Rating Action: Moody's downgrades eight Mexican banks and the IPAB; outlook negative

22 Apr 2020 Mexico, April 22, 2020 -- Moody's de México ("Moody's") has today downgraded to Baa1, from A3, the long- term global local and foreign currency deposit, issuer and debt ratings, where applicable of BBVA Bancomer, S.A. (BBVA), Banco Mercantil del Norte, S.A. (Banorte), Banco Santander México, S.A. (Santander México), Banco Nacional de México, S.A. (Citibanamex), HSBC México, S.A. (HSBC México), Banco Nacional de Obras y Servicios Públicos, S.N.C. (Banobras), Nacional Financiera, S.N.C. (Nafin), Banco Nacional de Comercio Exterior, S.N.C. (Bancomext), and the deposit insurer, Instituto para la Protección al Ahorro Bancario (IPAB). Moody's also affirmed MUFG Bank México, S.A.'s (MUFG) Baa1 deposit ratings. In the same rating action, Moody's affirmed the Aaa.mx/MX-1 long- and short-term Mexican National Scale ratings of BBVA, Banorte, Santander México, Citibanamex, HSBC México, Banobras, Nafin, Bancomext, and the IPAB. Moody's also affirmed long- and short-term Mexican National Scale ratings of Banco del Bajío, S.A. (BanBajío) at Aa2.mx/MX-1 and of MUFG at Aa1.mx/MX-1. The rating outlook on BBVA, Banorte, Santander México, Banobras, Nafin, Bancomext, and the IPAB remains negative. The rating outlook for Citibanamex and HSBC México was changed to stable, from negative. The rating outlook on BanBajío was changed to negative, from stable of its global local and foreign currency ratings. The rating outlook on MUFG remained stable. Moody's also affirmed the baseline credit assessments (BCAs) and adjusted BCAs of BBVA, Banorte, Santander México, Citibanamex, HSBC México, BanBajío, MUFG, Banobras, Nafin and Bancomext. The Counterparty Risk Assessments (CR Assessments) of BBVA, Santander México, Citibanamex, HSBC México, and MUFG were affirmed at A3(cr), while the CR Assessments of Banorte and BanBajío were downgraded by one notch Baa1(cr) and Baa2(cr), respectively. The rating actions follow the announcement by Moody's Investors Service, published on 17 April 2020, of the downgrade of the Government of Mexico's debt rating to Baa1, from A3. The outlook remained negative. For additional information, please refer to the related press release: "Moody's downgrades Mexico's ratings to Baa1, maintains negative outlook" (https://www.moodys.com/research/Moodys-downgrades-Mexicos-ratings- to-Baa1-maintains-negative-outlook--PR_422013). Moody's has also withdrawn the outlooks on the issuer ratings of Casa de Bolsa BBVA Bancomer, S.A. de C.V., Arrendadora y Factor Banorte, S.A. de C.V., Casa de Bolsa Santander, S.A. de C.V., Citibanamex Casa de Bolsa, S.A. de C.V. and the IPAB for its own business reasons. Please refer to the Moody's de México Policy for Withdrawal of Credit Ratings, available on its website, www.moodys.com.mx. A complete list of affected ratings can be found at the end of the press release. RATINGS RATIONALE DOWNGRADE OF GLOBAL LOCAL AND FOREIGN CURRENCY RATINGS The downgrade to Baa1, from A3, of the global local and foreign currency deposit, issuer and debt ratings, where applicable, of BBVA, Banorte, Santander México, Citibanamex, HSBC México, Banobras, Nafin, Bancomext, and the issuer rating of the IPAB is in line with the downgrade of Mexico's sovereign debt rating to Baa1, from A3, because (1) Mexico's medium term economic growth prospects have materially weakened, (2) the continued deterioration in Petróleos Mexicanos (Pemex, Ba2 negative) financial and operational standing is eroding the sovereign's fiscal strength, and (3) weakened policy making and institutional capacity. The rating actions reflect the high inter-linkages between Mexican banks' ratings and those of the sovereign via holdings of government bonds for liquidity purposes or lending to entities such as state-owned enterprises or regional and local governments that benefit from cash flows from the Federal government. Moreover, the global spread of the coronavirus is resulting in simultaneous supply and demand shocks. Moody's expects these shocks to materially slow global economic activity, particularly in the first half of this year. In Mexico, the coronavirus outbreak will mire an already weak economy into a recession, and as such Moody's forecasts a significant GDP contraction this year followed by a weak recovery. The full extent of the economic costs will be unclear for some time. Fear of contagion will dampen consumer and business activity. The longer it takes for households and businesses to resume normal activity, the greater the economic impact. Fiscal and monetary policy measures will likely help limit the damage in individual economies. The coronavirus outbreak will have a direct negative impact on the asset quality and profitability of banks, in some cases in a pronounced manner, for example for undiversified banks with material exposure to high-risk sectors and small and medium-sized enterprises. Moody's also views risks to be elevated for business models reliant on spread income, equity indices and sustained low rates. The exposure of the issuers affected by today's rating action to environmental and social risks is low and moderate, respectively, consistent with our general assessment for the global banking sector. