New York, April 22, 2020 -- Moody's Investors Service, ("Moody's") has
today downgraded to Baa1, from A3 long-term global scale
senior unsecured debt ratings of BBVA Bancomer, S.A.
Texas Agency (BBVA México), Banco Santander México,
S.A. (Santander México), Banco Mercantil del
Norte, S.A. (Cayman I) (Banorte), Nacional Financiera,
S.N.C. (Nafin), and Banco Nacional de Comercio
Exterior, SNC (CI) (Bancomext). The rating outlook remained
negative.
At the same time, Moody's downgraded the long-term
global scale certificate of deposit program of Nacional Financiera S.N.C.,
London Branch (Nafin London) to (P)Baa1, from (P)A3, as well
as the long-term Counterparty Risk Assessment (CR Assessment) of
Banorte to Baa1(cr), from A3(cr).
The rating agency also affirmed BBVA México's subordinated
debt ratings of Baa2 and Baa3(hyb), as well as the Baa3(hyb) subordinated
debt ratings of Santander México and Bancomext. Junior subordinated
debt ratings of Baa3 (hyb) of BBVA México, Ba1 (hyb) and
Ba2 (hyb) of Banorte and Ba1 (hyb) of Santander (initially issued by Grupo
Financiero Santander México, S.A.B.
de C.V.) were also affirmed.
Finally, Moody's affirmed the long- and short-term
CR Assessments of BBVA México at A3(cr) and Prime-2(cr),
the short-term CR Assessment of Banorte at Prime-2(cr),
and the short-term global scale certificate of deposit program
rating of Nafin London at (P)Prime-2.
The actions follow the downgrade of Government of Mexico's sovereign
debt rating to Baa1, from A3, with a negative outlook,
on 17 April 2020. For additional information, please refer
to the related press release: "Moody's downgrades Mexico's ratings
to Baa1, maintains negative outlook" (https://www.moodys.com/research/Moodys-downgrades-Mexicos-ratings-to-Baa1-maintains-negative-outlook--PR_422013).
A complete list of affected ratings can be found at the end of the press
release.
RATINGS RATIONALE
The downgrade of the ratings of BBVA México, Santander México,
Banorte, Nafin, and Bancomext is in line with the downgrade
of Mexico's sovereign debt rating to Baa1, from A3,
because (1) Mexico's medium term economic growth prospects have
materially weakened, (2) the continued deterioration in Petróleos
Mexicanos (Pemex, Ba2 negative) financial and operational standing
is eroding the sovereign's fiscal strength, and (3) weakened
policy making and institutional capacity. The rating actions reflect
the high inter-linkages between Mexican banks' ratings and those
of the sovereign via holdings of government bonds for liquidity purposes
or lending to entities such as state-owned enterprises or regional
and local governments that benefit from cash flows from the Federal government.
Moreover, the global spread of the coronavirus is resulting in simultaneous
supply and demand shocks. Moody's expects these shocks to materially
slow global economic activity, particularly in the first half of
this year. In Mexico, the coronavirus outbreak will mire
an already weak economy into a recession, and as such Moody's forecasts
a significant GDP contraction this year followed by a slow recovery.
The full extent of the economic costs will be unclear for some time.
Fear of contagion will dampen consumer and business activity. The
longer it takes for households and businesses to resume normal activity,
the greater the economic impact. Fiscal and monetary policy measures
will likely help limit the damage in individual economies. The
coronavirus outbreak will have a direct negative impact on the asset quality
and profitability of banks, in some cases in a pronounced manner,
for example for undiversified banks with material exposure to high-risk
sectors and small and medium-sized enterprises. Moody's
also views risks to be elevated for business models reliant on spread
income, equity indices and sustained low rates.
The exposure of the issuers affected by today's rating action to
environmental and social risks is low and moderate, respectively,
consistent with our general assessment for the global banking sector.
Moody's regards the coronavirus outbreak as a social risk under its ESG
framework, given the substantial implications for public health
and safety. Moody's does not have any particular concerns with
the governance of the five Mexican issuers and their affiliated entities
affected by this rating action. They show an appropriate risk management
framework commensurate with its risk appetite.
LOWERING OF ASSESSMENT ON PROBABILITY OF GOVERNMENT SUPPORT FOR BANKS
Moody's also lowered the government support assumptions it incorporates
in the credit ratings of Mexican commercial banks to high, from
very high, to reflect the Mexican government's stance towards
fiscal austerity, which may evidence less willingness to provide
support to privately-owned entities. As a result,
debt ratings for BBVA México and Santander México no longer
benefit from government support despite their importance to the Mexican
payment system. This change however, does not influence the
banks' ratings because of their relatively high adjusted baseline
credit assessments (BCAs), which are now at the same level as the
rating of the government.
Banorte's Baa1 debt ratings benefit from one notch of uplift from
the bank's baa2 adjusted BCA despite Moody's also having lowered
its assessment of government support for the bank.
Moody's views are also supported by the rating agency's expectation
that support from the Mexican federal government would be provided,
if needed, first and foremost to development banks, which
benefit from statutory support and that have relevant public policy mandates
Banco Nacional de Obras y Servicios Públicos, S.N.C.
(Banobras, Baa1 negative, ba1), Nafin and Bancomext,
and to state-owned enterprises, such as Pemex.
