the following rating:
–Individual rating to ‘C’ from ‘C/D’.
The Rating Outlook is Positive.
HBPA’s Individual rating was upgraded following the completion of the merger with Primer Banco del Istmo (PBI) and its consolidation as a leading bank in Panama and the region. The bank underwent a lengthy but thorough process of consolidation and cleaning of the balance sheet while it weathered the economic crisis in a cautious manner, sacrificing results to preserve solvency. The bank has become a major regional player, present in every segment and having the know-how and financial resources to continue growing within a very vibrant economic environment.
HBPA’s IDRs reflect the support it would receive from its parent (HSBC, rated ‘AA’ by Fitch) should it be required; the IDRs are constrained by Panama’s country ceiling. The Individual rating reflects its strong franchise, market share, asset and liability diversification, ample liquidity and improving capital. They also consider its lower – albeit stable – asset quality, moderate reserve coverage, lower efficiency and tough competition.
In Fitch’s opinion, considering HBPA’s size, importance, and key role in HSBC’s regional strategy, support from its parent should be forthcoming if needed.
HBPA’s IDRs could be upgraded if Panama’s country ceiling is upgraded; the IDRs would move in line with the country ceiling but downside risk is limited in the short term given Panama’s positive economic prospects. The Individual rating could be pressured if HBPA’s performance declines, asset quality deteriorates beyond reasonable levels, reserve coverage weakens, or capital ratios deteriorate.
HBPA’s performance in 2010 reflects the choices the bank made to face the crisis. Loan growth was curbed and the bank bolstered liquidity, thus limiting operating revenue growth and contributing to pressure on margins. Operating costs remained well under control and, after a spike, loan loss provisions returned to more normal levels. Net income improved in 2009 and is on pace to come close to those levels in 2010 without the help of non-recurring earnings. As a result, profitability declined to a return on average equity (ROAE) of 11.4% and a return on average assets (ROAA) of about 0.94% at June 2010 but seems to have stabilized. Asset quality declined but stabilized as did reserve coverage – albeit at a lower than pre-crisis level. Capital ratios improved thanks to retained earnings and a lower-risk asset mix.
Future growth should be moderate but strong in Panama while other countries could still lag for a while. Loans should increase about 10% and margins should remain stable as interest rates are expected to remain low through most of 2011. However, in the short run, heightened competition could put some pressure on margins. Non-interest revenues should continue to grow as the integrated bank focuses on market penetration and cross-selling. Operating costs should increase in the short term as the bank plans to expand its branch network but should not grow faster than revenues. Efficiency will be slow to improve but lower credit cost should allow for profitability to remain stable or improve with ROAE inching to the mid-teens and ROAA in the 10%-1.3% range. Nevertheless, internal capital generation should suffice to underpin moderate growth and sustain adequate capital levels.
HBPA is 100% owned by HSBC and is highly integrated within HSBC’s regional franchise, where it is considered a key subsidiary. A universal bank active in consumer, corporate and commercial lending, HBPA held about 17% of the system’s assets at June 2010; it merged with PBI to create Panama’s largest bank and a major regional player.
Additional information is available at ‘www.fitchratings.com‘.