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's does not have any particular concerns with the governance of the eleven Mexican issuers and their affiliated entities affected by this rating action. They show an appropriate risk management framework commensurate with its risk appetite. DOWNGRADE OF THE IPAB'S RATINGS The IPAB, in its role as the deposit insurance corporation, is an integral part of the Mexican government. The IPAB is largely funded by bonds that benefit from an implicit sovereign backing, whereas deposit insurance corporations elsewhere fund themselves privately. Therefore, IPAB's ratings and outlook are aligned with those of the Mexican government. LOWERING OF ASSESSMENT ON PROBABILITY OF GOVERNMENT SUPPORT FOR BANKS Moody's also lowered the government support assumptions it incorporates in the credit ratings of Mexican commercial banks to high, from very high, to reflect the Mexican government's stance towards fiscal austerity, which may evidence less willingness to provide support to privately-owned entities. As a result, deposit and debt ratings for BBVA, Santander México, and Citibanamex no longer benefit from government support despite their importance to the Mexican payment system. This change however, does not influence the three banks' ratings because of their relatively high adjusted BCAs, which are now at the same level as the rating of the government. Moody's views are also supported by the rating agency's expectation that support from the Mexican federal government would be provided, if needed, first and foremost to development banks, which benefit from statutory support and that have relevant public policy mandates (Banobras, Nafin, and Bancomext), and to state-owned enterprises, such as Pemex. VERY HIGH SUPPORT FOR DEVELOPMENT BANKS REMAINS UNCHANGED Moody's incorporates three notches of uplift for Banobras and Nafin, and four notches of uplift for Bancomext, based on the rating agency's assumption of very high government support for the three development banks based on the banks' laws. Moody's assumes the government will support the development banks' obligations with creditors and ensure timely payment of the banks' obligations. Consequently, the Baa1 ratings and negative outlooks of Banobras, Nafin and Bancomext are in line with Mexico's Baa1 sovereign rating and negative outlook. AFFIRMATION OF BBVA'S baa1 BCA AND AFFIRMATION OF CASA DE BOLSA BBVA'S RATINGS; NEGATIVE OUTLOOK FOR BOTH Moody's affirmed BBVA's baa1 BCA and adjusted BCA to reflect the bank's strong earnings generation that derives from a diversified loan portfolio and leading market shares in many asset classes and banking products that have cemented its position as the most profitable large bank in Mexico. BBVA's baa1 BCA also incorporates its higher capitalization, despite consistently high dividend payouts, and the improvements in asset quality that will mitigate the effects from Mexico's economic contraction. The strength of the bank's risk management over time is evidenced by a well-diversified loan portfolio and industry exposures, which have and should continue to limit the volatility of its asset quality indicators. Nevertheless, Moody's maintains a negative outlook on BBVA's ratings to incorporate its assessment of downward pressure on the bank's standalone credit strength derived from the more difficult economic scenario in Mexico. Moody's affirmed Casa de Bolsa BBVA Bancomer, S.A. de C.V.'s (Casa de Bolsa BBVA) long-term global local currency issuer rating in line with the affirmation of BBVA's baa1 adjusted BCA. Moody's also changed Casa de Bolsa BBVA's outlook to negative, from stable, in line with the negative outlook for BBVA. NEGATIVE OUTLOOK ON BANORTE AND AFFIRMATION OF ITS baa2 BCA; AFFIRMATION OF AYF BANORTE'S ISSUER RATINGS WITH STABLE OUTLOOK Moody's affirmation of Banorte's baa2 BCA reflects its improved earnings generation capacity, which will continue to support its ample capitalization. Banorte has expanded its loans into higher-yielding asset classes, though with disciplined underwriting, limiting potential deterioration under an increasingly more difficult operating environment. The baa2 BCA also benefits from the bank's core deposit funding, even if Banorte's deposit franchise is weaker relative to that of its large bank peers, as reflected in relatively higher funding costs. Banorte's Baa1 deposit ratings benefit from one notch of uplift from the bank's baa2 BCA despite Moody's having lowered its assessment of government support to high, from very high, for the large Mexican commercial banks. The outlook remains negative in line with the negative outlook on the sovereign debt rating. The affirmation of ratings for Arrendadora y Factor Banorte, S.A. de C.V. (AyF Banorte) and the brokerage house's stable outlook is in line with the affirmation of Banorte's baa2 BCA and adjusted BCA. Moody's assesses a very high support from Banorte for AyF Banorte, because the finance company is an integral part of Banorte, which operates it as a line of business mainly focused on factoring, financial and operating leases. Moody's downgraded Banorte's CR Assessment to Baa1(cr), from A3(cr), in line with the downgrade of