Sao Paulo, April 08, 2011 -- Moody's Investors Service downgraded the global local currency deposit
ratings and foreign-currency senior unsecured debt ratings of BES
Investimento do Brasil S.A. (BESI Brasil) to Ba1 and Not
Prime, from Baa2 and P-3, in the long- and short-term
respectively. Moody's also downgraded the bank's foreign-currency
deposit ratings to Ba1 and Not Prime from Baa3 and P-3; and
the long-term Brazilian national scale deposit rating to Aa2.br
from Aaa.br. The outlook on all ratings is negative.
The bank financial strength rating (BFSR) of D+ and the short-term
Brazilian national scale rating of BR-1 were both confirmed.
Moreover, BESI Brasil's baseline credit assessment was maintained
The rating actions conclude the review for downgrade of BESI Brasil's
deposit and debt ratings and reflect the downgrade of the ratings of its
parent, Banco Espírito Santo S.A., particularly
the downgrade of its BFSR to D+ from C-, which lowered
the baseline credit assessment to Ba1, from Baa2. For further
details, please refer to the press release dated April 6,
2011 "Moody's takes rating actions on Portuguese banks".
The following ratings were confirmed:
Bank financial strength rating: D+, with negative outlook;
Short-term Brazilian national scale deposit rating: BR-1
The following ratings of BES Investimento do Brasil S.A.
Global local-currency deposit ratings: to Ba1 and Not Prime
from Baa2 and P-3, with negative outlook;
Foreign-currency deposit ratings: to Ba1 and Not Prime from
Baa3 and P-3, with negative outlook;
Foreign-currency senior unsecured debt ratings: to Ba1 and
Not Prime from Baa2 and P-3, with negative outlook;
Long-term Brazilian national scale deposit rating: to Aa2.br
from Aaa.br, with negative outlook
Moody's highlighted that the downgrade of BESI Brasil's deposit
and senior debt ratings followed the lowering of Banco Espirito Santo's
stand alone financial strength rating to D+ and baseline credit assessment
(BCA) to Ba1. As per Moody's joint default analysis,
Portugal's Banco Espirito Santo's BCA is the anchor for assessing
parental support, which is incorporated into its subsidiary's
deposit and senior debt ratings. After the downgrade of the parent's
financial strength, BESI Brasil's Ba1 deposit and senior debt
ratings no longer incorporate any uplift from Banco Espirito Santo.
The confirmation of BESI Brasil's BFSR at D+ as well as the
maintenance of the bank's BCA at Ba1 reflect the limited dependence
on its parent both for business origination and funding and liquidity,
as indicated by revenue generation that is predominantly derived from
domestic activities. BESI Brasil's well-managed liquidity
position, which has not drawn on parent's resources over the
past couple of years, also supports the rating confirmation.
BESI Brasil's BFSR benefits from the consistent and independent
performance of the bank's financial metrics, particularly
its profitability and capital ratios, which have cushioned the bank's
stand-alone operation against pressures on its parent's creditworthiness.
Moody's noted, however, that the negative outlook on
the rating reflect the challenges that BESI Brasil may face particularly
in regards to its funding dynamics. The rating agency will monitor
the bank's funding structure for indications of rising costs or
decline in deposit volumes that might be associated to investors'
behavior, as the deposit ratings of the parent bank remain on review
for downgrade. Moody's will also monitor BESI Brasil's profitability
and capital ratios, including any extraordinary dividend up-streaming
that could weaken the subsidiary's performance.
Moody's last rating action on BESI Brasil was on December 14, 2010,
when Moody's placed on review for downgrade the deposit and debt ratings
of BESI Brasil following the review for downgrade of all ratings of Banco
Espírito Santo S.A. On the same date, Moody's
affirmed BESI Brasil's BFSR of D+ and the short-term
Brazilian national scale rating of BR-1.
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.
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 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 ".br" for Brazil.
For further information on Moody's approach to national scale ratings,
please refer to Moody's Rating Implementation Guidance published in August
2010 entitled "Mapping Moody's National Scale Ratings to Global Scale
BES Investimento do Brasil S.A is headquartered in São Paulo,
Brazil. In December 2010, the bank had total assets of approximately
R$6.0 billion (US$3.6 billion) and equity
of R$476 million (US$287 million).
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Financial Institutions Group
Moody's America Latina Ltda.
M. Celina Vansetti
Senior Vice President
Financial Institutions Group
Moody's Investors Service
Moody's America Latina Ltda.
Moody's concludes review on BES Investimento's ratings
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