Credit rating agency DBRS Ltd. has changed the trends on all ratings of HSBC Bank Canada to stable from negative, following a similar move on the long-term issuer rating of its parent company HSBC Holdings plc.

DBRS’ ratings on HSBC Bank Canada are based on the relationship it has with its parent company, and Friday DBRS confirmed the long-term issuer rating of HSBC Holdings plc is now AA (high) with a stable trend.

The revision comes in recognition of “the positive momentum evidenced across the franchise” DBRS says. It notes that the bank’s credit experience continues to improve leading to lower credit costs and improved earnings generation.

The impact of higher credit costs on its earnings power was a significant factor in the bank previously carrying a negative trend. “At $7.5 billion for the first half 2010, credit costs were the lowest since the beginning of the crisis,” DBRS notes, adding that it sees this “as proof of the effectiveness of the various actions taken to reduce risks inherent in the balance sheet, with some assistance from the overall improving, albeit uneven, global economic environment.”

“Given recent positive trends in asset quality, as well as an improving economy in most parts of HSBC’s diverse global footprint, DBRS expects continued improvement in credit and earnings through 2011, it says.

The trend change also reflects DBRS’s view that HSBC will continue to generate solid and improving results while continuing to “de-risk” its U.S. operations.

DBRS also views HSBC as well-placed to meet forthcoming liquidity and capital requirements from regulators.

IE