New York, September 15, 2020 -- Moody's Investors Service has today assigned a Baa1 long-term debt
rating to the proposed fixed rate senior debt notes to be issued by BBVA
Bancomer, S.A. (BBVA Mexico), through its Texas
Agency. The proposed notes will be denominated and settled in USD.
The outlook on the rating is negative, in line with the outlook
on Mexico's sovereign ratings.
The following rating was assigned:
..Issuer: BBVA Bancomer, S.A.
Texas Agency
....Senior Unsecured Debt Rating, Assigned
Baa1, negative outlook
RATINGS RATIONALE
The Baa1 senior unsecured debt rating assigned to the notes incorporates
BBVA Mexico's fundamental credit strength, as evidenced by the bank's
baa1 baseline credit assessment (BCA). BBVA Mexico's BCA reflects
the bank's strong and steady earnings generation supported by a diversified
business profile with dominant positions in several market segments,
providing the bank with ample access to a low-cost core deposit
base. These credit strengths support the bank's robust internal
capital generation.
BBVA Mexico reported consolidated net income of MXN 15.9 billion
for the first half of 2020, a 33.6% decline compared
to the same period of 2019. The performance was affected by higher
loan loss provisions, mostly built in Q1 2020, in view of
the rising uncertainties triggered by the coronavirus outbreak.
The expansion into lower-margin wholesale segments and waiver of
interest payments offered as support particularly to individual borrowers
and small companies, hit margins in the second quarter and will
further pressure Q3 earnings, until the payment holidays come to
an end in October. In June 2020, BBVA Mexico's profitability
ratio, measured as net income to tangible assets, was 1.3%,
a material decline from the high 2.3% for the full year
2019.
The bank's loan book expanded 8.9% in the twelve months
ended June 2020, primarily driven by committed lines withdrawn by
corporate customers at the onset of the pandemic, but this growth
has reversed in Q2, a trend for the remainder of the year.
The portfolio growth and loan deferrals helped to reduce BBVA Mexico's
nonperforming loan ratio to 1.9% in June 2020, from
2.2% at the end of 2019. However, this level
does not reflect the full impact of the pandemic yet. As loan deferrals
that accounted for 25% of total loans come to an end between September
and October, asset risk will likely rise towards the end of 2020.
The bank reinforced reserves for loan losses, which covered 170%
of nonperforming loans in June 2020, and will maintain reserve cushion
at conservative levels to protect capital from losses.
BBVA Mexico's capitalization ratio, measured by Moody's as
tangible common equity relative to risk weighted assets (TCE/RWA),
stood at 11% in June 2020. We view the bank's capitalization
as adequate benefiting from lower dividend payout in 2020, and moderate
loan growth in the next two quarters.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The Baa1 rating assigned to the senior unsecured notes is in line with
BBVA Mexico's deposit rating, which is at the same level of Mexico's
sovereign bond rating of Baa1, currently with a negative outlook.
Therefore, at this point, there is no upward pressure on the
rating, and the outlook could be moved to stable if the outlook
on the sovereign rating is stabilized.
Conversely, the rating could be downgraded if Mexico's sovereign
rating is downgraded. Downward pressure on the bank's baseline
credit assessment could also arise if its capitalization and profitability
weaken materially or in case of a rapid deterioration of its asset quality
metrics.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating 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 this methodology.
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
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and whose ratings may change as a result of this credit rating action,
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if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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rating and, if applicable, the related rating outlook or rating
review.
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and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
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.
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for additional regulatory disclosures for each credit rating.
Ceres Lisboa
Senior Vice President
Financial Institutions Group
Moody's America Latina Ltda.
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Brazil
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M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
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