MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings of Mexico's Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit), as follows:
--Long-term Issuer Default Rating (IDR) at 'BBB';
--Short-term IDR at 'F2';
--Long-term local currency IDR at 'BBB+';
--Short-term local currency IDR at 'F2';
--Support rating at '2';
--Support rating floor at 'BBB';
--Long-term national-scale rating at 'AAA(mex)';
--Short-term national-scale rating at 'F1+(mex)'.
The Outlook is Stable.
Infonavit's local currency IDR is in line with the long-term local currency sovereign rating of Mexico and reflects its systemic importance for the Mexican government on housing-finance policies and social development goals. Fitch considers that Infonavit plays a key role in financial intermediation, being the largest mortgage lender and pension fund manager in Mexico. Infonavit's local currency IDR would mirror any potential change in Mexico's local currency sovereign rating, which currently is 'BBB+' with a Stable Outlook.
In order to enhance its risk management practices and servicing functions, Infonavit has undergone important structural changes during the last two presidential periods. Fitch considers those changes to have had a positive impact on rebuilding its balance sheet through consistent mortgage loan growth and stable asset quality. As of second quarter 2011, the non-performing loan ratio stood at 7.2% (2009: 5.9%) reflecting growing pressures on mortgage delinquency trends that might result in aggressive restructuring programs in its lending portfolio and higher pressure on operational profitability. However, Fitch considers Infonavit to be able to sustain adequate net interest margins and strict cost control policies to partially mitigate credit costs pressures.
In Fitch's view, Infonavit's overall risk exposure is well managed. Credit risk mainly arises from its mortgage loan portfolio, since it is focused on low-income borrowers with weaker Loan-to-Value and Payment-to-Income metrics than other financial institutions. Positively, market risk exposure is low given its null trading activities and adequate reserves for extension risk. Even though liquidity risk remains moderate at the present time, certain pressures on long-run asset-liability management must be addressed, especially if Infonavit continues to diversify its funding structure.
Infonavit has a stable funding source in the form of received pension funds and capital market access has been successful through residential mortgage backed securities (RMBS). Capital adequacy, albeit reasonable, remains pressured by growing fixed and low-yield assets, since Infonavit has been retaining first-loss tranches of its RMBS.
Infonavit was created by the Mexican government in 1972 as an entity with a twofold social mandate: provide mortgage loans to formal low-income workers and to offer a rate of return on managed pension funds at least equal to the annual increase in minimum wages. Since 1992, it is part of the Mexican pension fund system. It possesses fiscal authority to collect mortgage payments through direct payroll deductions carried out by corporate employers.
Additional information is available at www.fitchratings.com
Applicable Criteria:
'Global Financial Institutions Rating Criteria', dated 16 Aug. 2010,
'Short-Term Ratings Criteria for Corporate Finance' dated 2 Nov. 2010,
'National Ratings Criteria' dated 19 Jan. 2011.
Applicable Criteria and Related Research:
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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