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S&P downgrades Accendo Banco as credit quality deteriorates

S&P Global Ratings on Nov. 26 downgraded Accendo Banco SA Institución de Banca Múltiple's long-term issuer credit rating to "mxBBB-" from "mxBBB+," as well as the short-term rating to "mxA-3" from "mxA-2," with a negative outlook.

The downgrade reflects deterioration in Accendo Banco's risk profile, with the rating agency noting that its nonperforming assets ratio hit 14% in September while its asset coverage ratio fell below 40%. S&P expects the NPA ratio to decline to about 10% and its coverage ratio to rise to 44% by year-end with the bank's sale of a portfolio of past due loans. However, the improvement is result of an "inorganic action and does not represent a better risk profile for the bank," it added.

S&P also pointed to the company's customer concentration, which it said is higher than the industry average.

"The decline in our assessment of the bank's risk position is based on the significant concentration of customers, the low coverage with reserves of its nonperforming assets and the significant deterioration of its asset quality indicators during 2018," S&P said. "The greater volatility and sensitivity to credit losses — due to the concentration per customer — were reflected in the strong deterioration of its indicators of asset quality and coverage."

In October, Germany's Deutsche Bank AG said it would cancel an agreement to sell Deutsche Bank México SA Institución de Banca Múltiple to Accendo Banco, although Accendo Chairman Enrique Vilatela later said the banks were still in talks to strike a revised deal. S&P's base scenario assumes a deal will not happen, and as such Accendo Banco will no longer assume a relevant position in Mexico's fiduciary business sector in the short-term.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.