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Rating Action:

Moody's confirms Banco Votorantim's ratings; outlook changed to stable

 The document has been translated in other languages

24 Mar 2014

Sao Paulo, March 24, 2014 -- Moody's Investors Service has today confirmed all ratings assigned to Banco Votorantim S.A. (Banco Votorantim), including the bank's D+ unsupported bank financial strength, which maps to a standalone baseline credit assessment (BCA) of baa3 in the global rating scale. The supported local and foreign currency deposit ratings were also confirmed at Baa2 and Prime-2, for long and short-term, respectively, as well as the foreign currency senior unsecured and subordinated debt ratings of Baa2 and Baa3 assigned to the outstanding notes issued through Banco Votorantim S.A. and through Banco Votorantim S.A. Nassau Branch. The outlook for all these ratings is stable. This action concludes the review for downgrade initiated on October 3, 2013.

The Aaa.br/BR-1 Brazilian national scale deposit ratings were not affected by today's actions.

The following ratings assigned to Banco Votorantim S.A. were confirmed:

Bank financial strength rating: D+; stable outlook

Long-term global local currency deposit ratings: Baa2; stable outlook

Short-term global local currency deposit rating: Prime-2

Long-term foreign currency deposit rating: Baa2; stable outlook

Short-term foreign currency deposit rating: Prime-2

Long-term foreign currency senior unsecured debt rating assigned to Programme: (P)Baa2

Short-term foreign currency senior unsecured debt rating assigned to Programme: (P)Prime-2

Long-term foreign currency senior unsecured debt rating: Baa2; stable outlook

Long-term foreign currency subordinated debt rating: Baa3; stable outlook

The following ratings assigned to Banco Votorantim S.A. Nassau Branch were confirmed:

Long-term foreign currency senior unsecured debt rating assigned to Programme: (P)Baa2

Short-term foreign currency senior unsecured debt rating assigned to Programme: (P)Prime-2

Long-term foreign currency senior unsecured debt rating: Baa2; stable outlook

RATINGS RATIONALE

In confirming all ratings for Banco Votorantim and returning the outlook to stable, Moody's noted the improvement in the bank's financial metrics, particularly in asset quality and profitability, and the consequent expected stabilization in its capitalization ratios. Steady improvements in underwriting standards, improved credit quality of car loan vintages, and the run off of lower quality legacy loan portfolios point to a further decline in credit costs over the next quarters, said the rating agency.

The significant 600 basis point reduction in BV's non-performing loan ratio over the past two quarters, to 5.1% in the fourth quarter of 2013, is the result of a decline in non-performing loan formation by 33%. Relative to total loans, new non-performing loans reached their lowest levels for the past two years, a due in part to more conservative origination standards and in part to the bank's loan portfolio shrinkage. In the car loan portfolio, better quality vintages now account for 75% of total, reflecting a meaningful run off of low quality vintages. Moody's said it expects more robust loan loss reserve coverage to result in lower credit costs in 2014, thus enabling Banco Votorantim to return to historical profitability.

In addition, following extraordinary charges related to lay offs and labor contingencies, the bank should enjoy cost savings from 2014 onwards. Costs related to the pre-payment of old securitizations -- with revenues originally accounted for upfront -- are also expected to fall significantly.

In this context, Moody's expects Banco Votorantim to achieve a return on equity around mid-single digits in 2014, as the restructuring process of the last two years starts to produce significant benefits. Moody's also expects Banco Votorantim to prudently manage its capital position by focusing on high quality assets and growth to support internal capital generation.

While Moody's anticipates continuing recovery in Banco Votorantim`s profitability in 2014, the agency notes that low growth in the Brazilian economy, rising interest rates and the high inflation will continue to pose challenges to the bank's loan growth and asset quality.

Moody's also recognizes that Banco do Brasil's (BB) 49.9% ownership represents direct and indirect benefits to Banco Votorantim's standalone credit quality, particularly with respect to asset and liability management, including long-term resources to fund consumer loans and a BRL7.0 billion stand-by credit facility, redeemable at any time, though so far not utilized.

Banco Votorantim's Baa2 long-term global local currency deposit rating incorporates one notch of uplift from its unsupported baa3 baseline credit assessment, and that results from Moody's view of the high likelihood of support from Banco do Brasil, rated Baa2 for deposits. This is because of the strategic importance of the Banco Votorantim's operations for BB's consumer finance expansion targets. Moody's, however, does not incorporate any systemic support into the bank's ratings.

The principal methodology used in this rating was Global Banks published in May 2013. 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 ".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 Banco Votorantim S.A. was on 3 October 2013, when Moody's placed all rating on review for downgrade.

Banco Votorantim S.A. is headquartered in São Paulo, Brazil and had total consolidated assets of BRL 105.49billion (USD44.69 billion) and equity of BRL7.14 billion (USD3.02 billion) as of December 31 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.

Alcir Freitas
Vice President - Senior 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 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 confirms Banco Votorantim's ratings; outlook changed to stable
No Related Data.
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