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Rating Action:

Moody's affirms Itau's ratings in Brazil and Chile; changes review direction to positive on CorpBanca and CorpGroup Banking's ratings

 The document has been translated in other languages

31 Jan 2014

Sao Paulo, January 31, 2014 -- Moody's Investors Service has affirmed all ratings assigned to Itaú Unibanco Holding S.A. (IUH), Itaú Unibanco S.A. (IU), Banco Itaú BBA S.A. (IBBA) and Banco Itaú Chile S.A (Itaú Chile), following the 29 January 2014 announcement of the agreement to merge Chilean bank CorpBanca and Banco Itaú Chile S.A..

At the same time, Moody's has changed, the rating review direction to possible upgrade, from review for downgrade, on the long and short term ratings of CorpBanca and its holding company, CorpGroup Banking S.A.

The following ratings were affirmed with a stable outlook:

Itaú Unibanco Holding S.A.

Long and Short-Term Local Currency Issuer Ratings: Baa2 and Prime-2

Long and Short-Term Brazilian National Scale Ratings: Aaa.br and BR-1

Long and Short-Term Foreign Currency Senior Unsecured Debt Ratings assigned to MTN Program: (P)Baa2 and (P)Prime-2

Long-Term Foreign Currency Subordinated Debt Rating assigned to MTN Program: (P)Baa3

Itau Unibanco Holding S.A. Cayman Branch

Long and Short-Term Foreign Currency Senior Unsecured Debt Ratings assigned to MTN Program: (P)Baa2 and (P)Prime-2

Long-Term Foreign Currency Subordinated Debt Rating assigned to MTN Program: (P)Baa3

Long-Term Foreign Currency Senior Unsecured Debt Rating assigned to the outstanding notes: Baa2

Long-Term Foreign Currency Subordinated Debt Rating assigned to the outstanding subordinated notes: Baa3

Itau Unibanco S.A.

Bank Financial Strength Rating: C-, mapping to baa1 on global rating scale

Long and Short-Term Global Local Currency Deposit Ratings: Baa1 and Prime-2

Long and Short-Term Foreign Currency Deposit Ratings: Baa2 and Prime-2

Long-Term Foreign Currency Senior Unsecured Debt Rating assigned to MTN Program: (P)Baa1

Long and Short-Term Brazilian National Scale Deposit Ratings: Aaa.br and BR-1

Itaú Unibanco S.A. Cayman Branch

Long-Term Foreign Currency Senior Unsecured Debt Rating assigned to MTN Program: (P)Baa1

Long-Term Foreign Currency Deposit Rating assigned to Deposit/CD Program: (P)Baa2

Banco Itau BBA S.A.

Bank Financial Strength Rating: C-, mapping to baa1 on global rating scale

Long and Short-Term Global Local Currency Deposit Ratings: Baa1 and Prime-2

Long and Short-Term Foreign Currency Deposit Ratings: Baa2 and Prime-2

Long-Term Foreign Currency Senior Unsecured Debt Rating assigned to MTN Program: (P)Baa1

Long and Short-Term Brazilian National Scale Deposit Ratings: Aaa.br and BR-1

Banco Itau BBA S.A. Nassau Branch

Long-Term Foreign Currency Senior Unsecured Debt Rating assigned to MTN Program: (P)Baa1

Long-Term Foreign Currency Senior Unsecured Debt Rating assigned to outstanding notes: Baa1

Banco Itaú Chile S.A.

Bank Financial Strength Rating: C-, mapping to baa2 on global rating scale

Long and Short Term Global Local Currency Deposit Ratings: A3 and Prime-2

Long and Short Term Global Foreign Currency Deposit Ratings: A3 and Prime-2

The following ratings assigned to CorpBanca and CorpGroup Banking were placed on review for upgrade:

CorpBanca

Bank Financial Strength Rating: D+, mapping to ba1 on global rating scale

Long and Short Term Local Currency Deposit Ratings: Baa3 and Prime-3

Long and Short Term Foreign Currency Deposit Ratings: Baa3 and Prime-3

Long Term Foreign Currency Senior Unsecured Debt Rating: Baa3

CorpGroup Banking S.A.

Long Term Local Currency Issuer Rating: B1

Long Term Foreign Currency Issuer Rating: B1

Long Term Foreign Currency Senior Unsecured Debt Rating: B1

RATINGS RATIONALE

ITAU UNIBANCO'S RATINGS

In affirming Itaú Unibanco's ratings, Moody's acknowledges the earnings diversification and business potential in Latin America for Itaú group that arises from the incorporation of CorpBanca and Itaú Chile. The deal will boost Itau Unibanco's economies of scale in Chile and will expand its presence in Colombia, as it gains access to CorpBanca's subsidiaries in that market, positioning it as the fourth and fifth largest banks in these countries, respectively. The transaction is consistent with Itaú Unibanco's expansion strategy with focus on important Latin American markets.

The deal involves a $652 million injection by Itau Unibanco in Banco Itau Chile prior to the deal closing, which will then be incorporated into CorpBanca to form Banco Itau CorpBanca. Once the merger materializes, Itaú will have a controlling stake in the new bank, that will control the Colombian operations.

The Baa1 rating assigned to the operating companies, IU and IBBA, reflects the group's strong financial fundamentals and important international footprint that correspond to approximately 15% of the bank's consolidated earnings in September 2013, with the Latin American operations accounting for 42% of total earnings abroad.

BANCO ITAU CHILE'S RATINGS

In affirming the ratings of Itau Chile with a stable outlook, Moody's cited the bank's solid fundamentals, including strong asset quality, liquidity, and tangible capitalization as well as improving profitability. The bank will further benefit from the franchise enhancement and diversification implied by the merger transaction, which will result in a stronger competitive position.

CORPBANCA'S AND CORPGROUP BANKING'S RATINGS

In placing the ratings of CorpBanca on review for upgrade, Moody's noted the benefits a change of control with respect to the merged bank could have on CorpBanca's funding flexibility, margins, and capital. These were key concerns that had led Moody's to downgrade and review for further downgrade CorpBanca's ratings in December 2013.

Moody's said that the proposed merger of CorpBanca and Banco Itau Chile and its association with Itau Unibanco will also strengthen the bank's market presence across multiple customer segments in Chile's highly competitive banking market, as well as facilitating scale efficiencies, thus increasing its earnings potential. Itau's experience in integrating acquisitions as well as its successful presence and brand identity already in Chile, and its partnership and co-management with existing shareholders should allow the bank to mine local management's expertise and relationships.

In placing the ratings of CorpGroup Banking on review for upgrade, Moody's indicated that it will remain a direct holding of the new Itau CorpBanca in accordance with the shareholder agreement signed with the Brazilian bank. Moody's also expects its obligations to be supported by a credit line, backed by the shares of CorpBanca, extended to its holding, CorpGroup Interhold, by Banco Itau BBA Nassau branch. The line offers CorpGroup the option of refinancing the obligations of the group that are subject to specific covenants and collateral package. CorpGroup Banking's ratings are anchored on its main subsidiary, CorpBanca's standalone rating, and are discounted three notches reflecting its high reliance on dividends from the bank, structural subordination of its liabilities to those of the bank, and its standalone leverage metrics.

Moody's said that completion of the rating review is subject to receipt of all required regulatory approvals and completion of the transfer of control and merger, which management expects in the fourth quarter of 2014.

METHODOLOGY USED & LAST RATING ACTIONS

The principal methodology used in this rating was Global Banks published in May 2013. Please see the Credit Policy page on www.moodys.com.br 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 ".mx" for Mexico. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Credit Ratings to Global Scale Credit Ratings.

The last rating action on Itau Unibanco Holding S.A. and Itau Unibanco Holding S.A. Cayman Branch was on 3 October 2013, when Moody's changed the outlook to stable, from positive, on the entity's global local currency issuer and foreign currency debt ratings. All ratings remained unchanged.

The last rating action on Itau Unibanco S.A. and Itau Unibanco S.A. Cayman Branch was on 3 October 2013, when Moody's changed the outlook to stable, from positive, on the entity's global local currency issuer and foreign currency debt ratings. All ratings remained unchanged.

The last rating action on Banco Itau BBA S.A. and Banco Itau BBA S.A. Nassau Branch was on 3 October 2013, when Moody's changed the outlook to stable, from positive, on the entity's global local currency issuer and foreign currency debt ratings. All ratings remained unchanged.

The last rating action on Banco Itaú Chile was on 10 January 2013 when Moody's affirmed all ratings assigned to Itaú Chile, including the C- standalone bank financial strength rating (BFSR) and baa2 baseline credit assessment (BCA), and its A3 and Prime-2 long and short term global local and foreign currency deposit ratings, respectively. The rating outlook remained stable.

The last rating action on CorpBanca was on 6 December 2013 when Moody's downgraded the supported global local and foreign currency deposit and debt ratings to Baa3 from Baa2, and lowered the bank's short term deposit ratings to Prime-3 from Prime-2. Moody's also lowered the bank's standalone baseline credit assessment (BCA) to ba1 from baa3, which maps to a D+ standalone bank financial strength rating (BFSR). All ratings remained on review for possible downgrade.

The last rating action on CorpGroup Banking S.A. was on 6 December 2013 when Moody's downgraded the local and foreign currency issuer and senior debt ratings to B1 from Ba3, which remained on review for possible downgrade.

Based in São Paulo, Itau Unibanco Holding S.A., the second financial conglomerate in Brazil, had $447.5 billion in consolidated assets (BRL1,082.8 billion) and $32.3 billion (BRL78.3 billion) in shareholders' equity as of 30 September 2013.

Based in Santiago, Banco Itaú Chile reported $12.8 billion in assets and $ 1.2 billion in shareholders' equity as of September 30, 2013.

Based in Santiago, CorpBanca was the fifth largest bank in Chile, with $ 28.2 billion (CLP 14.2 trillion) in consolidated assets and $2.4 billion in shareholders' equity as of 30 September 2013. CorpGroup Banking reported total consolidated assets of $35 billion and total net equity of $1.6 billion as of 30 September 2013.

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.

Ceres Lisboa
VP - Senior Credit Officer
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 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

Moody's affirms Itau's ratings in Brazil and Chile; changes review direction to positive on CorpBanca and CorpGroup Banking's ratings
No Related Data.
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