MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings of Consupago S.A. de C.V. as indicated below:
--Long-term foreign currency Issuer Default Rating (IDR) at 'BB-';
--Short-term foreign currency IDR at 'B';
--Long-term local currency IDR at 'BB-';
--Short-term local currency IDR at 'B';
--Senior unsecured debt for up to MX$750 million at 'BB-';
--Long-term national-scale rating at 'A-(mex)';
--Short-term national-scale rating at 'F2(mex)'.
The Rating Outlook is stable.
Consupago's ratings reflect its strong capitalization; sound and recurring profitability driven by ample margins, well-contained provisions and strong efficiency levels; and adequate asset quality and loan loss reserve coverage. However, the ratings also factor in the limited flexibility of its funding structure, the challenging operating and competitive environment, and portfolio concentrations by region and employer. The ratings consider the benefits of its business model based on loan collections through direct debit from payrolls of public sector employees (its target market), although there is certain exposure and reliance on the goodwill of public entities (employers) to make timely and fully cash collections. The funding mix represents a key challenge in the medium term due to the limited number and high concentration of creditors, in addition to high funding costs and relatively ample reliance on secured financing.
Consupago's ratings could be affected positively over the medium term as a result of material improvements in the profile and flexibility of its financing mix, as well as further diversification of loans by employer, coupled with maintenance of sound key financial metrics. In turn, a potential worsening to a material extent in the company's major financial strengths, such as its capitalization ratios, profitability, and asset quality metrics, could put downward pressure on Consupago's ratings.
Consupago is one of the most important companies in payroll deduction activity, serving the employees of roughly 140 government agencies and unions across Mexico. Consupago has strong capitalization as a result of its sound profitability, in turn driven by high margins (annualized net interest margin of 49% during first-half 2011) and sound efficiency, as well as the ability to maintain low credit costs, driving return on assets (ROA) of 11.5% over the same period. As of June 2011, its capitalization ratio (equity to total assets) was 42.2%, mostly composed of core capital. At the same date, it had a total loan portfolio of MXN$2.1 billion, of which 3.8% were impaired. Impairments have decreased recently following higher than historical records of charge-offs during 2009 and 2010, although they have remained moderate.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria', dated Aug. 16, 2011;
--'Finance and Leasing Companies Criteria', dated Dec. 13, 2010;
--'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
Finance and Leasing Companies Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=587245
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
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.