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Rating Action:

Moody's takes rating actions on Mexican financial institutions

 The document has been translated in other languages

05 Jun 2015

Reviews concluded on three banks, IPAB, and seven bank affiliates

Mexico, June 05, 2015 -- Moody's de México has concluded its rating reviews on BBVA Bancomer, S.A., Banco Mercantil del Norte, S.A. (Banorte), Scotiabank Inverlat, S.A. (Scotiabank México), and Instituto para la Protección al Ahorro Bancario, Organismo Descentralizado de la Administración Pública Federal (IPAB). The reviews, which were initiated on 6 March 2015 (see press release at https://www.moodys.com/research/--PR_320052 ) to reassess Moody's government support assumptions for these entities, concluded with the downgrade of the affected banks' debt and local currency deposit ratings to A3 from A2. The A3 ratings map to Aaa.mx on the Mexican National Scale. At the same time, Moody's placed on review for downgrade HSBC Mexico's, S.A. senior and subordinate debt ratings, and lowered the bank's standalone baseline credit assessment (BCA) by one notch to baa3.

In general, these rating changes do not reflect a deterioration in the affected issuers' credit fundamentals nor does it reflect a change in Moody's opinion on the Mexican sovereign's fundamental credit profile.

Today's actions reflect the new aspects of Moody's bank rating methodology published on 16 March 2015 (see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_179789).

Moody's affirmed the BCAs and deposit ratings of Banco Nacional de México, S.A. (Banamex), Banco Santander (México), S.A. (Santander México), Deutsche Bank México, S.A. (Deutsche México) and Barclays Bank México, S.A. (Barclays México).

Among the actions Moody's has taken on Mexican National Scale ratings (NSR) are the following: Eight long-term bank deposit and two issuer NSRs were affirmed, four issuer ratings confirmed, one long-term issuer downgraded, one short-term issuer upgraded, and one long-term bank subordinated debt rating placed on review for downgrade.

In addition, the rating agency assigned Counterparty Risk (CR) assessments to each of the banks it rates in México and their branches, in line with its new bank rating methodology.

Moody's has withdrawn the outlooks on all Mexican banks' junior instruments for its own business reasons. Please refer to Moody's Policy for Withdrawal of Credit Ratings, available on its website, www.moodys.com.mx.

Outlooks, which provide an opinion on the likely rating direction over the medium term, are now assigned only to long-term deposit and senior unsecured debt ratings. Except for HSBC México (ratings on review for downgrade) and Banco del Bajio, S.A. (BanBajio) (positive outlook), the outlook on other rated Mexican banks' debt and deposit ratings is stable.

Lastly, Moody's has concluded its rating reviews on three other Mexican brokerage houses and finance companies that were also initiated on 6 March 2015 (see press release at https://www.moodys.com/research/--PR_320054). These reviews also resulted in the downgrades of the affected entities ratings to the level of their respective affiliates' adjusted BCAs, from their affiliates' supported ratings, thereby removing any expectation of government support from the affected ratings. At the same time, Moody's placed on review for downgrade the ratings of HSBC Casa de Bolsa in line with the review on HSBC Mexico.

A detailed list of ratings affected is provided below.

RATINGS RATIONALE

The new bank methodology includes a number of elements that Moody's has developed to help accurately predict bank failures and determine how each creditor class is likely to be treated when a bank fails and enters resolution. These new elements capture insights gained from the crisis and the fundamental shift in the banking industry and its regulation.

In light of the new methodology, Moody's rating actions on Mexican banks generally reflect the following considerations: (1) the likelihood of government support; (2) the "Strong-" Macro Profile of México; and (3) the banks' core financial ratios.

1) Likelihood of government support

Moody's has changed the way it assesses the government's ability to support banks. Nevertheless, ratings for the Mexican banks benefit from an average of one notch of uplift due to our assumption of the probability of government support given its strong capacity and demonstrated willingness to support system stability.

2) México's "Strong-" Macro Profile

While recent reforms have not yet begun to provide the expected benefits, México's stable economic outlook and credit conditions provide a supportive operating environment for Mexican banks. The country has a well-diversified economy, limited susceptibility to event risk, and a predictable policy framework, and is not expected to be significantly affected by the recent drop in the price of oil. México's moderate institutional strength balances a track record of sound economic policy weighed down by a relatively weak rule of law that has historically restricted loan growth. However, financial intermediation should gradually gain traction as México's economy benefits from a series of recent structural reforms in key sectors including energy, telecommunications and financial services.

