OREANDA-NEWS. Fitch Ratings has today assigned 'BB' and 'B' long- and short-term Issuer Default Ratings (IDRs), respectively, to Banco Ve por Mas, S.A. Institucion de Banca Multiple (BX+), both in foreign and local currency. Fitch also assigned a Viability Rating (VR) of 'bb' to BX+. The Rating Outlook on the long-term IDR is Stable. A Support Rating (SR) and Support Rating Floor (SRF) were also assigned at '5' and 'NF'. A full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS
IDRS AND VR
BX+'s IDRs are driven by its VR of 'bb', which reflects the bank's sound asset quality, explained by its low non-perming loan (NPL) ratios, moderate borrower concentrations, reasonable levels of credit reserves and low risk trading portfolio. The VR also weights BX+'s robust capital ratios, although they are declining rapidly due to its fast growth. The adequate funding mix, based on stable core deposits and reasonable liquidity levels also support bank's ratings. In turn, BX+'s ratings considers its relatively weak profitability, which is likely to keep on the same trend over the next three years due to ambitious expansion plans in terms of loan and infrastructure growth.

As of September 2015, BX+'s loan growth was 29% over the past 12 months, higher than the average of the country's banking system at the same date (14.7%), and is focused on small and medium enterprises (SMEs) and recently on loan to individuals, specifically mortgage loans. Despite its rapid growth and its orientation to SMEs and individuals, the bank's asset quality remains sound; NPLs ratios in the last four years have been consistently below 1.4% and shows loan reserve coverages above 100%. Borrower concentrations are moderate and lower than its closest peers and with reasonable guarantees schemes. BX+'s risk profile in its trading book is conservative; a high share of its trading portfolio relies on low-risk securities at short-term tenure, mainly local government securities or bank securities with adequate credit quality.

From 2011-2014, BX+'s Fitch Core Capital (FCC) ratio was 12.9%. In 2015, and as a result of an alliance with Banco Popular Espanol (BPE) at the end of 2014, the bank received a capital infusion of MXN1.714 billion that improved BX+'s FCC ratios to a maximum of 18%. This action was in line with the bank's expansion strategy. However, at end-September, the bank's FCC ratio declined to 15.6% as a result of the portfolio's growth, especially in retail loans that increased its risk weighted assets. Fitch expects that BX+'s capital ratios will tend to constrain as the growth strategy develops, with a FCC around 13%. The bank's main challenge will be to compensate the decline with growing income or more capital infusions.

BX+'s profitability is weak and compares below its local and international closest peers. Until 2013, the bank's operating ROA was close to 1%, however, in recent years operating expenses have grown rapidly due to the expansion strategy. For the next three years the bank expects higher expenses due to the opening of 50 new branches and an expected loan growth at least higher than the banking system. Fitch deems that BX+ will have the challenge to compensate the high growth with higher profits and the agency expects that bank's operating ROA will remain under 1% at least for the next three years.

The bank shows an adequate funding mix. The main source of financing comes from low cost customer deposits. As of September 2015, the bank's deposits represented 67.6% of total funds. The rest comes from interbank funds (29.5%) and subordinated long-term debt (2.9%). Interbank funds are highly related to development bank loans which allow BX+ for a better ALM. Since 2013, the loans to deposits ratio has been around 1.5x, even with the recent growth in loans, as the deposits also grew rapidly. If the growth targets are met, the agency expects that this ratio will tend to reduce, although in the long term it may level to actual figures. The bank's Liquidity Cover Ratio under local regulator and Basel III rules is solid and well legal requirement (2Q15: 181%).

SUPPORT RATING AND SUPPORT RATING FLOOR
BX+'s Support Rating and Support Rating Floor of '5' and 'NF', respectively, reflects the bank's low systemic importance, indicating that, although possible, external support cannot be relied upon.

RATING SENSITIVITIES
BX+'s ratings could be improved in the medium term if the bank achieves its growth plan, in a controlled manner that allows them to improve and sustain its profitability metrics as well as maintain its actual capital and asset quality metrics. Fitch believes that this process will likely take time as the development of those factors requires a consolidation period. Specifically, the bank's ratings would benefit from an operating ROA consistently above 1.5% and a FCC at least to a level of 15%.

BX+'s ratings can be affected negatively from a deterioration in performance or asset quality that results in pressures in its FCC and drives it below 12% or operating ROA under 0.5%. A deterioration of its liquidity profile will also pressure the ratings down.

SUPPORT RATING AND SUPPORT RATING FLOOR
Upside potential for the SR and SRF is limited and can only occur over time with a material growth of the bank's systemic importance.

Fitch has assigned the following ratings to BX+:

--Foreign currency long-term Issuer Default Rating (IDR) 'BB'; Outlook Stable;
--Foreign currency short-term IDR 'B';
--Local currency long-term IDR 'BB'; Outlook Stable;
--Local currency short-term 'B';
--Viability Rating 'bb';
--Support Rating '5';
--Support Rating Floor 'NF'.