Sao Paulo, November 25, 2010 -- Moody's Investors Service has assigned a bank financial strength rating
(BFSR) of D- (D minus) to Banco Indusval Multistock S.A.
(Indusval). Moody's also assigned global local- and foreign-currency
deposit ratings of Ba3 and Not Prime, long- and short-term,
respectively; and Brazilian national scale deposit ratings of A2.br
and BR-2, long- and short-term, respectively.
All ratings have a stable outlook.
The following ratings were assigned to Banco Indusval Multistock:
Bank financial strength rating: D-, stable outlook
Global local-currency deposit ratings: Ba3 and Not Prime,
Foreign-currency deposit ratings: Ba3 and Not Prime,
Brazilian national scale deposit ratings: A2.br and BR-2,
Moody's said the D- BFSR reflects Indusval's modest
franchise as a commercial lender to small and medium size companies,
and the inherent challenges that its business model entails, particularly
the reasonably concentrated funding sources, as well as the limited
pricing power, despite a comfortable capitalization. The
rating also incorporates management's decision to develop a platform
for structured loans targeted at its existing commercial customer base,
after the discontinuation of its consumer finance platform in 2008.
If this platform grows successfully and becomes a positive earnings contributor,
Indusval's business and customer mix would also benefit.
Indusval's primary credit challenge is its funding structure,
and the negative effect that relatively expensive deposits may have on
its net interest margins. Deposits are predominantly sourced from
institutional investors and corporations, but these may be volatile,
as suggested by Indusval's loss of nearly 30% of its funding
late in 2008. To fund the increasing duration of its loan book,
the bank has relied on longer tenor time deposits guaranteed by the deposit
insurance fund (DPGEs), which accounted for 37% of its total
deposits in 3Q10. These funds, however, are among its
expensive sources, and have pressured Indusval's margins lately.
Therefore, in Moody's view, management has still to
prove its ability to diversify the funding base while preserving future
Moody's acknowledges Indusval's efforts to enhance its credit
risk management, as suggested by prudent loan growth, conservative
provisions, and focus on predominantly secured lending. Having
peaked in mid 2009 at 5.4% of total loans, the bank's
nonperforming loan indicator has improved since to reach 2.4%
in 3Q10. Nevertheless, at this level, the ratio remains
higher than Indusval' similarly niche peers'. Management
will therefore be challenged to maintain disciplined loan origination
as the bank's credit portfolio grows again, following seven
quarters of modest expansion.
We note that Indusval's capitalization is robust at 19.9%
as of September 2010, also reflecting the mentioned flat loan book.
According to Moody's scenario analysis, the bank's core
capital could absorb further losses were the quality of its loans to deteriorate
in a situation of stress. Although management anticipates robust
loan growth in the coming years, as the bank develops its structured
loan platform, it may rely on syndications, with resulting
low capital usage for this particular business.
Moody's will monitor the evolution of Indusval's loan book and the
effects of competition on asset quality and margins, as well as
management's actions on cost control and risk discipline.
The bank's Ba3 global local-currency deposit rating is directly
derived from the D- BFSR and the Ba3 baseline credit assessment.
Because of Indusval's modest systemic importance, Moody's
does not attribute any probability of support to the deposit rating.
The local currency deposit rating Ba3 assigned to Banco Indusval Multistock
reflects its global default and loss expectation, while the A2.br
national scale rating reflects the standing of its credit quality relative
to other domestic issuers. 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 ".mx" for Mexico. 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
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. "
Banco Indusval Multistock S.A.is headquartered in São
Paulo, Brazil, with assets totaling R$3,223 million
(US$1,886 million) and equity of R$432 million (US$242
million) as of September 30, 2010.
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 assigning
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.
VP - Senior Credit Officer
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 rates Banco Indusval Multistock D- for financial strength
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903