Fitch Ratings has affirmed the Long- and Short-Term Foreign and Local-Currency Issuer Default Ratings (IDRs) at 'BBB+'/'F2', respectively of
The Rating Outlook was revised to Stable from Negative in line with the Outlook of its ultimate parent,
This action follows Fitch's
KEY RATING DRIVERS
IDR and Senior Debt
The strong ability and propensity of SAN Mexico's ultimate parent, Santander, to support SAN Mexico drives its IDR and debt ratings. SAN Mexico's IDRs are rated one notch below its ultimate parent, Santander, reflecting SAN Mexico's important role within Santander's strategy of increasing its presence in growth markets taking advantage of the strong franchise of SAN Mexico in the country. SAN Mexico is the third-largest bank in terms of gross loans with a market share of 13.4% as of
SAN Mexico's senior unsecured debt ratings are aligned with the bank's IDR, as the likelihood of default is the same as the bank's ratings.
SAN Mexico's hybrid security ratings are capped by the level at which similar securities issued by its ultimate parent are rated due to Fitch's consideration that parental support neutralizes the non-performance risk.
SAN Mexico's Tier 2: The bank's Tier 2 notes' rating of 'BBB-' are a two-notch difference from the support-driven IDR to account for loss-severity risk. The notching for loss severity reflects that these are 'subordinated preferred'.
SAN Mexico's AT1: SAN Mexico's Tier 1 (AT1) securities of 'BB+' are rated three notches from its support-driven IDR. According to Fitch criteria, the baseline notching for these instruments is four notches, but non-performance risk is neutralized due to parent support. However, the rating is capped by the level at which similar securities issued by the parent would be rated: a two-notch adjustment for loss severity and a two-notch adjustment for nonperformance; implying that the cap is 'BB+', given the parent's anchor VR of 'a-'.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
IDR
SAN Mexico's IDR would be upgraded in the event of an upgrade of the parent's IDR, subject to country ceiling constraints, given that the entity is considered strategically important to Santander.
Senior Debt
An upgrade of the bank's global senior debt ratings would mirror any positive action on SAN Mexico's IDR.
Subordinated Debt
The bank's hybrid securities ratings could change in the event of an upgrade on the bank's support driven IDR.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
IDR
Any change of Fitch's perception of the strategic importance of SAN Mexico to its parent may trigger a review of its IDRs;
The ratings are also sensitive to a downgrade of
Senior Debt
A downgrade of the bank's global senior debt ratings would mirror any negative action on SAN Mexico's IDR.
Subordinated Debt
The bank's hybrid securities ratings could change in the event of a downgrade on the bank's support driven IDR.
For further specific sensitivities for SAN Mexico, please refer to its press releases and/or rating reports at www.fitchratings.com.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
SUMMARY OF FINANCIAL ADJUSTMENTS
Prepaid expenses and other deferred assets were classified as intangibles and deducted from
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
RATING ACTIONSENTITY/DEBT RATING PRIOR
Banco Santander Mexico, S. A ., Institucion de Banca Multiple, Grupo Financiero Santander Mexico LT IDR BBB+ Affirmed BBB+
ST IDR F2 Affirmed F2
LC LTIDR BBB + Affirmed BBB+
LC ST IDR F2 Affirmed F2
senior unsecured
LT BBB+ Affirmed BBB+
subordinated
LT BB+ Affirmed BB+
subordinated
LT BBB- Affirmed BBB-
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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