Fitch Ratings has affirmed the ratings of Banco del Bajio (Bajio) as follows:
--Long-term Issuer Default Rating (IDR) at 'BB+';
--Short-term IDR at 'B';
--Long-term local currency IDR at 'BB+';
--Short-term local currency IDR at 'B';
--Viability rating at 'bb+';
--Individual rating at 'C/D';
--Support rating at '5';
--Support rating floor at 'NF';
--National scale long-term rating at 'A+(mex)';
--National scale short-term rating at 'F1(mex)'.
The Rating Outlook is Stable.
Bajio's ratings reflect its good franchise in its core region, adequate loss absorption capacity, relatively modest risk appetite and favorable performance of its originated loans. They also factor in the ongoing challenges to maintain a good asset quality in its loan portfolio and further improve its revenue diversification and funding mix.
Bajio's ratings would be positively influenced over time by sustained improvements in core profitability, revenue diversification, funding and liquidity, while maintaining capital and asset quality metrics. In turn, downward pressure for the ratings could arise from a potential decrease on its loss absorption capacity and/or inability to contain weakening asset quality.
While Bajio's net income was significantly affected during the recent downturn, credit costs have now eased and the bank has been capable to restore its core profitability relatively rapid given its well-sustained margins and favorable operating efficiency. Asset quality is good in the commercial loans while deterioration in the mortgage portfolio has been decreasing gradually (2Q'11: delinquency ratio in this product stood at 9.2%). Bajio's funding profile has been very stable, with deposits and money market funds accounting for 83% of total liabilities as of June 2011, but the loans/deposits ratio at 138% is higher and relatively riskier than that of its closest peers although a considerable portion of the loans is funded using facilities with development banks. Capital growth has been in line with the sustained expansion in assets and loans. Bajio's capital base is largely unencumbered core capital.
Bajio is a medium-sized bank created in Leon, Guanajuato in 1994 by a group of regional investors to serve customers in western/central Mexico, where it maintains a strong and growing competitive position. Initially focused on SME and agriculture financing, it has grown increasingly diversified, with commercial and mortgage loans being its core products at present. Spain's Banco de Sabadell holds a 20% stake in Bajio and the World Bank's IFC, 10%. It wholly owns Financiera Bajio, the resulting entity of two mortgage companies acquired in the past, as well as a venture capital vehicle or SINCA (real estate holdings) and a 50% stake in Afore Afirme Bajio (pension management). It has continued to rapidly increase its distribution network to 235 branches and 457 ATMs as of 1Q'11.
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:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171
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, CFA, +52 81
8399 9146
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, +52 81 8399 9149
Associate Director
or
Committee
Chairperson
Rene Medrano, +503 2516 6610
Senior Director
or
Media
Relations:
Cindy Stoller, +1-212-908-0526
Email: cindy.stoller@fitchratings.com