New York, September 27, 2016 -- Moody's Investors Service has today affirmed Banco PSA Finance Brasil
S.A.'s (Banco PSA) long-term local-
and foreign-currency deposit ratings of Ba2 and Ba3 and changed
the outlook on the ratings to negative. At the same time,
Moody's downgraded the bank's long-term national scale
deposit rating to Aa2.br from Aa1.br and affirmed Banco
PSA's short-term local- and foreign-currency deposit
ratings at Not Prime, as well as its short-term national
scale rating at BR-1. Banco PSA's baseline credit assessment
(BCA) of ba3, adjusted BCA of ba2 and long- and short-term
counterparty risk assessments of Ba1(cr) and Not Prime(cr), respectively,
were also affirmed.
RATINGS RATIONALE
The rating action follows the recent completion of the joint venture agreement,
signed in July 2015, under which Banco Santander (Brasil) S.A.
(Ba1/Ba3, negative, ba2, Santander Brasil) acquired
50% of the shares of Banco PSA from Banque PSA Finance (Baa2/Baa2
stable, ba1, BPF). Moody's notes that the transaction
further deepens the global relationship between the banks' parents,
which already have similarly structured ventures in Europe, and
expects Banco PSA to benefit from lower funding costs through committed
facilities provided by Santander Brasil, as well as from increased
fee income from cross selling non-vehicle loan related products
and services, such as insurance.
Following the sale, Moody's now considers Santander Brasil
to be its primary support provider and notes that it will fully consolidate
Banco PSA. As a result, the bank's adjusted BCA of
ba2 and long-term deposit ratings of Ba2 continue to incorporate
one notch of uplift from the bank's standalone BCA of ba3.
Moody's also recognizes the ongoing close strategic alignment between
BPF and Banco PSA in their Brazilian operations.
The negative outlook assigned to Banco PSA's ratings reflects the
negative outlook on Santander Brasil's long-term debt and
deposit ratings which is in line with the outlook on Brazil's sovereign
bond rating. The downgrade of the bank's long-term
national scale rating to Aa2.br from Aa1.br, is in
line with the change in outlook in the global scale rating and reflects
its positioning versus its peers.
By affirming Banco PSA's standalone BCA of ba3, Moody's recognizes
the bank's role as the captive financing arm of automakers' Peugeot
and Citroen, the low risk profile of its loan book and its adequate
capitalization levels. Banco PSA's past due loan ratio was 1.4%
as of June 2016, down from 1.8% in June 2015,
reflects continued improvement in the bank's underwriting standards,
and remains below the system average for auto loan delinquencies.
The decline reflects continued improvement in the bank's underwriting
standards and the affirmation of its ratings comes even though its loan
book fell by 21% in the twelve months to June 2016. While
the industry as a whole experienced a decline in the same period,
Banco PSA's loan book contracted by more than the fall in vehicle
lending in Brazil.
Moody's also affirmed Banco PSA's ratings despite a significant
expected fall in its capitalization following the joint venture.
Banco PSA's June 2016 capitalization level of 16.7%,
as measured by Moody's, does not incorporate the 50%
sale of its shares and any subsequent dividend distributions. Despite
the reduction this would have caused, Banco PSA will operate with
adequate capitalization levels following the transaction.
Banco PSA's ba3 BCA also reflects the challenges it faces in maintaining
healthy profitability in a low loan growth environment, notwithstanding
lower funding costs and product cross selling. Banco PSA's
BCA remains constrained by its lack of business diversification due to
its mono-line business model, whereby growth in its subsidized
loan book intrinsically depends on sales of Peugeot and Citroen cars.
Moody's expects the recession in Brazil will continue to dampen
demand for new vehicles, therefore loans, and a recovery will
only be gradual, which will also constrain revenues growth.
WHAT COULD CAUSE THE RATINGS TO GO DOWN
A deterioration in the bank's asset risk or a significant decline in its
capitalization levels, would put pressure on the bank's ratings.
Lower profitability in light of the poor performance in the car industry
could also pressure the bank's ratings. A downgrade in Santander
Brasil's ratings, either due to a deterioration in its own
creditworthiness or as a result of an additional downgrade of Brazil's
sovereign rating, would lead to a downgrade in Banco PSA's
ratings.
WHAT COULD CAUSE THE RATINGS TO GO UP
Upward pressures on Banco PSA's ratings are unlikely, as they have
a negative outlook. However, the outlook could be stabilized
if the outlooks on Santander Brasil ratings and/or the sovereign are stabilized.
The following ratings for Banco PSA Finance Brasil S.A.
were downgraded:
........ Long-term
Brazilian national scale deposit rating, to Aa2.br from Aa1.br
The following ratings and assessments for Banco PSA Finance Brasil S.A.
were affirmed:
.... Long-term global local currency
deposit rating, Ba2
.... Long-term global foreign currency
deposit rating, Ba3
.... Short-term global local and foreign
currency deposit rating, NP
.... Short term Brazilian national scale deposit
rating, BR-1
.... Baseline credit assessment, ba3
.... Adjusted baseline credit assessment,
ba2
.... Long-term counterparty risk assessment,
Ba1(cr)
.... Short-term counterparty risk assessment,
NP(cr)
....Outlook, Changed To Negative From
Positive(m)
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Ratings Methodologies page on www.moodys.com
for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_189530.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Farooq Khan
Analyst
Financial Institutions Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
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M. Celina Vansetti
MD - Banking
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
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