3) Banks' core financial ratios

Mexican banks' BCAs (median baa2) take into account their very strong profitability, as well as comfortable core capitalization ratios and a high level of liquid resources. Despite a relatively heavy reliance on short-term repo funding, most banks also benefit from substantial funding through stable core deposits, which largely reduces refinancing risks. While asset quality metrics remain reasonably healthy, loan portfolios of Mexican banks tend to exhibit high concentrations that from time to time have exposed banks to large problem borrowers.

I. DOWNGRADE OF BBVA BANCOMER, BANORTE, SCOTIABANK MEXICO AND IPAB'S RATINGS, BANK BCAS AFFIRMED

Moody's downgraded the global local currency (GLC) long-term senior unsecured debt and the local and foreign currency deposit ratings of BBVA Bancomer, Banorte and Scotiabank México, as well as IPAB's GLC issuer rating, to A3 from A2. In addition, the corresponding short-term ratings were downgraded to Prime-2 from Prime-1.

The downgrades reflect a change in the way Moody's assesses the capacity of the Mexican government to provide support to banks. Moody's has recently revised it approach to assessing governments' capacity to provide support in a number of other Latin American countries as well, including Chile and Guatemala, and continues to reassess its views in several other countries in the region.

Previously, when imputing government support assumptions in bank ratings, deposit and senior unsecured debt ratings were, in certain cases, positioned above their relevant sovereign rating. This reflected an expectation that the extensive policy tools available to central banks to support domestic banks could result in a capacity for the sovereign to provide support to its country's banks that is higher than its own creditworthiness. However, insights gained from historical experiences showed that when a crisis is prolonged, these measures remain insufficient to restore confidence in the system and an outright recapitalization of the banks is necessary.

In this light, Moody's believes that Mexican government's own bond rating of A3 is the appropriate measure of a its ability to support banks and the IPAB, as this rating better captures the government's fiscal limitations and therefore its ultimate capacity to provide support. The ratings of these three banks and the IPAB were affected by this revised assessment as their local currency ratings were one notch above that of the Mexican government. The downgrades do not reflect any change in our opinion of the IPAB's or the government's fundamental credit profile.

The outlook on these banks' senior debt and deposit ratings and the IPAB's issuer ratings is stable, reflecting the stable outlook on the Mexican government's sovereign bond rating. These ratings are only likely to change if and when there is a change in the government bond rating, notwithstanding changes in the issuers' adjusted BCAs, which consider both their standalone BCAs and affiliate support.

BBVA BANCOMER

Moody's affirmed BBVA Bancomer's baa1 BCA reflecting the bank's ample and predictable core earnings, supported by its well-established and dominant franchise and strong cross-selling power to generate fee-based revenues. The bank's extensive branch network also gives it superior access to core deposits, notwithstanding its heavy reliance on repo funding, and it also benefits from ample liquid resources. Relative to peers, however, BBVA Bancomer's capital mix is less strong given a larger component of lower quality Tier-2 elements.

Moody's also affirmed the bank's Baa2 subordinated debt ratings and withdrew the corresponding outlooks for Moody's own business reasons. At the same time, Moody's assigned A2(cr) and Prime-1(cr) CR Assessments to BBVA Bancomer.

Unless core capital increases substantially and sustainably, the BCA is unlikely to face upward pressure.

The BCA could face downward pressure if the bank's capitalization or asset quality deteriorates significantly.

BANORTE

Moody's affirmed Banorte's baa1 BCA, reflecting the bank's very strong capitalization and robust earnings. While asset quality remains sound, the bank faces risks related to rapid loan growth and high borrower concentrations, some of which have become problematic at times.

Upward changes to the BCA could occur if expected loan growth in consumer and small and mid-sized enterprises (SME) lending delivers a substantial increase in profitability without deterioration in asset quality.

Moody's also affirmed Banorte's Baa2 subordinated and Baa3 (hyb) junior subordinated debt ratings and withdrew their corresponding outlooks. At the same time, Moody's assigned A2(cr) and Prime-1(cr) CR Assessments to Banorte.

The BCA could face downward pressure if unexpected problems with large borrowers occur affecting asset quality metrics and profitability, or if a deterioration in corporate governance leads to an increase in related-party lending or a rise in the bank's risk appetite.

SCOTIABANK MEXICO

The baa2 BCA of Scotiabank México was affirmed, reflecting the bank's strong capitalization despite an ongoing deterioration in profitability, Scotiabank México faces strong competition in its targeted customer segments, with large franchise and market share gaps versus other dominant Mexican banks. In addition, the bank faces asset quality risks related to rapid loan growth in recent years, but problem loan levels currently remain manageable and are supported by ample loan loss reserves.

Moody's also assigned A2(cr) and Prime-1(cr) CR Assessments to Scotiabank México.

Upward pressure on the BCA could occur if the bank profitability and asset quality exhibit significant improvements.

