International ratings agency Fitch Ratings has placed HSBC Bank Oman SAOG's (HBON) Long-Term Issuer Default Rating (IDR) of 'BB+' and 'bb-' Viability Rating (VR) on Rating Watch Negative (RWN). The 'bb+' Shareholder Support Rating (SSR) has also been placed on RWN.
The rating action follows the Central Bank of Oman's approval of the merger between HBON and Sohar International Bank SAOG (SIB) on February 5, 2023.The closing of the transaction is subject to approval by other regulatory bodies as well as the shareholders of both banks and is expected to take place in 2H23.
“The RWN on the SSR and IDR reflects that upon completion of the merger, Fitch will cease to factor potential support from HSBC Holdings plc (HSBC; A+/Stable) into HBON's ratings, which is likely to result in a downgrade and withdrawal of HBON's SSR and Long-Term IDR as HBON will be liquidated as a legal entity after the merger completion. Without the benefits from HSBC and as part of the merger with SIB, Fitch expects HBON's standalone credit profile to converge towards SIB's, as reflected in the RWN on HBON's VR,” the London-based ratings agency said.
Separately, Fitch Ratings affirmed Sohar International Bank SAOG's (SIB) Long-Term Issuer Default Ratings (IDRs) at 'BB-' with Stable Outlook. Fitch has placed SIB's 'b+' Viability Rating (VR) on Rating Watch Positive (RWP).
The RWP follows SIB's announcement on February 5, 2022 that it has received approval from the Central Bank of Oman for its proposed merger with HSBC Bank Oman SAOG (HBON). Fitch expects the transaction to have a positive impact on SIB's credit profile.
“Fitch will resolve the RWP upon the conclusion of the transaction and once it obtains more clarity on the business and financial profile of the merged entity, which may extend beyond the usual six-month review cycle,” it stated.
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