Mexico, April 05, 2018 -- Moody´s de México S.A. de C.V has downgraded
the long-term global local and foreign currency deposit ratings
of Barclays Bank México, S.A. (Barclays México)
to Ba1 from Baa3. The rating agency has also downgraded the bank's
adjusted baseline credit assessment (BCA) to ba1 from baa3, its
short-term global local and foreign currency deposit ratings to
Not Prime from Prime-3, and its long-term Mexican
national scale deposit rating to A1.mx from Aa3.mx.
Further, the bank's long- and short-term Counterparty
Risk (CR) assessments were downgraded to Baa3(cr) and Prime-3(cr),
from Baa2(cr) and Prime-2(cr).
In addition, Moody's downgraded the long-term global local
currency issuer rating of Barclays Capital Casa de Bolsa, S.A.
de C.V. (Barclays Capital CB) to Ba1 from Baa3. The
brokerage house's short-term global local currency issuer rating
was also downgraded to Not Prime from Prime-3, while its
long-term Mexican National scale issuer rating was also downgraded
to A1.mx from Aa3.mx.
At the same time, Moody's affirmed Barclays México's ba2
BCA, and its MX-1 short-term Mexican national scale
deposit rating, as well as Barclays Capital CB's MX-1 short-term
Mexican National scale issuer rating.
All Barclays México and Barclays Capital CB long-term ratings
have now stable outlooks. This rating action concludes the review
for downgrade initiated on 23 February 2018.
The rating action follows the downgrade of the ratings and BCA of Barclays
México's parent, Barclays Bank PLC (Barclays Bank,
LT deposits and senior unsecured debt A2 stable, BCA baa3),
which Moody's announced on 4 April 2018, due to ongoing credit
challenges and ring-fencing implementation. For more information,
please see Moody's press release "Moody's downgrades Barclays PLC's
long-term issuer and senior unsecured ratings to Baa3 from Baa2
due to ongoing credit challenges and ring-fencing implementation,
concluding review; outlook stable" via the following link:
https://www.moodys.com/research/Moodys-downgrades-Barclays-PLCs-long-term-issuer-and-senior-unsecured--PR_381364.
The following ratings and assessments were affirmed:
Barclays Bank México, S.A. (815083902)
.Baseline credit assessment of ba2
.Short-term Mexican National Scale deposit rating of MX-1
Barclays Capital Casa de Bolsa, S.A. de C.V.
(821609714)
.Short-term Mexican National Scale issuer rating of MX-1
The following ratings and assessments were downgraded:
Barclays Bank México, S.A. (815083902)
.Adjusted baseline credit assessment to ba1 from baa3
.Long-term global local and foreign currency deposit ratings
to Ba1, stable, from Baa3
.Short-term global local and foreign currency deposit ratings
to Not Prime from Prime-3
.Long-term Mexican National Scale deposit rating to A1.mx
from Aa3.mx
.Long-term Counterparty Risk Assessment to Baa3(cr) from
Baa2(cr)
.Short-term Counterparty Risk Assessment to Prime-3(cr)
from Prime-2(cr)
Barclays Capital Casa de Bolsa, S.A. de C.V.
(821609714)
.Long-term global local currency issuer rating to Ba1,
stable, from Baa3
.Short-term global local currency issuer rating to Not Prime
from Prime-3
.Long-term Mexican National Scale issuer rating to A1.mx
from Aa3.mx
Outlook actions:
Barclays Bank México, S.A. (815083902)
- Outlook: changed to stable from ratings under review
Barclays Capital Casa de Bolsa, S.A. de C.V.
