May 30, 2013 / 6:18 PM / 4 years ago

Fitch Affirms Banca Mifel's VR at 'bb-' and IDR at 'BB-'; Outlook Stable

(The following statement was released by the rating agency) MONTERREY, May 30 (Fitch) Fitch Ratings has today affirmed Banca Mifel's (Mifel) viability rating (VR) at 'bb-' and its long- and short-term Issuer Default Ratings (IDRs) at 'BB-' and 'B', respectively. The national scale ratings were affirmed at 'A-(mex)' and 'F2(mex)'. The Rating Outlook on the long-term international and/or national scale issuer ratings of Mifel remains Stable. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS Mifel's VR was affirmed at 'bb-' as well as its long- and short-term IDRs at 'BB-' and 'B', respectively, driven by its reasonable asset quality metrics, a sound funding profile as the banks has access to sizable retail deposits from a customer base that has proven stable and recurring, and recently improved capitalization levels. Also, its ratings are tempered by its still weak financial performance derived from its tight interest margins, high provisions and low operating efficiency; the latter associated to expenses related to the recent implementation of the bank's new banking platform. The ratings also consider the business, creditor and geographic concentrations of its loan portfolio and the bank's liquidity constraints which Fitch considers it still limits its ratings. Mifel's national scale long- and short-term ratings were also affirmed at 'A-(mex)' and 'F2(mex)', respectively; and are driven by the bank's VR. Mifel's support rating and support rating floor were affirmed at '5' and 'NF', reflecting that, although possible, external support cannot be relied upon; given the low systemic importance of the bank. The bank's hybrid security has been affirmed at 'B', two notches below Mifel's VR; driven by Fitch's approach to rate these subordinated securities, which incorporate its subordination and non-performance risk. Given its coupon omission features, coupons and even principal could be deferred well before the bank reaches a non-viability condition. RATING SENSITIVITIES - IDRS, NATIONAL RATINGS AND SENIOR DEBT Mifel's VR and IDRs could benefit over the medium term from sustained and material improvements on its core profitability drivers, especially if the bank is able to improve cost efficiency metrics to levels around 55% together with a higher and stable operating ROA (consistently above 1%) and a significant reduction of its asset-liability mismatches. Otherwise, if Mifel is not able to avoid further deterioration of its asset quality metrics, such as a NPL standing above 5% and loan reserves around 50% of impaired loans, and its liquidity profile deteriorates materially; together with a weakening financial performance, Mifel's VR and IDRs could be pressured downwards. A potential upgrade of Mifel's support rating and support rating floor is limited, since external support cannot be relied upon, although it's possible. Mifel's subordinated debt rating and national scale long- and short-term ratings will likely mirror any change in its VR, as this is expected to maintain the same relativity to its credit rating. Fitch has taken the following rating actions: Mifel: --Long-term foreign and local currency IDRs affirmed at 'BB-'; --Short-term foreign and local currency IDRs affirmed at 'B'; --Viability rating affirmed at 'bb-'; --Support rating affirmed at '5'; --Support rating floor affirmed at 'NF'; --USD150 million cumulative subordinated preferred notes affirmed at 'B'; --National-scale long-term rating affirmed at 'A-(mex)'; --National-scale short-term rating affirmed at 'F2(mex)'. Contact: Primary Analyst Monica Ibarra Director +52 818 8399 9150 Fitch Mexico SA de CV Prol. Alfonso Reyes 2612, Edificio Conexity Piso 8 Col. Del paseo Residencial 64920 Monterrey, N.L., Mexico Secondary Analyst Manuel Valdes Analyst +52 818 8399 9159 Committee Chairperson Franklin Santarelli Managing Director +1-212-908-0739 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available on www.fitchratings.com. Applicable Criteria and Related Research: -- 'Global Financial Institutions Rating Criteria' (Aug. 15, 2012); -- 'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 05, 2012); -- 'National Ratings Criteria' (Jan. 19, 2011). Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities here National Ratings 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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