Moodys Corporation (NYSE: MCO) have slashed the outlook ratings for HSBC (LON: HSBA) on Wednesday.
Moody’s have been busy over the last few weeks, and have been assessing global markets and firms outlook for 2020.
Last week, the firm gave the oil/gas and tobacco industry a stable outlook to investors.
The firm said that oil price will remain volatile next year, with key issues being producer responses to growing inventories, the recovery in Saudi Arabian volumes, accelerating US output, and a slowing in demand in general across the world.
The performance from firms in both these industries has been mixed, however in the Tobacco industry a strong update came from British American Tobacco PLC (LON: BATS) who saw their shares rally on after the firm gave a confident expectation outlook for 2019.
BAT continues to expect US industry volumes for 2019 to be down by 5.5%, while for 2020 it expects a drop in the range of 4% to 6%.
Additionally, at the start of the month Moody’s lowered the UK banking sector outlook from stable to negative.
HSBC have not been the only firm that have been struggling across 2019, as a whole host of British banks have been hit by market turbulence, political and economic complications.
At the end of October, Lloyds Banking Group PLC (LON: LLOY) saw their shares crash following a poor quarterly update. The firm saw a 97% fall in pre-tax profit for the third quarter from last year.
Today, Moody’s have given their rating of FTSE 100 listed HSBC, and it has not be a memorable update for shareholders.
Moody’s expressed concerns over HSBC, after the firm is going through both an operational and structural change.
HSBC are expected to announce a new wave of strategies designed to cut costs in February when the firm presents its full year 2019 results.
The firm saw a turbulent third quarter, where profits fell 18% due to structural changes, additionally HSBC also announced that they would be cutting jobs in the UAE a few weeks back.
“The negative outlook on HSBC Holdings’ ratings is driven by the execution risk attached to the planned repositioning of HSBC Bank and of the group’s US business, and our expectation of subdued profitability in 2020 and 2021,” said Alessandro Roccati, senior vice-president at Moody’s, in a statement.
“HSBC China’s long-term issuer and deposit ratings incorporate multiple notches of uplift based on Moody’s assessment of a very high level of affiliate support from the parent in times of need, and are aligned with the parent’s baseline credit assessment,” said Moody’s.
“In addition, a significant weakening in the operating environment, for example, if China’s economic growth moderates or corporate financial leverage continues to increase, would also be negative for the bank’s BCA,” Moody’s concluded.
HSBC have declined to comment on the update on Wednesday, however shareholders will be concerned.
Shares of HSBC trade at 599p (+0.93%). 18/12/19 18:25BST.
