Moody's on Dec. 22 affirmed Banco Santander (México) SA's baseline credit assessment at "baa2," citing recent improvements in the bank's asset quality and profitability.

The asset quality improvement is indicated by a declining nonperforming loan ratio and increasing reserves, relative to 2015, in the context of more subdued loan growth, while profitability has risen slightly due to ample margins and gains in operating efficiency, the rating agency said.

Santander's capitalization remains weak in comparison to peers and could face further pressures related to the uncertain economic environment in Mexico given the bank's high single-borrower concentrations and exposure to the troubled oil sector.

"However, it is Moody's expectation that Santander's capitalization could reach 11% over the next 12 to 18 months as a result of sustained improvements in profitability, depending on the bank's business expansion and capital retention strategy," the rating agency noted.