Mexico, June 08, 2016 -- Moody's de México has today concluded the rating reviews
on BBVA Bancomer, S.A. (Bancomer) and Banco Nacional
de Mexico, S.A. (Banamex) initiated on 4 April 2016.
Moody's confirmed the senior unsecured A3 debt and deposit ratings
of both banks and assigned a negative outlook. Moody's also
downgraded Bancomer's standalone baseline credit assessment (BCA)
and adjusted BCA by one notch to baa2. Because they were already
positioned more conservatively at the baa2 level, Banamex's
BCA and adjusted BCA of baa2 were not subject to the review.
Moody's also confirmed Bancomer's and Banamex's Mexican
National Scale deposit and senior unsecured debt ratings of Aaa.mx;
the short-term ratings were not subject to the review. Moody's
also confirmed the long- and short-term counterparty risk
assessments of A2(cr)/Prime-1(cr), of both banks, respectively.
Bancomer's long-term global scale subordinated MTN debt program
rating was lowered to (P)Baa3 from (P)Baa2, and its Mexican National
Scale rating was downgraded to Aa3.mx from Aa1.mx.
Moody's also downgraded the long-term issuer ratings of Casa
de Bolsa BBVA Bancomer, S.A. de C.V.
and of Hipotecaria Nacional, S.A. de C.V.,
to Baa2 from Baa1, to reflect the subsidiaries' alignment to Bancomer's
ratings. The National Scale Ratings assigned to these two issuers
were downgraded to Aa2.mx from Aaa.mx. The outlook
on these entities' ratings is stable.
At the same time, Moody's has assigned A3 and Aaa.mx
long term global local currency and Mexican National Scale senior unsecured
debt ratings, with negative outlook, to Bancomer's issuance
of Certificados Bursatiles Bancarios (BACOMER 16) announced in Bancomer's
June 8th 2016 press release.
A detailed list of affected ratings is provided below.
RATINGS RATIONALE
CONFIRMATION OF DEPOSIT RATINGS WITH A NEGATIVE OUTLOOK
The confirmation of Bancomer and Banamex's A3 deposit and senior
debt ratings reflects Moody's continued assessment of a very high
likelihood that the Mexican government would support these systemically
important institutions should they face severe financial stress.
Moody's continues to regard the government as having a high willingness
to support the country's banks to assure banking system stability
and investor confidence. According to Moody's Senior Credit
Officer David Olivares, "Moody's assessment incorporates
the government's track record of support, the system's
reliance on domestic deposit funding, and the absence in Mexico
of an operational bank resolution regime based on the principle of bailing-in
bank creditors".
Moody's assessment of government support results in two notches
of uplift from the banks' baa2 adjusted BCAs, leading to A3
deposit ratings that are aligned to the government's own bond rating.
As a result of the negative outlook on the government's bond rating,
the outlook on Bancomer's and Banamex's deposit ratings is
also negative.
LOWERING OF BANCOMER'S STANDALONE BASELINE CREDIT ASSESSMENT
Bancomer, along with other Mexican banks, faces increased
medium-term tail risks because of the country's less favorable
operating environment stemming from a combination of the oil price shock
and the slower than expected economic growth. At the same time,
the structural reforms adopted in 2013-14, which were expected
to deliver a boost to economic activity, have not provided the anticipated
benefit. While Moody's does not project an economic deceleration,
together these factors have undermined expectations for improved economic
performance and shifted the balance of risks and opportunities for the
country's banking sector to the downside.
"Although Bancomer's recent performance has remained strong,
the bank's historically lower core capitalization relative to other
large Mexican banks and high loan concentrations leave it exposed to a
potential deterioration in asset quality", Olivares added.
Bancomer's core capital ratio measured as tangible common equity
to risk weighted assets (TCE/RWA) of around 10.7%,
while still reasonably sound, leads to a low ba2 score for capital
in Moody's methodology, and is nearly 370 basis points lower
than that of its closest competitor Banamex.
