MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has upgraded the foreign and local currency Issuer Default Ratings (IDRs) of Banco Nacional de Mexico (Banamex) to 'A' from 'A-'. A full list of rating actions follows at the end of this release.
Rating Drivers
The upgrade of Banamex's IDRs was triggered by a recent rating action that upgraded Mexico's sovereign long-term IDR to 'BBB+' and the Country Ceiling to 'A'. Banamex is considered by Fitch a 'core' subsidiary of Citigroup Inc. (IDRs 'A'; VR 'a-'; Outlook Stable) and as such, according to Fitch's rating criteria, there is an extremely high probability of support from its parent. Banamex's IDRs are now aligned with those of Citigroup. Banamex's support and national-scale ratings are also driven by the potential support of Citigroup.
In turn, Banamex's VR of 'a-', not reviewed in this action, is driven by its ample loss absorption capacity, strong and resilient earnings, robust franchise, and sound liquidity and funding. However, this rating also factors in the lower than pre-crisis core profitability, above average credit costs, and somewhat volatile trading revenues.
Rating Sensitivities
While Banamex's remains a core subsidiary of Citigroup, its IDRs will likely remain aligned to its parent's IDRs, therefore mirroring any potential upgrade of Citigroup's IDRs. However, upside potential in Banamex's IDRs would remain capped to two notches above the sovereign rating (local currency) and to Mexico's country ceiling in the case of the foreign currency IDRs, according to Fitch's rating criteria.
Although not a baseline scenario, Banamex's IDRs could be downgraded if Fitch perceives a diminished strategic importance to Citigroup. In this unlikely scenario, or in the event of a downgrade of Citigroup's IDRs, Banamex's IDRs would not be downgraded lower than the level indicated by its VR.
In Fitch's opinion, a sustained recovery of core profitability, coupled with the maintenance of its robust franchise, capital metrics, and liquidity, could potentially result in an upgrade of Banamex's VR of 'a-'.
In turn, weaker financials could pressure downward Banamex's VR. In Fitch's opinion, impairment ratios above 3%, and/or credit costs (provisions and charge-offs) above 6% of average assets, could trigger a revision of Banamex's 'a-' VR, depending on the robustness and trends in its base of loan loss reserves. A Fitch core capital ratio below 12% of risk weighted assets could also negatively affect the VR, if not accompanied by an improved internal capital generation capacity (higher earnings).
Even if Banamex's VR were eventually downgraded, its IDRs will likely remain aligned to Citigroup's IDRs, unless Fitch's perception of Banamex as a core subsidiary of Citigroup changes. This also underpins the affirmation of Banamex's support rating at '1'.
Fitch has upgraded the following ratings:
Banamex:
--Long-term foreign and local currency IDRs to 'A' from 'A-'; Outlook Stable.
Fitch has affirmed the following ratings:
Banamex:
--Short-term foreign and local currency IDR at 'F1';
--Support rating at '1';
--Long-term national-scale rating at 'AAA(mex)'; Outlook Stable;
--Short-term national-scale rating at 'F1+(mex)';
--Long-term national-scale rating for local senior debt issues at 'AAA(mex)'.
The Rating Outlook is Stable.
Additional information is available on www.fitchratings.com
Applicable Criteria and Related Research:
--Global Financial Institutions Rating Criteria (Aug. 15, 2012);
--Rating Financial Institutions above the Sovereign (Dec. 12, 2012);
--Rating FI Subsidiaries and Holding Companies (Aug. 10, 2012);
--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=686181
Rating Financial Institutions Above the Sovereign
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696373
Rating FI Subsidiaries and Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=791025
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.