Fitch Affirms Grupo Financiero Banorte at 'BBB'; Outlook Stable; Subs Affirmed

MONTERREY, Mexico--()--Fitch Ratings has affirmed Grupo Financiero Banorte (GFNorte)'s viability rating at 'bbb' and its Long- and Short-term Issuer Default Ratings (IDRs) at 'BBB' and 'F2', respectively. The viability ratings of its two banking subsidiaries, Banco Mercantil del Norte (Banorte) and Ixe Banco (Ixe) were affirmed at 'bbb' and 'bb', respectively, while their Long- and Short-term IDRs were affirmed at 'BBB' and 'F2' for both entities. The National scale ratings for these two banks, as well the ratings of certain non-bank subsidiaries driven by the likely support of GFNorte, were affirmed at 'AA+(mex)' and 'F1+(mex)'. A full list of rating actions follows at the end of this release.

Banorte's viability rating is driven by its overall adequate financial condition, relative resilience during the recent crisis, and gradually improving franchise and competitive position. The ratings also factor in its still moderate loss absorption capacity (cushion of capital and reserves), and the challenges to sustain capital and liquidity metrics in view of higher expected loan growth and still moderate profitability.

Ixe Banco's viability rating of 'bb' is driven by its still weak core performance, the slightly worsening trend in capital adequacy and asset quality metrics, as well as some risks that are common to small-sized banks, such as relatively high risk and borrower concentrations. This rating also factors in Ixe Banco's strong business model, well contained impaired loans, and sound funding and liquidity.

In Fitch's view, the overall financial profile of GFNorte remains closely associated to Banorte's, which explains the affirmation of the holding company's viability rating at 'bbb'. GFNorte's performance was somewhat affected by the integration of the less profitable subsidiaries of Ixe Grupo Financiero (IxeGF), completed in April 2011. However, GFNorte's operating performance remains similar or slightly better than Banorte's, due to the higher profitability of its non-bank subsidiaries. In addition, the franchise and business profile was enhanced by the IxeGF acquisition, while there is some upside potential over the near future on the earnings prospects of IxeGF's acquired subsidiaries. GFNorte's rating also reflects that there is no double leverage at the holding company level, according to local regulations for financial groups.

Given Banorte's systemic importance and its role as the largest domestically-owned bank, its support rating and support rating floor were affirmed at '2' and 'BBB-', respectively. Fitch's support rating floors indicate a level below which the agency will not lower the bank's Long-term IDRs. In turn, Ixe Banco's support rating, also affirmed at '2', reflects the institutional support that it could receive from GFNorte, if needed. In view of GFNorte's nature as a holding company, its support rating and support rating floor were affirmed at '5' and 'NF', respectively, which indicates that, although possible, external support cannot be relied upon.

The hybrids of Banorte and Ixe Banco were affirmed at 'A+(mex)' and 'BB-', which already reflect Fitch's revised approach to rate these capital securities (see Fitch's commentary "Fitch Downgrades Mexican Bank Capital Securities Under New Criteria", dated March 13, 2012 and available at www.fitchratings.com).

The ratings of GFNorte's non-banking subsidiaries (Arrendadora y Factor Banorte, Casa de Bolsa Banorte-Ixe, Fincasa Hipotecaria, and Ixe Automotriz), continue to reflect support considerations associated with Banorte's credit quality and GFNorte's legal obligation to support its subsidiaries. These ratings are aligned to Banorte's 'AA+(mex)' and 'F1+(mex)' national scale ratings, reflecting the support that they now receive from a highly-rated holding company. Certain senior unsecured debt issues of the leasing and mortgage companies were also affirmed at 'AA+(mex)' and/or 'F1+(mex)', as indicated below.

The local ratings of Casa de Bolsa Banorte were affirmed at 'AA+(mex)' and 'F1+(mex)' and simultaneously withdrawn, since this entity has been merged into Casa de Bolsa Banorte-Ixe.

The following ratings have been affirmed with a Stable Outlook:

GFNorte:

--Long-term foreign and local currency IDRs at 'BBB';

--Short-term foreign and local currency IDRs at 'F2';

--Viability rating at 'bbb';

--Support rating at '5';

--Support rating floor at 'NF'.

