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Rating Action:

Moody's affirms Banco PSA's ratings; stable outlook on supported ratings

 The document has been translated in other languages

10 Oct 2014

New York, October 10, 2014 -- Moody's Investors Service has today affirmed Banco PSA Finance Brasil S.A.'s (Banco PSA) baseline credit assessment (BCA) of ba3, which is equivalent to a bank financial strength rating of D-. Moody's also affirmed the bank's global local and foreign currency deposit ratings of Ba2 and Not-Prime, long- and short-term, respectively, and the Brazilian national scale deposit ratings of Aa3.br and BR-1, long- and short-term, respectively. At the same time, Moody's changed to stable, from negative, the outlook on Banco PSA's long-term deposit ratings. The outlook on Banco PSA's bank financial strength rating remains stable.

The following ratings of Banco PSA Finance Brasil were affirmed:

Bank financial strength rating: D-, with stable outlook, which maps to a standalone baseline credit assessment of ba3

Long-term global local-currency deposit rating: Ba2, with stable outlook;

Long-term foreign-currency deposit rating: Ba2, with stable outlook;

Long-term Brazilian national scale deposit rating: Aa3.br, with stable outlook

Short-term global local-currency deposit rating: Not Prime;

Short-term foreign-currency deposit rating: Not Prime;

Short-term Brazilian national scale deposit rating: BR-1

RATINGS RATIONALE

In affirming Banco PSA's unsupported ratings at D-/ba3, Moody's acknowledges the bank's adequate financial metrics, particularly profitability and asset quality, despite the decline in vehicle production and new car sales in Brazil in the first nine months of 2014. Banco PSA's role as captive financing arm of automakers Peugeot and Citroen allowed it to sustain business volumes through subsidized interest rates and sales promotions in the first half of 2014. As a result, the bank's interest income increased by 13% in the 12 months to June 2014, although car financing dropped 6.9% in the banking system during the same period.

Asset quality deteriorated modestly in the period as a consequence of lower loan growth pace, but Banco PSA's 1.8% past due loan ratio remained well below the system's 5.1% average for auto loan delinquency, reflecting selective credit origination. The high capitalization level at a Tier 1 ratio of 23.57% provides cushion against non-performing loans.

The ratings are constrained by inherently modest earnings diversification, which derives from a narrow product suit comprised of auto loans to individuals and floor-plan financing to car dealers. The bank's wholesale funding structure also limits ratings because of the high concentration on institutional depositors, which tend to be more volatile and pressure funding costs up.

The stable outlook on Banco PSA's ratings reflects the expectation that as a captive bank, it will continue to benefit from special arrangements with car manufacturers. Nevertheless, continuing weak performance of the Brazilian car industry may hurt its asset quality and profitability. The Brazilian subsidiary's Ba2 long-term deposit rating incorporates one notch of uplift from its standalone ba3 credit assessment to reflect Moody's view of a high probability of parental support in the event of stress, based on the shared strategic focus of the subsidiary and its parent.

The last rating action on Banco PSA Finance Brasil S.A. was on 29 January 2014, when Moody's affirmed all ratings of Banco PSA and changed to negative from stable the outlook on its long-term deposit and debt ratings.

The principal methodology used in this rating was Global Banks published in July 2014. Please see the Credit Policy 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 June 2014 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

Banco PSA Finance Brasil S.A. is headquartered in São Paulo, Brazil, and had total assets of BRL3.03 billion ($1.37 billion) and total equity of BRL435 million ($197.5 million) as of 30 June 2014.

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.

Alexandre M. Albuquerque
Asst Vice President - Analyst
Financial Institutions Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300

Maria Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms Banco PSA's ratings; stable outlook on supported ratings
No Related Data.
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