Fitch Affirms GFNorte & Banorte's Ratings; Outlook Stable

  Fitch Affirms GFNorte & Banorte's Ratings; Outlook Stable

Business Wire

MONTERREY, Mexico -- December 11, 2012

Fitch Ratings has affirmed the ratings of Grupo Financiero Banorte (GFNorte)
and its major banking subsidiary Banco Mercantil del Norte (Banorte),
following the announcement of the agreement to acquire the pension fund
company Afore Bancomer from Spain's BBVA. The Rating Outlook on the long-term
international and/or national scale issuer ratings of these entities remains
Stable. A full list of rating actions follows at the end of this release.

In Fitch's view, the acquisition of Afore Bancomer could somewhat pressure
GFNorte and Banorte's capital adequacy metrics, given the sizable goodwill
that will arise. However, Fitch expects that capital ratios will remain
consistent with the 'bbb' Viability Ratings (VR) of GFNorte and Banorte, even
under the more aggressive scenarios of this acquisition being fully funded
with internal resources or short-term debt at the parent company level. Core
capital metrics have improved materially during 2012, providing GFNorte and
Banorte with some flexibility to absorb the impact of this relatively large
and ambitious acquisition.

GFNorte will invest between USD800 million and USD870 million for the 50%
stake of Afore Bancomer (the Mexican Social Security Institute is GFNorte's
partner in the pension fund business with equal stakes). Financing details are
yet to be determined, but GFNorte is already exploring different alternatives,
which should be disclosed in first quarter 2013 (Q1'13), when the acquisition
is expected to be completed after receiving some pending regulatory approvals.
The pension fund regulator has already approved this transaction.

If the acquisition is financed with internal resources, when completed, Fitch
estimates that core capital metrics for Banorte (direct owner of GFNorte's
interest in the pension fund business) relative to risk-weighted assets could
deteriorate by roughly 180 basis points (bps), which is relatively in line
with the bank's estimated impact on regulatory capital ratios. In turn, the
impact on a more stringent measure of tangible common equity to tangible
assets will be roughly 100 bps. Both measures, although affected when the
transaction is completed, will remain roughly in line with recent records
during the 2010-2011 period.

If the acquisition is financed with a short-term loan at the parent company
level, Fitch's perception of Banorte's capital metrics will not vary
materially, since little credit will be given to the equity contributed by the
group from the proceeds of such loan, given that projected adjusted capital
metrics will remain constrained by the need to upstream dividends over a
relatively short timeframe for debt servicing purposes. Under this scenario,
Fitch estimates that double leverage at GFNorte will not exceed 115%, while
liquidity risk would be partially mitigated by the subsidiaries' ability to
upstream enough dividends. Therefore, GFNorte's ratings will likely remain
aligned with those of its major subsidiary, Banorte.

Fitch's affirmation of GFNorte's and Banorte's ratings and the Stable Outlook
also reflect the strategic benefits of this acquisition. GFNorte's franchise
will be enhanced, while Fitch also expects a gradual positive impact on the
group's revenue diversification and overall risk profile. The Stable Outlook
is also driven by the group's management objective to restore capital metrics
to pre-acquisition levels within the 24 months following the completion of the
deal. This will likely be achieved through a combination of internally
generated capital and other strategic alternatives that will be assessed over
the near future.

GFNorte's and Banorte's ratings could be negatively affected if the tangible
common equity to tangible assets ratio deteriorates beyond 6.5%. A Fitch core
capital-to-risk-weighted assets ratio at Banorte below 10.5% could also
pressure the ratings. Downside risk could also arise from execution risk
and/or lower than expected positive effects on revenue diversification and
overall earnings.

GFNorte's and Banorte's VRs are driven by its overall adequate financial
condition, relative resilience during the recent economic crisis, and
gradually improving franchise and competitive position. The ratings also
factor in GFNorte's still moderate loss absorption capacity, and the
challenges to sustain capital and liquidity metrics in view of higher expected
loan growth and still moderate profitability.

Given Banorte's systemic importance and its role as the largest
domestically-owned bank, its support rating and support rating floor were
affirmed at '2' and 'BBB-', respectively. Fitch's support rating floors
indicate a level below which the agency will not lower the bank's long-term
IDRs. In view of GFNorte's nature as a holding company, its support rating and
support rating floor were affirmed at '5' and 'NF', respectively, which
indicates that, although possible, external support cannot be relied upon.

The hybrid securities of Banorte were affirmed at 'A+(mex)', which reflects
Fitch's approach to rate these capital securities.

The following ratings have been affirmed with a Stable Outlook:

GFNorte:

--Long-term foreign and local currency IDRs at 'BBB';

--Short-term foreign and local currency IDRs at 'F2';

--Viability rating at 'bbb';

--Support rating at '5';

--Support rating floor at 'NF'.

Banorte:

--Long-term foreign and local currency IDRs at 'BBB';

--Short-term foreign and local currency IDRs at 'F2';

--Viability rating at 'bbb';

--Support rating at '2';

--Support rating floor at 'BBB-';

--National scale long-term rating at 'AA+(mex)';

--National scale short-term rating at 'F1+(mex)';

--National scale long-term rating for a local issue of subordinated unsecured
debt (BANORTE 09) at 'A+(mex)'.

Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:

-- 'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);

-- 'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 05,
2012);

-- 'National Ratings Criteria' (Jan. 19, 2011).

Applicable Criteria and Related Research:

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Assessing and Rating Bank Subordinated and Hybrid Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695542

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

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Contact:

FitchRatings
Primary Analyst
Alejandro Garcia, CFA, +52 81 8399 9146
Senior Director
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
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Monica Ibarra, +52 81 8399 9150
Director
or
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Franklin Santarelli, +1 212-908-0739
Managing Director
or
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