Fitch Affirms Banco Santander Mexicano's Ratings.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 13, 2002

Fitch Ratings has affirmed Banco Santander Mexicano's ratings at Foreign currency long-term 'BBB-' (Outlook Stable), short-term 'F3', Local currency long-term 'BBB', short-term 'F2' and Individual 'C'. In addition, Fitch has revised its support rating to '4' from '3', signifying that it believes support for the bank is likely, but not certain. Banco Santander Mexicano's (SanMex) ratings reflect the bank's adequate capital base, sound asset quality and profitability and are enhanced by Spain's Banco Santander Central Hispano's (SAN) operational support and backing. Its foreign currency ratings are constrained by the country's sovereign rating.

The change in SanMex's support rating, which represents Fitch's assessment of whether a bank would receive support should it be necessary, reflects the tightening of Fitch's global methodology for assigning support ratings, as communicated by the agency on July 29, 2002. A support rating of '3' is assigned to a bank that has an institutional, majority owner of sufficient reputation and possessing such resources and resolve that, in Fitch's opinion, support would be forthcoming. In order to qualify for a support rating of '3', certain conditions must be met, including written confirmation of the formalization of parental support. While Fitch continues to take SAN's ownership into account and considers that its commitment to SanMex remains strong, the more restrictive conditions for assigning a support rating of '3' have forced the change, not only in Mexico, but in a number of subsidiaries of financial institutions globally.

SanMex was Mexico's sixth largest commercial bank by total assets at end-June 2002, with a market share of 7.4%. It offers a wide range of banking services through its network of 358 branches and 7,048 members of staff. SanMex is 100%-owned by Grupo Financiero Santander Serfin (GFSS), which originates from the merger between Grupo Financiero Santander Mexicano (GFSM) and Grupo Financiero Serfin (GFS), both having been acquired by SAN in 1997 and 2000, respectively. From 1998 to early 2001, SAN injected more than USD 700 mln into the group (excluding the USD 1.5 bln paid for GFS) to clean-up and strengthen its banking operations, namely SanMex and Banca Serfin (Serfin). Together, SanMex and Serfin have a combined market share by total assets of around 16%. On December 11, 2002, SAN announced it had agreed to sell a 24.9% stake in GFSS to Bank of America (BofA) for USD 1.6 bln; this is still subject to regulatory approval. Under the agreement, BofA will have 2 voting members (currently totaling 12) in GFSS's board and commits to stay as a shareholder in the group for a minimum of three years, time when it will have a put option to sell its stake back to SAN at book value or list on the stock market. This alliance is intended to advance BofA's strategy to better serve the Hispanic market in the US while at the same time open new business opportunities for SAN through its Mexican subsidiary.

SAN announced in September 2002 the commercial integration of both subsidiaries. As a result, it is expected that GFSS will restructure both institutions, which may comprise the transfer of activities between them in order to benefit from substantial deferred tax assets and operational synergies. Although both banks will remain as separate legal institutions, they will operate under the same brand name 'Santander Serfin'.