Fitch Expects to Rate Banco Inbursa's Proposed Senior Notes 'BBB+'

MONTERREY, Mexico--(BUSINESS WIRE)-- Fitch Ratings has assigned an expected long-Term rating of 'BBB+(EXP)' to Banco Inbursa, S.A., Institucion de Banca Multiple's (Banco Inbursa) proposed senior notes. The final rating is contingent upon the receipt of final documents conforming to the information already received.

The proposed USD1,500 million senior notes will have a maturity of 10 years (due 2026) with semi-annual fixed-rate interest payments and the principal will be paid on the maturity day. The notes will be Banco Inbursa's direct, unconditional and unsecured general obligations.

KEY RATING DRIVERS

The expected rating of 'BBB+(EXP)' reflects that these are senior unsecured obligations of Banco Inbursa that rank pari passu with other senior indebtedness, and therefore, this rating is aligned with the bank's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of 'BBB+', which in turn are driven by the bank's Viability Rating (VR) of 'bbb+'.

Banco Inbursa's ratings reflect its robust loss-absorbing capacity created by ample capital ratios and loan-loss provisions. It also considers the bank's adequate funding and liquidity profile which have been stable through economic cycles, and its historically low and contained credit losses. The ratings also factor in Banco Inbursa's strong and growing franchise on both sides of the balance sheet, especially when assessed with the other financial companies of its parent, Grupo Financiero Inbursa (GF Inbursa), and given the strong synergies with other non-financial companies related to the controlling shareholders. The bank's sound and relatively stable earnings are also considered positive.

Banco Inbursa's ratings also consider the relatively higher than its peers business, risk, and funding concentrations, although these have continued to decline gradually through increased consumer loans and retail deposits. The relatively high and volatile contribution of trading revenues is also factored in, although this item is typically positive and highly influenced by the mark-to-market of the bank's hedging positions. Also, Banco Inbursa is seeking to reduce the volatility of trading revenues by shifting the mix of its hedging positions and other funding alternatives.

RATING SENSITIVITIES

Given their senior unsecured nature, these notes will typically be aligned with the bank's IDRs, and the rating of the notes will mirror any potential change to Banco Inbursa's IDRs.

Specifically, Banco Inbursa's International scale ratings could be upgraded over the medium term if business and risk diversification continues to improve steadily, when the longer-term assets are entirely funded with stable customer deposits and/or wholesale debt that completely offsets tenor mismatches, and if the bank reduces earnings volatility driven by market-related revenues.

In turn, downside potential for these ratings and the National scale ratings would arise if the bank's capital adequacy metrics or internal capital generation deteriorate materially (i.e. FCC ratio below 15%), or in the event of a reversal in the improving trends in funding and liquidity, and/or business and revenue diversification. Materially higher earnings volatility and/or inability to sustain recurring operating profits to average assets above 1.5% could also be detrimental to the bank's ratings.

For further information about the rating sensitivities for Banco Inbursa's VR please see Fitch's press release 'Fitch Affirms Banco Inbursa' VR & IDRs at 'bbb+' and 'BBB+'; Outlook Stable', available at www.fitchratings.com.

--Date of Relevant Rating Committee: March 17, 2016

Summary of Financial Statement Adjustments - Pre-paid expenses and other deferred assets were reclassified as intangibles and deducted from Fitch Core Capital as Fitch considered them to have a low capacity to absorb losses.

Additional information is available on www.fitchratings.com

Applicable Criteria

Global Bank Rating Criteria - Effective from 20 March 2015 to 15 July 2016 (pub. 20 Mar 2015)

https://www.fitchratings.com/site/re/863501

Global Non-Bank Financial Institutions Rating Criteria -- Effective 4/28/2015 to 7/15/2016 (pub. 28 Apr 2015)

https://www.fitchratings.com/site/re/865351

National Scale Ratings Criteria (pub. 30 Oct 2013)

https://www.fitchratings.com/site/re/720082

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011330

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160907006497/en/

Fitch Ratings
Primary Analyst
Alejandro Tapia
Director
+52 818 399 9156
Fitch Mexico S.A. de C.V.
[Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst
Veronica Chau]
Senior Director
+52 818 399 9169
or
Committee Chairperson
Alejandro Garcia, CFA
Managing Director
+1-212-908 9137
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• The tech crown switches hands: Apple dethrones Nvidia as $4 trillion king
• Florida Contractor Expands Private Inspections for Storm Roof Work
• DB cautious on cruise stocks as fundamentals “not as clear as bulls believe”