MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings of Banco Santander (Mexico) (SanMex) as follows:
--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';
--Viability rating at 'bbb+';
--Individual rating at '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 issues of market linked securities at 'AAA(emr)(mex)'.
The Rating Outlook is Stable.
SanMex's IDR and Support ratings are driven by the potential support that the bank would receive from its ultimate parent, Spain's Banco Santander (SAN; long-term IDR of 'AA' with a Stable Outlook by Fitch), should it be required. These ratings will likely remain driven by sovereign and/or country ceiling considerations, unless the propensity/capacity of SAN to provide support decreases significantly, which Fitch currently considers very unlikely.
In turn, the Individual and Viability ratings reflect SanMex's overall sound and resilient financial condition, with well-sustained profits, good asset quality, consistent risk management approach, and sound capital and liquidity levels. These ratings could be positively influenced over time by continued improvements in business, risk and funding diversification, while further strengthening its overall franchise and/or competitive position. In turn, downside risk for these ratings would stem from deterioration in its loss absorption capacity or core earnings materially beyond those observed during the recent financial crisis.
Historically, well-contained margins and exceptionally strong efficiency levels have sustained recurring earnings. These prevented material deterioration of profitability during the worst part of the recent crisis. The lowest tick during the recent crisis in core profitability as percentage of average assets was a strong 1.5%, and all performance ratios are rapidly consolidating around or above 2%, a level that Fitch considers will likely be maintained over the foreseeable future.
Despite sustained loan growth, Fitch believes that the bank has remained aligned to a relatively conservative risk management approach. Therefore, impairments have remained moderate and reserve coverage ratios are sound, while SanMex has been able also to comfortably and selectively resume lending since the second half of 2010.
The funding and liquidity profile is adequate and improving, customer deposits being the largest contributors to traditional banking funding and the loans-to-deposit ratio at a comfortable 97% as of June 2011.
Capital adequacy is also an important strength, especially in view of the bank's high capacity to sustain internal equity generation throughout different phases of the economic cycle. Fitch also regards positively the predominance of core capital (14.8% of risk weighted assets or 9.4% of total reported assets as of June 2011).
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:
Treatment of Hybrids in Bank Capital Analysis
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=641269
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Short-Term Ratings Criteria for Corporate Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=568726
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685
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