Advertisement
Singapore markets closed
  • Straits Times Index

    3,224.01
    -27.70 (-0.85%)
     
  • S&P 500

    5,248.49
    +44.91 (+0.86%)
     
  • Dow

    39,760.08
    +477.75 (+1.22%)
     
  • Nasdaq

    16,399.52
    +83.82 (+0.51%)
     
  • Bitcoin USD

    70,449.26
    +391.55 (+0.56%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,958.04
    +26.06 (+0.33%)
     
  • Gold

    2,227.70
    +15.00 (+0.68%)
     
  • Crude Oil

    82.11
    +0.76 (+0.93%)
     
  • 10-Yr Bond

    4.1960
    0.0000 (0.00%)
     
  • Nikkei

    40,168.07
    -594.66 (-1.46%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • FTSE Bursa Malaysia

    1,530.60
    -7.82 (-0.51%)
     
  • Jakarta Composite Index

    7,288.81
    -21.28 (-0.29%)
     
  • PSE Index

    6,903.53
    +5.36 (+0.08%)
     

Hewlett-Packard International Bank DAC -- Moody's affirms ratings of Hewlett-Packard International Bank; outlook stable

Rating Action: Moody's affirms ratings of Hewlett-Packard International Bank; outlook stable

Global Credit Research - 27 Jan 2021

London, 27 January 2021 -- Moody's Investors Service ("Moody's") has today affirmed Hewlett-Packard International Bank DAC's (HPIB) long-term deposit ratings at A3, with a stable outlook. Moody's also affirmed the bank's standalone Baseline Credit Assessment (BCA) and Adjusted BCA at baa1. In addition, the agency affirmed the bank's long- and short-term Counterparty Risk Ratings at A3 and Prime-2, and Counterparty Risk Assessments (CR Assessments) at A2(cr) and Prime-1(cr) respectively. The bank's short-term deposit ratings and commercial paper ratings were affirmed at Prime-2.

A full list of affected ratings can be found at the end of this press release.

ADVERTISEMENT

RATINGS RATIONALE

--- RATIONALE FOR THE BCA AND ADJUSTED BCA

The affirmation of HPIB's BCA at baa1 reflects its solid solvency underpinned by very strong capitalisation supported by full retention of its stable and good profitability, low asset risk and robust residual value risk management. The products financed by HPIB are an essential part of lessee's core operations helping to mitigate against asset risk deterioration and profitability pressures during Covid-19. Lessees are primarily corporates, banks and sovereigns which tend to have strong credit profiles. Additionally, the BCA also incorporates the bank's strong liquidity profile with moderate reliance on market funding, through European Certificates of Deposits (ECDs) and other short-term instruments and a very high regulatory liquidity coverage ratio. Furthermore, the BCA reflects HPIB's mono-line leasing business which will remain heavily reliant on Hewlett Packard Enterprise Company's (HPE, Baa2 stable) (servers, storage, networking, services and software) and HP Inc.'s (HPI, Baa2 stable) (printers and personal computers) products sales and services.

Nonetheless, Moody's positions HPIB's BCA one notch higher than the long-term issuer rating of Baa2 of its parent HPE because as a regulated bank, HPIB is subject to supervision and going concern capital and liquidity requirements, as well as, to Europe's bank resolution regime (Bank Recovery and Resolution Directive, BRRD). In the event of the failure of its parent, Moody's expects that the BRRD would allow for ring-fencing of HPIB. In such an event, HPIB could be liquidated, or its performing assets sold, facilitated by its relatively strong capital base, which would significantly reduce losses for investors.

The affirmation of the Adjusted BCA in line with the BCA reflects Moody's assumption of a high probability of support from HPE which does not lead to an uplift, due to the Baa2 issuer rating of HPE being one notch lower than HPIB's BCA.

--- RATIONALE FOR THE DEPOSIT AND COMMERCIAL PAPER RATINGS

The affirmation of HPIB's long-term deposit ratings at A3 and the affirmation of short-term deposit and commercial paper ratings at Prime-2 are based on the bank's BCA and the results of Moody's Advanced Loss Given Failure (LGF) Analysis. In its LGF analysis, Moody's assumes a residual tangible common equity at failure relative to tangible banking assets of 8%, given the bank's very high level of excess capital relative to its high minimum capital requirement and its consistent track record of full capital retention. As a result, the rating agency considers that, in a resolution scenario, HPIB's residual equity would be higher than the standard 3% of tangible banking assets. In addition, upon further analysis of the bank's deposit funding, Moody's changed the junior deposit assumption to 100% from 26%, as the bank does not have any preferred retail sourced funding. In tandem, Moody's also changed the run-off assumption of junior deposits to 90% from 25%, due to the short-term tenor of money market ECDs and their higher-level of confidence sensitivity relative to relationship based corporate deposits, as reflected by their treatment in the regulatory net stable funding ratio.

Moody's Advanced LGF Analysis indicates that HPIB's deposits and commercial paper are likely to face low loss-given-failure, due to the loss-absorption provided by the bank's sizable residual tangible equity. This results in HPIB's deposits and commercial paper ratings being affirmed at A3 and Prime-2 respectively, one notch above the BCA of baa1. Moody's assumption of a low probability of government support for HPIB's creditors leads to no further uplift.

--- RATIONALE FOR THE STABLE OUTLOOK

The stable outlook on the bank's deposit ratings incorporates Moody's expectation that HPIB will continue to form an integral part of the HPE businesses and maintain its stable earnings generation and strong capitalisation levels. The outlook is also in line with the outlook of its parent HPE.

HPIB's solid capital levels, very low problem loans and strong lessee credit profiles and efficient operations puts it in a strong position against headwinds from Covid-19 induced economic contraction and any expected modest weakening in its assets risk and profitability.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

HPIB's BCA could be upgraded as a result of an upgrade to its parent's rating, combined with the bank maintaining its strong capitalisation levels and effective asset risk management. A positive change in the bank's BCA would likely lead to an upgrade in all ratings.

A downgrade of HPIB's BCA could be caused by (1) a downgrade of its parent's rating or (2) a significant deterioration in the bank's financial fundamentals, in particular, weakening asset quality and residual risks management or a material decline in the bank's level of capital following sizable dividend payments or capital repatriation. A negative movement in the bank's BCA would likely lead to the downgrade of all ratings.

LIST OF AFFECTED RATINGS

..Issuer: Hewlett-Packard International Bank DAC

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed A3

....Short-term Counterparty Risk Ratings, affirmed P-2

....Long-term Bank Deposits, affirmed A3, outlook remain Stable

....Short-term Bank Deposits, affirmed P-2

....Long-term Counterparty Risk Assessment, affirmed A2(cr)

....Short-term Counterparty Risk Assessment, affirmed P-1(cr)

....Baseline Credit Assessment, affirmed baa1

....Adjusted Baseline Credit Assessment, affirmed baa1

....Commercial Paper, affirmed P-2

..Outlook Action: ....Outlook remains Stable PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Arif Bekiroglu Vice President - Senior Analyst Financial Institutions Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Laurie Mayers Associate Managing Director Financial Institutions Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.