Safe and Sound

HSBC Bank USA, National Association

Mclean, VA
3
Star Rating
HSBC Bank USA, National Association is a Mclean, VA-based, FDIC-insured bank dating back to 2004. The bank has equity of $23.26 billion on assets of $180.37 billion, according to December 31, 2017, regulatory filings.

U.S. bank customers have $126.90 billion on deposit at 230 offices in multiple states run by 6,042 full-time employees. With that footprint, the bank currently holds loans and leases worth $65.79 billion, including $29.12 billion worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, HSBC Bank USA, National Association exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial fortitude. It acts as a buffer against losses and affords protection for depositors during times of financial trouble for the bank. When it comes to safety and soundness, more capital is preferred.

HSBC Bank USA, National Association did better than the national average of 13.13 points on our test to measure capital adequacy, scoring 16 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. HSBC Bank USA, National Association's Tier 1 capital ratio was 16.68 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, HSBC Bank USA, National Association held equity amounting to 12.90 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

Having extensive holdings of these types of assets may eventually require a bank to use capital to absorb losses, diminishing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

HSBC Bank USA, National Association scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.69 percent of HSBC Bank USA, National Association's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on HSBC Bank USA, National Association's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial trouble. Conversely, losses diminish a bank's ability to do those things.

HSBC Bank USA, National Association underperformed the average on Bankrate's test of earnings, achieving a score of 0 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for HSBC Bank USA, National Association was -0.98 percent, below the national average of 8.10 percent.

The bank recorded net income of $-232.8 million on total equity of $23.26 billion for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of -0.12 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.