UPDATE 1-BofA Merrill Lynch lowers recommendation on Mexican Banorte shares to "neutral"

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MEXICO CITY, Nov 12 (Reuters) – Bank of America Merrill Lynch has reduced the investment recommendation for Grupo Financiero Banorte's Mexican shares to "neutral" since its "purchase", citing concerns over its exposure to volatility. markets by recent announcements.

The report, sent to customers and seen by Reuters, indicates that the recent cancellation of the construction of a new airport in Mexico City and an initiative to limit the recovery of bank charges "have heightened the uncertainty and driven the country risk of Mexico is growing. "

"In an uncertain environment, we prefer to position ourselves on banks with strong balance sheets (high capital ratios, stable financing structure and reduced exposure to credit risk)," he said.

The shares of Banorte, the bank that holds the highest weight in the main index of the local market and recorded its largest weekly decline since November 2016, lost more than 7.0% Monday to 98 010 pesos.

Last week, after his party's senators, Morena, presented an unexpected initiative on bank commissions, Mexico's elected president, Andrés Manuel López Obrador, said he would not advocate changes to the legal framework. governing economic, financial and fiscal matters in the country. first half of his six-year term.

However, Morena Senators Coordinator Ricardo Monreal said the initiative would continue.

"The legislative process will continue, it can not be stopped," Monreal told reporters on Monday. "It's not in our plans to stop that," he said.

Bank of America Merrill Lynch said that large retail banks, such as Banorte and Santander Mexico, are more vulnerable to commission changes, accounting for about 10% of their total operating revenue.

The entity also downgraded Gentera's stock recommendation from "neutral" to "lower than market performance".