The BCA could come under downward pressure if the bank suffers loss of market share and franchise erosion, leading to a further deterioration in profitability and a decreasing ability to attract and retain additional core depositors, or if capitalization declines significantly.

IPAB

Moody's downgraded the IPAB's GLC issuer ratings to A3/Prime-2, the same level as México's sovereign bond ratings. The downgrade reflects the change in the anchor rating for government support. IPAB is part of the Mexican government and benefits from an implicit sovereign guarantee that covers the deposit insurer's obligations.

The stable outlook on the IPAB's ratings is in line with the stable outlook of México's rating. IPAB's ratings would change along with any change in México's sovereign rating.

II. LOWERING OF HSBC MEXICO'S BCA AND REVIEW FOR DOWNGRADE OF ADJUSTED BCA, DEPOSIT AND DEBT RATINGS

In lowering HSBC México's BCA to baa3 from baa2, Moody's considered the bank's consistently weak profitability metrics, which will continue to constrain the bank's capacity to bolster its relatively limited capital levels organically. In addition, the bank continues to exhibit asset quality metrics notably weaker than the system's average. While HSBC Mexico also has weaker access to core deposit funding than its larger peers and consequently is more depending on market funding, the rating nevertheless is supported by the bank's high level of liquidity resources.

The review of HSBC México's Adjusted BCA (BCA plus affiliate support from HSBC Holdings plc -- LT senior unsecured A1) and deposit and debt ratings will entail an assessment of the willingness of the HSBC group to provide support to this subsidiary. This is in light of the conclusion of an HSBC internal review of those subsidiaries and operations that are delivering sub-par risk-adjusted returns, which the group will announce on 9 June. HSBC is expected to conclude its internal review with an announcement that it will exit from some of those markets, while reaffirming its commitment to other markets. Unless HSBC group publically strengthens its commitment to HSBC Mexico, the ratings will likely be downgraded, potentially by more than one notch.

Upward rating pressure is limited at this juncture. By contrast, we could further lower the BCA if the bank is unable to achieve substantial and sustainable improvements in profitability and asset quality metrics, and to increase capitalization by 100 basis points to 11% or more. Even if the current review concludes with a confirmation of the bank's ratings, a future reduction of the BCA to ba1 would likely be accompanied by downgrades of the bank's debt and deposit ratings at that time.

Moody's also placed on review for downgrade the bank's A3 and (P) A3 local currency subordinated debt ratings, and (P)Baa1 junior subordinated MTN debt program ratings, as well as the A3 issuer ratings of HSBC Casa de Bolsa. At the same time, Moody's assigned A1(cr) and Prime-1(cr) CR Assessments to HSBC México. These CR Assessments are on review for downgrade.

III. AFFIRMATION OF BANAMEX, SANTANDER MEXICO, DEUTSCHE BANK MEXICO AND BARCLAYS MEXICO'S RATINGS

BANAMEX

In affirming Banamex's baa2 BCA and A3 GLC senior debt and deposit ratings Moody's took into account the bank's very strong capital levels, ample liquid resources, and relatively strong funding profile. While asset quality metrics remain resilient, the BCA is constrained because of shortcomings in the bank's factoring operations that last year revealed a business culture that placed insufficient emphasis on risk awareness and led to the underestimation of credit and operational risks. The resulting write-offs significantly affected the bank's previously strong long-run loss performance record.

Moody's also assigned A2(cr)/Prime-1(cr) CR Assessments to Banamex.

The bank's outlook is stable, in line with the stable outlook on the Mexican sovereign. Upward pressure on the BCA could occur if the bank is able to demonstrate that it has effectively addressed the risk management shortcomings and strengthened its business culture to ensure that it will not report any further incidents similar to last year's fraud. The BCA could face negative pressure if further weaknesses in risk practices are revealed or if there are new unexpected charges to earnings or capital. However, even if the BCA is revised, the bank's A3 GLC deposit rating is only likely to be affected if the government's bond rating changes due to an expectation of a very high probability of government support given the bank's very large market shares.

SANTANDER MEXICO

Moody's affirmed Santander México baa1 BCA and A3 GLC senior debt and deposit ratings reflecting the bank's strong capitalization, ample reserve coverage, and substantial liquid resources. Despite the successful resolution of problem loans to homebuilders than caused a spike in delinquencies, Moody's expects the bank's higher levels of nonperforming loans to remain stable as it focuses its growth on the higher-yielding yet higher risk consumer and SME segments. Profitability has declined somewhat in recent years, but Santander México's core earnings remain robust. While the bank relies on a high level of potentially more volatile repo funding, as is common among Mexican banks, it benefits from a large base of stable core deposits. The banks ratings also consider our expectation of a very high likelihood of public support given its significant market presence.

