Dominion Bond Rating Service has put the ratings of HSBC Holdings plc and its Canadian subsidiaries under review with positive implications.

The rating action reflects the bank’s successful efforts, over an extended period of time, in improving the breadth and potential of its operations, the rating agency says. “Over the past several years, HSBC has negotiated the Asian crisis, generated organic growth, and successfully integrated numerous acquisitions, including Household International, Inc. (now HSBC Finance), actions that substantially improved both geographic and business segment diversification.”

DBRS says that although current credit conditions are as good as they can be, “HSBC, as it is now structured, is strongly positioned to weather future difficult issues through the next cycle and beyond.”

HSBC also stands out among its peers with respect to geographic diversification, and its business segments are weighted towards traditionally less volatile businesses, DBRS says. Consumer lending is seen as a major growth area, with countries like China, India, Mexico, and Turkey seen as prime areas for longer-term expansion.

“The group’s emerging markets exposure continues to have both positive and negative aspects, with the potential for higher profitability and growth rates offset by higher economic and geopolitical risks,” it adds.

As for HSBC Bank Canada, DBRS considers the bank’s efficient productivity, favourable credit quality despite some geographic and industry concentrations, and ongoing strength in providing customer service as contributing positively to the ratings on a stand-alone basis. DBRS says it believes the bank has shown some progress over the past 18 months in executing its five-year strategic plan, “Revenue growth strategies include leveraging the HSBC Finance platform, strengthening the bank’s IT infrastructure to invest in sales and service, and growing the distribution network to better cross-sell.”

“The bank is moving its credit cards onto HSBC Finance’s platform, which should give HSBC better control of its customer base and ability to service these customers,” DBRS notes. “The bank’s ability to leverage HSBC Group IT solutions is unique vis-à-vis other Canadian banks, which should translate into better delivery of service and sales.” Also, the distribution network was expanded in Ontario with the acquisition of Intesa Bank Canada and an agreement to allow HSBC’s customers to use the Bank of Montreal’s bank machines without surcharges.

Finally, DBRS says that the firm’s consumer finance arm, HSBC Financial Corporation Ltd., continues to benefit from “lower funding costs and enhanced financial flexibility and opportunities exist to expand operations into other countries currently served by HSBC Holdings. In addition, there have been benefits in the integration of administrative, IT, and certain credit card processes.”