MONTERREY, Mexico & NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings of Mexican development bank Nacional Financiera (Nafin) as follows:
--Long-term Issuer Default Rating (IDR) at 'BBB';
--Short-term IDR at 'F2';
--Long-term local currency IDR at 'BBB+';
--Short-term local currency IDR at 'F2';
--Support rating at '2';
--Support rating floor at 'BBB';
--Long-term national-scale rating at 'AAA(mex)';
--Short-term national-scale rating at 'F1+(mex)';
--Local senior unsecured debt issues at 'AAA(mex)'.
The Rating Outlook is Stable.
Nafin's ratings reflect the strength of the explicit support that the bank would receive from the Mexican government, if required. Fitch also notes its importance as a development bank to the country. The Mexican federal government is Nafin's majority shareholder (99.9%). Under Nafin's organic law (article 10), the Mexican federal government is explicitly responsible for the operations entered into by Nafin with domestic or foreign institutions, as well as for its deposits. Given Mexico's investment grade sovereign rating, there is a high probability that support from the authorities would be forthcoming, if required.
Given that the bank's IDRs are driven by the explicit support granted by the Mexican government, Nafin's ratings would mirror any potential change in Mexico's sovereign ratings, which currently have a Stable Outlook.
During the recent crisis, development banks played a critical role in providing financing alternatives locally, following the liquidity crunch in the local debt market and reduced credit risk appetite from private sector banks. Nafin was particularly active in granting loans and credit guarantees to corporations and small and medium enterprises (SMEs). Loans increased at a 22% annual rate in 2008 and 2009, although growth slowed down in 2010 and was negative in 9M'11. Despite the low interest rate environment, Nafin has benefited from increased lending volumes and well contained credit and non-interest costs since the recent financial crisis, improving rapidly its efficiency and overall profitability metrics. While credit growth has been ample in recent years, higher recurring earnings have fueled equity growth (core and regulatory capital ratios to risk weighted assets were 17.67% and 16.31%, respectively, as of September 2011). Impairments remain at a very low 0.12% of total loans, while the reserve coverage ratio is a comfortable 1.9% of total lending. Nafin's funding base is mostly composed of wholesale term deposits and bond issuances in the local debt market. The sovereign guarantee is a major strength, and the challenging market conditions during the recent crisis did not affect Nafin's liquidity and funding profile.
Founded in 1934, Nafin is one of Mexico's largest development banks. Nafin's main role is to foster the development of private sector small and medium companies by providing both financing and technical support.
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', dated Aug. 16, 2011.
--'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
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
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