Mexico, July 24, 2012 -- Moody's Investors Service has today affirmed Scotiabank Inverlat,
S.A., Institución de Banca Múltiple,
Grupo Financiero Scotiabank Inverlat (Scotiabank México)'s
standalone financial strength rating (BFSR) of C-, which
translates to a standalone credit assessment (BCA) of baa2; long/short
term local currency deposit ratings of A2/Prime-1; and long/short
term foreign currency deposit ratings of Baa1/Prime-2. Moody's
also affirmed Scotia Inverlat Casa de Bolsa, S.A.
de C.V., Grupo Financiero Scotiabank Inverlat (CB
Scotia)'s long/short term local currency issuer ratings of A2/Prime-1.
At the same time, Moody's de México affirmed Scotiabank
México's long/short term Mexican National Scale deposit ratings
of Aaa.mx/MX-1 and CB Scotia's long/short term Mexican
National Scale issuer ratings of Aaa.mx/MX-1.
All ratings were affirmed with a stable outlook.
RATINGS RATIONALE
In affirming Scotiabank México's ratings, Moody's
noted the bank's steady recurring earnings generation against the
competitive challenges it faces as a result of its smaller scale relative
to other large Mexican banks'. Scotiabank México's
ample net interest margins derive from a well diversified loan portfolio
and a sizable and relatively inexpensive core funding base, which
reflects its well established local franchise in the segments of large
and medium sized corporations and high net worth individuals.
Moody's noted that being the smallest among banks with national
franchises in Mexico, Scotiabank México has focused on service
quality as a point of differentiation relative to its larger and more
diversified peers, a strategy that reflects in high asset quality
and stable earnings. However, operating costs are also high
and result in risk adjusted profitability that tends to lag those of peers.
The bank reports a manageable delinquency ratio of 2.54%,
which is comparable with the system's average; a comfortable
reserves coverage and a strong Tier 1 capital ratio, at 16.5%
as of 31 March 2012, provide adequate cushion against unexpected
losses.
Scotiabank México faces strong competition in its targeted customer
segments; nevertheless, management has been successful in defending
its market position as exhibited by steady organic growth and healthy
asset quality levels. As Mexico's economic activity grows,
we expect Scotiabank México to expand its business volumes and
thus earnings, benefiting from its presence in corporate and commercial
lending and in residential mortgages. Scotiabank México
is the seventh-largest bank in the country and holds 5%
of the system's deposits and gross loans as of 31 March 2012.
Scotiabank México's A2 local currency deposit rating incorporates
three notches of uplift from its baa2 BCA. Moody's assessment
of moderate probability of support from its Canadian parent, Bank
of Nova Scotia (rated B for BFSR and Aa1 for local currency deposits),
results in two notches of uplift from the BCA, with an additional
notch of uplift being derived from Moody´s assessment of a high
probability of government support given the bank's systemic importance
measured both in terms of loans and deposit market shares.
RATINGS OF SCOTIA INVERLAT CASA DE BOLSA
CB Scotia's A2 local currency issuer rating is based on its standalone
credit assessment of ba2 and Moody's assessment of full support
from Scotiabank México through Grupo Financiero Scotiabank Inverlat,
S.A. de C.V. (GF Scotiabank). Both
CB Scotia and Scotiabank México are fully owned by GF Scotiabank,
wherein Scotiabank México is the main source of earnings of the
local financial group.
CB Scotia's standalone BCA of ba2 is based on the brokerage house's
small franchise, as indicated by its limited pre-tax income
of Mx$193 million during 2011 and its limited product diversification,
especially when compared to much larger financial institutions in Mexico.
CB Scotia is nevertheless among the more active brokerage houses in Mexico,
ranking eighth out of 34 for assets under management as of year-end
2011, with focus on investment, advisory and trading activities,
as well as debt and equity capital markets. The entity's
focus on high net worth individuals for investments and advisory and on
large and medium size companies for origination, offers a more granular
diversification of customers when compared to other brokerage houses in
Mexico.
CB Scotia is fully integrated with Scotiabank México, with
which it effectively shares the same operating infrastructure.
The principal methodologies used in these ratings were "Moody's Consolidated
Global Bank Rating Methodology" published in June 2012 and "Global
Securities Industry Methodology" published in December 2006.
Please see the Credit Policy page on www.moodys.com.mx
for a copy of these methodologies.
The date of the last Credit Rating Action was 19 October 2009, when
Moody's downgraded Scotiabank México's local currency deposit ratings
to A2, from A1, and CB Scotia's local currency issuer
ratings to A2, from A1.
Scotiabank México and CB Scotia are headquartered in Mexico City,
Mexico. Scotiabank México reported US$8.9
billion in gross loans, US$15 billion in assets, US$10.1
billion in deposits, and US$2.2 billion in shareholders'
equity as of 31 March 2012. CB Scotia reported US$1.1
billion in assets and US$131 million in shareholders' equity
as of 31 December 2011.
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 Methodology published in March 2011 entitled
"Mapping Moody's National Scale Ratings to Global Scale Ratings".
The following ratings were affirmed:
Scotiabank Inverlat, S.A., Institución
de Banca Múltiple, Grupo Financiero Scotiabank Inverlat
- Standalone financial strength rating of C-
- Long term local currency deposit rating of A2
- Short term local currency deposit rating of Prime-1
- Long term foreign currency deposit rating of Baa1
- Short term foreign currency deposit rating of Prime-2
- Long term Mexican National Scale deposit rating of Aaa.mx
- Short term Mexican National Scale deposit rating of MX-1
Scotia Inverlat Casa de Bolsa, S.A. de C.V.,
Grupo Financiero Scotiabank Inverlat
- Long term local currency issuer rating of A2
- Short term local currency issuer rating of Prime-1
- Long term Mexican National Scale issuer rating of Aaa.mx
- Short term Mexican National Scale issuer rating of MX-1
The period of time covered in the financial information used to determine
Scotiabank México's rating is between 31 December 2006 and
31 March 2012 (source: Scotiabank México, Moody's,
and CNBV). The period of time covered in the financial information
used to determine CB Scotia's rating is between 31 December 2008
and 31 December 2011 (source: CB Scotia, Moody's, and
CNBV).
The sources and items of information used to determine Scotiabank México's
rating include 2011 and 2012 interim financial statements (source:
Scotiabank México); year-end 2011 audited financial
statements (source: Scotiabank México, audited by KPMG
Cárdenas Dosal, S.C.); financial statements
and information on market position (source: CNBV); regulatory
capital information (source: Banco de México). The
sources and items of information used to determine CB Scotia's rating
include 2010 and 2011 interim financial statements (source: CB Scotia);
year-end 2011 audited financial statements (source: CB Scotia,
audited by KPMG Cárdenas Dosal, S.C.);
financial statements and information on market position (source:
CNBV); regulatory capital information (source: CNBV).
Additional information on Rating Symbols and Definitions, issuer,
lead analyst, ratings history, etc. can be found in
Moody's local website www.moodys.com.mx.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
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.
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 México 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.
Felipe Carvallo
Asst Vice President - Analyst
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
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Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
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Moody's affirms ratings of Scotiabank México and Scotia Inverlat Casa de Bolsa
