Fitch Affirms Banco Inbursa's Ratings

Fitch Ratings has affirmed Banco Inbursa's (Inbursa) ratings 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';

--Viability rating at 'bbb';

--Individual rating at 'C';

--Support rating at '4';

--Support rating floor at 'B';

--Long-term national-scale rating at 'AA+(mex)';

--Short-term national-scale rating at 'F1+(mex)'.

The Rating Outlook is Stable.

Inbursa's viability rating and IDRs reflect gradual improvements on two of the bank's major challenges, namely reducing risk concentrations and enhancing its funding profile. While improvements have been moderate and gradual, Fitch expects this trend to continue, which will gradually strengthen Inbursa's credit quality over the medium term. These positive trends have been accompanied by further increases in the bank's already sound loss absorption capacity and proven ability to maintain a low level of impaired loans, despite hefty lending growth in recent years.

In addition to strong capital levels, Inbursa's credit profile also benefits from a large cushion of loan loss reserves, which accounted for over 13% of total loans as of June 2011 (more than 3.7 times [x] the amount of impaired loans at the same date). Inbursa was one of the few banks whose performance continued improving throughout the recent crisis.

Given ample loan growth, the drivers of core earnings were enhanced, with wider margins and increasing fees. Sound efficiency and its proven capacity to contain provisions are additional sources of comfort regarding the bank's core profitability. The operating return on average assets has been higher than 2% since fiscal year (FY) 2009.

The bank has maintained throughout the cycle a strong track record of minor credit losses in its core corporate lending portfolio. Obligor and sector concentrations are still relatively high, but gradually declining. While the bank has expanded its retail portfolio through acquisitions, overall impairments levels remain relatively low.

While the loan to deposits ratio is still somewhat weak, its funding profile continues improving gradually. Demand deposits have continued growing, but their relative contribution has not changed dramatically in view of ample loan growth in recent years. However, the bank has reduced its reliance on less stable wholesale time deposits through medium term debt placements in the local capital markets. This has also narrowed maturity mismatches among assets and liabilities.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

-- 'Global Financial Institutions Rating Criteria' (Aug 16, 2010);

-- 'Short-Term Ratings Criteria for Corporate Finance' (Nov. 2, 2010);

-- 'National Ratings Criteria' (Jan. 19, 2011).

Applicable Criteria and Related Research:

Short-Term Ratings Criteria for Corporate Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=568726

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

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Contacts:

Fitch Ratings
Primary Analyst
Alejandro Garcia, [phone]
Senior Director
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst
Oliver Venegas, [phone]
Associate Director
or
Committee Chairperson
Rene Medrano, [phone]
Senior Director
or
Media Relations:
Cindy Stoller, [phone]
Email: [e-mail]