HSBC Rating Cut Over Regulation and Compliance Costs, BNP / SocGen Eye U.S. IB Expansion

HSBC Canary Wharf

HSBC Holdings has had its Long-term Issuer Default Rating downgraded by Fitch Ratings to AA- from AA as it braces itself for stiffer regulation and additional compliance costs.

Bloomberg reports that the ratings company also downgraded the lender’s HSBC Bank Plc unit to AA- from AA and its Hongkong and Shanghai Banking Corp. Ltd. unit to AA- from AA, it said in a statement Friday. The outlook for all three was revised to stable from negative.

Chief Executive Officer Stuart Gulliver’s plans to cut costs and improve profitability are held back by U.S. probes and compensation claims from U.K. clients. A Senate committee said in July that failures in HSBC’s money-laundering controls allowed terrorists and drug cartels access to the U.S. financial system. Fitch said that HSBC’s expansion into 'higher-risk markets' such as China and tougher competition in Hong Kong were among the main reasons for the downgrade.

In the meantime, Reuters reports that France's top banks are taking advantage of calmer markets to return to expanding in the United States, a year after deep cuts to their investment banks saw them lose ground to rivals in the world's biggest financial market.

BNP Paribas (BNPP.PA: Quote), France's largest bank, and closest rival Societe Generale (SOGN.PA: Quote) have hired several top U.S. bankers in recent months, signaling a selective return to growth in areas like private banking, fixed income, equity derivatives or mortgage securitizations, according to bankers.

HSBC Rating Lowered One Step by Fitch on Regulation, Costs

French banks eye U.S. expansion after year of cuts

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