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Rating Action:

Moody's affirms Unión de Crédito Progreso's ratings; outlook remains negative

 The document has been translated in other languages

Global Credit Research - 17 Jan 2014

Mexico, January 17, 2014 -- Moody's de México today affirmed all ratings on Unión de Crédito Progreso, S.A. (Unión Progreso), including the E+ standalone bank financial strength rating, which maps to a b3 standalone baseline credit assessment (BCA). Moody's also affirmed Unión Progreso's long-term and short-term local currency deposit ratings of B3 and Not Prime, respectively, as well as the long-term and short-term Mexican National Scale deposit ratings of Ba2.mx and MX-4, respectively. The outlook on all ratings remains negative.

LIST OF RATINGS AFFIRMED

The following ratings on Unión Progreso were affirmed with a negative outlook:

- Bank financial strength rating: E+

- Long-term global local currency deposit rating: B3

- Short-term global local currency deposit rating: Not Prime

- Long-term Mexican National Scale deposit rating: Ba2.mx

- Short-term Mexican National Scale deposit rating: MX-4

RATINGS RATIONALE

In affirming Unión Progreso's ratings and maintaining the negative outlook, Moody's cited the risks related to a shift in the credit union's strategic focus if its long pursued banking license is not approved by the Mexican regulatory authority. Since 2011, Unión Progreso has aimed at transforming itself into a regional bank, through a combination with other group entities such as savings and loans company Akala Sofipo and FX-brokerage Única Casa de Cambio.

Another credit constraint is Unión Progreso's modest capitalization which, although improved through capital injections in the last couple of years, does not adequately support management's ambitious growth plans in the future, said Moody's. Of particular concern is the credit union's goal to expand operations beyond Unión Progreso's geographic footprint and to target small, less formal and riskier financial institutions. Unión Progreso's capital base is also vulnerable to potential credit losses stemming from the credit union's concentrated loan book where a small number of borrowers hold the bulk of loans.

The ratings also incorporate governance concerns related to Unión Progreso's potential exposure to conflicts of interests derived from existing relationships between credit union shareholders and government officials at the State of Chihuahua, where the entity is headquartered.

Unión Progreso's intrinsic credit strength is nevertheless underpinned by its relatively stable funding structure, which includes an expanding customer deposit base as well as access to bank credit facilities. Asset quality metrics remain at relatively stable levels, supported by improving risk management practices.

The principal methodology used in this rating was Global Banks published in May 2013. Please see the Credit Policy page on www.moodys.com.mx for a copy of this methodology.

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 México. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

The long-term Mexican National Scale ratings of Ba.mx indicate issuers or issues with below-average creditworthiness relative to other domestic issuers. The short- term Mexican National Scale ratings of issuers rated MX-4 indicate a below-average ability to repay short-term senior unsecured debt obligations relative to other domestic issuers.

The period of time covered in the financial information used to determine the ratings is between 31 December 2008 and 30 September 2013 (source: Moody's and Unión Progreso).

The sources and items of information used to determine the ratings include 2012 and 2013 interim financial statements (source: Moody's, Unión Progreso and CNBV); year-end 2012 and 2011 financial statements (source: Unión Progreso and Moody's); information on market position (source: CNBV); regulatory capital information (source: Unión Progreso).

Unión Progreso is headquartered in Delicias, Chihuahua, Mexico. As of 30 September 2013, it had total assets of MXN3.3 billion ($251 million).

REGULATORY DISCLOSURES

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's information.

The rating has been disclosed to the rated entity prior to public dissemination.

A general listing of the sources of information used in the rating process, and the structure and voting process for the rating committees responsible for the assignment and monitoring of ratings can be found in the Disclosure tab in www.moodys.com.mx.

The date of the last Credit Rating Action was 20/June/2012.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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.mx.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this 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.

This Rating is subject to upgrade or downgrade based on future changes in the financial condition of the Issuer/Security, and said modifications will be made without Moody's de México S.A. de C.V accepting any liability as a result.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com.mx for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com.mx for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com.mx for further information.

Please see www.moodys.com.mx for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

The ratings issued by Moody's de Mexico are opinions regarding the credit quality of securities and/or their issuers and not a recommendation to invest in any such security and/or issuer.

Please see the ratings tab on the issuer/entity page on www.moodys.com.mx for additional regulatory disclosures for each credit rating.

David Olivares Villagomez
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: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700

Maria Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
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: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700

Moody's affirms Unión de Crédito Progreso's ratings; outlook remains negative
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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