Moody's also assigned A2(cr)/Prime-1(cr) CR Assessments to Santander México. The bank's overall outlook is stable.

As with the other large Mexican banks, Santander México's ratings carry a stable outlook in line with outlook on the Mexican government's sovereign bond rating. Its BCA could be raised if the bank is able to avoid further deterioration in asset quality as it continues its strong expansion into higher risk market segments. The bank's BCA could come under downward pressure if earnings and capitalization were to be affected by asset quality problems. However, the bank's debt and deposit ratings are only likely to change if and when the sovereign's rating changes.

DEUTSCHE MEXICO AND BARCLAYS MEXICO

The ba2 BCAs and Baa3/Prime-3 deposit ratings of Deutsche México and Barclays México were affirmed. The BCAs reflects the banks' niche wholesale and investment banking operations, with a narrow focus on offering securities and derivatives trading, bond underwriting and M&A services mostly to local institutional clients, including local pension funds, insurance companies and local top corporations. While neither bank undertakes any proprietary trading, and consequently is not exposed to significant market risk, these business are less stable than traditional retail and commercial banking. The banks are highly dependent on their parent companies to drive business and for operational support. In addition, the banks' parents retain a significant portion of the assets and profits generated by their subsidiaries on their own books, which benefits the subsidiaries' reported capitalization levels and asset risk indicators. Both banks deposit ratings incorporate an expectation of a high probability of support from their parents, which provides two notches of ratings uplift from their BCAs in both cases.

Moody's also assigned Baa2(cr) and Prime-2(cr) CR Assessments to Deutsche México and Barclays México.

The banks outlooks are stable. The banks' ratings are only likely to change if and when their parents' ratings change.

IV. RATIONALE FOR COUNTERPARTY RISK ASSESSMENTS

Moody's has also assigned CR assessments to Banco Regional de Monterrey, S.A., BanBajío, Banco Azteca, S.A., Banco Interacciones, S.A., Banco Ve por Mas, S.A., Volkswagen Bank, S.A. and Bank of Tokyo-Mitsubishi UFJ (México), S.A. CR assessments are opinions of how counterparty obligations are likely to be treated if a bank fails, and are distinct from debt and deposit ratings in that they (1) consider only the risk of default rather than expected loss and (2) apply to counterparty obligations and contractual commitments rather than debt or deposit instruments. The CR assessment is an opinion of the counterparty risk related to a bank's covered bonds, contractual performance obligations (servicing), derivatives (e.g., swaps), letters of credit, guarantees and liquidity facilities.

The CR Assessment takes into account the issuer's standalone strength as well as the likelihood of affiliate and government support in the event of need, reflecting the anticipated seniority of these obligations in the liabilities hierarchy. The CR Assessment also incorporates other steps authorities can take to preserve the key operations of a bank should it enter a resolution.

In most cases, the starting point for the CR Assessment, which is an assessment of the bank's ability to avoid defaulting on its operating obligations, is one notch above the bank's adjusted BCA, to which Moody's then typically adds the same notches of support uplift as applied to deposit and senior unsecured debt ratings.

As a result, the CR Assessment for all rated banks in México is one notch higher than their deposit ratings, reflecting Moody's views that authorities are likely to honor the operating obligations the CR Assessment refers to in order to preserve a bank's critical functions and reduce potential for contagion.

V. CONCLUSION OF THE REVIEW OF AFFILIATE BROKERAGE HOUSES AND FINANCE COMPANIES

Moody's downgraded the issuer ratings of Casa de Bolsa BBVA Bancomer, S.A de C.V., Hipotecaria Nacional, S.A. de C.V. (HipNal), Acciones y Valores Banamex Casa de Bolsa, S.A. (Accival), Arrendadora y Factor Banorte, S.A. de C.V.'s (AyF Banorte), Casa de Bolsa Santander, S.A. de C.V. and Scotia Inverlat Casa de Bolsa, S.A. de C.V.

The downgrades of these issuers' GLC ratings was prompted by a change of the reference rating Moody's uses in assigning affiliate support. Moody's now uses the corresponding sister bank's Adjusted BCA as anchor for affiliate support instead of the GLC deposit rating, because the latter in many cases incorporates our expectation of government support for the banks. The change relates to the fact that these non-bank entities, although within the regulated holding company structure of the bank, are not direct subsidiaries of the bank. As such, we do not expect that they will benefit from potential government support that would be forthcoming to bank deposits in the case of stress. Nor do we believe the banks will be permitted to provide support to their affiliates if and when the banks themselves are dependent upon public support, or to the extent that supporting their affiliates would force the banks to seek public support.

LIST OF ALL AFFECTED RATINGS

- BBVA Bancomer, S.A.

