Research Update: Banca Mifel Outlook Revised To Negative On Expected Capital Level Pressures, 'BB-/B' And 'mxA-/mxA-2' Ratings Affirmed

We expect capital levels of Mexico-based niche bank Banca Mifel S.A. (Mifel) to be pressured because the expected asset quality deterioration will force the bank to increase loan-loss reserve, eating into the internal capital origination. For the past three years, the bank's deposit base increased. However, during the pandemic period, Mifel experienced a minor deposit run-off. As market conditions improve, our base-case expectations assume that Mifel will regain past growth momentum and continue increasing the deposits' share in the funding base. We're revising the outlook on Banca Mifel to negative from stable. Additionally, we're affirming our 'BB-/B' global scale and 'mxA-/mxA-2' national scale issuer credit ratings. Finally, we're affirming our 'B-' issue-level rating on the bank's subordinated notes. Our negative

...- We expect capital levels of Mexico-based niche bank Banca Mifel S.A. (Mifel) to be pressured because the expected asset quality deterioration will force the bank to increase loan-loss reserve, eating into the internal capital origination. - For the past three years, the bank's deposit base increased. However, during the pandemic period, Mifel experienced a minor deposit run-off. As market conditions improve, our base-case expectations assume that Mifel will regain past growth momentum and continue increasing the deposits' share in the funding base. - We're revising the outlook on Banca Mifel to negative from stable. Additionally, we're affirming our '##-/B' global scale and 'mxA-/mxA-2' national scale issuer credit ratings. Finally, we're affirming our 'B-' issue-level rating on the bank's subordinated notes. - Our negative outlook reflects our belief that the bank will face capital level pressures stemming from higher loan-loss provisioning due to worsening asset quality indicators....

Research Update