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Fitch Expects to Assign a 'BBB+' Rating to Banco Inbursa's Proposed Senior Notes
May 28, 2014 / 5:57 PM / 3 years ago

Fitch Expects to Assign a 'BBB+' Rating to Banco Inbursa's Proposed Senior Notes

(The following statement was released by the rating agency) MONTERREY, May 28 (Fitch) Fitch Ratings expects to assign a 'BBB+' rating to Banco Inbursa, S.A.'s (BInbursa) proposed issuance of global senior notes. KEY RATING DRIVERS The expected rating of 'BBB+(EXP)' reflects that these are senior unsecured obligations of BInbursa that rank pari passu with other senior indebtedness, and therefore, this rating is aligned with the bank's long-term Issuer Default Rating (IDRs) of 'BBB+', which in turn are driven by the bank's Viability Rating (VR) of 'bbb+'. BInbursa's VR and IDRs are driven by its robust loss-absorbing capacity, adequate funding and liquidity profile, and its historically low and contained credit losses. These ratings also factor in BInbursa's strong and enhancing franchise, especially when assessed together with the other financial companies of its parent, Grupo Financiero Inbursa, and given the strong synergies with other non-financial companies related to the controlling shareholders. The bank's sound and relatively stable earnings are also considered. The VR and IDRs also consider the relatively higher than its peers business, risk, and funding concentrations, although these have continued to decline gradually. The relatively high and volatile contribution of trading revenues is also factored in, although this item is typically positive and highly influenced by the mark-to-market of the bank's hedging positions. Also, BInbursa is seeking to reduce the volatility of trading revenues by shifting the mix of its hedging positions. RATING SENSITIVITIES Given their senior unsecured nature, these notes will typically be aligned with the bank's IDRs, and the rating of the notes will mirror any potential change on BInbursa's IDRs. The VR and IDRs could be upgraded over the medium term if business and risk diversification continue to improve steadily, when the longer-term assets are entirely funded with stable customer deposits and/or wholesale debt that completely offsets tenor mismatches, and if the bank reduces earnings volatility driven by market-related revenues. In turn, downside potential for these ratings would arise if the bank's capital adequacy metrics or internal capital generation deteriorate materially (i.e. Fitch core capital ratio below 15%), in the event of a reversal in the improving trends in funding and liquidity, and/or business and revenue diversification. Credit Profile BInbursa is Mexico's sixth-largest bank by loans, with 6.2% of the system's lending portfolio as of March 2014. It ranks seventh by deposits, with 5.9% of the sector's total. Initially oriented toward corporate banking, it has grown recently with a more diversified business mix among corporate, retail, infrastructure, and public sector loans. It is financed mostly through deposits and local issues of long-term debt. BInbursa has a strong capital position and an ample loan loss reserve cushion that provide a high capacity to absorb losses. It also has sound profitability, driven by stable margins, outstanding operating cost efficiency, and well-contained credit costs. Its funding and liquidity profile is adequate and improving, while risk concentrations continue declining gradually, although these remain relatively high. Contact: Primary Analyst Alejandro Garcia, CFA Senior Director +52 818 399 9146 Fitch Mexico S.A. de C.V. Prol. Alfonso Reyes 2612 64920 Monterrey, Mexico Secondary Analyst Alejandro Tapia Director +52 818 399 9156 Committee Chairperson Franklin Santarelli Managing Director +1 212 908 0739 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available on Applicable Criteria and Related Research: --'Global Financial Institutions Rating Criteria' (Jan. 31, 2014); Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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.

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