...Asset Quality, Capital Drive Ratings: Banco Mare Nostrum S.A.'s (BMN) ratings reflect the bank's challenge to improve profitability and its capitalisation, which, although maintained with moderate buffers over regulatory requirements continues to be highly vulnerable to unreserved problem assets. The ratings also factor in BMN's sound regional franchise, improved but still weak asset quality, and an adequate funding and liquidity profile. Improving Asset Quality: BMN's asset-quality metrics have been improving, although they are still weaker than the sector average despite the transfers of most real-estate exposure to Spain's bad bank, SAREB, in 2013. Fitch Ratings expects this to continue in the coming quarters. Non-performing loans (NPLs) declined to 10.8% of gross loans (14.4% including foreclosed assets) at end-June 2016. Reserves for NPLs were stable at 41%, at the low end of Spanish banks. Some protection is provided by high mortgage collateralisation. Capital Remains Vulnerable:...