Banorte:

--Long-term foreign and local currency IDRs at 'BBB';

--Short-term foreign and local currency IDRs at 'F2';

--Viability rating at 'bbb';

--Support rating at '2';

--Support rating floor at 'BBB-';

--National-scale long-term rating at 'AA+(mex)';

--National-scale short-term rating at 'F1+(mex)';

--National-scale long-term rating for a local issue of subordinated unsecured debt at 'A+(mex)'.

Ixe Banco:

--Long-term foreign and local currency IDRs at 'BBB';

--Short-term foreign and local currency IDRs at 'F2';

--Viability rating at 'bb';

--Support rating at '2';

--USD120 million junior subordinated perpetual notes at 'BB-';

--USD120 million 10-year junior subordinated securities at

'BB-';

--National-scale long-term rating at 'AA+(mex)';

--National-scale short-term rating at 'F1+(mex)'.

Arrendadora y Factor Banorte:

--National-scale long-term rating at 'AA+(mex)';

--National-scale short-term rating at 'F1+(mex)';

--National-scale long-term rating for local issues of senior unsecured debt at 'AA+(mex)';

--National-scale short-term rating for local issues of senior unsecured debt at 'F1+(mex)'.

Ixe Automotriz:

--National-scale long-term rating at 'AA+(mex)';

--National-scale short-term rating at 'F1+(mex)';

--National-scale short-term rating for local issues of senior unsecured debt at 'F1+(mex)'.

Fincasa Hipotecaria:

--National-scale long-term rating at 'AA+(mex)';

--National-scale short-term rating at 'F1+(mex)';

--National-scale short-term rating for local issues of senior unsecured debt at 'F1+(mex)'.

Casa de Bolsa Banorte-Ixe (formerly Ixe Casa de Bolsa):

--National-scale long-term rating at 'AA+(mex)';

--National-scale short-term rating at 'F1+(mex)'.

The following ratings have been affirmed and withdrawn:

Casa de Bolsa Banorte:

--National-scale long-term rating at 'AA+(mex)';

--National-scale short-term rating at 'F1+(mex)'.

The Outlook for the Long-term ratings is Stable.

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' (Aug. 16, 2011);

--'Finance and Leasing Companies Criteria' (Dec. 12, 2011);

--'Securities Firm Criteria' (Aug. 16, 2011);

--'Bank Holding Companies' (Aug. 16, 2011);

--'Rating Bank Regulatory Capital and Similar Securities' (Dec. 15, 2011);

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

--'National Ratings Criteria' (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

Finance and Leasing Companies Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=659834

Securities Firms Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649173

Bank Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648612

Rating Bank Regulatory Capital and Similar Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656371

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

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Contacts

Fitch Ratings
Primary Analyst (GFNorte, Banorte, Ixe Banco, Casa de Bolsa Banorte - Ixe, Casa de Bolsa Banorte, and Fincasa Hipotecaria)
Alejandro Garcia, CFA, +52 81 8399 9146
Senior Director
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst (GFNorte, Banorte, Ixe Banco, Casa de Bolsa Banorte - Ixe, Casa de Bolsa Banorte, and Fincasa Hipotecaria)
Alejandro Tapia, +52 81 8399 9156
Associate Director
or
Primary Analyst (Arrendadora y Factor Banorte, Ixe Automotriz)
Daniel Martinez, +52 81 8399 9130
Associate Director
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst (Arrendadora y Factor Banorte, Ixe Automotriz)
Veronica Chau, +52 81 8399 9169
Associate Director
or
Committee Chairperson
Peter Shaw, +1-212-908-0553
Managing Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst (GFNorte, Banorte, Ixe Banco, Casa de Bolsa Banorte - Ixe, Casa de Bolsa Banorte, and Fincasa Hipotecaria)
Alejandro Garcia, CFA, +52 81 8399 9146
Senior Director
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst (GFNorte, Banorte, Ixe Banco, Casa de Bolsa Banorte - Ixe, Casa de Bolsa Banorte, and Fincasa Hipotecaria)
Alejandro Tapia, +52 81 8399 9156
Associate Director
or
Primary Analyst (Arrendadora y Factor Banorte, Ixe Automotriz)
Daniel Martinez, +52 81 8399 9130
Associate Director
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst (Arrendadora y Factor Banorte, Ixe Automotriz)
Veronica Chau, +52 81 8399 9169
Associate Director
or
Committee Chairperson
Peter Shaw, +1-212-908-0553
Managing Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com