Mexico's sovereign debt rating to Baa1, from A3. The Baa1(cr) long-term CR Assessment is now one notch above Banorte's adjusted BCA of baa2 and therefore in line with the deposit rating of the bank. Banorte's CR Assessment no longer benefits from government support given the downgrade of the Mexican government's debt rating. AFFIRMATION OF SANTANDER MÉXICO'S baa2 BCA AND SANTANDER CASA DE BOLSA'S RATINGS AFFIRMATION; BOTH WITH NEGATIVE OUTLOOK The affirmation of Santander México's baa2 BCA reflects the bank's stable asset quality, amid a robust profitability. Nonperforming loans have declined to levels comparable to those of the system thanks to a decline in delinquencies in the commercial loan book, which represents half of the bank's loans. The robust asset quality has helped protect earnings, which also benefits from good cost controls and improved net interest margins. Santander also benefits from ample liquidity buffers. However, the bank's BCA could face downward pressure stemming from its below-peer profitability, in line with its higher funding costs. The bank will also face higher delinquencies as operating conditions in Mexico weaken. Although the bank's ability to absorb losses has been enhanced by a higher capitalization, it remains below that of its peers. Moody's affirmed Casa de Bolsa Santander, S.A. de C.V.'s (Casa de Bolsa Santander) Baa1 long-term global local currency issuer rating and changed the brokerage house's outlook to negative to reflect downward pressure on Santander México's standalone BCA stemming from the more difficult economic scenario in Mexico. The moderate support from the bank's ultimate parent Banco Santander S.A. (Spain) (deposits A2 stable, BCA baa1) translates into one notch of uplift from Santander México's baa2 standalone BCA. If Santander México's standalone BCA were to be downgraded, its adjusted BCA would be downgraded, leading to a downgrade of Casa de Bolsa Santander's ratings. AFFIRMATION OF CITIBANAMEX'S baa1 BCA AND AFFIRMATION OF CITIBANAMEX CASA DE BOLSA's RATING WITH STABLE OUTLOOK Moody's affirmation of Citibanamex's baa1 BCA and adjusted BCA incorporates its established, large and inexpensive granular deposit base and high capitalization ratio. Marked improvement in asset quality, as evidenced by enhancements in the bank's audit and risk management policies, should limit deterioration stemming from Mexico's more difficult operating environment. Citibanamex's strong earnings generation benefits from lower credit costs and its entrenched deposit franchise. Citibanamex's outlook was changed to stable, from negative, reflecting the benefit to its ratings of Moody's assessment of very high probability of affiliate support from its A3 rated parent (Citigroup Inc., A3 stable). Moody's also affirmed Citibanamex Casa de Bolsa, S.A. de C.V.'s (Citibanamex Casa de Bolsa) long-term global local currency issuer rating and maintained the stable outlook on the brokerage house in line with the affirmation of Citibanamex's baa1 adjusted BCA. AFFIRMATION OF HSBC MÉXICO'S ba1 BCA AND HSBC CASA DE BOLSA'S RATINGS, BOTH WITH STABLE OUTLOOK Moody's affirmed the ba1 BCA of HSBC México in line with the material improvements in profitability, supported by continued enhancement of its asset quality profile and risk discipline. The bank's important deposit franchise in Mexico, and its good liquidity profile, also lend support for its ba1 BCA. HSBC México's ample access to core deposits ensures it has one of the lowest funding costs in the Mexican banking system. However, the bank's profitability remains limited by relatively narrow net interest margins, given the predominance of lower-yielding corporate clients relative to its peers, and above average, credit and operating costs, despite recent improvements. Accordingly, moderate earnings limit the bank's ability to increase its capitalization, which is below peers. Moody's also affirmed HSBC México's adjusted BCA of baa1 and changed the outlook to stable, from negative, on HSBC México's debt and deposit ratings because of Moody's assessment of a very high probability of affiliate support from its parent, HSBC Holdings plc (A2 negative, a2). Moody's assessment of affiliate support results in three notches of uplift from HSBC México's ba1 BCA. HSBC México's outlook is stable because even if HSBC Holdings' ratings were to be downgraded in line with its own negative outlook, HSBC Holdings ability to support HSBC México would not be affected. Moody's also affirmed HSBC Casa de Bolsa, S.A. de C.V.'s (HSBC Casa de Bolsa) long-term global local currency issuer rating with a stable outlook in line with the affirmation of HSBC México's baa1 adjusted BCA. AFFIRMATION OF BANBAJÍO'S DEPOSIT RATINGS AND CHANGE OF OUTLOOK TO NEGATIVE; DOWNGRADE OF COUNTERPARTY RISK ASSESSMENT Moody's affirmed BanBajío's baa3 BCA and Baa2 deposit ratings in line with the bank's strong asset quality and ample capitalization, which has benefitted from continued low dividend payouts and robust earnings generation. The bank's conservative underwriting should help mitigate deterioration stemming from Mexico's weaker operating environment. Asset risks are also contained by loan guarantees from government-owned development