NOTE: On May 24, 2022, the press release was corrected as follows: The second contact was removed from the end of the press release. Revised release follows.
New York, May 12, 2022 -- Moody's Investors Service ("Moody's") has today affirmed the baseline credit assessments (BCAs), adjusted BCAs, deposit ratings and counterparty risk assessments (CR Assessments) assigned to BBVA México, S.A. (BBVA Mexico) and Banco del Bajío, S.A. (BanBajío). Moody's also affirmed the debt ratings of BBVA Mexico issued through its Houston agency, BBVA Mexico SA Ins Houston Agency (BBVA Houston Agency).
Moody's also assigned Counterparty Risk Ratings (CRRs) to BBVA Mexico, BBVA Houston Agency and BanBajío.
All the remaining ratings of were unaffected by this action.
The outlook of BBVA Mexico and BBVA Houston Agency remains negative in line with the negative outlook on the Government of Mexico (Baa1 negative). The outlook on BanBajío remains stable.
A complete list of affected ratings can be found at the end of the press release.
RATINGS RATIONALE
Moody's has affirmed the ratings and assessments of BBVA México and BanBajío in line with the rating agency's expectation that Mexican bank financial fundamentals will remain sound over the next 12 to 18 months, supported by their strict underwriting standards and well-diversified portfolios, which will reflect into stable asset quality performance in 2022. These banks' recurring earnings generation will continue to provide consistent capital replenishment supported by a more moderate loan growth, while the phase-in of new capital requirements will help to enhance loss absorption capacity. Mexican banks maintain ample pricing power and access to low-cost deposit funding, which will continue to result in strong net interest margins under a high interest rates environment. Strong liquidity and core deposit funding remain key credit strengths of Mexican banks.
The negative outlook on some of the largest Mexican banks' deposit ratings, including BBVA Mexico, reflects the Mexican government's deteriorating capacity to provide support to Mexico's largest banks, as indicated by the negative outlook on Mexico's Baa1 credit rating.
AFFIRMATION OF BBVA MEXICO'S RATINGS WITH NEGATIVE OUTOOK
The affirmation of BBVA Mexico's baa1 BCA reflects its strong earnings generation that derives from a diversified loan portfolio and leading market shares in various asset classes and banking products, coupled with its highly efficient operations. BBVA Mexico's standalone credit profile is also supported by a strong capitalization. Historically, the bank has presented solid asset quality that results from a conservative risk management and well-diversified loan book.
BBVA Mexico's Baa1 deposit ratings and BBVA Houston Agency's Baa1 senior unsecured debt ratings incorporate (1) BBVA Mexico's baa1 BCA, (2) Moody's view of a moderate probability of support from the bank's parent, Banco Bilbao Vizcaya Argentaria, S.A. (BBVA Spain, A2 stable, baa2). The Baa1 rating also acknowledges a high likelihood of public support in line with BBVA Mexico's high systemic importance. However, the incorporation of affiliate and government support, does not result in any ratings uplift at for BBVA Mexico's ratings because its BCA is already at baa1.
Moody's also affirmed the Baa2 rating of the subordinated cumulative notes and the Baa3(hyb) ratings of the subordinated preferred capital notes and subordinated cumulative, nonconvertible capital notes, all issued through BBVA Houston Agency, in line with the affirmation of the bank's baa1 Adjusted BCA.
The negative outlook on BBVA Mexico's deposit and BBVA Houston Agency's senior debt ratings derives from the negative outlook on the Government of Mexico's rating. Because BBVA Mexico's BCA is at the same level as the sovereign rating, a downward pressure could emerge on the bank's ratings in case of a sovereign downgrade.
AFFIRMATION OF BANBAJÍO'S RATINGS WITH STABLE OUTLOOK
The affirmation of BanBajío's Baa2 local and foreign currency deposit ratings with a stable outlook reflects the bank's disciplined risk management, historic low delinquencies despite its exposure to high-risk agricultural sector in Mexico, strong capitalization and solid earnings generation through economic cycles. These drivers are supported by disciplined risk management, robust buffers for loan losses maintained by the bank and an important share of its operations covered by collaterals. The rating also incorporates recent improvements in the bank's funding base which have led to lower funding costs, although liquidity buffers remain below those of its peers in Mexico.
Although Moody's assesses a moderate probability of public support given BanBajío's regional importance and visibility in the states of the Bajío region in Mexico, it does not result in an uplift from its BCA of baa2.
ASSIGNMENT OF CRRs TO BBVA MEXICO, BBVA HOUSTON AGENCY AND BANBAJÍO
The CRRs assigned to BBVA Mexico and BBVA Houston Agency is in line with their CR Assessments of A3(cr)/P-2(cr). The CRRs assigned to BanBajío are aligned to its CR Asssessments of Baa1(cr)/P-2(cr).