Long-term global local currency deposit rating: Downgrade to A3 from A2, stable outlook

Short-term global local currency deposit rating: Downgrade to Prime-2 from Prime-1

Long-term foreign currency deposit rating: Affirm at A3, stable outlook

Short-term foreign currency deposit rating: Affirm at Prime-2

Long-term Mexican National Scale deposit rating: Affirm at Aaa.mx

Short-term Mexican National Scale deposit rating: Affirm at MX-1

Long-term global local currency senior unsecured debt rating: Downgrade to A3 from A2, stable outlook

Long-term global local currency senior unsecured MTN debt program rating: Downgrade to (P)A3 from (P)A2

Long-term Mexican National Scale senior unsecured debt rating: Affirm at Aaa.mx

Long-term Mexican National Scale senior unsecured MTN debt program rating: Affirm at Aaa.mx

Long-term global local currency subordinated debt rating: Affirm at Baa2

Long-term global local currency subordinated MTN debt program rating: Affirm at (P)Baa2

Long-term Mexican National Scale subordinated debt rating: Affirm at Aa1.mx

Long-term Mexican National Scale subordinated MTN debt program rating: Affirm at Aa1.mx

Baseline credit assessment: Affirm at baa1

Adjusted baseline credit assessment: Affirm at baa1

Long-term counterparty risk assessment: Assigned at A2(cr)

Short-term counterparty risk assessment: Assigned at Prime-1(cr)

Overall rating outlook: Stable

--- Casa de Bolsa BBVA Bancomer S.A. de C.V.

Long-term global local currency issuer rating: Downgrade to Baa1 from A2, stable outlook

Short-term global local currency issuer rating: Downgrade to Prime-2 from Prime-1

Long-term Mexican National Scale issuer rating: Confirm at Aaa.mx

Overall rating outlook: Stable

--- Hipotecaria Nacional, S.A. de C.V.

Long-term global local currency issuer rating: Downgrade to Baa1 from A3, stable outlook

Long-term Mexican National Scale issuer rating: Confirm at Aaa.mx

Overall rating outlook: Stable

- Banco Nacional de México, S.A.

Long-term global local currency deposit rating: Affirm at A3, stable outlook

Short-term global local currency deposit rating: Affirm at Prime-2

Long-term foreign currency deposit rating: Affirm at A3, stable outlook

Short-term foreign currency deposit rating: Affirm at Prime-2

Long-term Mexican National Scale deposit rating: Affirm at Aaa.mx

Short-term Mexican National Scale deposit rating: Affirm at MX-1

Long-term global local currency senior unsecured debt rating: Affirm at A3, stable outlook

Long-term global local currency senior unsecured MTN debt program rating: Affirm at (P)A3

Short-term global local currency senior unsecured MTN debt program rating: Affirm at (P)Prime-2

Long-term Mexican National Scale senior unsecured debt rating: Affirm at Aaa.mx

Long-term Mexican National Scale senior unsecured MTN debt program rating: Affirm at Aaa.mx

Short-term Mexican National Scale senior unsecured MTN debt program rating: Affirm at MX-1

Baseline credit assessment: Affirm at baa2

Adjusted baseline credit assessment: Affirm at baa2

Long-term counterparty risk assessment: Assigned at A2(cr)

Short-term counterparty risk assessment: Assigned at Prime-1(cr)

Overall rating outlook: Stable

--- Acciones y Valores Banamex Casa de Bolsa, S.A.

Long-term global local currency issuer rating: Downgrade to Baa2 from A3, stable outlook

Short-term global local currency issuer rating: Confirm at Prime-2

Long-term Mexican National Scale issuer rating: Downgrade to Aa1.mx from Aaa.mx

Overall rating outlook: Stable

- Banco Mercantil del Norte, S.A.

Long-term global local currency deposit rating: Downgrade to A3 from A2, stable outlook

Short-term global local currency deposit rating: Downgrade to Prime-2 from Prime-1

Long-term foreign currency deposit rating: Affirm at A3, stable outlook

Short-term foreign currency deposit rating: Affirm at Prime-2

Long-term Mexican National Scale deposit rating: Affirm at Aaa.mx

Short-term Mexican National Scale deposit rating: Affirm at MX-1

Long-term global local currency subordinated debt rating: Affirm at Baa2

Long-term global local currency subordinated MTN debt program rating: Affirm at (P)Baa2

Long-term Mexican National Scale subordinated debt rating: Affirm at Aa1.mx

Long-term Mexican National Scale subordinated MTN debt program rating: Affirm at Aa1.mx

Long-term global local currency junior subordinated debt rating: Affirm at Baa3 (hyb)

Long-term global local currency junior subordinated MTN debt program rating: Affirm at (P)Baa3

Long-term Mexican National Scale junior subordinated debt rating: Affirm at Aa2.mx (hyb)

Long-term Mexican National Scale junior subordinated MTN debt program rating: Affirm at Aa2.mx

Baseline credit assessment: Affirm at baa1

Adjusted baseline credit assessment: Affirm at baa1

Long-term counterparty risk assessment: Assigned at A2(cr)

Short-term counterparty risk assessment: Assigned at Prime-1(cr)

Overall rating outlook: Stable

--- Arrendadora y Factor Banorte, S.A. de C.V.

