MOODY'S Recalibrates Mexico's National Rating Scale And Repositions National Scale Ratings Of Banks And Other Financial Institutions

Moody's de México (Moody's) has repositioned the national scale ratings (NSRs) of 16 Mexican banks and other financial institutions in conjunction with the recalibration of the Mexican national rating scale. In addition, to enhance transparency of the meaning of NSRs and to minimize the chances they will be misinterpreted, the long-and/or short-term GSRs of 3 issuers, the corresponding NSRs of which are already public, are being published for the first time.

NSRs, which provide a measure of relative creditworthiness within a single country, are derived from GSRs using country-specific maps, or correspondences. The adoption of a revised correspondence between Moody's global scale ratings and the Mexican national scale follows implementation of Moody's updated methodology "Mapping National Scale Ratings from Global Scale Ratings" in Mexico on www.moodys.com.mx at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_189644. The revised correspondence for Mexican NSRs is available in the updated compendium, published June 13, of National Scale Rating Maps By Country at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBC_190457 in Spanish and http://v3.moodys.com/viewresearchdoc.aspx?docid=PBC_190456 in English. The new methodology mirrors that implemented by Moody's Investors Service in other jurisdictions last month. For more information, please see "Moody's publishes updated methodology for national scale ratings" https://www.moodys.com/research/Moodys-publishes-updated-methodology-for-national-scale-ratings--PR_348579. Moody's Investors Service's updated NSR methodology is available in English on www.moodys.com at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_189032.

With approximately 170 rated fundamental issuers in Mexico, the new map has been designed using the modified approach, whereby the map design is adjusted to reflect the distribution of fundamental ratings in the country in order to ensure adequate opportunity for differentiation where ratings are most highly concentrated. At the same time, however, the modified approach also seeks to maintain the stability of the map design in order to limit the volatility of NSRs derived from it. Structured finance ratings are not taken into consideration in the determination of the map design.

In the new national scale map for Mexico, the anchor point, or the lowest GSR that can map to Aaa.mx, has been raised to A3, which is equal to the sovereign bond rating, from the previous level of Baa1. The revised map provides the ability to differentiate on the national scale between issuers rated A3 and above and those rated Baa1 on the global scale, which together account for more than 20% of fundamental issuers. Although there is a meaningful difference in the creditworthiness of these two groups of issuers, as reflected in their global scale ratings, under the previous map all were eligible to receive Aaa.mx NSRs. In addition, in order to clarify the meaning of NSRs, overlap -- where two GSRs can correspond to the same NSR -- has been eliminated from the Mexican national scale map, so every NSR maps back to just one GSR (with the exception of Aaa.mx). As a result of these changes, GSRs of B2 and above will in some cases correspond to lower NSRs on the Mexican scale than they did previously, GSRs of Caa1 and below may correspond to higher NSRs, while GSRs of B3 may correspond to either higher or lower NSRs.

Consequently, approximately 20% of Mexican fundamental issuer's primary long-term NSRs are being repositioned lower and 2% are being repositioned higher. Certain short-term and other NSRs may be affected for these and other issuers as well. In addition, approximately 7% of the NSRs assigned to Mexican structured finance transactions are being repositioned lower and 7% are being repositioned higher. Almost all ratings changes are just one notch. The repositioned NSRs of individual issuers do not signify a change in credit risk, since the GSRs for these issuers remain unchanged.

As a result of the recalibration, the level of risk associated with a particular Mexican NSR level (e.g. B2.mx) has changed in some cases. NSRs have no inherent absolute meaning in terms of default risk or expected loss; they are ordinal rankings of creditworthiness relative to other domestic issuers within a given country. However, a historical probability of default and/or expected loss consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. As a result, both the probability of default and the expected loss associated with an NSR may change if and when a country's national scale is remapped.

ISSUERS AND RATINGS AFFECTED

The following ratings were repositioned:

- Acciones y Valores Banamex Casa de Bolsa, S.A.

Long-term Mexican National Scale issuer rating: to Aa2.mx, from Aa1.mx derived from a Baa2 GSR

- Almacenadora Accel, S.A.