banks, balancing the risks on the bank's significant exposure to small and midsized enterprises. BanBajío's profitability has improved on the back of higher lending rates and stable funding costs. In addition, as policy rate declines, Moody's expects earnings generation to benefit from the bank's relatively low credit costs, consistent with the strong asset quality. Moody's changed BanBajío's outlook to negative, from stable, in line with the negative outlook on Mexico's sovereign debt rating. Because of its sizeable deposit market share in Mexico's central (Bajío) region, Moody's incorporates a moderate probability of government support on BanBajío's deposit ratings, which benefit from one notch of uplift from its BCA. Moody's downgrade of BanBajío's CR Assessment to Baa2(cr), from Baa1(cr), is in line with the downgrade of Mexico's sovereign debt rating to Baa1, from A3. The Baa2(cr) long-term CR Assessment is now one notch above BanBajío's adjusted BCA of baa3 and therefore in line with its deposit rating. BanBajío's CR Assessment no longer benefits from government support given the downgrade of the Mexican government's debt rating. AFFIRMATION OF MUFG'S RATINGS WITH STABLE OUTLOOK Moody's affirmation of MUFG's Baa1 ratings reflects Moody's views that the baseline credit assessment of ba1 already incorporates the potential risks that the COVID-19 outbreak could produce in the Mexican economy. MUFG has a proven track record of very strong asset quality, liquidity, capitalization, and stable funding. The bank continues to hold no nonperforming loans. MUFG's ratings also reflect Moody's assessment that there is a very high probability that the bank would receive support from its Japanese parent, MUFG Bank, Ltd. (A1 stable, a3) in an event of financial stress. This assessment is based on the importance of the Mexican subsidiary to its parent's global operations and shared client relationship. The stable outlook reflects Moody's view that MUFG's ratings would not be affected even if the Mexican Government rating is downgraded to Baa2 from Baa1, because of its parent support. The outlook also incorporates Moody's expectation that the bank will continue to exhibit strong asset-quality metrics, ample capital buffers and solid profitability. AFFIRMATION OF BANOBRAS'S ba1 BCA The affirmation of Banobras's ba1 BCA reflects its strong asset quality and high core capitalization, even if earnings are moderate. Banobras's good asset quality stems from a loan portfolio that is predominantly secured by federal government fiscal transfers. The bank's wholesale funding mix and modest intrinsic liquidity limits the bank's ba1 BCA. AFFIRMATION OF NAFIN'S ba1 BCA Moody's affirmed Nafin's ba1 BCA to reflect its strong capitalization, as well as its relatively low risk profile given the bank's main focus on on-lending via other financial institutions. The bank's narrow profitability stems from its focus on indirect lending and the relatively high funding costs. Although Nafin's funding is largely wholesale, its refinancing risks are mitigated by the sovereign guarantee on its liabilities. AFFIRMATION OF BANCOMEXT'S ba2 BCA The affirmation of Bancomext's ba2 BCA incorporates its strong capitalization and good asset quality, which benefits from the bank's conservative underwriting process, therefore helping mitigate a rise in delinquencies resulting from Mexico's weaker operating environment. The bank's BCA is nevertheless limited by sizable sector and, particularly, single-borrower concentrations and relatively low holdings of liquid assets. The bank's narrow profitability stems from its focus on large corporates, US dollar lending and relatively high funding costs. Although the bank's funding is mainly wholesale, refinancing risks are mitigated by the government's guarantees as well as its ample access to capital markets. RATING ACTIONS ON CASAS DE BOLSA The rating actions on the rated casas de bolsa reflects Moody's view that the rated brokerage houses are highly integrated and harmonized (HIH) with their sister banks due to the strong linkages between the entities in terms of operating infrastructure, risk management practices and customer base. As such, Moody's incorporates affiliate support from the bank to the brokerage house via the bank's adjusted BCA, which excludes government support, to arrive at the casa de bolsa's issuer rating. AFFIRMATION OF MEXICAN NATIONAL SCALE RATINGS Moody's affirmed the Aaa.mx Mexican National Scale ratings of BBVA, Banorte, Santander México, Citibanamex, HSBC México, Banobras, Nafin, Bancomext, and the IPAB in line with their Baa1 ratings. Moody's also affirmed BanBajío's Aa2.mx National Scale rating, which corresponds to its Baa2 global scale rating. Moody's affirmed the Aa1.mx Mexican national scale rating of MUFG, even if the bank's though the global scale Baa1 maps to Aaa.mx and Aa1.mx, Moody's believes the lower end of the range exhibits the bank's niche position and its relatively modest scale in the Mexican banking industry. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS In line with the negative outlook, the ratings and assessments of BBVA and Santander México, could be downgraded in the event of a further downgrade of the Mexican government's sovereign debt rating, which would indicate a weaker operating environment for banks and a deterioration of the banks' asset quality, capitalization and profitability. In line with the negative outlook, the ratings of Banorte, BanBajío, Banobras, Nafin, Bancomext and the IPAB could be downgraded if Mexico's sovereign debt rating were to be downgraded. Downward pressure on HSBC México's deposit and senior debt ratings could emerge if, in line with HSBC México's rapid loan growth and higher single-borrower concentration, there is a material deterioration in its asset quality or capitalization. A significant increase in MUFG's delinquencies combined with an important deterioration in its capitalization or a downgrade of the parent's BCA, could lead to a downgrade. Upward ratings pressure is more limited at this time given the negative outlook on the ratings of BBVA, Banorte, Santander México, BanBajío, Banobras, Nafin, Bancomext, and the IPAB. However, the negative outlook could be stabilized in line with an outlook change to stable, from negative, on the sovereign rating. Upward pressure on Citibanamex's ratings is more limited because they are already in line with the government's Baa1 debt rating. Upward pressure on HSBC México's ratings could accumulate if profitability continues to improve as the bank manages to grow its balance sheet without further strain on asset quality and capital. BanBajío's ratings could be upgraded if the bank's capital levels and profitability remain strong by historical standards even as Mexico's operating conditions weaken and interest rates decline. Upward pressure would also arise if the bank's access to retail deposit funding were to increase. MUFG's ratings could be upgraded if there is a sustained upward trend in its profitability, if the bank's asset- risk and capitalization metrics remain strong as well as if its parent's BCA is upgraded. List of affected ratings The following ratings and assessments were downgraded: BBVA Bancomer, S.A. (600012042) . Long-term global local and foreign currency deposit ratings to Baa1, from A3, outlook remains negative . Long-term global local currency debt ratings to Baa1, from A3, outlook remains negative (BACOMER 10U, BACOMER 17, BACOMER 10, BACOMER18V, BACOMER 17-2, BACOMER 19, BACOMER 18, BACOMER 20, BACOMER 20-2, BACOMER 07U, BACOMER 19-2) . Long-term global foreign currency debt rating to Baa1, from A3, outlook remains negative (BACOMER 20D) Banco Mercantil del Norte, S.A. (600017135) . Long-term global local and foreign currency deposit ratings to Baa1, from A3, outlook remains negative . Long-term Counterparty Risk Assessment to Baa1(cr), from A3(cr) Banco Santander México, S.A. (600011987) . Long-term global local and foreign currency deposit ratings to Baa1, from A3, outlook remains negative . Long-term global local currency debt ratings to Baa1, from A3, outlook remains negative (BSMX 16-2, BSMX 11-3, BSMX 18, BSMX 19, BSMX 16-3, BSMX 19-2) Banco Nacional de México, S.A. (600009991) . Long-term global local and foreign currency deposit ratings to Baa1, from A3, outlook changed to stable, from negative . Long-term global local currency debt ratings to Baa1, from A3, outlook changed to stable, from negative (BANAMEX 10-2) HSBC México, S.A. (6700) . Long-term global local and foreign currency deposit ratings to Baa1, from A3, outlook changed to stable, from negative . Long-term global local currency debt ratings to Baa1, from A3, outlook changed to stable, from negative (HSBC 17, HSBC 18, HSBC 19, HSBC 13-2, HSBC 19-2, HSBC 17-2) . Long-term global foreign currency debt ratings to Baa1, from A3, outlook changed to stable, from negative (HSBC 18D, HSBC 19D, HSBC 19-2D) Banco del Bajío, S.A. (600036312) . Long-term Counterparty Risk Assessment to Baa2(cr), from Baa1(cr) Banco Nacional de Obras y Servicios Públicos, S.N.C. (90400) . Long-term global local and foreign currency issuer ratings to Baa1, from A3, outlook remains negative . Long-term global local currency debt ratings to Baa1, from A3, outlook remains negative (BANOB 17X, BANOB 11U, BANOB 18, BANOB 11-2, BANOB 19, BANOB 12, BANOB 13, BANOB 13-2, BANOB 17-2X, BANOB 14-2, BANOB 18X, BANOB 19X, BANOB 19UX) Banco Nacional de Comercio Exterior, S.N.C. (704200) . Long-term global local and foreign currency issuer ratings to Baa1, from A3, outlook remains negative . Long-term global local currency debt ratings to Baa1, from A3, outlook remains negative (BACMEXT 17, BACMEXT 18, BACMEXT 12-2, BACMEXT 12-3, BACMEXT 13, BACMEXT 18-2, BACMEXT 14, BACMEXT 17-2) Nacional Financiera, S.N.C. (525100) . Long-term global local and foreign currency issuer ratings to Baa1, from A3, outlook remains negative . Long-term global local currency debt ratings to Baa1, from A3, outlook remains negative (NAFR 200403, NAFR 210423, NAFR 17S, NAFF 16V, NAFF 260925) Instituto para la Protección al Ahorro Bancario (809050570) . Long-term global local and foreign currency issuer ratings to Baa1, from A3, negative outlook withdrawn The following ratings and assessments were affirmed: BBVA Bancomer, S.A. (600012042) . Baseline credit assessment and adjusted baseline credit assessment of baa1 . Short-term global local and foreign currency deposit ratings