August 22, 2016 / 9:32 PM / 2 years ago

Fitch Affirms BRB's IDRs at 'BB-'; Downgrades VR to 'b+'

(The following statement was released by the rating agency) SAO PAULO, August 22 (Fitch) Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (LT IDRs) of BRB - Banco de Brasilia S.A. and downgraded the bank's Viability Rating (VR) to 'b+' from 'bb-'. A full list of rating actions follows at the end of this release. KEY RATING DRIVERS IDRs, NATIONAL RATINGS AND SUPPORT RATINGS BRB's IDRs and National Ratings are driven by support from its controlling shareholder, the Government of Distrito Federal (GDF). The affirmation of BRB's ratings reflect that the current rating levels already take into account Fitch's internal assessment of the Government of Distrito Federal (GDF). BRB is strategically important for GDF as it acts as the state's tax-collecting agent, carry out transfers to municipalities, and is responsible for the cash management of the state. In addition, BRB has relevant business with state public entities to which they provide services and grant credit to suppliers and public servants, via special payroll deductible loans. The upgrade of the Support Rating to '3' from '4' reflects a smaller differentiation between Fitch's internal analysis of the parent and the support driven LT IDRs assigned to BRB, which is consistent with Fitch's assessment of support according to its criteria. GDF holds 96.8% of BRB's voting shares. BRB's activities are concentrated in the Federal District (DF), and it operates with a network of 121 branches, which cover all of DF's administrative regions. VR Fitch downgraded BRB's VR to 'b+' from 'bb-' due to the bank's weak performance in 2015 and 1Q16, affected by a sharp increase in credit costs, reflecting vulnerabilities of its asset quality. In addition to that, the bank's capitalization should also suffer from the weak internal capital generation. BRB's VR reflects its regional importance and local franchise. The bank's profitability has fallen sharply as a result of the deterioration on the operating environment, the recovery of which should be slow and gradual. As such, profitability and asset quality remain under pressure as well as internal capital generation. On a positive note, the bank counts on good funding access through its branch network and has maintained a good liquidity position. RATING SENSITIVITIES IDRS, NATIONAL RATINGS AND SUPPORT RATINGS Fitch carries out internal analysis of GDF and BRB's IDRs. National and Support Ratings are based on the expected support of the state and are therefore strongly influenced by this analysis. As such, any changes to GDF's financial strength that hampers its ability to provide support or any change in Fitch's view about GDF's propensity to provide support to BRB could lead to a change on the bank's ratings. VR BRB's VR could be downgraded again if BRB's FCC ratio falls to less than 7% and if the bank's Operating ROAA remains below 0.5% for a prolonged period. An upgrade of BRB's VR would be conditional to a sharp recovery on its profitability to levels of Operating ROAA superior to 0.8% and an improvement on FCC to levels above 10%. Fitch has taken the following rating actions: BRB - Banco de Brasilia S.A --Long-Term Local and Foreign Currency IDRs affirmed at 'BB-(bra)'; Outlook Negative; --Short-Term Foreign and Local Currency IDRs affirmed at 'B' --Long-Term National Rating downgraded to 'A+(bra)' from 'AA-(bra)', Outlook revised to Stable from Negative; --Short-Term National Rating downgraded to 'F1(bra)' from 'F1+(bra)'; --Support Rating upgraded to '3' from '4'; --Viability Rating downgraded to 'b+' from 'bb-' . Contact: Eduardo Ribas Director +55 11 4504-2213 Fitch Ratings Brasil Ltda. Alameda Santos, 700 - 7th Floor Sao Paulo, SP, Brazil Paulo Fugulin Director +55 11 4504-2206 Committee Chairperson Alejandro Garcia Managing Director +1-212-908-9137 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 15 Jul 2016) here National Scale Ratings Criteria (pub. 30 Oct 2013) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1010664 Solicitation Status here Endorsement Policy here ail=31 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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