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Announcement:

Moody's affirms Banco Votorantim's ratings, outlook revised to negative

30 Nov 2011

New York, November 30, 2011 -- Moody's Investors Services affirmed all ratings assigned to Banco Votorantim S.A. (Banco Votorantim), including the C- bank financial strength rating (BFSR), the global local and foreign currency deposit ratings, the national scale deposit ratings on the Brazilian national scale as well as the foreign currency senior unsecured and subordinated debt ratings assigned to the notes issued by Banco Votorantim S.A. (Nassau Branch).

At the same time, Moody's changed to negative from stable the outlook on Banco Votorantim's C- BFSR and on the A3 long-term global local currency deposit rating, as well as on the Baa1 foreign currency subordinated debt rating.

The outlook on the foreign currency senior unsecured debt rating assigned to notes issued by Banco Votorantim S.A. Nassau Branch was changed to stable from positive, to reflect the negative outlook on the local currency rating, from which it is derived.

The long and short-term foreign currency deposit ratings remain constrained by Brazil's Baa2 country ceiling for foreign currency deposits, and have a positive outlook that is aligned with the positive outlook on the ceiling.

The following ratings were affirmed and had the outlook changed to negative from stable:

Bank Financial Strength Rating of C-

Global Long-Term Local Currency Deposit Rating of A3

Long-Term Foreign Currency Subordinated Debt Rating of Baa1

The following rating was affirmed and had the outlook changed to stable from positive:

Long-Term Foreign Currency Senior Unsecured Debt Rating of Baa1

The following ratings remained unchanged:

Short-Term Global Local Currency Deposit Rating of Prime-2

Long-Term Foreign Currency Deposit Rating of Baa2, positive outlook

Short-Term Foreign Currency Deposit Rating of Prime-2

Long-Term Brazilian National Scale Deposit Rating of Aaa.br, stable outlook

Short-Term Brazilian National Scale Deposit Rating of BR-1

RATING RATIONALE

The affirmation of Banco Votorantim's C- BFSR primarily reflects the bank's strong business franchise and well established market shares in consumer finance, and in car finance in particular, as well as in wholesale banking . In addition, Banco Votorantim has developed a middle market lending platform that should help the bank to expand into better yielding commercial lending products supported by strong collateral structures while at the same time reducing. the concentration risk inherent in its corporate lending book.

The negative outlook on the ratings reflects Moody's expectation that Banco Votorantim's financial metrics are likely to come under further pressure over the coming quarters as management continues to adjust its provisioning policies and shift the bank's consumer business mix to lower yielding assets. Moody's said it views as positive the refocusing of the bank's operations towards less volatile business lines as well as the increased balance sheet protection management is seeking to achieve by building additional reserves, maintaining high levels of liquidity, and exiting capital intensive businesses. In the meantime, however, Moody's expects the bank's asset quality indicators and earnings generation capacity to weaken, which will also reduce the pace of internal capital generation from retained earnings.

The asset quality deterioration reported in the 3Q11 reflects both the seasoning of the bank's car loan portfolio, which had grown substantially during 2009 and 2010 as well as borrowers' weakening repayment capacity. Non-performing loan ratios are expected to remain high for the next several quarters, reflecting less favorable economic conditions that affect the repayment capacity of consumer borrowers. Consumer loans accounted for roughly 60% of Banco Votorantim's consolidated loans as of September 2011.

Moody's said that the bank presented adequate BIS capitalization of 12.7% as of September 2011, which increases to 14.1% when considering the easing of additional capital requirement on long term consumer loans, announced by regulators in November 2011. However, the rating agency warned that the lower profitability expected for the next 12 to 18 months will likely pressure capital and thus limit the bank's ability to grow.

The A3 long-term global local currency deposit is the result of (1) Banco Votorantim's unsupported rating of C- which translates into a baseline credit assessment of Baa2 and (2) Moody's view that the likelihood of the bank to receive support from Banco do Brasil S.A. (BB) is high, given the strategic importance of the partnership for BB's consumer finance expansion targets. Moody's does not incorporate any systemic support into the bank's ratings.

Moody's last rating action on Banco Votorantim S.A. was on June 20, 2011, when the foreign currency deposit and debt ratings were upgraded to Baa2 from Baa3, and to Baa1 from Baa2, respectively. The upgrade was aligned with the upgrade of the respective sovereign ceilings for Brazil, as the ratings are constrained.

The principal methodologies used in this rating were "Bank Financial Strength Ratings: Global Methodology" published in February 2007, and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology" published in March 2007, and "Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt" published in November 2009.

Moody's National Scale 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 ratings in that they are not globally comparable to 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 ".br" for Brazil. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Implementation Guidance August 2010 "Mapping Moody's National Scale Ratings to Global Scale Ratings."

Banco Votorantim S.A. is headquartered in São Paulo, Brazil and reported consolidated assets of R$ 124.3 billion (US$ 68.1 billion) and equity of R$ 8.7 billion (US$ 4.8 billion) as of September 30, 2011.

The Local Market analyst for this rating is Ceres Lisboa, 55-11-3043-7317.

REGULATORY DISCLOSURES

Although the present credit ratings have been issued in a non-EU country which has not been recognised as endorsable at point of registration, the present credit ratings may still be used by financial institutions for regulatory purposes until 31 January 2012, including credit ratings issued within this period. Moreover, ESMA may decide and disclose by end December 2011 to extend the possibility to use credit ratings for regulatory purposes in the European Community for three additional months, until 30 April 2012, provided that exceptional circumstances occur that may imply potential market disruption or financial instability. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

Information sources used to prepare the rating are the following : parties involved in the ratings, [and] parties not involved in the ratings, [and] public information, [and] confidential and proprietary Moody's Investors Service information, [and] confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Jeanne Del Casino
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

M. Celina Vansetti
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 Votorantim's ratings, outlook revised to negative
No Related Data.
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