of Prime-2 . Long- and short-term Mexican National Scale deposit ratings of Aaa.mx/MX-1 . Long-term Mexican National Scale local currency debt rating of Aaa.mx (BACOMER 10U, BACOMER 17, BACOMER 10, BACOMER18V, BACOMER 17-2, BACOMER 19, BACOMER 18, BACOMER 20, BACOMER 20-2, BACOMER 07U, BACOMER 19-2) . Long-term Mexican National Scale foreign currency debt rating of Aaa.mx (BACOMER 20D) . Long- and short-term Counterparty Risk Assessments of A3(cr)/Prime-2(cr) Casa de Bolsa BBVA Bancomer, S.A. de C.V. (808154858) . Long-term global local currency issuer rating of Baa1, stable outlook withdrawn . Short-term global local currency issuer rating of Prime-2 . Long- and short-term Mexican National Scale issuer ratings of Aa1.mx/MX-1 Banco Mercantil del Norte, S.A. (600017135) . Baseline credit assessment and adjusted baseline credit assessment of baa2 . Short-term global local and foreign currency deposit ratings of Prime-2 . Long- and short-term Mexican National Scale deposit ratings of Aaa.mx/MX-1 . Long-term global local currency subordinated debt rating of Baa3 (BANORTE 08U) . Long-term Mexican National Scale subordinated debt rating of Aa3.mx (BANORTE 08U) . Short-term Counterparty Risk Assessment of Prime-2(cr) Arrendadora y Factor Banorte, S.A. de C.V. (806979176) . Long-term global local currency issuer rating of Baa2, stable outlook withdrawn . Short-term global local currency issuer rating of Prime-2 . Long- and short-term Mexican National Scale issuer ratings of Aa2.mx/MX-1 . Short-term global local currency debt program rating of Prime-2 . Short-term Mexican National Scale debt program rating of MX-1 Banco Santander México, S.A. (600011987) . Baseline credit assessment of baa2 . Adjusted baseline credit assessment of baa1 . Short-term global local and foreign currency deposit ratings of Prime-2 . Long- and short-term Mexican National Scale deposit ratings of Aaa.mx/MX-1 . Long-term Mexican National Scale debt ratings of Aaa.mx (BSMX 16-2, BSMX 11-3, BSMX 18, BSMX 19, BSMX 16-3, BSMX 19-2) . Long- and short-term Counterparty Risk Assessments of A3(cr)/Prime-2(cr) Casa de Bolsa Santander, S.A. de C.V. (821609725) . Long-term global local currency issuer rating of Baa1, stable outlook withdrawn . Short-term global local currency issuer rating of Prime-2 . Long- and short-term Mexican National Scale issuer ratings of Aa1.mx/MX-1 Grupo Financiero Santander México, S.A.B. de C.V. (600013749) (the below issuance was assumed by Santander México) . Long-term global local currency junior subordinated debt rating of Ba1(hyb) (BSMX17) . Long-term Mexican National local currency junior subordinated debt rating of A1.mx(hyb) (BSMX17) Banco Nacional de México, S.A. (600009991) . Baseline credit assessment and adjusted baseline credit assessment of baa1 . Short-term global local and foreign currency deposit ratings of Prime-2 . Long- and short-term Mexican National Scale deposit ratings of Aaa.mx/MX-1 . Long-term Mexican National Scale debt ratings of Aaa.mx (BANAMEX 10-2) . Long- and short-term Counterparty Risk Assessments of A3(cr)/Prime-2(cr) Citibanamex Casa de Bolsa, S.A. de C.V. (821608738) . Long-term global local currency issuer rating of Baa1, stable outlook withdrawn . Short-term global local currency issuer rating of Prime-2 . Long- and short-term Mexican National Scale issuer ratings of Aa1.mx/MX-1 HSBC México, S.A. (6700) . Baseline credit assessment of ba1 . Adjusted baseline credit assessment of baa1 . Short-term global local and foreign currency deposit ratings of Prime-2 . Long- and short-term Mexican National Scale deposit ratings of Aaa.mx/MX-1 . Long-term Mexican National Scale local currency debt ratings of Aaa.mx (HSBC 17, HSBC 18, HSBC 19, HSBC 13-2, HSBC 19-2, HSBC 17-2) . Long-term Mexican National Scale foreign currency debt ratings of Aaa.mx (HSBC 18D, HSBC 19D, HSBC 19-2D) . Long- and short-term Counterparty Risk Assessments of A3(cr)/Prime-2(cr) HSBC Casa de Bolsa, S.A. de C.V. (821608741) . Long- and short-term global local currency issuer ratings of Baa1/Prime-2 . Long- and short-term Mexican National Scale issuer ratings of Aa1.mx/MX-1 Banco del Bajío, S.A. (600036312) . Baseline credit assessment and adjusted baseline credit assessment of baa3 . Long-term global local and foreign currency deposit ratings of Baa2, outlook changed to negative, from stable . Short-term global local and foreign currency deposit ratings of Prime-2 . Long- and short-term Mexican National Scale deposit ratings of Aa2.mx/MX-1 . Short-term Counterparty Risk Assessment of Prime-2(cr) MUFG Bank México, S.A. (600036336) . Baseline credit assessment of ba1 . Adjusted baseline credit assessment of baa1 . Long-term global local and foreign currency deposit ratings of Baa1, stable outlook . Short-term global local and foreign currency deposit ratings of Prime-2 . Long- and short-term Mexican National Scale deposit ratings of Aa1.mx / MX-1 . Long- and short-term Counterparty Risk Assessments of A3(cr)/Prime-2 (cr) Banco Nacional de Obras y Servicios Públicos, S.N.C. (90400) . Baseline credit assessment and adjusted baseline credit assessment of ba1 . Short-term global local and foreign currency issuer ratings of Prime-2 . Long- and short-term Mexican National Scale issuer rating of Aaa.mx/MX-1 . Long-term Mexican National Scale local currency debt ratings of Aaa.mx (BANOB 17X, BANOB 11U, BANOB 18, BANOB 11-2, BANOB 19, BANOB 12, BANOB 13, BANOB 13-2, BANOB 17-2X, BANOB 14-2, BANOB 18X, BANOB 19X, BANOB 19UX) Banco Nacional de Comercio Exterior, S.N.C. (704200) . Baseline credit assessment and adjusted baseline credit assessment of ba2 . Short-term global local and foreign currency issuer ratings of Prime-2 . Long- and short-term Mexican National Scale issuer ratings of Aaa.mx/MX-1 . Long-term Mexican National Scale local currency debt ratings of Aaa.mx (BACMEXT 17, BACMEXT 18, BACMEXT 12-2, BACMEXT 12-3, BACMEXT 13, BACMEXT 18-2, BACMEXT 14, BACMEXT 17-2) Nacional Financiera, S.N.C. (525100) . Baseline credit assessment and adjusted baseline credit assessment of ba1 . Short-term global local and foreign currency issuer ratings of Prime-2 . Long- and short-term Mexican National Scale issuer ratings of Aaa.mx/MX-1 . Long-term Mexican National Scale local currency debt ratings of Aaa.mx (NAFR 200403, NAFR 210423, NAFR 17S, NAFF 16V, NAFF 260925) Instituto para la Protección al Ahorro Bancario (809050570) . Short-term global local and foreign currency issuer ratings of Prime-2 . Long- and short-term Mexican National Scale issuer ratings of Aaa.mx/MX-1 Outlook actions BBVA Bancomer, S.A. (600012042) . Outlook remains negative Casa de Bolsa BBVA Bancomer, S.A. de C.V. (808154858) . Outlook changed to negative, from stable Banco Mercantil del Norte, S.A. (600017135) . Outlook remains negative Arrendadora y Factor Banorte, S.A. de C.V. (806979176) . Outlook remains stable Banco Santander México, S.A. (600011987) . Outlook remains negative Casa de Bolsa Santander, S.A. de C.V. (821609725) . Outlook changed to negative, from stable Banco Nacional de México, S.A. (600009991) . Outlook changed to stable, from negative Citibanamex Casa de Bolsa, S.A. de C.V. (821608738) . Outlook remains stable HSBC México, S.A. (6700) . Outlook changed to stable, from negative HSBC Casa de Bolsa, S.A. de C.V. (821608741) . Outlook remains stable Banco del Bajío, S.A. (600036312) Banco del Bajío, S.A. (600036312) . Outlook changed to negative, from stable MUFG Bank México, S.A. (600036336) . Outlook remains stable Banco Nacional de Obras y Servicios Públicos, S.N.C. (90400) . Outlook remains negative Banco Nacional de Comercio Exterior, S.N.C. (704200) . Outlook remains negative Nacional Financiera, S.N.C. (525100) . Outlook remains negative Instituto para la Protección al Ahorro Bancario (809050570) . Outlook remains negative The principal methodology used in rating BBVA Bancomer, S.A., Banco Mercantil del Norte, S.A., Banco Santander México, S.A., Grupo Financiero Santander México, S.A.B. de C.V., Banco Nacional de México, S.A., HSBC México, S.A., Banco del Bajio, S.A., and MUFG Bank Mexico, S.A. was Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx? docid=PBC_1147865. The principal methodologies used in rating Banco Nacional de Obras y Servicios Públicos, S.N.C., Banco Nacional de Comercio Exterior, S.N.C., and Nacional Financiera, S.N.C. were Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865 , and Government- Related Issuers published in June 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?&docid=PBC_1104983 . The principal methodology used in rating Casa de Bolsa BBVA Bancomer S.A. de C.V., Casa de Bolsa Santander, S.A. de C.V., Citibanamex Casa de Bolsa, S.A. de C.V., and HSBC Casa de Bolsa, S.A. de C.V. was Securities Industry Market Makers published in June 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?&docid=PBC_1104941 . The principal methodology used in rating Arrendadora y Factor Banorte, S.A. de C.V. was Finance Companies Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx? docid=PBC_1187099. The principal methodology used in rating Instit.para la Protec.al Ahorro Bancario was Government-Related Issuers published in June 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?&docid=PBC_1104983 . Alternatively, please see the Rating Methodologies page on www.moodys.com.mx for a copy of these methodologies. The English version of the Government-Related Issuers available at the above link is outdated for all jurisdictions, except for Mexico. The English version of the Securities Industry Market Makers available at the above link is outdated for all jurisdictions, except for Mexico. The period of time covered in the financial information used to determine BBVA Bancomer, S.A.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Banco Mercantil del Norte, S.A.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Banco Santander México, S.A.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Banco Nacional de México, S.A.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine HSBC México, S.A.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Banco del Bajio, S.A.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine MUFG Bank Mexico, S.A.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Banco Nacional de Obras y Servicios Públicos, S.N.C.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Banco Nacional de Comercio Exterior, S.N.C.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Nacional Financiera, S.N.C.