(821609714)
- Outlook: changed to stable from ratings under review
RATINGS RATIONALE
The downgrade of Barclays México and Barclays Capital CB's
ratings follows the downgrade of the ratings of their parent, Barclays
Bank. The downgrade of Barclays Bank's ratings and BCA reflects
Moody's assessment of the overall group's credit profile, particularly
in light of its ongoing profitability challenges, and the impact
on existing creditors of the implementation of ring-fencing regulation
in the United Kingdom (Aa2 stable). Ring-fencing aims to
make economically vital banking services more resilient to financial shocks
and will affect a small number of large UK banking groups, including
Barclays, which will see its business mix narrow. Barclays
Bank has become the group's non ring-fenced bank, following
the transfer of the group's UK retail and business banking activities
to the newly formed ring-fenced bank, Barclays Bank UK PLC
(LT deposits A1, stable, BCA a3). Barclays Bank has
therefore become more reliant on riskier wholesale and capital markets
activities, increasing its risk profile and expected earnings volatility,
as well as its dependence on wholesale funding, though its funding
profile will remain diversified.
In conjunction with the downgrade of Barclays Bank, Moody's
has lowered its assessment of the probability of affiliate support that
Barclays México will receive from its parent to "High"
from "Very High". This reduction reflects the group's
greater strategic focus on its two key markets, the UK and the US,
which has resulted in a reduction in its international footprint in recent
years and implies a lower willingness of Barclays Bank to support its
relatively small Mexican operations than in the past. The high
probability of affiliate support which Barclays México benefits
from, captures the continued management and financial integration
between Barclays Bank and its Mexican subsidiary, and also reflects
the reputational risks entailed by their shared brand.
The downgrade of the ratings of Barclays Capital CB considers Moody's
view of the brokerage house as highly integrated and harmonized (HIH)
with Barclays México due to the strong linkages between the two
in terms of infrastructure, risk management practices and customer
base. Consequently, Barclays Capital CB's ratings are aligned
with those of Barclays México.
The affirmation of Barclays México's ba2 BCA captures the bank's
very strong core capitalization and its low asset risk profile,
given that a significant portion of its risks from derivative operations
are effectively transferred to other companies of the Barclays group.
The bank's reported total capital ratio increased to 33.3%
as of January 2018, from 15.3% posted a year earlier,
mainly as a result of a decrease in regulatory capital charges related
to operational risk, as well as continued high earnings retention.
However, Barclays México's BCA is constrained by the bank's
niche wholesale and investment banking operations, with a narrow
focus on derivative operations, foreign exchange trading and bond
underwriting. This generates inherently volatile earnings that
are more vulnerable than those of traditional retail and commercial banking
to the current uncertainties regarding the outcome of the North American
Free Trade Agreement (NAFTA) negotiations and the upcoming presidential
election in Mexico.
The stable outlooks on Barclays México and Barclays Capital CB
is in line with the stable outlook of Barclays Bank.
WHAT COULD MOVE THE RATINGS UP OR DOWN
Barclays México's ratings may face upward pressures if the NAFTA
renegotiation results in a benign outcome for Mexico, and the uncertainty
related to the outcome of Mexican presidential elections subsides,
as the bank's capital, asset quality, and earnings are vulnerable
to the heightened market volatility these dynamics generate. On
the other hand, the bank's ratings could be downgraded in
the case of a significant deterioration in earnings generation or liquidity
position.
The principal methodology used in rating Barclays Bank México,
S.A. was Banks published in September 2017. The principal
methodology used in rating Barclays Capital Casa de Bolsa, S.A.
de C.V. was Securities Industry Market Makers published
in September 2017. Please see the Rating 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
Barclays Bank Mexico, S.A. and Barclays Capital Casa
de Bolsa, S.A. de C.V.'s ratings is
between 01 January 2013 and 31 December 2017 (source: Moody's,
issuers' annual audited and quarterly unaudited financial statements).
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 May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113601.
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 for Barclays Bank Mexico,
S.A. was 23 February 2018.
The date of the last Credit Rating Action for Barclays Capital Casa de
Bolsa, S.A. de C.V. was 23 February
2018.
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 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 credit 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.
Georges Hatcherian
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: 1 888 779 5833
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 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: 1 888 779 5833
Client Service: 1 212 553 1653
