MONTERREY, Mexico--(BUSINESS WIRE)--According to Fitch Ratings, Banco Nacional de Mexico's ratings (Banamex; rated 'A/F1', Outlook Stable and Viability Rating of 'a') are not affected following the disclosure of the negative impact on its net income, due to its exposure to the company Oceanografia. On Feb. 28, Banamex announced that its net income will suffer a negative impact of approximately $3,177 million of pesos at the end of 2013 as a result of its exposure to Oceanografia, a direct supplier of the government-owned oil company Pemex, which was accused of fraud. Such impact represents roughly 2% of Banamex's equity.
As of Dec. 31, 2013, Banamex had a total exposure to Oceanografia of $8,830 million pesos of which $7,650 million was in form of short term factoring accounts backed by Pemex receivables, and the balance were direct loans and letters of credit. After the fraud was identified, Banamex estimated a real recovery of 29% of the factoring accounts and the difference was taken as a direct charge to Banamex's earnings at the end of 2013, causing a negative impact on its net income of $3,177 million pesos. Banamex has initiated the legal process in order to recover the direct exposure to Oceanografia. In Fitch's opinion, the recovery prospects are deemed low to none.
In Fitch's view, this exposure and losses do not affect Banamex's overall financial condition, due to the bank's ample loss absorption capacity, and strong and resilient earnings. Fitch considers that Banamex's Fitch Core Capital (assuming the full impact of the announced losses) will remain in a solid range of 13.7% -14.0%. Also, this charge represents just 7% of the 2013 operating income before loan loss provisions, which highlights the ability of the bank to absorb negative effects of this nature without materially affecting its financial profile.
Nonetheless, Fitch considers that this event is negative from a risk management and internal controls perspective, which the agency will continue to monitor closely.
Additional information is available at www.fitchratings.com.