New York, April 12, 2018 -- Moody's Investors Service ("Moody's") has today assigned a Ba2 long-term
foreign currency senior unsecured debt rating to the proposed senior unsecured
notes of Banco do Brasil S.A. (BB), acting through
its Grand Cayman branch. The proposed senior unsecured notes takedown
will be denominated and settled in USD, and due in April 2023.
They are part of the USD 20 billion senior unsecured EMTN Program.
The outlook on the senior unsecured debt rating is stable.
The notes will be senior unsecured obligations, and will rank pari
passu in right of payment with all of BB's existing and future senior
unsecured and unsubordinated liabilities.
The following ratings were assigned:
..Issuer: Banco Do Brasil S.A. (Cayman)
....Senior Unsecured Regular Bond/Debenture,
Assigned Ba2, stable
RATINGS RATIONALE
The Ba2 rating on the notes incorporates BB's moderate profitability,
which has steadily improved in the last year, and its strong,
stable funding. However, the rating is constrained by the
bank's Moody's adjusted capital metrics, which remain relatively
modest by global standards despite a significant enhancement since 2015.
BB has managed to contain asset risks and improve its portfolio quality
by limiting exposures to riskier borrowers and sectors, while focusing
growth on less risky asset classes, such as payroll loans and mortgage.
As a result, non-performing loans have declined to 3.7%
of gross loans in 4Q17, down by 40 basis points from 2Q17.
At the same time, loan loss reserves have continued to climb,
reaching 155% of non-performing loans as of December 2017.
The reduction in credit costs has supported the rebound in profitability,
with net income to tangible assets of 0.93% at the year
ended in 2017. Earnings generation has also been sustained by ongoing
efforts to improve cost efficiency and to widen credit spreads,
as a nascent loan demand takes hold.
The bank's tangible common equity to adjusted risk weighted assets,
Moody's preferred capitalization metric, has risen to 10.6%
in December 2017, from just 6.8% two years before,
due to a slowdown in loan growth and an increased focus on low risk weighting
assets that consume less capital. Despite the notable improvement
in capital ratios, BB's metrics remain modest by both regional
and global standards.
BB has a low reliance on market funds given its substantial base of core
deposit collected through its nationwide branch network and its access
to stable funding from federal funds and judicial deposits. As
a result, market funds historically range around just 15%
of tangible assets.
BB's rating is at the same level as Brazil's Ba2 sovereign rating and
the stable outlook on the bank's ratings is in line with the stable
outlook on the sovereign rating.
WHAT COULD CHANGE THE RATING UP OR DOWN
At the moment, there is limited upward pressure on BB's ratings
owing to the stable outlook on its ratings, which is in line with
the stable outlook on Brazil's sovereign rating.
Banco do Brasil S.A., is headquartered in Brasilia,
Brasil, and reported USD413.9 billion (BRL1,369 billion)
in assets and USD29.8 billion (BRL98.7 billion) in shareholders'
equity, as of December 2017.
The principal methodology used in this rating was Banks published in September
2017. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
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 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.
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.
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.
Alexandre Albuquerque
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
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 Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
