Citibanamex Casa De Bolsa, S.A. de C.V. -- Moody's places all ratings and assessments of Citibanamex on review for downgrade

Rating Action: Moody's places all ratings and assessments of Citibanamex on review for downgradeGlobal Credit Research - 16 Jan 2022Mexico, January 16, 2022 -- Moody's de México ("Moody's") has today placed on review for downgrade the Baa1 deposit ratings, baa1 Baseline Credit Assessment (BCA) and Aaa.mx long-term Mexican National deposit rating assigned to Banco Nacional de México, S.A. (Citibanamex). Moody's also placed on review for downgrade all other ratings and assessments, except the bank's short-term Mexican National Scale deposit rating of MX-1.In the same rating action, Moody's placed on review for downgrade Citibanamex Casa de Bolsa, S.A. de C.V.'s long-term global local currency issuer rating of Baa1 and long-term Mexican National Scale issuer rating of Aa1.mx. Moody's affirmed the brokerage house's short-term Mexican National Scale issuer rating of MX-1.The review for downgrade is triggered by Citigroup Inc.'s (A3 stable) announcement, released on 11 January 2022, that it will sell its consumer segments in Mexico, as well as its small and middle market businesses in Mexico. Citigroup will retain ownership of Citibanamex's Institutional Clients Group (ICG) and its private bank, as well as its local brokerage house, Citibanamex Casa de Bolsa. As of November 2021, Citibanamex was the third-largest bank in Mexico with 12.9% of the system's deposits and second-largest in consumer loans with 15.8% the market, as well as the fourth-largest in commercial loans with an 9.2% market share.This exit from consumer banking is part of Citigroup's global strategy to refocus its international activities. The structure of the sale of its Mexican consumer banking operations entails uncertainties, which are considered in this review.The following ratings were placed on review for downgrade:Banco Nacional de México, S.A. (600009991).Baseline Credit Assessment of baa1 placed under review for downgrade.Adjusted Baseline Credit Assessment of baa1 placed under review for downgrade.Long-term global local and foreign currency deposit ratings of Baa1 placed under review for downgrade, outlook changed to rating under review from stable.Short-term global and local foreign currency deposit ratings of P-2 placed under review for downgrade.Long-term Mexican National Scale deposit rating of Aaa.mx placed under review for downgrade.Long-term Counterparty Risk Assessment of A3(cr) placed under review for downgrade.Short-term Counterparty Risk Assessment of Prime-2(cr) placed under review for downgradeCitibanamex Casa de Bolsa, S.A. de C.V. (Citibanamex Casa de Bolsa, 821608738).Long-term global local currency issuer rating of Baa1 placed under review for downgrade.Short-term global local currency issuer rating of Prime-2 placed under review for downgrade.Long-term Mexican National Scale issuer rating of Aa1.mx placed under review for downgradeThe following ratings were affirmed:Banco Nacional de México, S.A. (600009991).Short-term Mexican National Scale deposit rating of MX-1Citibanamex Casa de Bolsa, S.A. de C.V. (Citibanamex Casa de Bolsa, 821608738).Short-term Mexican National Scale issuer rating of MX-1Outlook Actions:Banco Nacional de México, S.A. (600009991)- Outlook changed to rating under review from stableCitibanamex Casa de Bolsa, S.A. de C.V. (Citibanamex Casa de Bolsa, 821608738)- Outlook changed to rating under review from stableRATINGS RATIONALEDuring the review period, Moody's will assess the structure and ownership of the resulting Citibanamex post-divestiture, and its ability to maintain a resilient asset quality, strong capitalization, ample profitability, and a stable funding mix while addressing the challenges related to Mexico's uneven economic recovery and a much smaller and less diversified portfolio. In Moody's opinion, Citigroup has many different possible paths to executing its divestiture, including the sale of the consumer business or the spin-off of the ICG business into a new entity with a brand new bank license. The ultimate resolution of the review is contingent upon whether Citigroup ultimately retains ownership of Citibanamex as a legal entity and what operations are retained by Citibanamex. Also, Moody's will reassess government support considerations, as well as affiliate support in line with the expected ownership, as it relates to strategic fit, control, and financial links, following the business reorganization.Moody's placed Citibanamex's ratings and assessments on review for downgrade in order to incorporate the uncertainties that will come out of this divestiture and the implications on the bank's standalone credit profile. Moody's will also assess the bank's competitive environment, whether in the ICG segment or consumer segments in Mexico. During the review period, the appropriate levels of affiliate and government support will also be reassessed by Moody's. Given the size and scale of Citibanamex in Mexico, this divestiture will likely take more time to be concluded and extend Moody's review of Citibanamex's ratings