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07 Apr 2011
Mexico, April 07, 2011 -- Moody's Investors Service downgraded Banco Autofin México,
S.A. (Banco Autofin)'s long term local and foreign
currency deposit ratings to B3, from B1. The bank financial
strength rating was affirmed at E+. At the same time,
Moody's de México downgraded Banco Autofin's long term
Mexican National Scale deposit rating to Ba2.mx, from Baa2.mx;
and its short term National Scale deposit rating to MX-4,
from MX-3. All ratings have a stable outlook.
The following rating actions were taken:
.Bank financial strength rating of E+, affirmed
.Long term local currency deposit rating to B3, from B1
.Long term foreign currency deposit rating to B3, from B1
.Long term Mexican national scale debt rating to Ba2.mx,
from Baa2.mx
.Short term Mexican national scale debt rating to MX-4,
from MX-3
RATINGS RATIONALE
Moody's downgrade of Banco Autofin's ratings reflects (i)
continued challenges the bank faces in its core business of car financing,
which pressure margins (ii) still untested changes in strategic direction,
as it moves into agribusiness financing, and (iii) continued dependence
from related party relationships. As a result, the bank's
E+ BFSR now maps to a baseline credit assessment of B3, from
B2 previously.
Moody's noted that Autofin's car finance operation continues
to face strong competition from much larger finance institutions,
with resulting margin compression and modest business volume origination.
Autofin has sought to increase its fleet dealer financing in response
to lower growth on individual car lending and on its taxi financing program
within the Federal District. Loans acquired from its sister-company,
Autofinanciamiento de México, S.A. have also
declined. These challenges are compounded by the bank's still
significant reliance on more expensive wholesale funding and by high expense
base, relative to that of its peers, which have contributed
to continued operating losses.
Management's decision to expand the bank's focus into agribusiness
commodity repos exposes Banco Autofin to transition and implementation
risks, because this line of business requires a very different know-how
than its core car financing business. Since mid-2010,
Banco Autofin's new commodities repos have increased to reach Mx$333
million, representing 15% of total assets as of year-end
2010.
One critical challenge to the ratings is Banco Autofin's large loan
exposures to related parties, especially those within an unrelated
industry, and to large single borrowers. In Moody's view,
related party exposures create conflicts of interest that are difficult
for the board or management to handle, and thus, increase
the bank's credit risk. Moreover, large loans could
experience fast deterioration and results in higher earnings volatility.
The downgrade of the bank's deposit ratings reflects the view that
parental support is difficult to assess given the limited publicly available
information on its controlling group, Grupo Autofin. The
deposit rating therefore, reflects Banco Autofin's standalone
B3 baseline credit assessment and does not benefit of any uplift of parental
support.
Though Moody's expects marginal improvements in Banco Autofin's
earnings, the nature of these earnings bear more risk and potential
volatility than the original retail-centered strategy. This
is because its funding has a high proportion of expensive deposits while
part of its earnings are sourced from agricultural commodity financing.
The bank's adjusted Tier 1 ratio continues to be adequately high
to absorb Moody's stresses on Banco Autofin's portfolio of
loans and securities within anticipated and stressed losses, especially
when incorporating higher expected losses related to the bank's
large exposure to related party loans. As of year-end 2010,
the unadjusted tier one ratio of the bank stood at 18.03%,
maintained by continued support from shareholders through capitalizations
in 2007, 2009, and 2010.
The principal methodologies used in rating Banco Autofin 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, available
on www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
website
Banco Autofin is headquartered in Mexico City, Mexico. As
of year-end 2010, the bank reported Mx$2.219
billion in assets, Mx$1.726 billion in loans,
and Mx$540 million in equity.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information and confidential
and proprietary Moody's Investors Service information.
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a credit rating.
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Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
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Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Mexico
Felipe Carvallo-Mendoza
Asst Vice President - Analyst
Financial Institutions Group
Moody's de Mexico S.A. de C.V
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700
New York
M. Celina Vansetti
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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 downgrades Banco Autofin's deposit rating to B3, outlook is stable
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
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Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.” Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. 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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000. MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
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