In addition, Moody's also highlights Bancomer's high
loan concentrations, especially relative to core capital.
The bank's 20 largest loan exposures are larger than its TCE,
leaving the bank exposed to a potential crystallization of rising tail
risks. The bank's direct loan portfolio exposure to Mexico's
national oil company Pemex (issuer Baa3 negative, b3 BCA),
whose credit quality has deteriorated significantly even considering the
likelihood that it will benefit from sovereign support, is particularly
large, at nearly 30% of Bancomer's TCE, according
to Moody's estimates.
However, these credit challenges are balanced by important credit
strengths, including the bank's ample core earnings and superior
access to retail deposit funding, which continue to underpin the
baa2 BCA. Despite the less favorable operating environment,
Moody's expects the bank's profitability to remain resilient,
supported by ample net interest margins (NIM) of about 6%,
and very strong operating efficiency, which stood at just 41%
of net revenues as of March 2016. Lending concentrations aside,
the bank also benefits from relatively strong asset quality, with
a delinquency ratio of 2.4% as of 1Q2016, though its
focus on higher-risk consumer lending leaves it more exposed to
a potential deterioration of the economy. Moreover, as is
the case with all Mexican banks, Bancomer's delinquency ratios
are flattered by a very high level of write-downs relative to banks
globally. Lastly, as the largest deposit taker in Mexico,
Bancomer exhibits a very stable and low-cost funding structure.
Given that Banamex's BCA was more conservatively positioned than
Bancomer's, at baa2 vs. baa1, due to its recent
experience with borrower fraud and the shortcomings in risk management
and controls, the BCA was not affected by Mexico's less favorable
economic prospects. Olivares noted that "Banamex's
strong capitalization, reflected by a TCE/RWA ratio of around 14.4%,
provides the bank strong loss absorption capacity, while its lower
borrower concentrations, leave it less exposed to tail risks than
Bancomer". In addition, as with Bancomer, Banamex
benefits from superior access to low cost retail deposit funding.
These strengths help to mitigate concerns regarding Bancomer's very
high credit costs and their impact on its profitability.
WHAT COULD CHANGE THE RATINGS UP OR DOWN
The banks' BCAs could face downward pressure if a slowdown in or
further shock to the Mexican economy causes their capitalization,
profitability, and/or asset quality deteriorate. In addition,
Banamex's BCA could also face downward pressure if new shortcomings
on risk management or controls, which have plagued the bank in the
past, are revealed. Though the bank has undertaken an ambitious
program to improve these internal controls, reducing the likelihood
of a recurrence of past problems. However, the banks'
deposit and senior debt ratings would not be affected by a change in their
BCAs provided that the government continues to demonstrate a very high
willingness to support them. That said, the senior unsecured
debt and deposit ratings would be lowered if Mexico's government
bond ratings, which currently carry a negative outlook, are
downgraded. While there is no upwards ratings pressure at this
point, the banks' outlooks will likely stabilize if and when
the government outlook returns to stable.
LIST OF AFFECTED RATINGS
BBVA Bancomer, S.A.
The following ratings were confirmed with a negative outlook:
Long-term global local currency deposit rating of A3, negative
outlook
Long-term foreign currency deposit rating of A3, negative
outlook
Long-term Mexican National Scale deposit rating of Aaa.mx
Long-term global local currency senior unsecured debt rating of
A3 (BCM0001 06, BACOMER 07U, BACOMER 10, BACOMER 10U,
BACOMER 15), negative outlook
Long-term global local currency senior unsecured MTN debt program
rating of (P)A3
Long-term Mexican National Scale senior unsecured debt rating of
Aaa.mx (BCM0001 06, BACOMER 07U, BACOMER 10,
BACOMER 10U, BACOMER 15)
Long-term Mexican National Scale senior unsecured MTN debt program
rating of Aaa.mx
Long-term counterparty risk assessment of A2(cr)
Short-term counterparty risk assessment of Prime-1(cr)
The following ratings were downgraded:
Baseline credit assessment to baa2 from baa1
Adjusted baseline credit assessment to baa2 from baa1
Long-term global local currency subordinated MTN debt program rating
to (P)Baa3 from (P)Baa2
Long-term Mexican National Scale subordinated MTN debt program
rating to Aa3.mx from Aa1.mx
The following ratings were assigned:
Long term global local currency senior unsecured debt rating of A3 (BACOMER
16), negative outlook
Long term Mexican National Scale senior unsecured debt rating of Aaa.mx
(BACOMER 16)
-- Casa de Bolsa BBVA Bancomer, S.A.
