--Long-term foreign and local currency IDRs to 'BBB-' from 'BB+';
--Short-term foreign and local currency IDRs to 'F3' from 'B';
--Viability Rating to 'bbb-' from 'bb+';
--Support Rating to '4' from '5';
--Support Rating Floor revised to 'BB-' from 'NF';
--National scale long-term rating to 'AA-(mex)' from 'A+(mex)';
--National scale short-term rating to 'F1+(mex)' from 'F1(mex)'.
The long-term Rating Outlook is Stable.
Key Rating Drivers
The upgrade reflects:
--Sustained and material improvements in the bank's asset quality metrics, with a continued positive trend in the impairment ratio, reserve coverage, and credit costs;
--Recent improvement in recurring profitability, driven by sustained margins, well contained credit costs, and positive prospects in terms of business volumes and operating efficiency. Fitch expects that the recently improved profitability metrics are sustainable, which will continue to enhance the bank's internal capital generation;
--The bank's strong and improving franchise, as well as the expected further improvements in its funding and liquidity profile.
In general, and despite the challenges of an operating environment of low interest rates and limited economic growth, BanBajio has been able to preserve its capital base (
A higher than average burden of operating expenses, due to the expansion of its branch network, is starting to improve and reduce the gap relative to similar banks, and Fitch expects BanBajio to sustain this trend, providing additional uplift to its profitability prospects. Steady growth of core deposits and a more astringent funding management policy are reducing the historically high asset-liability tenor mismatches. However, this is yet one of the rating factors where the bank still has important room for improvement.
SR and SRF
The upgrade of the bank's SR and the revision of the SRF are driven by the steady increase in BanBajio's market share of core customer deposits. While its overall penetration is still moderate, BanBajio is one of the few niche or regional banks that, in Fitch's opinion, could receive sovereign support if this were needed, due to the growing share of retail deposit, and the widespread geographical and customer dispersion of such accounts. Fitch's SRFs indicate a level below which the agency would not lower the bank's long-term IDRs.
These ratings could be affected negatively if the improving trends in asset quality and profitability are not sustained and/or if the bank's capital metrics are further tightened. Fitch considers that these ratings could be downgraded if operating ROA remains below 1% and/or if Fitch's core capital is not sustained at least at 12%. In turn, there could be some upside potential for these ratings over the medium term, if operating ROA consolidates closer to 2%, while also further and materially improving the funding profile, and reducing the prevailing tenor mismatches among assets and liabilities.
SR and SRF
Upside potential for the SR and SRF is limited and can only occur over time with a material gain of the bank's systemic importance. These ratings could be downgraded if the bank loses material market share in terms of retail customer deposits.
Additional information is available on www.fitchratings.com
--'Global Financial Institutions Rating Criteria' (
--'National Ratings Criteria' (
Global Financial Institutions Rating Criteria
National Scale Ratings Criteria
+52 818 399 9150
+52 818 399 9161
Source: Fitch Ratings
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