Long-term global local currency issuer rating: Downgrade to Baa1 from A3, stable outlook

Long-term Mexican National Scale issuer rating: Confirm at Aaa.mx

Long-term global local currency senior unsecured MTN debt program rating: Downgrade to (P)Baa1 from (P)A3

Long-term Mexican National Scale senior unsecured MTN debt program rating: Confirm at Aaa.mx

Overall rating outlook: Stable

- Scotiabank Inverlat, S.A.

Long-term global local currency deposit rating: Downgrade to A3 from A2, stable outlook

Short-term global local currency deposit rating: Downgrade to Prime-2 from Prime-1

Long-term foreign currency deposit rating: Affirm at A3, stable outlook

Short-term foreign currency deposit rating: Affirm at Prime-2

Long-term Mexican National Scale deposit rating: Affirm at Aaa.mx

Short-term Mexican National Scale deposit rating: Affirm at MX-1

Baseline credit assessment: Affirm at baa2

Adjusted baseline credit assessment: Affirm at a3

Long-term counterparty risk assessment: Assigned at A2(cr)

Short-term counterparty risk assessment: Assigned at Prime-1(cr)

Overall rating outlook: Stable

--- Scotia Inverlat Casa de Bolsa, S.A. de C.V.

Long-term global local currency issuer rating: Downgrade to A3 from A2, stable outlook

Short-term global local currency issuer rating: Downgrade to Prime-2 from Prime-1

Long-term Mexican National Scale issuer rating: Affirm at Aaa.mx

Overall rating outlook: Stable

- Instituto para la Protección al Ahorro Bancario

Long-term global local currency issuer rating: Downgrade to A3 from A2

Short-term global local currency issuer rating: Downgrade to Prime-2 from Prime-1

Overall rating outlook: Stable

- Banco Santander (México), S.A.

Long-term global local currency deposit rating: Affirm at A3, stable outlook

Short-term global local currency deposit rating: Affirm at Prime-2

Long-term foreign currency deposit rating: Affirm at A3, stable outlook

Short-term foreign currency deposit rating: Affirm at Prime-2

Long-term Mexican National Scale deposit rating: Affirm at Aaa.mx

Short-term Mexican National Scale deposit rating: Affirm at MX-1

Long-term global local currency senior unsecured debt rating: Affirm at A3, stable outlook

Long-term global local currency senior unsecured MTN debt program rating: Affirm at (P)A3

Short-term global local currency senior unsecured MTN debt program rating: Affirm at (P)Prime-2

Long-term Mexican National Scale senior unsecured debt rating: Affirm at Aaa.mx

Long-term Mexican National Scale senior unsecured MTN debt program rating: Affirm at Aaa.mx

Short-term Mexican National Scale senior unsecured MTN debt program rating: Affirm at MX-1

Baseline credit assessment: Affirm at baa1

Adjusted baseline credit assessment: Affirm at baa1

Long-term counterparty risk assessment: Assigned at A2(cr)

Short-term counterparty risk assessment: Assigned at Prime-1(cr)

Overall rating outlook: Stable

--- Casa de Bolsa Santander, S.A. de C.V.

Long-term global local currency issuer rating: Downgrade to Baa1 from A3, stable outlook

Long-term Mexican National Scale issuer rating: Confirm at Aaa.mx

Overall rating outlook: Stable

- HSBC Mexico, S.A.

Long-term global local currency deposit rating: A2, on review for downgrade

Short-term global local currency deposit rating: Prime-1, on review for downgrade

Long-term foreign currency deposit rating: Affirm at A3, stable outlook

Short-term foreign currency deposit rating: Affirm at Prime-2

Long-term Mexican National Scale deposit rating: Affirm at Aaa.mx

Short-term Mexican National Scale deposit rating: Affirm at MX-1

Long-term global local currency senior unsecured debt rating: A2, on review for downgrade

Long-term global local currency senior unsecured MTN debt program rating: (P)A2, on review for downgrade

Short-term global local currency senior unsecured MTN debt program rating: (P)Prime-1, on review for downgrade

Long-term Mexican National Scale senior unsecured debt rating: Affirm at Aaa.mx

Long-term Mexican National Scale senior unsecured MTN debt program rating: Affirm at Aaa.mx

