TEXT-Fitch upgrades various Panamanian banks

Following the recent rating action taken on Panama, Fitch Ratings has today upgraded the ratings of various Panamanian banks. On June 2, 2011, Fitch upgraded Panama's Sovereign Issuer Default Ratings (IDRs) to 'BBB' and its country ceiling to 'A', citing its solid economic growth and favorable government debt dynamics. The Rating Outlook was revised to Stable.

As a result, Fitch has taken the following actions on HSBC Bank (Panama), S.A.(HBPA) ratings, which are constrained by the country ceiling: --Foreign Currency long-term IDR upgraded to 'A' from 'A-'; --Foreign Currency short-term IDR affirmed at 'F1'; --Support Rating affirmed at '1'; --National long-term Foreign Currency Rating affirmed at 'AAA(Pan)'; --National short-term Foreign Currency Rating affirmed at 'F1+(Pan)'. The 'C' Individual Rating remains unchanged. The Rating Outlook has been revised to Stable from Positive.

In addition, Fitch has taken the following actions on Banco Nacional de Panama's (Banconal) ratings, which are support driven, to reflect the improved credit standing of its sole owner and implicit guarantor: Banco Nacional de Panama: --Foreign Currency long-term IDR upgraded to 'BBB' from 'BBB-'; --Foreign Currency short-term IDR upgraded to 'F2' from 'F3'; --Support Floor upgraded to 'BBB' from 'BBB-'; --Support Rating affirmed at '2'; --National long-term Foreign Currency Rating affirmed at 'AA+(Pan)'; --National short-term Foreign Currency Rating affirmed at 'F1+(Pan)'. The 'C/D' Individual Rating remains unchanged. The Rating Outlook has been revised to Stable from Positive.

HBPA's IDRs, Support Rating and National Ratings reflect the support it would receive from its parent (HSBC Holdings PLC, rated 'AA' by Fitch) should it be required; the IDRs are constrained by Panama's country ceiling. In Fitch's opinion, considering HBPA's size, importance, and key role in HSBC's regional strategy, support from its parent should be forthcoming if needed. HBPA's IDRs could be upgraded if Panama's country ceiling is upgraded; the IDRs would move in line with the country ceiling, but downside risk is limited in the short term given Panama's positive economic prospects. Banconal's IDRs, Support Rating and Support Floor reflect the support it would receive from its sole shareholder, the Republic of Panama, should it be required.

Given its systemic importance and the explicit provision in its inception law, which Fitch considers an implicit guarantee, Banconal would certainly receive support from the Panamanian government, whose ability to provide such support is considered high and reflected in its sovereign rating. In general terms, Banconal's ratings should move in line with those of the Sovereign.