Fitch Affirms BBVA Bancomer's Ratings

MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings of BBVA Bancomer as follows:

BBVA Bancomer:

--Long-term issuer default rating (IDR) at 'A-';

--Short-term IDR at 'F1';

--Long-term local currency IDR at 'A';

--Short-term local currency IDR at 'F1';

--Long-term rating of global senior unsecured debt issues at 'A-';

--Long-term rating of global subordinated debt issues at 'BBB+';

--Viability rating at 'a-';

--Individual rating at 'B/C';

--Support rating at '1';

--Long-term national-scale rating at 'AAA(mex)';

--Short-term national-scale rating at 'F1+(mex)';

--Long-term national-scale rating for local senior unsecured debt issues at 'AAA(mex)';

--Long-term national-scale rating for local subordinated debt issues at 'AAA(mex)';

--Long-term national-scale rating for local issues of market linked securities at 'AAA(emr)(mex)'.

The Rating Outlook is Stable.

BBVA Bancomer's support and issuer default ratings (IDRs) are driven by the potential support that the bank would receive from its ultimate parent, Spain's Banco Bilbao Vizcaya Argentaria SA ('BBVA', long-term IDR of 'AA-' with Stable Rating Outlook by Fitch), if this was required. In Fitch's opinion, the probability of support from BBVA would be very high. These ratings will likely remain driven by sovereign and/or country ceiling considerations, unless the propensity/capacity of BBVA to provide support to BBVA Bancomer decreases significantly, which Fitch currently considers unlikely.

In turn, the viability rating reflects its sound and recurring earnings, robust franchise, resilient asset quality, adequate funding and liquidity profiles, and relatively lower than peers, although comfortable, capital ratios. Given their already high levels, upside potential for the individual and viability ratings is limited in the near future. However, these could be upgraded over time by steady and significant improvements in its loss absorption capacity (capital and reserve coverage ratios), liquidity and funding profiles, and/or the overall economic environment. Downside risk would stem primarily from inability to contain asset quality problems.

Its position as the largest and one of the most diversified domestic banks underpins BBVA Bancomer's intrinsic profile in different ways: larger business volumes and economies of scale; adequate risk diversification; a more recurring revenue stream; resilience to external shocks; among others.

The performance of BBVA Bancomer, although affected by higher credit costs during the recent crisis, has remained strong. Ample margins and sound operating efficiency are key drivers of its resilience. Operating and net returns on assets (ROA) have remained strong, although obviously lower than the exceptionally high pre crisis levels, and are improving relatively quickly.

BBVA Bancomer was successful on containing the increase in credit costs during the recent crisis, as the impairment ratio remained at reasonable levels across the board without heavily relying on hefty charge-offs. BBVA Bancomer is slightly more exposed than peers to the mortgage sector and restructured loans given its ample market share.

The bank's funding and liquidity profiles are major strengths. This is further enhanced with a robust framework and conservative limits for market, liquidity and interest rate risk management. However, loan growth has exceeded the pace of deposit growth, another challenge in the foreseeable future.

Robust core earnings are the primary driver of capital growth, despite a usually high pay-out ratio, although decreasing in recent years. Capital ratios appear somewhat moderate in view of the expected growth of assets and the relatively ample contribution of hybrids.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 16, 2010);

--'Short-Term Ratings Criteria for Corporate Finance' (Nov. 2, 2010);

--'National Ratings Criteria' (Jan. 19, 2011);

--'Treatment of Hybrids in Bank Capital Analysis' (July 11, 2011).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685

Short-Term Ratings Criteria for Corporate Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=568726

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

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