VERY HIGH SUPPORT FOR DEVELOPMENT BANKS REMAINS UNCHANGED
Moody's incorporates three notches of uplift for Nafin and four
notches of uplift for Bancomext, based on the rating agency's
assumption of very high government support for these development banks
based on Nafin's law[1] and Bancomext's law[2].
Moody's assumes the government will support the development banks'
obligations with creditors and ensure timely payment of the banks' obligations.
Consequently, the Baa1 ratings and negative outlooks of Nafin and
Bancomext are in line with Mexico's Baa1 sovereign rating and negative
outlook.
OUTLOOK REMAINS NEGATIVE
The outlooks remain negative in line with the negative outlook on Mexico's
sovereign debt rating. The outlooks on BBVA México and Santander
México also incorporate Moody's assessment of downward pressure
on the bank's standalone BCAs derived from the more difficult economic
scenario in Mexico.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
In line with the negative outlook, the ratings of BBVA México
and Santander México, could be downgraded in the event of
a further downgrade of the Mexican government's sovereign debt rating,
which would indicate a weaker operating environment for banks and a deterioration
of the banks' asset quality, capitalization and profitability.
In line with the negative outlook, the ratings of Banorte,
Nafin, and Bancomext could be downgraded if Mexico's sovereign
debt rating were to be downgraded.
Upward ratings pressure is more limited at this time given the negative
outlook on the ratings of BBVA México, Banorte, Santander
México, Nafin, and Bancomext. However,
the negative outlook could be stabilized in line with an outlook change
to stable, from negative, on the sovereign rating.
List of affected ratings
The following ratings and assessments were downgraded:
BBVA Bancomer, S.A. Texas Agency
. Long-term global local currency senior unsecured debt
rating to Baa1, from A3, outlook remains negative
Banco Mercantil del Norte, S.A.(Cayman I)
. Long-term global foreign currency senior unsecured debt
rating to Baa1, from A3, outlook remains negative
. Long-term Counterparty Risk Assessment to Baa1(cr),
from A3(cr)
Banco Santander México, S.A.
. Long-term global foreign currency senior unsecured debt
rating to Baa1, from A3, outlook remains negative
Banco Nacional de Comercio Exterior, SNC (CI)
. Long-term global foreign currency senior unsecured debt
rating to Baa1, from A3, outlook remains negative
Nacional Financiera, S.N.C.
. Long-term global foreign currency senior unsecured debt
rating to Baa1, from A3, outlook remains negative
Nacional Financiera S.N.C., London Branch
. Long-term global local currency certificate of deposit
program to (P)Baa1, from (P)A3
. Long-term global foreign currency certificate of deposit
program to (P)Baa1, from (P)A3
The following ratings and assessments were affirmed:
BBVA Bancomer, S.A. Texas Agency
. Long-term global local currency subordinated debt rating
of Baa2
. Long-term global local currency subordinated debt rating
of Baa3 (hyb )
.Long-term global local currency junior subordinated debt
rating of Baa3 (hyb)
. Long-term Counterparty Risk Assessment of A3(cr)
. Short-term Counterparty Risk Assessment of Prime-2(cr)
Banco Mercantil del Norte, S.A.(Cayman I)
. Long-term global foreign currency junior subordinated
debt rating of Ba1 (hyb)
. Long-term global foreign currency junior subordinated
debt rating of Ba2 (hyb)
. Short-term Counterparty Risk Assessment of Prime-2(cr)
Banco Santander México, S.A.
. Long-term global foreign currency subordinated debt rating
of Baa3 (hyb )
Grupo Financiero Santander México, S.A.B.
de C.V. (the below issuance was assumed by Santander México)
. Long-term global foreign currency junior subordinated
debt rating of Ba1(hyb)
Banco Nacional de Comercio Exterior, SNC (CI)
. Long-term global foreign currency subordinated debt rating
of Baa3 (hyb)
Nacional Financiera S.N.C., London Branch
. Short-term global local currency certificate of deposit
program of (P)Prime-2
. Short-term global foreign currency certificate of deposit
program of (P)Prime-2
Outlook actions
BBVA Bancomer, S.A. Texas Agency
. Outlook remains negative
Banco Mercantil del Norte, S.A.(Cayman I)
. Outlook remains negative
Banco Nacional de Comercio Exterior, SNC (CI)
. Outlook remains negative
The principal methodologies used in rating Banco Nacional de Comercio
Exterior, SNC (CI), Nacional Financiera, S.N.C.,
and Nacional Financiera S.N.C., London Branch
were Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865,
and Government-Related Issuers Methodology published in February
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207.
The principal methodology used in rating BBVA Bancomer, S.A.
Texas Agency, Banco Mercantil del Norte, S.A.(Cayman
I), Banco Santander México, S.A.,
and Grupo Financiero Santander México, S.A.B
de C.V. was Banks Methodology published in November 2019
and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
REFERENCES/CITATIONS
[1] Ley Orgánica de Nacional Financiera 26-Dec-1986
[2] Ley Orgánica del Banco Nacional de Comercio Exterior 20-Jan-1986
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Jose Angel Montano
Vice President - Senior 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
Ceres Lisboa
Senior Vice President
Financial Institutions Group
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