de C.V.
The following ratings were downgraded:
Long-term global local currency issuer rating to Baa2 from Baa1,
stable outlook
Long-term Mexican National Scale issuer rating to Aa2.mx
from Aaa.mx
-- Hipotecaria Nacional, S.A. de C.V.
The following ratings were downgraded:
Long-term global local currency issuer rating to Baa2 from Baa1,
stable outlook
Long-term Mexican National Scale issuer rating to Aa2.mx
from Aaa.mx
Banco Nacional de Mexico, S.A.
The following ratings were confirmed with a negative outlook:
Long-term global local currency deposit rating of A3, negative
outlook
Long-term foreign currency deposit rating of A3, negative
outlook
Long-term Mexican National Scale deposit rating of Aaa.mx
Long-term global local currency senior unsecured debt rating of
A3 (BANAMEX 10, BANAMEX 10-2), negative outlook
Long-term global local currency senior unsecured MTN debt program
rating of at (P)A3
Long-term Mexican National Scale senior unsecured debt rating of
Aaa.mx (BANAMEX 10, BANAMEX 10-2)
Long-term Mexican National Scale senior unsecured MTN debt program
rating of Aaa.mx
Long-term counterparty risk assessment of A2(cr)
Short-term counterparty risk assessment of Prime-1(cr)
The principal methodology used in rating BBVA Bancomer, S.A.,
Banco Nacional de Mexico, S.A. and Hipotecaria Nacional
S.A. de C.V. was Banks published in January
2016. The principal methodology used in rating Casa de Bolsa BBVA
Bancomer S.A. de C.V. was Global Securities
Industry Methodology published in May 2013. Please see the Ratings
Methodologies page on www.moodys.com.mx for a copy
of these methodologies.
The period of time covered in the financial information used to determine
BBVA Bancomer, S.A., Casa de Bolsa BBVA Bancomer
S.A. de C.V., Hipotecaria Nacional S.A.
de C.V.'s and Banco Nacional de Mexico, S.A.
rating is between 01/01/2011 and 03/31/2016 (source: Comisión
Nacional Bancaria y de Valores).
BBVA Bancomer is headquartered in Mexico City, Mexico and reported
1,759 billion in assets (source: Comisión Nacional
Bancaria y de Valores), as of March 2016.
Banamex is headquartered in Mexico City, Mexico and reported MXN1,196
billion in assets (source: Comisión Nacional Bancaria y de
Valores), as of March 2016.
Moody's National Scale Credit 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 credit 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 ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in June 2014 entitled "Mapping Moody's National
Scale Ratings to Global Scale Ratings".
REGULATORY DISCLOSURES
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's information.
The ratings have been disclosed to the rated entities 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 on BBVA Bancomer, S.A.,
Casa de Bolsa BBVA Bancomer S.A. de C.V.,
Hipotecaria Nacional S.A. de C.V.'s was 04/April/2016.
The date of the last Credit Rating Action on Banco Nacional de Mexico,
S.A was 04/April/2016.
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 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.mx.
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.
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 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 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
M. Celina Vansetti
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 confirms A3 deposits and senior debt ratings of BBVA Bancomer and Banamex; negative outlook
