MONTERREY, Mexico & NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to assign a 'BBB+' rating to the planned issuance of Banco Santander Mexico (SAN Mexico)'s dollar-denominated fixed rate senior unsecured notes. The amount of these notes could be up to USD 1.0 billion, with a tenor for up to 10 years.
The 'BBB+' expected rating of these senior notes is aligned to SAN Mexico's 'BBB+' long-term Issuer Default Ratings (IDRs), which reflects that these notes rank pari passu with other senior obligations. In turn, SAN Mexico's IDRs are aligned to its viability rating (VR) of 'bbb+', indicating that its credit quality is driven by the bank's intrinsic financial profile.
SAN Mexico's VR of 'bbb+' and its long term IDRs of 'BBB+' are driven by the bank's relevant and growing franchise, strong risk management, sound capital ratios and improving profitability, although they also consider SAN Mexico's lower than peers margins and the challenges arising from above average loan growth recently.
The Rating Outlook on SAN Mexico's IDR remains Negative, highlighting the inherent linkage of a subsidiary and its parent. The Negative Outlook reflects that SAN Mexico's VR and IDR could be affected by further potential downgrades of its parent, Spain's Banco Santander (SAN, rated 'BBB+' with a Negative Outlook by Fitch).
In Fitch's opinion, SAN Mexico has the financial strength to merit a rating above its parent, absent a significant deterioration of market sentiment, but only to certain degree. Therefore, a potential multi-notch downgrade of SAN, could affect SAN Mexico's VR, its IDRs, and the rating of the proposed senior notes.
Considering the systemic importance of SAN Mexico, Fitch maintains a Support Rating Floor (SRF) of 'BBB-', given the vested interest from the Mexican sovereign to preserve the health of its financial system. In Fitch's view, the sovereign could provide support, should it be required. Fitch's SRFs indicate a level below which the agency will not lower the bank's long-term IDRs. The proposed senior notes are not explicitly guaranteed by the Mexican savings protection agency.
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' (Aug. 15, 2012);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181
Rating FI Subsidiaries and Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209
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