MOODY'S ASSIGNS Ba2 TO GUARANTEED US$- EURONOTES OF SERFIN INTERNATIONAL BANK & TRUST
New York, 02-09-95 -- Moody's assigned a Ba2 rating to Guaranteed US$-Euronotes issued by Serfin International Bank & Trust Limited, the fully owned Cayman Island subsidiary of Banca Serfin, S.A., Mexico (Serfin). The notes are guaranteed by Serfin. Moody's also assigned B1/Not Prime ratings to Serfin for its long- and short-term foreign currency deposits.
By assets, Serfin is Mexico's third largest bank and is the principal subsidiary of Grupo Financiero Serfin. Serfin plans to take increasing advantage of a countrywide network of 600 branches, including its strong position in Mexico City and Monterrey, to complement its long-standing presence in corporate lending and money markets with retail-oriented credit operations.
Moody's points out that Serfin continues to deal with a heritage of rapid loan growth, combined with the inadequate underwriting procedures in place at many of the branches that became part of Serfin in a series of mergers. The implementation of better credit processes took longer than was the case for Serfin's principal competitors as the bank continued to focus more on large exposures to corporations, state-controlled companies, and infrastructure projects. The particularly high incidence of nonperforming loans that Serfin has suffered as a consequence was the motivation for a restructuring program. The program aims at improving the long-term prospects of the bank through increased loan loss reserve and capital levels, as well as through the enhancement of its cost structure.
The Mexican peso crisis compounds Serfin's weaknesses. The asset quality outlook for 1995, on one hand, is particularly negative. Serfin's expertise and leading position in foreign exchange and securities trading, as well as in treasury operations, on the other hand, have helped to soften the damage to earnings in the short run. Moody's also noted that management's decision to press on with its restructuring program is encouraging.
The program entails sharp increases in provisions and charge-offs and an accelerated reduction of staffing levels. Despite the current environment of uncertainty in Mexico and the considerable pressure on net income that the program will have in 1995 and 1996, the majority of Grupo Financiero Serfin's core shareholders has recently made substantial contributions to capital. This infusion should enable Serfin to absorb the immediate peso depreciation-induced negative effects on its capital adequacy. More capital injections will be required to provide Serfin with a capital base sufficient to support further consolidation and the resumption of balance sheet growth in the future, the rating agency added.
Serfin chose to obtain Banco de Mexico's assistance in the recent difficult foreign-currency funding situation, and Moody's believes that Serfin's role as one of Mexico's most important banks can secure all necessary regulatory support it may require to complete its restructuring. Serfin should be able to build on a well-established franchise, a high level of staff and management expertise, improving credit processes and management information systems, and a modern countrywide transaction infrastructure.
Banca Serfin, S.A., headquartered in Mexico D.F., had total assets of US$22 billion as of December 31, 1994.
The following ratings were assigned:
Serfin International Bank & Trust Limited, Cayman Islands (formerly Dynaworld Bank & Trust Limited), Guaranteed US$-Euronotes, Ba2
Banca Serfin, S.A., Long-term Foreign Currency Deposits, B1; Short-term Foreign Currency Deposits, Not Prime
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