Moody's cuts Banamex rating on Oceanografia concerns
Investigations into alleged fraudulent lending to Pemex supplier drive downgrade on Mexican bank
Banamex's credit rating has taken a hit due to
investigations into lending against allegedly fraudulent
receivables, three months after allegations first arose.
Ratings agency Moody's cut the Mexican lender's foreign
currency debt rating a notch to A3 on Tuesday, as a result of
the investigations that it says fuel uncertainty over the
bank's risk profile and taint its reputation.
The SEC and its Mexican counterpart the CNBV are
investigating Banamex for allegedly lending around $400m to
Oceanografia, a Pemex supplier, against fraudulent
Banamex said at the end of February that
its fourth quarter results would be MXN2.88bn ($216m) lower
than expected after it found evidence of fraud in its
lending to Oceanografia. The bank had MXN7.65bn worth of short
term loans outstanding with the Pemex supplier at the end of
December, under an accounts receivable financing deal, of which
just MXN2.42bn could be backed up by documentation.
"The rating actions reflect the severity of the fraud
revealed in March and the subsequent revelations about the
deficiencies in Banamex's risk management and auditing
functions that permitted this fraud to occur," Moody's said in
a statement on Tuesday.
Banamex set aside MXN2.15bn in reserves in the first
quarter to offset losses in relation to the alleged fraud.
The allegations of fraud have had a knock-on effect on parent
company Citi, which cut its 2013 numbers by around $235m after
Moody's said there could be further charges to Banamex's
earnings or capital, "while the resulting damage to the
company's reputation may result in a loss of business and
Moody's, Standard & Poor's and Fitch affirmed Banamex's
ratings in March, at A2, BBB+ and A, respectively.