May 10, 2017 / 6:00 PM / 3 months ago

Fitch: No Impact on Ratings of Financial Parents of Mexican Afores after Monopolistic Fines

(The following statement was released by the rating agency) MONTERREY, May 10 (Fitch) Potential effects on the rated parents of the Mexican pension fund managers (Afores, as per its Spanish acronym) recently fined by the regulator related to monopolistic practices are not significant, since these fines are unlikely to materially weaken the parents' relatively strong financial profiles, says Fitch Ratings. On May 4, after an investigation initiated in 2015, the Mexican Anti-trust Commission (COFECE) announced sanctions totalling MXN1.1 billion on four Afores as well as 11 individuals based on monopolistic practices. They were accused of intending to reduce the number of transfers among Afores. As of today, Afore XXI Banorte is the only entity that has disclosed the amount of the sanction, approximately MXN429 million initially which was reduced to nearly MXN300 million, which the company intends to dispute through legal remedies. Fitch has estimated an approximate amount of the fines, and the assessment of the potential implications is based on such estimates. Three out of four fined Afores are subsidiaries of Fitch's rated holding companies: Grupo Financiero Banorte, S.A.B. de C.V. (Afore XXI Banorte), Grupo Profuturo, S.A.B. de C.V. (Profuturo GNP Afore) and SURA Asset Management, S.A. (Afore SURA). Current ratings of the parent companies are listed at the end of this press release. Fitch does not foresee a significant negative effect on the three rated entities' financial performance from the sanctions, given their sound financial profile, relatively diversified income sources and their well-proven track record in the Mexican pension fund management business. Therefore, the financial effects of the fines imposed by the regulator are likely to be minor. Although the financial effects could be absorbed with relative ease, Fitch believes that some reputational risks could arise from the investor and other market participants' side, but not from a business volume perspective, since the Afores serve a retail customer base, which is less sensitive to these market events. The ability of these Afores' parent companies to avoid any material impact on their access to funding at unchanged prices and conditions is yet to be tested. Current Ratings: Grupo Financiero Banorte, S.A.B. de C.V. --Long-Term Foreign and Local Currency Issuer Default Rating (IDR) at 'BBB+'; Outlook Negative; --Viability rating at 'bbb+'; --Short-Term Foreign and Local Currency IDR at 'F2'; --Support Rating at '5'; --Support Rating Floor at 'NF'. SURA Asset Management, S.A. --Long-Term Foreign and Local Currency IDR at 'BBB+'; Outlook Stable; --Short-Term Foreign and Local Currency IDR at 'F2'; Grupo Profuturo, S.A.B. de C.V. - National scale long-term Rating at 'AAA(mex)'; Outlook Negative; - National scale short-term rating at 'F1+(mex)'. Contact: Veronica Chau Senior Director +52 81 83 99 91 69 Fitch Mexico S.A. de C.V. Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8 Col. Del Paseo Residencial 64920 Monterrey, N.L., Mexico Alejandro Tapia Director +52 81 83 99 91 56 Abraham Martinez Director +56-2-499-33-17 Omar Rojas Associate Director +52 81 83 99 91 67 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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