Short-term Mexican National Scale senior unsecured MTN debt program rating: Affirm at MX-1

Long-term global local currency subordinated debt rating: A3, on review for downgrade

Long-term global local currency subordinated MTN debt program rating: (P)A3, on review for downgrade

Long-term Mexican National Scale subordinated debt rating: Aaa.mx, on review for downgrade

Long-term Mexican National Scale subordinated MTN debt program rating: Aaa.mx, on review for downgrade

Long-term global local currency junior subordinated MTN debt program rating: (P)Baa1, on review for downgrade

Long-term Mexican National Scale junior subordinated MTN debt program rating: Aaa.mx, on review for downgrade

Baseline credit assessment: Lowered to baa3 from baa2

Adjusted baseline credit assessment: a2, on review for downgrade

Long-term counterparty risk assessment: Assigned at A1(cr), on review for downgrade

Short-term counterparty risk assessment: Assigned at Prime-1(cr), on review for downgrade

Overall rating outlook: Review for downgrade

--- HSBC Casa de Bolsa, S.A. de C.V.

Long-term global local currency issuer rating: A2, on review for downgrade

Short-term global local currency issuer rating: Prime-1, on review for downgrade

Long-term Mexican National Scale issuer rating: Affirm at Aaa.mx

Short-term Mexican National Scale issuer rating: Affirm at MX-1

Overall rating outlook: Review for downgrade

- Barclays Bank Mexico, S.A.

Long-term global local currency deposit rating: Affirm at Baa3, stable outlook

Short-term global local currency deposit rating: Affirm at Prime-3

Long-term foreign currency deposit rating: Affirm at Baa3, stable outlook

Short-term foreign currency deposit rating: Affirm at Prime-3

Long-term Mexican National Scale deposit rating: Affirm at Aa2.mx

Short-term Mexican National Scale deposit rating: Affirm at MX-1

Baseline credit assessment: Affirm at ba2

Adjusted baseline credit assessment: Affirm at baa3

Long-term counterparty risk assessment: Assigned at Baa2(cr)

Short-term counterparty risk assessment: Assigned at Prime-2(cr)

Overall rating outlook: Stable

- Deutsche Bank Mexico, S.A.

Long-term global local currency deposit rating: Affirm at Baa3, stable outlook

Short-term global local currency deposit rating: Affirm at Prime-3

Long-term foreign currency deposit rating: Affirm at Baa3, stable outlook

Short-term foreign currency deposit rating: Affirm at Prime-3

Long-term Mexican National Scale deposit rating: Affirm at Aa2.mx

Short-term Mexican National Scale deposit rating: Upgrade to MX-1 from MX-2

Baseline credit assessment: Affirm at ba2

Adjusted baseline credit assessment: Affirm at baa3

Long-term counterparty risk assessment: Assigned at Baa2(cr)

Short-term counterparty risk assessment: Assigned at Prime-2(cr)

Overall rating outlook: Stable

--- Deutsche Securities Mexico, S.A. de C.V.

Short -term Mexican National Scale issuer rating: Upgrade to MX-1 from MX-2

Overall rating outlook: Stable

- Banco Regional de Monterrey, S.A.

Long-term counterparty risk assessment: Assigned at Baa1(cr)

Short-term counterparty risk assessment: Assigned at Prime-2(cr)

Overall rating outlook: Stable

- Banco del Bajio, S.A.

Long-term counterparty risk assessment: Assigned at Baa2(cr)

Short-term counterparty risk assessment: Assigned at Prime-2(cr)

Overall rating outlook: Positive

- Banco Interacciones, S.A.

Long-term counterparty risk assessment: Assigned at Ba1(cr)

Short-term counterparty risk assessment: Assigned at Not Prime(cr)

Overall rating outlook: Stable

- Banco Azteca, S.A.

Long-term counterparty risk assessment: Assigned at Baa3(cr)

Short-term counterparty risk assessment: Assigned at Prime-3(cr)

Overall rating outlook: Stable

- Banco Ve por Mas, S.A.

Long-term counterparty risk assessment: Assigned at Ba2(cr)

Short-term counterparty risk assessment: Assigned at Not Prime(cr)

Overall rating outlook: Stable

- Bank of Tokyo-Mitsubishi UFJ (Mexico), S.A.

Long-term counterparty risk assessment: Assigned at Baa1(cr)

Short-term counterparty risk assessment: Assigned at Prime-2(cr)

Overall rating outlook: Stable

- Volkswagen Bank, S.A.