Long-term Mexican National Scale issuer rating: to Ba1.mx, from Baa3.mx derived from a B2 GSR

Short-term Mexican National Scale issuer rating: to MX-4, from MX-3

- Arrendadora y Factor Banorte, S.A. de C.V.

Long-term Mexican National Scale issuer rating: to Aa1.mx, on review for downgrade, from Aaa.mx, on review for downgrade, derived from a Baa1 GSR

Long-term Mexican National Scale senior unsecured MTN debt program rating: to Aa1.mx, on review for downgrade from Aaa.mx, on review for downgrade, derived from a (P) Baa1 GSR

- Asigna, Compensación y Liquidación

Long-term Mexican National Scale clearing counterparty rating: to Aa1.mx, from Aaa.mx derived from a Baa1 GSR

- Banco Azteca, S.A.

Short-term Mexican National Scale deposit rating: to MX-1, from MX-2

- Banco del Bajío, S.A.

Long-term Mexican National Scale deposit rating: to Aa3.mx, from Aa2.mx derived from a Baa3 GSR

- Banco Interacciones, S.A.

Short-term Mexican National Scale deposit rating: to MX-1, from MX-2

- Banco Mercantil del Norte, S.A.

Long-term Mexican National Scale subordinated debt rating: to Aa2.mx, on review for downgrade from Aa1.mx, on review for downgrade (BANORTE 08, BANORTE 08-2, BANORTE 09, BANORTE 12), derived from a Baa2 GSR

Long-term Mexican National Scale subordinated MTN debt program rating: to Aa2.mx, on review for downgrade from Aa1.mx, on review for downgrade, derived from a (P) Baa2 GSR

Long-term Mexican National Scale junior subordinated debt rating: to Aa3.mx (hyb), on review for downgrade from Aa2.mx (hyb), on review for downgrade (BANORTE 08U) , derived from a Baa3 (hyb) GSR

Long-term Mexican National Scale junior subordinated MTN debt program rating: to Aa3.mx, on review for downgrade from Aa2.mx, on review for downgrade, derived from a (P) Baa3 GSR

- Bank of Tokyo-Mitsubishi UFJ (México), S.A.

Long-term Mexican National Scale deposit rating: to Aa2.mx, from Aa1.mx derived from a Baa2 GSR

- Barclays Bank México, S.A.

Long-term Mexican National Scale deposit rating: to Aa3.mx, from Aa2.mx derived from a Baa3 GSR

- Barclays Capital Casa de Bolsa, S.A. de C.V.

Long-term Mexican National Scale issuer rating: to Aa3.mx, from Aa2.mx derived from a Baa3 GSR

- Casa de Bolsa Santander, S.A. de C.V.

Long-term Mexican National Scale issuer rating: to Aa1.mx, on review for downgrade from Aaa.mx, on review for downgrade, derived from a Baa1 GSR

- Financiera Bepensa S.A. de C.V. SOFOM E.N.R.

Long-term Mexican National Scale issuer rating: to Ba1.mx, from Baa3.mx derived from a B2 GSR

Short-term Mexican National Scale issuer rating: to MX-4, from MX-3

- HSBC México, S.A.

Long-term Mexican National Scale junior subordinated MTN debt program rating: to Aa1.mx, on review for downgrade from Aaa.mx, on review for downgrade, derived from a (P) Baa1 GSR

- Scotia Inverlat Casa de Bolsa, S.A. de C.V.

Long-term Mexican National Scale issuer rating: to Aa1.mx, on review for downgrade from Aaa.mx, on review for downgrade derived from a Baa1 GSR

- Volkswagen Bank, S.A.

Short-term Mexican National Scale deposit rating: to MX-1, from MX-2

The following ratings were assigned:

- Bank of Tokyo-Mitsubishi UFJ (México), S.A.

