Moody's may cut Mexican banks

Moody's Investors Service said it placed under review for possible downgrade the local currency deposit ratings of three banks and the local currency and foreign currency issuer ratings of five financial, government-related issuers.

The reviews are the result of the rating agency's global reassessment of the extent to which local currency deposit ratings should be more closely aligned with that of the supporting government given the role systemic support plays in such ratings, the agency said.

Moody's added that the local currency debt and deposit ratings of three other Mexican banks were already under review and continue on review for possible downgrade.

Moody's explained that only the largest financial institutions are being affected by this reassessment of systemic support considerations because their deposit and issuer ratings benefit from several notches of uplift over the ratings implied by their inherent financial strength.

Separately, Moody's said it affirmed with stable outlooks the Baa1 foreign currency deposit ratings of six Mexican banks, as well as of three Mexican subsidiaries of foreign wholesale banks following the affirmation with stable outlook of Mexico's government bond rating and bond and deposit ceilings.

Placed under review for downgrade are the local currency deposit ratings of Banamex and Scotiabank Mexico, as well as Banorte's local currency deposit and debt ratings, the agency said. These banks' financial strength ratings, which reflect their stand-alone financial strength without benefit of systemic support considerations, were affirmed, Moody's said.

The GRIs whose ratings were placed under review are Instituto para la Proteccion al Ahorro Bancario, Sociedad Hipotecaria Federal, SNC, Banco Nacional de Comercio Exterior, SNC, Banco Nacional de Obras Publicas, SNC and Nacional Financiera, SNC, the agency said.

The local currency debt and deposit ratings of BBVA Bancomer, SA, HSBC Mexico, SA and Banco Santander, SA were previously placed under review and remain on review for possible downgrade, Moody's added.

In affirming Banamex's C+ BFSR with stable outlook, Moody's said it concluded that the bank's strong capitalization is well positioned to withstand potentially higher credit losses over the near term at its current rating level.

Banco Santander's ratings include the global local currency deposits of Aa3/Prime-1, global local currency senior debt of Aa3/Prime-1, foreign currency senior debt of A1/Prime-1, foreign currency deposits of Baa1/Prime-2 and Mexican national-scale deposit and senior debt ratings of Aaa.mx/MX-1.

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