Moody’s downgraded the rating outlook of Bancomer, Banorte, Santander, Citibanamex, Nafin, Banobras and Bancomext.
Moody’s maintained the ratings of seven Mexican banks and the deposit guarantee fund Institute for the Protection of Bank Savings (IPAB), but changed the outlook from stable to negative.
The rating agency indicated that the revision is the result of the change of perspective also from stable to negative of the A3 rating of Mexican government bonds , made two days ago.
The banks evaluated downwards in the A3 rating are BBVA Bancomer, Banorte, Banco Santander and Citibanamex, as well as the development banks Nacional Financiera (Nafin), the National Public Works and Services Bank (Banobras), the National Foreign Trade Bank ( Bancomext).
“Moody’s continues to assess a very high willingness on the part of the government to provide support to affected issuers. In the case of BBVA Bancomer, Banorte, Santander México and Citibanamex, the evaluation is based on its importance for the country’s payment system and its considerable participation in the deposit market of 21.0%, 13.3%, 13.7% and 13.3%, respectively, to March 2019, “the agency said.
He also explained that the review of the Mexican bond rating was taken into account because it reflects the government’s ability to provide extraordinary financial support to financial institutions in case of stress.
On this, Moody’s mentioned that the change of perspective of the country’s ratings was motivated because the policies of the current government have become less predictable and are affecting the confidence of investors, in addition to that there has been lower economic growth.
In the same tone, the rating agency said that there have been changes in the country’s energy policy and in the role of Pemex, whose rating outlook was downgraded yesterday, in such a way that they introduce risks for the medium-term fiscal outlook, despite the commitment of the government with maintaining a prudent fiscal policy.
Moody’s responds to AMLO: Mexico’s rating does measure corruption
Moody’s on Wednesday revised the outlook for Mexico’s rating, which went from stable to negative; however, the note remains at level A3.
Jaime Reusche, sovereign analyst of Moody’s for Mexico, affirms that the sovereign note A3 already contemplates the status of corruption that exists in the country.
“Moody’s methodology for assigning sovereign ratings does contemplate the impact of corruption on the economy. Also, consider an analysis of the economic factors in all countries in a consistent manner, this implies the institutional strength, fiscal strength and susceptibility to risk events, “said Jaime Reusche at a press conference.
In the morning, the president of Mexico criticized the methodology of the rating agencies, considering that they use a neoliberal and outdated framework.
Moody’s on Wednesday revised the outlook for Mexico’s rating, which went from stable to negative; however, the note remains at level A3. For its part, Fitch Ratings reduced the rating from BBB + to BBB with a stable outlook, to two grades of a ‘junk’ rating.
In response, the president of Mexico, Andrés Manuel López Obrador, said during his morning conference that the rating agencies had a methodology applied for 30 years designed for a neoliberal framework, which does not contemplate the effects of the fight against corruption.
However, Reusche explains that the revision of the perspective is related to the uncertainty derived from the policies of the energy sector (the construction of the Dos Bocas refinery and the constraints for Pemex to associate with private companies), the weak economic growth and the institutional weakness
Reusche explained that the policies related to the government’s support to Pemex create uncertainty because they do not guarantee the financial viability of the company.
“Pemex is going to need recurring support and it is going to become a recurrent liability. There is no clarity about how their financial situation is going to be resolved.”
For the analyst, Pemex has not been able to fund itself in the markets because the investors do not agree to invest in a refinery, because it does not represent a profitable business, besides that it is not seen with good eyes that the oil company refrains from generating strategic partnerships with private companies to improve their performance.
“There have not been enough strong measures to anchor the trust,” said Moody’s analyst.
Corruption, long-term issue
Asked about the corruption scenario in the country, Reusche said that Moody’s already considers this variable within its rating.
“Mexico should have a higher rating, but corruption, impunity limit the rating and have an effect of deteriorating credit strength.”
For Moody’s, corruption is a complex issue that will take more than a six-year term to resolve.
“There is no measure that by itself has a significant impact, we have seen a set of measures, adjustments to various laws, regulation of transfers to states and municipalities that could be positive, but corruption is widespread and needs a concerted attack” .
The Mazatlan Post