Long-term global local currency deposit rating: Baa2, stable outlook

Short-term global local currency deposit rating: Prime-2

Long-term foreign currency deposit rating: Baa2, stable outlook

Short-term foreign currency deposit rating: Prime-2

- Ford Credit de México S.A. de C.V., SOFOM

Short-term global local currency senior unsecured debt rating: Prime-2

Short-Term Debt Rating Senior Unsecured: (P) Prime-2

- NR Finance de México, S.A. de C.V. SOFOM, ER

Long-term global local currency senior unsecured debt rating: A3, stable outlook

Long-term senior unsecured MTN debt program rating: (P) A3

Short-term global local currency senior unsecured debt rating: Prime-2

Short-term global local currency debt rating senior unsecured: (P) Prime-2

The following entities rated by Moody's de México were unaffected by this rating action:

AF Banregio, S.A. de C.V. SOFOM, BBVA Bancomer, S.A., Banco Nacional de Comercio Exterior, S.N.C., Banco Nacional de México, S.A., Banco Nacional de Obras y Servicios Públicos, S.N.C., Banco Regional de Monterrey, S.A., Banco Santander (México), S.A., Scotiabank Inverlat S.A., Casa de Bolsa BBVA Bancomer S.A. de C.V., Caterpillar Credito S.A. de C.V.,SOFOM,E.N.R., CI Casa de Bolsa, S.A. de C.V., Deutsche Bank México, S.A., Deutsche Securities México, S.A. de C.V., Hipotecaria Nacional S.A. de C.V., HSBC Casa de Bolsa, S.A. de C.V, Instituto para la Protección al Ahorro Bancario, Nacional Financiera, S.N.C., Santander Consumo, S.A. de C.V., SOFOM, E.R., SGFP México, S. de R.L. de C.V., Volkswagen Leasing, S.A. de C.V., Value, S.A. de C.V., Casa de Bolsa.

RATING RATIONALE

NSRs are assigned by applying the published correspondence from GSRs. Where a single GSR maps to multiple NSRs, rating committees assigned higher or lower NSRs to individual issuers and debts depending on their relative credit position within the same GSR category, using the same methodologies as were used to determine the GSRs themselves.

Bank of Tokyo-Mitsubishi UFJ (México)

The Baa2 long-term global local and foreign currency deposit ratings assigned to Bank of Tokyo-Mitsubishi UFJ (México) S.A. (BTMU México) are based on the bank's ba2 baseline credit assessment (BCA), coupled with Moody's assessment that there is a very high probability that the bank would receive affiliate support from its parent, in cases of stress. BTMU México is a subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU, deposits A1/senior unsecured A1 stable, BCA a3).

The bank's short-term global local and foreign currency deposit ratings of Prime-2 are based on the bank's Baa2 global scale deposit ratings, in line with Moody's global scale long- to short-term ratings map.

Ford Credit de México S.A. de C.V., SOFOM

The global scale short-term Prime-2 senior unsecured debt rating assigned to Ford Credit de México S.A. de C.V., SOFOM (Ford Credit México) reflects the full, irrevocable and unconditional guarantee provided by its parent, Ford Motor Credit Company LLC (senior unsecured Baa2, stable).

NR Finance de México, S.A. de C.V. SOFOM, ER

The A3/Prime-2 long- and short-term global local currency senior unsecured ratings and the (P) A3 long-term senior unsecured MTN debt program rating assigned to NR Finance de México, S.A. de C.V. SOFOM, ER (NR Finance) reflect the full, irrevocable and unconditional guarantee provided by its parent company Nissan Motors Acceptance Corporation (NMAC, senior unsecured A3, stable).

WHAT COULD CHANGE THE RATINGS -- UP AND DOWN

The NSRs would face upward or downward pressure if their corresponding GSRs are upgraded or downgraded, unless this is in conjunction with a sovereign rating action that results in another recalibration of the Mexican national scale with an offsetting impact on NSRs. In addition, the NSRs may be repositioned upwards (downwards) if Mexico's sovereign is downgraded (upgraded) and the map is revised accordingly, but the corresponding GSRs have not changed as a result of the sovereign action. Because of the higher granularity of national scales, NSRs may also face pressure due to changes in creditworthiness that are not sufficient to cause a change in the corresponding GSR, measured using the same methodologies used to determine the GSR.

MOODY'S Recalibrates Mexico's National Rating Scale And Repositions National Scale Ratings Of Banks And Other Financial Institutions

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