Long-term counterparty risk assessment: Assigned at Ba1(cr)

Short-term counterparty risk assessment: Assigned at Not Prime(cr)

Overall rating outlook: Review for Upgrade

The principal methodology used in rating BBVA Bancomer, Banamex, Santander México, Banorte, HSBC México, Scotiabank México, BanBajío, Interacciones, Banco Azteca, BanRegio, Barclays Bank México, Deutsche Bank México, BX+, BTMUM and VW Bank was Banks published in March 2015. The principal methodology used in rating IPAB was Government-Related Issuers published in October 2014. The principal methodology used in rating Casa de Bolsa Bancomer, Accival, Casa de Bolsa Santander, Scotia Casa de Bolsa, HSBC Casa de Bolsa and Deutsche Securities Mexico was Global Securities Industry Methodology published in May 2013. The principal methodology used in rating HipNal and AyF Banorte was Finance Company Global Rating Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com.mx for a copy of these methodologies.

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".

BBVA Bancomer is headquartered in Mexico City, Mexico and reported MXN1,629 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

Banamex is headquartered in Mexico City, Mexico and reported MXN1,118 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

Santander México is headquartered in Mexico City, Mexico and reported MXN1,049 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

Banorte is headquartered in Mexico City, Mexico and reported MXN916 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

HSBC México is headquartered in Mexico City, Mexico and reported MXN614 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

Scotiabank México is headquartered in Mexico City, Mexico and reported MXN305 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

BanBajío is headquartered in León, Guanajuato, México and reported MXN137 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

Interacciones is headquartered in Mexico City, Mexico and reported MXN142 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

Banco Azteca is headquartered in Mexico City, Mexico and reported MXN118 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

BanRegio is headquartered in Monterrey, Nuevo León, Mexico and reported MXN98 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

Barclays Bank México is headquartered in Mexico City, Mexico and reported MXN58 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

Deutsche Bank México is headquartered in Mexico City, Mexico and reported MXN48 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

BX+ is headquartered in Mexico City, Mexico and reported MXN25 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

BTMUM is headquartered in Mexico City, Mexico and reported MXN22 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

VW Bank is headquartered in Puebla, Mexico and reported MXN5 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

IPAB is headquartered in Mexico City, Mexico and reported MXN940 billion in assets (source: IPAB), as of March 2015.

The period of time covered in the financial information used to determine the ratings is between 1 January 2011 and 31 March 2015 (source: Moody's, Issuers' financial statements, Comisión Nacional Bancaria y de Valores and Banco de México).

The sources and items of information used to determine the ratings include 2014 and 2015 interim financial statements (source: Moody's and Issuers' financial statements); year-end 2013 and 2014 audited financial statements (source: Moody's and Issuers' annual audited financial statements); information on market position (source: Comisión Nacional Bancaria y de Valores); regulatory capital information (source: Banco de México).

REGULATORY DISCLOSURES

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not 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 BBVA Bancomer was 6/March/2015

The date of the last Credit Rating Action for Casa de Bolsa Bancomer was 6/March/2015

The date of the last Credit Rating Action for HipNal was 6/March/2015

The date of the last Credit Rating Action for Banamex was 14/October/2014

The date of the last Credit Rating Action for Accival was 6/March/2015

The date of the last Credit Rating Action for Santander México was 17/July/2014

The date of the last Credit Rating Action for Casa de Bolsa Santander was 6/March/2015

The date of the last Credit Rating Action for Banorte was 6/March/2015

The date of the last Credit Rating Action for AyF Banorte was 6/March/2015

The date of the last Credit Rating Action for HSBC México was 3/July/2014

The date of the last Credit Rating Action for HSBC Casa de Bolsa was 19/October/2009

The date of the last Credit Rating Action for Scotiabank México was 6/March/2015

The date of the last Credit Rating Action for Scotia Casa de Bolsa was 6/March/2015

The date of the last Credit Rating Action for BanBajío was 7/April/2014

The date of the last Credit Rating Action for Interacciones was 2/June/2015

The date of the last Credit Rating Action for Banco Azteca was 20/March/2014

The date of the last Credit Rating Action for BanRegio was 7/April/2014

The date of the last Credit Rating Action for Barclays Bank Mexico was 28/June/2012

The date of the last Credit Rating Action for Deutsche Bank Mexico was 5/August/2014

The date of the last Credit Rating Action for Deutsche Securities Mexico was 5/August/2014

The date of the last Credit Rating Action for BX+ was 10/March/2015

The date of the last Credit Rating Action for BTMUM was 15/March/2012

The date of the last Credit Rating Action for VW Bank was 23/March/2015

The date of the last Credit Rating Action for IPAB was 6/March/2015

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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com.mx, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.

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

Maria Celina Vansetti-Hutchins
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 takes rating actions on Mexican financial institutions

No Related Data.
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