S&P Global Ratings on Dec. 1 lifted its ratings outlook on Mexico-based Banco Sabadell SA Institucion De Banca Multiple to positive from stable while affirming the bank's long- and short-term national credit ratings at "mxA-" and "mxA-2," respectively.
The upgraded outlook, the rating agency said, reflects the possibility that Sabadell Mexico's risk adjusted capital ratio could hold above 15% over the next 12 to 18 months thanks to continued capital injections from parent company Banco de Sabadell SA. The Spanish parent company is set to send 1.66 billion Mexican pesos to the recently created Mexican unit in 2018.
S&P also pointed to "a better than expected financial performance" at the Mexican bank, "which could generate a significant reduction in its net losses (given the short history of operations) earlier than we had estimated." Still, S&P expects Sabadell Mexico to continue to post losses through 2019, before breaking even in 2020.
"Our ratings continue to be based on a business position that, despite having a growing credit portfolio ... Sabadell still reports net losses due to the operating costs that newly created banks usually face," it added.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.
