Mexico, January 21, 2011 -- Moody's Investors Service affirmed Banco Regional de Monterrey,
S.A.'s (BanRegio) bank financial strength rating (BFSR)
at D+ and local and foreign currency deposit ratings at Baa3/Prime-3,
as well as AF BanRegio, S.A. de C.V.
SOFOM E.R.'s (AF BanRegio) local currency issuer ratings
at Baa3/Prime-3. At the same time, Moody's de
México affirmed BanRegio's Mexican national scale deposit
ratings at Aa3.mx/MX-1.
Moody's also assigned a (P)Prime-3 local currency debt rating
to AF BanRegio's proposed expansion of its five-year short
term debt program (programa de certificados bursátiles de corto
plazo) to Mx$5 billion, from Mx$3.5 billion.
In addition, Moody's de México affirmed its short term
Mexican national scale debt rating at MX-1 for the program.
The outlook on all ratings is stable.
In affirming BanRegio's D+ BFSR, Moody's noted
the bank's continued ability to generate adequate core earnings,
despite the still recovering economy, and its important franchise
and market presence in one of the most prosperous regions of Mexico,
mainly in the states of Nuevo León, Coahuila and Tamaulipas.
BanRegio's earnings generation benefits from its established franchise
as a commercial lender to small and medium-size enterprises,
and the stable funding base that is predominantly sourced from retail
depositors, thus ensuring healthy net interest margins.
Moody's notes that the bank's past due loans have stabilized
at levels that are comparable to those of its regional bank peers,
while loan loss reserve coverage remains ample. Nevertheless,
Moody's Assistant Vice President Felipe Carvallo mentioned that
"further deterioration, especially in light of strong loan
growth during 2010 and planned out-of-footprint expansion,
will be closely monitored by Moody's, and any significant
deterioration could place downward pressure on the ratings."
BanRegio's notable exposures to related-party loans (though
within regulatory limits) and large borrower concentrations continue to
be of concern for Moody's, and raise question about the robustness
of the corporate governance function of the financial group.
The local currency deposit rating of Baa3 is based on the bank's
baseline credit assessment of Ba1 and incorporates Moody's assessment
of potential systemic support for BanRegio, in a situation of stress,
thus translating into a one notch uplift. Moody's assessment of
the level of systemic support incorporates BanRegio's important market
shares in Mexico's northeastern region, although its national
share is small at 1% of the system's deposits.
AF BanRegio is a sister leasing company of BanRegio, both under
direct ownership (99.99%) of BanRegio Grupo Financiero,
S.A. de C.V. (GF BanRegio). The ratings
assigned to AF BanRegio are in line with those of the bank, fully
incorporating group support for the leasing company through the group's
main subsidiary, BanRegio.
The last rating action regarding BanRegio was on 21 July 2008, when
Moody's assigned first time ratings. The last rating action regarding
AF BanRegio was on 21 July 2008, when Moody's assigned first time
Headquartered in San Pedro Garza García, Nuevo León,
Mexico, BanRegio had Mx$41.8 billion (US$3.3
billion) in assets, Mx$18.6 billion in loans,
Mx$16.7 billion in deposits, Mx$2.3
billion in equity, and accumulated net income of Mx$184 million,
as of 30 September 2010.
GF BanRegio had Mx$49.5 billion in assets, Mx$22.2
billion in loans, Mx$3.9 billion in equity,
and accumulated net income of Mx$477 million, as of 30 September
The principal methodologies used in rating BanRegio were "Bank Financial
Strength Ratings: Global Methodology" published in February 2007,
and "Incorporation of Joint-Default Analysis into Moody's Bank
Ratings: A Refined Methodology" published in March 2007.
The main methodology used in rating AF BanRegio was "Analyzing the Credit
Risk of Finance Companies," published in October 2000.
Moody's National Scale Ratings (NSRs) are intended as relative measures
of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale ratings in that they are not globally
comparable with the full universe of Moody's rated entities, but
only with NSRs for other rated debt issues and issuers within the same
country. NSRs are designated by a ".nn" country
modifier signifying the relevant country, as in ".mx"
for Mexico. For further information on Moody's approach to national
scale ratings, please refer to Moody's Rating Implementation Guidance
published in August 2010 entitled "Mapping Moody's National Scale
Ratings to Global Scale Ratings."
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and proprietary Moody's Investors Service information.
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Asst Vice President - Analyst
Financial Institutions Group
Moody's de Mexico S.A. de C.V
M. Celina Vansetti
Senior Vice President
Financial Institutions Group
Moody's Investors Service
Moody's de Mexico S.A. de C.V
Moody's affirms BanRegio's ratings; assigns (P)P-3 to AF BanRegio's proposed debt program expansion
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