Moody's downgrades subordinated debt of BBVA, Banorte

Moody's de Mexico said it downgraded the ratings assigned to subordinated debt issued by BBVA Bancomer, SA and Banco Mercantil del Norte, SA (Banorte), concluding the review for downgrade begun on these ratings on June 28, 2012 and Dec. 4, respectively.

Specifically, the agency downgraded BBVA Bancomer's long-term global local-currency subordinated debt rating to Baa2 from A3 and long-term Mexican national scale subordinated debt rating to Aa1.mx from Aaa.mx; BBVA Bancomer, SA Texas Agency's long-term global local-currency subordinated debt rating to Baa2 from A3 and long-term global local-currency junior subordinated debt rating to Baa3 (hyb) from Baa2 (hyb); and BBVA Bancomer, SA, Grand Cayman Branch's long-term global local-currency junior subordinated debt rating to Baa3 (hyb) from Baa2 (hyb). The outlook is stable.

Moody's downgraded Banorte's long-term global local-currency subordinated debt rating to Baa3 from Baa1, long-term global local-currency junior subordinated debt rating to Ba1(hyb) from Baa2 (hyb), long-term Mexican national scale subordinated debt rating to Aa2.mx from Aaa.mx, long-term Mexican national scale junior subordinated debt rating to Aa3.mx (hyb) from Aa1.mx (hyb) and long-term foreign-currency subordinated debt rating to Baa3 (hyb) from Baa1 (hyb) and confirmed its long-term foreign-currency junior subordinated debt rating at Ba1 (hyb). The outlook is negative.

The agency said it removed systemic support from these banks' subordinated debt instruments, placing them one notch below their respective adjusted baseline credit assessments in the case of subordinated debt and two notches for junior subordinated debt. Moody's noted the global trend towards imposing losses on junior creditors in the context of future bank resolutions, which reduces the predictability of systemic support being provided to subordinated debt holders.

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