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Rating Action:

Moody's upgrades BICBANCO's supported ratings; outlook stable

 The document has been translated in other languages

01 Dec 2014

New York, December 01, 2014 -- Moody's Investors Service has today downgraded Banco Industrial and Comercial S.A.'s (BICBANCO) standalone bank financial strength rating (BFSR) to D from D+, thereby lowering the baseline credit assessment (BCA) to ba2 from ba1. At the same time, Moody's upgraded the long-term global local- and foreign-currency deposit ratings to Baa3 from Ba1; the short-term global local- and foreign-currency deposit ratings to Prime-3 from Not Prime. In addition, Moody's upgraded the long-term foreign-currency senior unsecured debt rating to Baa3 from Ba1; the senior unsecured MTN program (foreign currency) rating to (P)Baa3 from (P)Ba1; the long-term foreign-currency subordinated debt rating to Ba1 from Ba2; and the long-term Brazilian national scale deposit rating to Aa1.br from Aa2.br. Also, Moody's affirmed the short-term Brazilian national scale deposit rating of BR-1. The rating agency revised the outlook on all ratings to stable from developing.

At the same time, Moody's upgraded Banco Industrial e Comercial S.A., Cayman's long-term foreign-currency debt rating to Baa3 from Ba1 and the senior unsecured MTN program (foreign currency) rating to (P)Baa3 from (P)Ba1, and changed the outlook to stable from developing.

The following ratings assigned to Banco Industrial and Comercial S.A. were downgraded, with the outlook changed to stable from developing:

Bank financial strength rating to D from D+

The following ratings assigned to Banco Industrial and Comercial S.A. were upgraded, and the outlook changed to stable from developing:

Long-term global local-currency deposit ratings to Baa3 from Ba1

Short-term global local-currency deposit ratings to Prime-3 from Not Prime

Long-term foreign-currency deposit rating to Baa3 from Ba1

Short-term foreign-currency deposit rating to Prime-3 from Not Prime

Long-term foreign-currency senior unsecured debt rating to Baa3 from Ba1

Senior unsecured MTN program (foreign currency) rating to (P)Baa3 from (P)Ba1

Long-term foreign-currency subordinated debt rating to Ba1 from Ba2

Long-term Brazilian national scale deposit rating to Aa1.br from Aa2.br

The following ratings of Banco Industrial e Comercial S.A., Cayman were also upgraded, with a stable outlook:

Long-term foreign currency senior unsecured debt rating to Baa3 from Ba1

Senior unsecured MTN program (foreign currency) rating to (P)Baa3 from (P)Ba1

The following rating of Banco Industrial e Comercial S.A. was affirmed:

Short-term Brazilian national scale deposit rating of BR-1

RATINGS RATIONALE

Moody's reassessed BICBANCO's ratings to reflect the formalization of its acquisition by China Construction Bank (CCB, deposits A1 stable, BFSR C-/BCA baa2 stable), which will initially own a 72% stake. Following the tender offer to minority shareholders, CCB's final ownership will likely be close to 100%.

DOWNGRADE OF STANDALONE RATING

Moody's downgraded the standalone BFSR to D, from D+, thereby lowering the BCA to ba2 from ba1. The downgrade reflects BICBANCO's ongoing challenges in generating profits, following the meaningful losses over the last two quarters that resulted from a comprehensive reassessment of credit risks, and led to a relevant increase in loan loss provisions. Consequently, the Tier 1 capital ratio decreased to 9.3% in third-quarter 2014, shrinking by 330 basis points in two quarters. BICBANCO's smaller balance sheet, combined with conservative loan origination in light of the weak economic scenario, contributed to lower core earnings performance in the period. Moody's therefore views BICBANCO's current profitability dynamics and capital position as more aligned to a ba2 BCA.

The stable outlook on BICBANCO's standalone rating reflects Moody's expectation that net income will become positive over the next 12 to 18 months, although it will likely stabilize at low levels. Moody's views positively the effect of BICBANCO's new ownership on its cost of funds, as the bank replaces expensive maturing funding, and of easing pressures from loan loss provisions. Having carried out a thorough credit review aimed at recognizing the potential problem loans in BICBANCO's portfolio up front, Moody's expects that future loan loss provisions will be manageable. As management refocuses the bank's operations and adjusts its structure to new business targets, the bank's capitalization will likely remain stable, because its internal capital generation, though modest, will be sufficient to support the slow growth of its balance sheet.

UPGRADE OF SUPPORTED RATINGS

The upgrade of BICBANCO's deposit ratings to Baa3 from Ba1 follows the completion of its acquisition by China Construction Bank, and reflects Moody's assessment of a high likelihood of support from its parent, based on its majority ownership stake and the strategic positioning of the subsidiary given the important trade linkages between Brazil and China. The deposit ratings do not incorporate a probability of systemic support given BICBANCO's modest market share in deposits (0.4%).

The last rating action on BICBANCO and Banco Industrial e Comercial S.A., Cayman was on 6 November 2013, when Moody's affirmed all of its ratings and changed the outlook to developing from negative. The rating action followed the 31 October 2013 announcement that BICBANCO's controlling shareholders had agreed to sell their 72% stake to China Construction Bank Corporation, which was subject to regulatory authorities' approval.

The principal methodology used in these ratings was Global Banks published in July 2014. 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 "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 June 2014 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

BICBANCO is headquartered in São Paulo, Brazil, and had total consolidated assets of BRL14.9 billion (USD6.1 billion) and shareholders' equity of BRL1.4 billion (USD591 million), as of 30 September 2014.

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 Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades BICBANCO's supported ratings; outlook stable
No Related Data.
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