In assigning CRRs to BBVA Mexico, BBVA Houston Agency and BanBajío, Moody's took into consideration the Adjusted BCAs of BBVA Mexico at baa1 and of BanBajío at baa2 and existing basic Loss-Given-Failure (LGF) approach, which provides one notch of uplift from the banks' Adjusted BCAs to reflect the lower probability of default of CRR liabilities.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
BBVA MEXICO
A rating upgrade for BBVA Mexico is unlikely given its negative outlook. Moreover, BBVA Mexico's BCA is at the same level as the Baa1 Mexican government debt rating, which has a negative outlook.
The BCA of baa1 assigned to BBVA Mexico could face downward pressure in case of the downgrade at the sovereign debt rating. In addition, if Mexico's government bond rating is downgraded, BBVA Mexico's supported ratings would also be downgraded.
BANBAJÍO
Upward pressure on BanBajío's ratings would accumulate if the bank demonstrates increased sectoral and industry diversification, while maintaining low NPLs and strong capitalization. Additionally, better access to retail deposit funding would also be credit positive.
BanBajío's ratings could be downgraded if its capital were to fall substantially and looser origination practices were to lead to a deterioration in its asset quality and profitability.
Affirmations:
..Issuer: BBVA México, S.A.
.... Adjusted Baseline Credit Assessment, Affirmed baa1
.... Baseline Credit Assessment, Affirmed baa1
.... ST Counterparty Risk Assessment, Affirmed P-2(cr)
.... LT Counterparty Risk Assessment, Affirmed A3(cr)
.... ST Deposit Rating (Foreign Currency), Affirmed P-2
.... ST Deposit Rating (Local Currency), Affirmed P-2
.... LT Bank Deposit Rating (Foreign Currency), Affirmed Baa1, Negative Outlook
.... LT Bank Deposit Rating (Local Currency), Affirmed Baa1, Negative Outlook
..Issuer: BBVA México SA Ins Houston Agency
.... ST Counterparty Risk Assessment, Affirmed P-2(cr)
.... LT Counterparty Risk Assessment, Affirmed A3(cr)
.... Junior Subordinated Regular Bond/Debenture (Local Currency), Affirmed Baa3 (hyb)
.... Subordinate Regular Bond/Debenture (Local Currency), Affirmed Baa3 (hyb)
.... Subordinate Regular Bond/Debenture (Local Currency), Affirmed Baa2
.... Senior Unsecured Regular Bond/Debenture (Local Currency), Affirmed Baa1, Negative Outlook
..Issuer: Banco del Bajío, S.A.
.... Adjusted Baseline Credit Assessment, Affirmed baa2
.... Baseline Credit Assessment, Affirmed baa2
.... ST Counterparty Risk Assessment, Affirmed Baa1(cr)
.... ST Counterparty Risk Assessment, Affirmed P-2(cr)
....ST Bank Deposit Rating (Foreign Currency), Affirmed P-2
....ST Bank Deposit Rating (Local Currency), Affirmed P-2
....LT Bank Deposit Rating (Foreign Currency), Affirmed Baa2, Stable Outlook
....LT Bank Deposit Rating (Local Currency), Affirmed Baa2, Stable Outlook
Assignments:
..Issuer: BBVA México, S.A.
LT Counterparty Risk Rating (Local Currency), Assigned A3
ST Counterparty Risk Rating (Local Currency, Assigned P-2
LT Counterparty Risk Rating (Foreign Currency), Assigned A3
ST Counterparty Risk Rating (Foreign Currency), Assigned P-2
..Issuer: BBVA México SA Ins Houston Agency
LT Counterparty Risk Rating (Local Currency), Assigned A3
ST Counterparty Risk Rating (Local Currency, Assigned P-2
LT Counterparty Risk Rating (Foreign Currency), Assigned A3
ST Counterparty Risk Rating (Foreign Currency), Assigned P-2
..Issuer: Banco del Bajío, S.A.
LT Counterparty Risk Rating (Local Currency), Assigned Baa1
ST Counterparty Risk Rating (Local Currency, Assigned P-2
LT Counterparty Risk Rating (Foreign Currency), Assigned Baa1
ST Counterparty Risk Rating (Foreign Currency), Assigned P-2
Outlook Actions:
..Issuer: BBVA México, S.A.
....Outlook, Remains Negative
..Issuer: BBVA México SA Ins Houston Agency
....Outlook, Remains Negative
..Issuer: Banco del Bajío, S.A.
....Outlook, Remains Stable
The principal methodology used in these ratings was Banks Methodology published in July 2021 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at:
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at
http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Felipe Carvallo
VP - Senior Credit Officer
Financial Institutions Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653
Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653<
