Standard & Poor’s has confirmed its stable outlook on HSBC Bank Canada, based on its expectation that the bank will continue to maintain its strong operating performance supported by its respectable retail and commercial banking franchise primarily in British Columbia.

The rating agency says that the economic prospects for the province seem to be evenly balanced for recovery versus a slowdown given the softening U.S. indicators, although higher oil prices might threaten recovery. Industry, geographic, and customer concentration issues remain rating considerations, it cautions.

S&P says that the ratings on HSBC Canada reflect its consistent core earnings growth; strong productivity; good asset quality; and access to the support, brand, and global network of a strong parent. It says that the bank’s strong presence in domestic retail Asian banking, trade finance, and cross-border financial services reflects the strength derived from the association with the HSBC group and HSBC brand.

The rating agency says the close alignment with HSBC Bank USA (HSBC Canada’s U.S. sister company) is helping HSBC Canada to expand its distribution channels and product offerings by leveraging the U.S. operations. HSBC Canada’s investment banking arm has a small market share position in Canada compared to the big Canadian banks, reflecting its boutique-style operations with full service and direct retail brokerage operations, it notes.

The HSBC group’s acquisition of Household International Inc. (in 2003), which included the Canadian operations, Household Financial Corp. Ltd. provided HSBC Canada with access to a larger customer base with the opportunity to cross-sell a wider range of retail products as well as leveraging its IT systems. HSBC Canada is focused on several initiatives with HFCL, S&P reports, including tapping into HFCL’s technology as well as putting in place a more robust retail credit scoring system. Other initiatives include migrating HSBC Canada’s credit card business to HFCL’s platform in 2005; expanding the auto finance and direct mortgage business through broker channels, and the possibility of re-branding the Household name in Canada to HSBC.

HSBC Holdings plc’s recent announcement to discontinue its unlimited guarantee on HSBC Canada’s short- and long-term deposits made on or after July 1, 2005, had no effect on the ratings as Standard & Poor’s Ratings Services expects HSBC Canada to remain an integral part and strategically important to the HSBC Group. In lieu of the guarantee, HSBC has provided a letter of undertaking to the Canada Deposit Insurance Corp. to ensure that HSBC Canada complies with Canadian regulatory requirements, including the requirement to meet regulatory capital adequacy standards.