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Fitch: Banorte's and GFNorte's Ratings Unaffected by the Sale of Inter National Bank
April 7, 2017 / 4:38 PM / 8 months ago

Fitch: Banorte's and GFNorte's Ratings Unaffected by the Sale of Inter National Bank

(The following statement was released by the rating agency) MONTERREY, April 07 (Fitch) According to Fitch Ratings, the finalized sale of Banco Mercantil del Norte's (Banorte) U.S. financial subsidiary, Inter National Bank (INB), will not have any immediate impact on the Mexican bank's or the Grupo Financiero Banorte (GF Norte)'s ratings. The transaction has some minor positive and negative implications as described below, but the sale and its effects have already been factored into its current ratings (for more information, see "Fitch Affirms GFNorte and Banorte's VR & IDRs at 'bbb+/BBB+'; Outlook Negative", dated March 16, 2017). Banorte acquired INB in 2006. Early this year, Banorte announced its divestment of INB, mainly as the result of a corporate restructuring process focused on the most profitable business and certain changes in regulatory environment in the U.S. which limited the bank's strategy for the subsidiary. At YE2016, Banorte reported an estimated value for its investment in INB of about MXN5,299 million, which was reclassified in the audited statements as a long-term asset available for sale. The estimated negative effect of the sale, related mainly to goodwill from the acquisition, was seen in equity (i.e. income from prior years). Although the sale reduced total equity by around 4%, and Fitch Core Capital Metrics fell during 2016 from 15.8%(YE15) to 12.7%(YE16) for diverse reasons, Fitch expects no further effects on capital from the finalized sale and considers core capital ratios to still be adequate for the rating level. In addition, Fitch believes that any potential impact on future profitability would not be significant, given INB's net income, as discontinued operations represented only 1.6% of Banorte's stable and recurrent profits. The expected effect on 1Q17 financial statements will be a liquidity increase for the value of investments, cash proceeds usage from the transaction is pending.. Fitch believes there is limited upside potential for Banorte's VR and IDR at the present time, in line with the expectations for the Mexican sovereign ratings and the country's operating environment. Contact: Primary Analyst Veronica Chau Senior Director +52 81 83 99 91 69 Fitch Mexico S.A. de C.V. Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8 Col. Del Paseo Residencial 64920 Monterrey, N.L., Mexico Secondary Analyst Omar Rojas Associate Director +52 81 83 99 91 67 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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