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Casa de Bolsa BBVA Bancomer S.A. de C.V.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Casa de Bolsa Santander, S.A. de C.V.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Citibanamex Casa de Bolsa, S.A. de C.V.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine HSBC Casa de Bolsa, S.A. de C.V.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Arrendadora y Factor Banorte, S.A. de C.V.'s rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). The period of time covered in the financial information used to determine Instit.para la Protec.al Ahorro Bancario's rating is between 1 January 2016 and 31 December 2019 (source: Moody's, as well as issuer's annual audited and quarterly unaudited financial statements). Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in May 2016 entitled "Mapping National Scale Ratings from Global Scale Ratings". While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216309 . REGULATORY DISCLOSURES For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx? docid=PBC_79004. Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's information. The ratings have been disclosed to the rated entities prior to public dissemination. A general listing of the sources of information used in the rating process, and the structure and voting process for the rating committees responsible for the assignment and monitoring of ratings can be found in the Disclosure tab in www.moodys.com.mx. The date of the last Credit Rating Action for BBVA Bancomer, S.A. was 3/1/2020 The date of the last Credit Rating Action for Banco Mercantil del Norte, S.A. was 7/6/2019 The date of the last Credit Rating Action for Banco Santander México, S.A. was 27/3/2020 The date of the last Credit Rating Action for Grupo Financiero Santander México, S.A.B. de C.V. was 30/5/2018 The date of the last Credit Rating Action for Banco Nacional de México, S.A. was 15/4/2020 The date of the last Credit Rating Action for HSBC México, S.A. was 29/8/2019 The date of the last Credit Rating Action for Banco del Bajio, S.A. was 21/5/2018 The date of the last Credit Rating Action for MUFG Bank Mexico, S.A. was 10/7/2018 The date of the last Credit Rating Action for Banco Nacional de Obras y Servicios Públicos, S.N.C. was 29/1/2020 The date of the last Credit Rating Action for Banco Nacional de Comercio Exterior, S.N.C. was 29/1/2020 The date of the last Credit Rating Action for Nacional Financiera, S.N.C. was 29/1/2020 The date of the last Credit Rating Action for Casa de Bolsa BBVA Bancomer S.A. de C.V. was 18/10/2018 The date of the last Credit Rating Action for Casa de Bolsa Santander, S.A. de C.V. was 30/5/2018 The date of the last Credit Rating Action for Citibanamex Casa de Bolsa, S.A. de C.V. was 25/2/2019 The date of the last Credit Rating Action for HSBC Casa de Bolsa, S.A. de C.V. was 23/7/2019 The date of the last Credit Rating Action for Arrendadora y Factor Banorte, S.A. de C.V. was 10/10/2019 The date of the last Credit Rating Action for Instit.para la Protec.al Ahorro Bancario was 7/6/2019 For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.mx. For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit 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. This credit rating is subject to upgrade or downgrade based on future changes in the financial condition of the Issuer/Security, and said modifications will be made without Moody's de México S.A. de C.V accepting any liability as a result. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569 . At least one ESG consideration was material to the credit rating action(s) announced and described above. The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com.mx, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings. Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating. Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Please see Moody's Rating Symbols and Definitions on www.moodys.com.mx for further information on the meaning of each rating category and the definition of default and recovery. Please see ratings tab on the issuer/entity page on www.moodys.com.mx for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see our website www.moodys.com.mx for further information. Please see www.moodys.com.mx for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. The ratings issued by Moody's de Mexico are opinions regarding the credit quality of securities and/or their issuers and not a recommendation to invest in any such security and/or issuer. Please see the ratings tab on the issuer/entity page on www.moodys.com.mx for additional regulatory disclosures for each credit rating. Jose Angel Montano Vice President - Senior Analyst 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: 1 888 779 5833 Client Service: 1 212 553 1653 M. Celina Vansetti-Hutchins MD - Banking Financial Institutions Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Ceres Lisboa Senior Vice President Senior Vice President Financial Institutions Group JOURNALISTS: 1 888 779 5833 Client Service: 1 212 553 1653 Releasing Office: 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: 1 888 779 5833 Client Service: 1 212 553 1653

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