DBRS Confirms HSBC Finance at AA (low ), R-1 (middle)

Dominion Bond Rating Service (“DBRS”) has today confirmed the ratings of HSBC Finance Corporation (“HSBC Finance” or the “Company”) as well as the ratings of the Canadian subsidiary, HSBC Financial Corporation Limited, as indicated above.

With the integration process largely complete, HSBC Finance is expected to benefit even further from membership in the HSBC group of companies and from the strong support of the ultimate parent, HSBC Holdings plc (“HSBC”). HSBC Finance provides almost 20% of HSBC group’s earnings and provides consumer finance growth opportunities in both developed and developing markets. A significant benefit for HSBC Finance results from HSBC group-related funding, which has increased to over US$40 billion. This provides lower funding costs, and being a part of the HSBC group of companies also provides other opportunities for improved liquidity and funding strategies.

HSBC is a major credit card lender, issuing products in 39 countries with 24% of loans originated in Europe and further expansion of operations expected in such areas as Asia, Mexico, and Brazil. The overall receivables mix has been gradually changing, with an even greater proportion of loans represented by lower-yielding real estate secured loans, resulting in pressure on the net interest margin, although contributing to a lower credit risk profile.

Credit quality has remained favourable, but there continues to be concerns related to the financial health of households, both in the U.S. and in the U.K., and what impact a possible weakening in the economy or a decline in home values in the U.S. may have on credit losses.

The ratings of the Canadian entity, HSBC Financial Corporation Limited, are a result of: (1) a guarantee from HSBC Finance, and (2) the support of the ultimate parent, HSBC [DBRS rates the parent AA and R-1 (middle)].