MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed Mexican development bank Banco Nacional de Obras y Servicios Publicos' (Banobras) ratings 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)';
--Local senior unsecured debt issues at 'AAA(mex)'.
The Rating Outlook is Stable.
Banobras' ratings reflect the strength of the explicit support that the bank would receive from the Mexican government, if required. Fitch also notes its important role providing financing for public infrastructure in the country, a cornerstone of the current administration's economic policy. The Mexican federal government is Banobras' majority shareholder (99.5%). Under its organic law (article 11), the federal government is explicitly responsible for Banobras' liabilities with domestic or foreign institutions. Given Mexico's investment grade rating, there is a high probability that support from the authorities would be forthcoming, if required.
Given that the bank's IDRs are driven by the explicit support granted by the Mexican government, Banobras' ratings would mirror any potential change in Mexico's sovereign ratings, which currently have a stable outlook.
Given its relatively low operating costs and the counter-cyclical nature of its core lending activities, Banobras has recorded the best and most stable recurring operating performance among local development banks, even during the recent economic downturn. Banobras has a well-recognized competitive advantage in its core activity of financing sub-nationals and infrastructure projects, particularly in long-term and/or specialized loans. Despite sustained loan growth for a number of years, Banobras maintains a strong capital position. As of September 2011, the core and regulatory capital ratios to risk weighted assets remained above 20%. Impairments stand at very low levels (0.31% of total loans at the same date), with the reserve coverage ratios at sound levels of 10 times impairments or 3.24% of total loans. In addition, Banobras' credit risk is highly associated to and largely mitigated by lending to the public sector and related entities. The proportion of liquid assets is comfortable (44% of total assets as of September 2011) and largely composed of government securities and highly rated debt issued by major local banks. However, Banobras is still reliant on wholesale funding. Liquidity and funding stability are heavily enhanced by the sovereign guarantee on its liabilities.
Banobras, established in 1933, is mandated to promote and fund infrastructure, public services and regional development projects entered into by the federal, local governments and state-owned companies.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria', dated Aug. 16, 2011.
--'National Ratings Criteria', dated Jan. 19, 2011.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
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