From Moody’s Investors Service

Global Credit Research – 05 Jun 2015

Counterparty Risk assessments assigned

New York, June 05, 2015 — Moody’s Investors Service (MIS) today concluded its rating reviews on BBVA Bancomer, S.A. Texas Agency (Bancomer Texas Agency) and Banco Mercantil del Norte, S.A. (Cayman I) (Banorte Cayman), and downgraded the senior unsecured debt ratings of these issuers to A3 from A2. These reviews were initiated on 6 March 2015 (see press release at https://www.moodys.com/research/–PR_320056).

At the same time, MIS placed on review for downgrade HSBC México, S.A. Cayman Islands’s (HSBC México Cayman) senior unsecured MTN debt program ratings and affirmed Banco Nacional de México, S.A.’s (Banamex) and Banco Santander (México), S.A.’s (Santander México) foreign currency senior unsecured debt and senior unsecured MTN debt program ratings.

MIS has also assigned Counterparty Risk (CR) assessments to Bancomer Texas Agency, Banorte Cayman and HSBC México Cayman, in line with its new bank rating methodology published on 16 March 2015 (see https://www.moodys.com/research/Banks–PBC_179038).

MIS has withdrawn the outlooks on all junior instruments for its own business reasons. Please refer to Moody’s Investors Service’s Policy for Withdrawal of Credit Ratings, available on its website, www.moodys.com.

Outlooks, which provide an opinion on the likely rating direction over the medium term, are now assigned only to long-term deposit and senior unsecured debt ratings. Except for HSBC México Cayman whose ratings are on review for downgrade, Moody’s has assigned stable outlooks to the banks’ senior unsecured debt ratings.

A detailed list of ratings affected is provided below.

RATINGS RATIONALE

MIS downgraded Bancomer Texas Agency’s and Banorte Cayman’s senior unsecured debt ratings to A3, from A2, in line with the downgrade earlier today of their parent banks’ global local currency (GLC) deposit ratings by Moody’s de México (MdM). MIS uses the parent banks’ GLC deposit ratings as anchors for these branches’ ratings. The review for downgrade of HSBC México Cayman is also in line with the review for downgrade of HSBC México, S.A.’s ratings. The affirmation of Banamex’s and Santander México’s foreign currency senior unsecured debt and senior unsecured MTN debt program ratings also follows the affirmation of their GLC deposit ratings by MdM. For details on the rating actions taken on the above mentioned parent banks please see the MdM press release entitled “Moody’s takes rating actions on Mexican financial institutions.”

RATIONALE FOR COUNTERPARTY RISK ASSESSMENTS

Moody’s assigned A2(cr) and Prime-1(cr) CR Assessments to Bancomer Texas Agency and Banorte Cayman, respectively. At the same time, Moody’s assigned CR Assessments of A1(cr) and Prime-1(cr), on review for downgrade, to HSBC México Cayman. The CR Assessments of these three branches are in line with the CR Assessments of their corresponding parent banks.

CR Assessments are opinions of how counterparty obligations are likely to be treated if a bank fails, and are distinct from debt and deposit ratings in that they (1) consider only the risk of default rather than expected loss and (2) apply to counterparty obligations and contractual commitments rather than debt or deposit instruments. The CR Assessment is an opinion of the counterparty risk related to a bank’s covered bonds, contractual performance obligations (servicing), derivatives (e.g., swaps), letters of credit, guarantees and liquidity facilities.

The CR Assessment takes into account the issuer’s standalone strength as well as the likelihood of affiliate and government support in the event of need, reflecting the anticipated seniority of these obligations in the liabilities hierarchy. The CR Assessment also incorporates other steps authorities can take to preserve the key operations of a bank should it enter a resolution.

In most cases, the starting point for the CR Assessment, which is an assessment of the bank’s ability to avoid defaulting on its operating obligations, is one notch above the bank’s adjusted BCA, to which Moody’s then typically adds the same notches of support uplift as applied to deposit and senior unsecured debt ratings.

As a result, the CR Assessments for these entities are one notch higher than their parent banks’ deposit ratings, reflecting Moody’s views that authorities are likely to honor the operating obligations the CR Assessment refers to in order to preserve a bank’s critical functions and reduce potential for contagion.

LIST OF ALL AFFECTED RATINGS

— BBVA Bancomer Texas Agency

Long-term global local currency senior unsecured debt rating: Downgrade to A3, from A2, stable outlook

Long-term global local currency subordinated debt rating: Affirm at Baa2

Long-term global local currency subordinated debt rating: Affirm at Baa3 (hyb)

Long-term global local currency junior subordinated debt rating: Affirm at Baa3 (hyb)

Long-term counterparty risk assessment: Assigned at A2(cr)

Short-term counterparty risk assessment: Assigned at Prime-1(cr)

Overall rating outlook: Stable

– Banco Nacional de México, S.A.

Long-term foreign currency senior unsecured MTN debt program rating: Affirm at (P)A3

– Banco Mercantil del Norte, S.A.

Long-term foreign currency subordinated debt rating: Affirm at Baa2 (hyb)

Long-term foreign currency junior subordinated debt rating: Affirm at Baa3 (hyb)

— Banco Mercantil del Norte (Cayman I)

Long-term foreign currency senior unsecured debt rating: Downgrade to A3, from A2, stable outlook

Long-term counterparty risk assessment: Assigned at A2(cr)

Short-term counterparty risk assessment: Assigned at Prime-1(cr)

Overall rating outlook: Stable

– Banco Santander (México), S.A.

Long-term foreign currency senior unsecured debt rating: Affirm at A3, stable outlook

Long-term foreign currency senior unsecured MTN debt program rating: Affirm at (P)A3

Long-term foreign currency subordinated debt rating: Affirm at Baa3 (hyb)

— HSBC México, S.A. Cayman Islands

Long-term foreign currency senior unsecured MTN debt program rating: (P)A2, on review for downgrade

Short-term foreign currency senior unsecured MTN debt program rating: (P)Prime-1, on review for downgrade

Long-term counterparty risk assessment: Assigned at A1(cr), on review for downgrade

Short-term counterparty risk assessment: Assigned at Prime-1(cr), on review for downgrade

Overall rating outlook: Review for downgrade

The principal methodology used in these ratings was Banks published in March 2015. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Banamex is headquartered in Mexico City, Mexico and reported MXN1,118 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

Santander México is headquartered in Mexico City, Mexico and reported MXN1,049 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

Banorte is headquartered in Mexico City, Mexico and reported MXN916 billion in assets (source: Comisión Nacional Bancaria y de Valores), as of March 2015.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody’s disclosures on the lead analyst and the Moody’s legal entity that has issued the ratings.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

David Olivares Villagomez
VP – Senior Credit Officer
Financial Institutions Group
Moody’s de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 – 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700
Maria Celina Vansetti-Hutchins
MD – Banking
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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