beyond the one- to three-month period.REVIEW OF CITIBANAMEX CASA DE BOLSA RATINGSMoody's placed the ratings of Citibanamex Casa de Bolsa's ratings on review for downgrade in line with the review for downgrade of Citibanamex's adjusted BCA, because the rating agency assesses Citibanamex Casa de Bolsa as highly integrated entity with Citibanamex. Consequently, the creditworthiness of this entity is best reflected by the baa1 adjusted BCA of Citibanamex, from which Moody's currently expects full support.Moody's approach reflects the rating agency's assessment of a very high probability that Citibanamex itself will be supported by Citigroup, but does not incorporate any support from the Mexican government given the brokerage house's very small size and lack of systemic importance.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSCitibanamex's ratings could be downgraded in line with a lower BCA that would result from higher asset risks without higher earnings generation, higher loan reserves and capitalization. A lower BCA would also result in a lower issuer rating for Citibanamex Casa de Bolsa. A downgrade of Citibanamex's deposit ratings will also depend on Moody's reassessment of support from the Mexican government and affiliate support from Citigroup or the new owner of the bank.Citibanamex's ratings would be confirmed at their current levels if following Moody's reassessment of the ratings, the rating agency concludes that the bank is able to maintain good asset quality that benefits from disciplined risk management and good corporate governance while maintaining a well-positioned franchise in Mexico that results in sound earnings generation capacity that lends support to capitalization, and if Moody's expects the bank to continue to benefit from existing levels of affiliate and government support.Given that ratings were placed on review for downgrade, an upgrade of ratings is less likely at this moment. At the same time, an upgrade of the bank's BCA is unlikely given that it is currently at the same level as the Mexican government's Baa1 ratings.The principal methodology used in rating Banco Nacional de Mexico, S.A. was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. The principal methodology used in rating Citibanamex Casa De Bolsa, S.A. de C.V. was Securities Industry Market Makers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187332. Alternatively, please see the Rating Methodologies page on www.moodys.com.mx for a copy of these methodologies.The period of time covered in the financial information used to determine Banco Nacional de Mexico, S.A.'s rating is between 01 January 2018 and 30 September 2021 (source:Audited financial statements and interim financial statements).The period of time covered in the financial information used to determine Citibanamex Casa De Bolsa, S.A. de C.V.'s rating is between 01 January 2018 and 30 September 2021 (source: Audited financial statements and interim financial statements).Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in May 2016 entitled "Mapping National Scale Ratings from Global Scale Ratings". While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1280297.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's information.The ratings have been disclosed to the rated entities prior to public dissemination.A general listing of the sources of information used in the rating process, and the structure and voting process for the rating committees responsible for the assignment and monitoring of ratings can be found in the Disclosure tab in www.moodys.com.mx.The date of the last Credit Rating Action for Banco Nacional de Mexico, S.A. was 26/08/2020The date of the last Credit Rating Action for Citibanamex Casa De Bolsa, S.A. de C.V. was 22/04/2020For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.mx.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.This credit rating is subject to upgrade or downgrade based on future changes in the financial condition of the Issuer/Security, and said modifications will be made without Moody's de México S.A. de C.V accepting any liability as a result.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.Please see Moody's Rating Symbols and Definitions on www.moodys.com.mx for further information on the meaning of each rating category and the definition of default and recovery.Please see ratings tab on the issuer/entity page on www.moodys.com.mx for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see our website www.moodys.com.mx for further information.Please see www.moodys.com.mx for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.The ratings issued by Moody's de Mexico are opinions regarding the credit quality of securities and/or their issuers and not a recommendation to invest in any such security and/or issuer.Please see the ratings tab on the issuer/entity page on www.moodys.com.mx for additional regulatory disclosures for each credit rating. Felipe Carvallo VP - Senior Credit Officer Financial Institutions Group Moody's de Mexico S.A. de C.V Ave. Paseo de las Palmas No. 405 - 502 Col. 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