Banco Ahorro Famsa Outlook Revised To Stable From Negative, #B# Ratings Affirmed On Similar Action On Its Parent

Stocks and Financial Services Press Releases Friday February 12, 2016 09:16
MEXICO CITY--12 Feb--Standard & Poor's

MEXICO CITY (Standard & Poor's) Feb. 11, 2016--Standard & Poor's RatingsServices revised the outlook on Banco Ahorro Famsa (BAF) to stable fromnegative. At the same time, we affirmed the 'B' global scale and'mxBBB-/mxA-3' national scale ratings on the bank.

The rating action on Banco Ahorro Famsa follows a similar action on GrupoFamsa, S.A.B. de C.V. (Grupo Famsa; B/Stable/--), which directly owns 100% ofBAF. We maintain our view of BAF as core entity of Grupo Famsa.

The ratings on BAF continue to reflect its core status to Grupo Famsa, sinceBAF´s business activities are mainly related to the group. Also, BAF offersmost of its products through the group´s stores as well as customer of itsother subsidiaries and suppliers. In addition, the bank follows the samestrategy as the group, and has the same risk management controls. The bank hasweak business position, adequate capital and earnings, very weak riskposition, average funding and adequate liquidity, in our opinion.

The stable outlook on the global scale ratings reflects that of its parent,Grupo Famsa, since we consider it a core subsidiary; thus, the ratings on thebank will continue to move in tandem with those on the parent. The stableoutlook on Grupo Famsa reflects our view that the company will continue

improving its operating performance amid solid same-store sales (SSS) growth.We also expect BAF´s improved asset quality and stable deposits and growth inpersonal loans will support Grupo Famsa´s revenues, given its reliance onbanks deposits as a source of funding and on personal loans as a source ofrevenues. This, along with the company´s market position and expertise in theindustry, will allow it to gradually improve its credit metrics withconsolidated (unadjusted) EBITDA margins above 11%.

We could lower the ratings in the next 12 months it Grupo Famsa´s expansionprogram becomes more aggressive than we expect, resulting in higher debt. Wecould also lower the ratings if the company faces higher competition due to aweakening economy, pressuring its revenues and EBITDA growth. This wouldresult in debt to EBITDA consistently above 5x and consolidated EBITDA marginnear 10%.

A downgrade on BAF will follow a similar action on Grupo Famsa.We also could downgrade the ratings on BAF if we no longer consider the bank acore subsidiary of Grupo Famsa.

We could upgrade Grupo Famsa in the next 12 months if its strategy at itsretail and banking divisions improves the revenues and EBITDA growth beyondour expectations. We could also raise the ratings if Grupo Famsa reduces itsexposure to the dollar further than we expect, which could boost its cash flowgeneration and liquidity. An upgrade is also possible if Mexico´s economystrengthens beyond our expectations, spurring the SSS growth with debt toEBITDA consistently below 3x. Such scenario could prompt us to revise ourcomparable rating analysis assessment and/or financial risk profile.

An upgrade on BAF will follow a similar action on Grupo Famsa.

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