News
Fitch Assigns 'BBB+' IDR to ING Bank (Mexico); Outlook Stable
MONTERREY, Mexico-(Business Wire)-May 6, 2008 - Fitch Ratings has assigned the following ratings to ING Bank (Mexico) (INGMEX):
—Foreign and local currency long-term Issuer Default Ratings (IDR) 'BBB+';
—Foreign and local currency short-term IDR 'F2';
—Individual 'C/D';
—Support '2'.
The Rating Outlook is Stable.
At the same time, Fitch has affirmed INGMEX long-term and short-term national-scale ratings at 'AAA(mex)' and 'F1+(mex)', respectively. The Outlook on the long-term national-scale rating remains Stable.
Long- and short-term IDRs as well as Support rating of INGMEX are based on implicit support from its parent, ING Bank NV (rated 'AA' with Stable Outlook by Fitch). Individual rating reflects the bank's adequate financial profile, liquidity and good asset quality. It also considers its market risk exposure that commonly results in volatile and relatively tight profitability and capitalization.
Albeit positive, net income remains exposed to trading activities. INGMEX is highly active in FX and interest rate derivatives given its wholesale nature (2007: loans / assets equal 6.1%). However, null provisioning -due to a high credit quality- and effective cost control somewhat absorbs this volatility. Securities lending operations are recurrent since 2004 and they overstate balance sheet size.
Asset quality remains sound. Debt instruments are mostly composed of government securities (2007: 97.3% of total), while private bonds correspond to highly rated companies. Lending is modest on local books and strongly directed to a few number of high-quality corporate clients. INGMEX does not have past-due loans.
Fitch considers market risk as reasonable and well managed. Structural interest rate and FX positions are partially hedged with derivatives. Overall VaR limit is set at roughly 3% of equity and during 2007 it showed 68% of average consumption.
Funding is mostly short term and wholesale in nature. Government securities are held by the bank and exhibit a good secondary market trading activity; hence liquidity risk is considered modest by Fitch. Securities lending transactions show a relatively well matched funding structure.
In Fitch's opinion, INGMEX is adequately capitalized. Backed in the past by capital infusions from its parent, earnings retention acts now as it main source for capital growth. The bank issued subordinated bonds in 2002 for MXP494 million (as per local regulation they are fully accounted as Tier 1 capital; Fitch does not assign any equity credit to this issuance) that will mature in 2012.
In case INGMEX ran into difficulties, its main source of support would be ING Bank NV. According to Fitch, there is a high probability for INGMEX to receive support from ING Bank NV, if required. INGMEX long-term IDR is currently set at the same level as that of Mexico's sovereign IDR. It could be negatively impacted in case of a weak ability and/or willingness of support from ING Bank NV. Individual rating could be upgraded if the bank manages to improve income stability while keeping market risk exposure at a manageable level and reach more robust capitalization ratios. It could be downgraded if volatility increases as a result of higher than expected risk appetite and/or a material deterioration on its securities portfolio.
INGMEX is a niche bank focus on trading activities and to a lesser extent corporate lending. It started operations in 1995 and has since been a subsidiary of ING Grupo Financiero. Its ultimate parent is ING Bank NV, the banking arm of ING Groep: an international financial group focused on insurance, banking and asset management activities.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Search Our News Using Google Search
Can't find what you want? Try using Google:
