Sao Paulo, April 10, 2018 -- Moody's America Latina (MAL) has today changed to stable, from negative,
the outlook on the global scale local currency debt and/or issuer ratings
assigned to Banco Daycoval S.A. (Daycoval), BNDES
Participações S.A. - BNDESPAR,
Itaúsa - Investimentos Itaú S.A. (Itaúsa)
and B3 S.A. -- Brasil, Bolsa, Balcão
(B3 S.A.). At the same time, MAL affirmed all
the affected global scale ratings and corresponding national scale ratings.
These actions follow the announcements by Moody's Investors Service (MIS)
that it had changed the outlook on Brazil's Ba2 government bond rating
("Moody's changes outlook on Brazil's ratings to stable from negative;
Ba2 ratings affirmed") and on certain ratings of the affected issuers
or their affiliates to stable ("Moody's changes to stable
outlook on multiple Brazilian banks and B3 S.A.; affirms
ratings"), from negative, published on 9 and 10 April
2018, respectively.
For additional information, please refer to the related announcements:
https://www.moodys.com/viewresearchdoc.aspx?docid=PR_380048
and https://www.moodys.com/viewresearchdoc.aspx?docid=PR_381908.
The following are the Brazilian entities covered in this press release:
- Banco Daycoval S.A.
- BNDES Participações S.A. -
BNDESPAR
- Itaúsa - Investimentos Itaú S.A.
- B3 S.A. -- Brasil, Bolsa, Balcão
RATINGS RATIONALE
The rating actions were prompted by the change in outlook to stable,
from negative, on Brazil's government bond rating, which reflects
reduced downside risks to growth and uncertainty regarding the country's
reform momentum and has relieved the sovereign constraint on the affected
banks' ratings and/or assessments. In particular, the
change in the sovereign outlook considers Brazil's higher-than-expected
short- and medium-term growth prospects, backed by
structural reforms, which will support fiscal consolidation efforts.
Banks exhibit strong credit interlinkages with their sovereign.
Banks' exposure to sovereigns can be direct, via liquidity-related
exposure to central banks and government bonds, and indirect,
via lending book exposures to the real economy, which is itself
correlated to the government's creditworthiness.
Moody's projects average GDP growth of 2.8% in 2018-19
and 2.5% in the following years in Brazil. The near-term
outlook will be supported by a pick-up in credit growth backed
by an accommodative monetary policy and solid prospects in the job market.
Supported by improving investor confidence, these elements will
underpin a broad-based recovery in domestic demand driven by both
investment and consumption, which will benefit bank's earnings
prospects and relieve pressure on asset quality that accumulated during
the country's recession.
Over the medium term, Brazil's growth prospects will be supported
by structural reforms approved by the Temer administration since 2016,
including a labor reform that added flexibility to contract negotiations
between employees and employers. In addition, several measures
were adopted to improve the ease of doing business with a focus on reducing
red tape and regulations, while the decision to phase out subsidized
lending by BNDES will improve credit allocation and contribute to the
development of domestic capital markets.
The banks' stable outlooks and ratings affirmations consider that
their credit fundamentals remain sound despite the significant challenges
they faced during Brazil's recession. Banks are well prepared
to face a new credit cycle as economic growth gains traction and credit
risk declines, supported by historically low inflation and interest
rates. Following two years of contraction, credit is expected
to grow between 3%- 5% in 2018, with credit
demand supported by household deleveraging as corporate lending remains
subdued. Banks have emerged from the recession with manageable
asset risks, and non-performing loan ratio remained relatively
stable over the 12 months through January 2018 at approximately 3.5%,
while loan loss reserves are conservative at 6.5% of gross
loans. Resumed loan growth, lower credit costs, and
continued cost cutting will help offset margin compression as loan books
begin to reprice at lower rates and competition increases, leading
to a modest improvement in earnings. At the same time, contraction
in public banks' lending has reduced pricing distortions.
In addition, having risen to an ample 14.5% of risk-weighted
assets in 2017,the average regulatory capitalization ratio is more
than adequate to support the projected gradual loan expansion over the
coming quarters, as well as to accommodate the final phase-in
of Basel III rules early in 2019, though the quality of capital
is relatively weak compared to global banks because of high amounts of
deferred tax assets. Finally, strong liquidity will limit
banks' funding needs, while a largely domestic funding structure
reduces their vulnerability to potential unexpected shocks coming from
global markets.
WHAT COULD CHANGE THE RATING -- DOWN/UP
The ratings could face upward pressure if Brazil's government bond rating
is upgraded in conjunction with continued improvement in the issuers'
credit fundamentals and/or Brazil's macroeconomic environment.
On the other hand, if Brazil's government bond rating again faces
downward pressures, the affected ratings would be negatively pressured
as well. The ratings would also face downward pressure if the issuers'
fundamentals deteriorate unexpectedly.
The following ratings assigned to Banco Daycoval S.A. were
affirmed:
Long-term global local-currency senior unsecured debt rating
of Ba2; outlook changed to stable, from negative
Long-term global local-currency senior unsecured MTN rating
of (P)Ba2
Long-term Brazilian national scale senior unsecured debt rating
of Aa2.br
Long-term Brazilian national scale senior unsecured MTN rating
of Aa2.br
The following ratings assigned to B3 S.A. -- Brasil,
Bolsa, Balcão were affirmed:
Long term global local currency senior unsecured debt rating of Ba1;
outlook changed to stable, from negative
Long term Brazilian national scale senior unsecured debt rating of Aaa.br
The following ratings assigned to BNDES Participações S.A.
- BNDESPAR were affirmed:
Long-term global local-currency issuer rating of Ba2;
outlook changed to stable, from negative
Long-term global local-currency senior unsecured debt rating
of Ba2; outlook changed to stable, from negative
Long-term Brazilian national scale issuer rating of Aa1.br
Long-term Brazilian national scale senior unsecured debt rating
of Aa1.br
Outlook changed to stable from negative
The following ratings assigned to Itaúsa - Investimentos
Itaú S.A. were affirmed:
Long-term global local-currency issuer rating of Ba3;
outlook changed to stable, from negative
Long-term Brazilian national scale issuer rating of A1.br
Outlook changed to stable from negative
The principal methodology used in rating Banco Daycoval S.A.,
BNDES Participações S.A. - BNDESPAR,
and Itaúsa - Investimentos Itaú S.A.
was Banks published in September 2017. The principal methodology
used in rating B3 S.A. -- Brasil, Bolsa,
Balcão was Securities Industry Service Providers published in September
2017. Please see the Rating Methodologies page on www.moodys.com.br
for a copy of these methodologies.
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_1113601.
REGULATORY DISCLOSURES
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's information.
Information types used to prepare the rating are the following:
financial data, operating data, asset portfolio data,
historical performance data, public information, and Moody's
information.
Sources of Public Information: Moody's considers public information
from many third party sources as part of the rating process. These
sources may include, but are not limited to, the list available
in the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_193459.
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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
Please see the ratings disclosure page on www.moodys.com.br
for general disclosure on potential conflicts of interests.
Moody's America Latina Ltda. may have provided Other Permissible
Service(s) to the rated entity or its related third parties within the
12 months preceding the credit rating action. Please go to the
report "Ancillary or Other Permissible Services Provided to Entities Rated
by Moody's America Latina Ltda." in the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_198873
for detailed information.
Entities rated by Moody's America Latina Ltda. and the rated entities'
related parties may also receive products/services provided by parties
related to Moody's America Latina Ltda. engaging in credit ratings
activities within the 12 months preceding the credit rating action.
Please go to the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_198874
for a list of entities receiving products/services from these related
entities and the products/services received.
The date of the last Credit Rating Action for Banco Daycoval S.A.
was 21/3/2018
The date of the last Credit Rating Action for B3 S.A. --
Brasil, Bolsa, Balcão was 31/5/2017
The date of the last Credit Rating Action for Itaúsa - Investimentos
Itaú S.A. was 31/5/2017
The date of the last Credit Rating Action for BNDES Participações
S.A. - BNDESPAR was 31/5/2017
Moody's ratings are constantly monitored, unless designated as point-in-time
ratings in the initial press release. All Moody's ratings are reviewed
at least once during every 12-month period.
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 credit rating action on the support provider and in relation to
each particular credit 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.br.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit 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.
Please see ratings tab on the issuer/entity page on www.moodys.com.br
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.br
for further information.
Please see Moody's Rating Symbols and Definitions on the Ratings Definitions
page on www.moodys.com.br for further information
on the meaning of each rating category and the definition of default and
recovery.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com.br,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
Please see www.moodys.com.br 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.br
for additional regulatory disclosures for each credit rating.
Ceres Lisboa
Senior Vice President
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
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 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
Client Service: 1 212 553 1653
