DUFF & PHELPS: BANCOMER, S.A. SHORT-TERM PESO OBLIGATIONS RATED DUFF 1+ LONG-TERM PESO OBLIGATIONS RATED 'AA-'
CHICAGO, June 30 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has assigned a rating of Duff 1+ (one plus) to the short-term peso denominated obligations of Bancomer, S.A. This is Duff & Phelps highest short-term rating. The long-term peso denominated obligations are rated `AA-' (double A minus). Also, Duff & Phelps has assigned ratings to the dollar denominated obligations of Bancomer. These ratings incorporate a term to maturity factor based on the Mexican sovereign ratings associated with each time horizon. This sovereign rating acts as a ceiling on individual issuer ratings. The short-term (maturity under one year) dollar denominated rating for Bancomer is Duff 2. Long-term dollar obligations maturing beyond one year but before Dec. 31, 1996, are rated 'BBB' (triple B). Dollar obligations maturing between January 1, 1997, and Dec. 31, 1999, are rated 'BBB-' (triple B minus).
Dollar obligations maturing after
Dec. 31, 1999 are rated BB+ (double B plus).
The peso ratings in particular recognize Bancomer's excellent access to local currency funding markets as well as the solid fundamentals of the organization. Bancomer maintains Mexico's largest branch network which is very effective in raising core deposits as well as an excellent distribution vehicle for loans and investment products. This branch network has been critical to building Bancomer's substantial market shares in loans, deposits and the newly developed national pension fund program (the "Sistema de Ahorro para el Retiro" or "SAR"). These substantial market shares have translated into above average levels of profitability, with Bancomer reporting a return on assets of 1.93 percent in the first quarter of 1993 and 1.85 percent and 1.64 percent for full year 1992 and 1991, respectively. A large net interest margin, a function of a relatively low cost deposit base coupled with a higher yielding consumer and middle market commercial loan focus, is a principal factor in the strong profitability. Capital levels are also above average with stockholders' equity equaling 7.57 percent at March 31, 1993, while the risk adjusted capital ratio equaled 9.78 percent. The ratings also take into consideration the dramatic changes occurring in the Mexican banking system. Over recent years Mexico's commercial banking system has been privatized with, in many cases, new management groups installed. Further, the universal banking concept has been adopted, reserve requirements reduced, loan classification and loan loss reserve requirements established, and international capital guidelines implemented. Loans have grown dramatically since 1989, reflecting the improving economic environment and the improved availability of credit. Given the rapid loan growth over recent years, establishment and implementation of effective risk management controls has been essential. As the economy has slowed, the industry has experienced a sizable increase in problem loans. As such, improving and then maintaining loan quality is an industry issue. Further, developing competitive pressures and assimilation of formerly government institutions into the private sector are also systemic issues confronting the industry. Positively, the economy is significantly underbanked, providing substantial opportunities for those institutions that weather this period of transition. While several issues present near- to medium-term challenges for the industry, Bancomer is well-positioned to succeed given its very attractive franchise which includes the industry's largest branch system (773 branches) and ATM network (1,420 machines). Further, Bancomer holds the leading bank deposit market share at 25 percent, and has the leading position in residential mortgage lending with a 34 percent share and in peso-based credit cards at a 37 percent share. Additionally, enhancements to systems technology, implementation of improved risk management policies and procedures, and a focus on expense control and efficiency have positive implications for Bancomer's future performance. -0- 6/30/93 /CONTACT: Charles J. Orabutt, Jr., CPA, of Duff & Phelps Credit Rating Co., 312-368-3153/
CO: Bancomer, S.A. ST: IN: FIN SU: RTG
LR -- NY061 -- 7255 06/30/93 14:53 EDT
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|Date:||Jun 30, 1993|
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