MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has upgraded the viability rating (VR) of Banco Nacional de Mexico, S.A. (Banamex) to 'a' from 'a-'. Banamex's Issuer Default Ratings (IDRs) and support rating were affirmed at 'A' and '1', respectively.
The national scale ratings of Banamex and Acciones y Valores Banamex, S.A. de C.V., Casa de Bolsa (Accival) were affirmed at 'AAA(mex)' and 'F1+(mex)'. Additionally, the national ratings of the local debt issued by Citi Mexico Investments, S. de R.L. de C.V. (Citi Mexico Investments) was affirmed at 'AAA(mex)emr'. A full list of rating actions follows at the end of this press release.
The Rating Outlook is Stable.
KEY RATING DRIVERS
The upgrade of Banamex's VR was triggered by the bank's ability to sustain its ample loss absorption capacity, strong and resilient earnings, robust franchise, and sound liquidity and funding even in times of economic pressures in Mexico. In addition, Banamex's financial profile compares favourably to other 'single-a' entities in emerging markets. However, the VR also factors in the lower than pre-crisis core earnings, above average credit costs, and somewhat volatile trading revenues.
Consequentially, Banamex's IDRs and National-scale ratings are driven by its strong intrinsic profile, reflected in its relatively higher VR.
In turn, the national ratings of Accival, one of the largest brokerage firms in Mexico, have been affirmed because it is perceived by Fitch as a core entity of Banamex. Fitch believes that Accival is a core and highly integrated affiliate of the bank and its local parent company, Grupo Financiero Banamex (GFBanamex). In addition, GFBanamex is legally enforced to provide support to its subsidiaries. Therefore, the national scale ratings of the brokerage unit are aligned with the bank's ratings.
The local debt issued by Citi Mexico Investments, an indirect subsidiary of Citigroup, was affirmed at 'AAA(mex)emr' as a result of an irrevocably and unconditionally guarantee in favour of the bond holders provided by Citigroup.
RATING SENSITIVITIES
In Fitch's opinion, the upside potential of Banamex's VR is limited in the foreseeable future, since this rating is already two notches above Mexico's sovereign foreign currency rating.
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 (i.e. higher earnings). A negative action on Mexico's sovereign ratings could also potentially affect Banamex's VR.
The downside potential for Banamex's IDRs and its National-scale ratings is currently low, since Fitch considers that Banamex is a core subsidiary of Citigroup Inc. (rated by Fitch at 'A' with a Stable Outlook, and VR at 'a-'). Even if Banamex's VR were eventually downgraded, its IDRs will likely remain aligned with Citigroup's IDRs, while maintaining the relativity with Mexico's sovereign ratings. This also underpins the affirmation of Banamex's support rating at '1'. In turn, a potential upgrade of Citigroup's IDRs could positively affect Banamex's IDRs, since the latter is considered core to the former, but Banamex's IDRs could be capped by sovereign and/or country ceiling considerations.
Accival and Citi Mexico Investments' national scale ratings could only be negatively affected by a multi-notch downgrade of Banamex's or Citigroup' IDRs, respectively, or a change in their propensity to support these affiliates.
Fitch upgrades the following:
Banamex:
--Viability rating to 'a' from 'a-';
Fitch affirms the following:
Banamex:
--Foreign and Local Currency Long-Term IDRs at 'A'; Outlook Stable;
--Foreign and Local Currency Short-Term IDRs 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 issuances at 'AAA(mex)'.
Accival:
--Long-term National-scale rating at 'AAA(mex)'; Outlook Stable;
--Short-term National-scale rating at 'F1+(mex)';
Citi Mexico Investments:
--Long-term National-scale rating for local senior debt issuances at 'AAA(mex)emr'.
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);
-- Securities Firm Criteria (Aug. 15, 2012);
-- Rating FI Subsidiaries and Holding Companies (Aug. 10, 2012);
-- National Scale Ratings Criteria (Oct. 30, 2013).
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 Scale Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=806818
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