S&P Global Ratings on Feb. 1 affirmed Paraná Banco SA's global and national ratings at BB-/B and brA, respectively with a negative outlook.

The rating agency also removed its negative CreditWatch on the bank's ratings.

According to S&P, the action was based on a re-evaluation on the bank's risk-adjusted capital, or RAC, ratio for the next two years. The re-evaluations incorporated the bank's dividend distributions tied to 2016 results, as well as its strategy to reduce its exposure to the consumer finance and medium-sized company lending segments, which resulted in a credit risk reduction in the rating agency's capital model.

S&P also said that the negative impact of extraordinary dividends distribution was offset by the bank's forecast to achieve higher margins in 2017 and 2018, thanks to its payroll loan portfolio's greater profitability, which should lead to an average RAC ratio of 9.8% for the next two years.

The rating agency also expects an improvement in the bank's profitability over the next two years, with an ROAA above 3% and an ROE of around 12% in 2018.

"At the same time, the public offering for the acquisition of shares should not affect the bank's capitalization, since the offer is being negotiated directly between the controlling shareholder and the market and we do not expect further dividend distributions to make the transaction viable," S&P said.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.