S&P ups view on HSBC Bank's capital, but sees offsetting risks

HSBC Bank's capital position was set to strengthen as the lender moved to top up its capital cushions, but that improvement would be offset by the greater risks for its investment banking arm should global economic and geopolitical crystalise, Standard&Poor's said.

S&P, arguably the most influential of the world's three main ratings agencies, on Tuesday revised its assessment of the Asia-focused bank's capital and earnings from 'moderate' to 'adequate', anticipating it would be successful in its efforts to husband more regulatory capital.

The agency's analysts estimated HSBC Bank would be able to lift its risk-adjusted capital ratio above their 7% threshold over the next 18-24 months.

At year-end 2014 it stood at 6.3%.

However, despite the bank's "relatively conservative" credit underwriting and risk management versus peers meant, its investment bank "added complexity" to the business model.

Furthermore, it remained subject to litigation risks, S&P said in a statement.

"Helped by improving GDP growth and low interest rates, HSBC Bank's credit losses have declined to a very low level and we expect them to increase over our rating horizon, particularly if global economic and geopolitical risks crystallize."

S&P reaffirmed the bank's long-term credit rating and kept its outlook on the same at 'stable'.

HSBC Bank is a direct wholly owned subsidiary - and the largest by balance sheet size - of HSBC Holdings.

It was also "integral" to the group's identity and strategy, S&P said.