MONTERREY--(BUSINESS WIRE)--Fitch Ratings has affirmed its ratings for Banco Interacciones, S.A. (Interacciones) and its affiliate securities firm, Interacciones Casa de Bolsa, S.A. de C.V. (ICB) as follows:
Interacciones:
--Long-term foreign and local currency IDRs at 'BB';
--Short-term foreign and local currency IDRs at 'B';
--Viability rating at 'bb';
--Support rating at '5';
--Support rating floor at 'NF';
--National-scale long-term rating at 'A(mex)';
--National-scale short-term rating at 'F1(mex)';
--National-scale long-term rating for local senior unsecured debt issues at 'A(mex)';
--National-scale long-term rating for local subordinated debt issues at 'BBB(mex)'.
ICB:
--National-scale long-term rating at 'A(mex)';
--National-scale short-term rating at 'F1(mex)'.
The Rating Outlook on the long-term international and/or national scale issuer ratings of both entities remains Stable.
KEY RATING DRIVERS
Interacciones' viability rating and IDRs reflect the company's solid franchise in its main business, becoming a specialized entity and an important player on public-sector financing; favorable and stable financial performance, as the bank has been able to sustain good profitability metrics; low impairment ratios and ample cushion of loan reserves; and adequate loss absorption capacity through a Fitch Core Capital ratio standing at comfortable levels.
The bank's ratings are limited by loan portfolio concentrations (by borrower and sector) that expose it to event risk and by the deteriorated creditworthiness of some of its main borrowers. Nevertheless, most of its total loan portfolio is secured by direct or indirect government guarantees. The ratings consider Interacciones' challenging liquidity and funding profile, as the restructurings of some of its largest exposures increased significantly its asset and liability mismatches in recent years; and its concentrated customer deposits base.
Interacciones' national scale long- and short-term ratings are driven by the bank's financial strength. The support rating and support rating floor reflect that, although possible, external support cannot be relied upon; given the low systemic importance of the bank.
Fitch affirmed the bank's hybrid local securities at 'BBB(mex)', which is three notches below Interacciones' long-term national scale rating. This was driven by Fitch's approach to rating subordinated securities, which incorporates its non-performance risk (two notches) and recognition of loss severity (one notch).
ICB is a subsidiary of Grupo Financiero Interacciones (GFI), whose credit quality is linked to Interacciones (the group's primary subsidiary). The ratings of ICB reflect the parent's legal obligation to support its subsidiaries as well as its core role to the overall group's business.
RATING SENSITIVITIES
Interacciones' viability rating and IDRs could benefit over the medium term from a significant decrease in its borrower concentrations, as well as in its assets and liabilities maturities mismatches. Fitch considers these changes unlikely at present, as reduced concentration levels or material improvements in the bank's borrower credit quality is not expected in the near term. However, sustained improvements on the bank's funding and liquidity profile could result in a positive rating action over the medium term. A downgrade is also possible if further negative credit events emerge among the bank's major borrowers with consequent material effects to its overall financial profile and asset quality. Also, pressures on the bank's capitalization levels (FCC and/or tangible equity ratios below 10% and 5%, respectively) could also pressure the ratings.
A potential upgrade of Interacciones' support rating and support rating floor is limited, since external support cannot be relied upon, although it's possible.
The subordinated debt national scale ratings will likely mirror any change in Interacciones' VR, as these are expected to maintain the same relativity to the bank's credit rating.
A potential upgrade or downgrade of ICB's ratings will be driven by any potential changes on Interacciones' ratings, or changes in the legal framework that could alter the propensity of GFI to provide support, scenario that seems unlikely at present.
Additional information is available on www.fitchratings.com
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 5, 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
Assessing and Rating Bank Subordinated and Hybrid Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695542
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=799483
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.