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Fitch downgrades several Brazilian banks following sovereign action

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Fitch downgrades several Brazilian banks following sovereign action

Fitch Ratings on March 13 took various ratings actions on several Brazilian financial institutions following the recent downgrade of Brazil's sovereign rating to BB- from BB.

Among larger players, Fitch downgraded Banco Bradesco SA's viability rating to "bb" from "bb+," one notch above Brazil's sovereign rating. As a result, Bradesco's long-term foreign and local currency issuer default ratings were downgraded to BB from BB+ while its short-term issuer default ratings were affirmed at B.

The action comes a day after the rating agency lowered its ratings on fellow Brazilian large-cap Itaú Unibanco Holding SA on the back of the sovereign downgrade.

Among Brazil's smaller financial institutions, Fitch affirmed Banco BBM SA's viability rating at "bb-" but lowered Banco ABC Brasil SA's viability rating to "bb-" from "bb," noting that the banks' good credit profiles nonetheless do not warrant a rating above the sovereign. Both banks' long-term foreign currency issuer default ratings were also downgraded to BB from BB+, with the outlook being revised to stable from negative. These issuer default ratings remain above the sovereign's because of the expected institutional support from the banks' respective parent companies.

Fitch also downgraded Banco BBM's long-term local currency issuer default rating to BB+, with a stable outlook, from BBB-, with a negative outlook. Meanwhile, the same rating for Banco ABC Brasil was affirmed at BB+.

Elsewhere, Fitch lowered Banco Daycoval SA and Banco Industrial do Brasil SA's long-term foreign and local currency issuer default rating to BB- from BB and their viability ratings to "bb-" from "bb." The outlook on the long-term issuer default ratings is stable.

Fitch also downgraded Banco Pan SA's long-term issuer default ratings to B+ from BB-, while revising the outlook to stable from negative.

Elsewhere, Banco BTG Pactual SA and BTG Pactual Holding SA's BB- long and B short-term issuer default ratings were affirmed, but the outlook was changed to stable from negative.

As for Banestes SA - Banco do Estado do Espírito Santo, its viability rating was affirmed at "bb-" and its issuer default rating maintained at BB-. Its outlook was revised to stable.

State-owned banks

The long-term foreign and local currency issuer default ratings of Brazil's state-owned banks — including Banco da Amazônia SA, Banco do Brasil SA, Banco do Nordeste do Brasil SA, Banco Nacional de Desenvolvimento Econômico e Social and Caixa Econômica Federal — were lowered to BB- from BB, with the outlook changed to stable from negative. Their short-term issuer default ratings were affirmed at B. Meanwhile, Banco do Brasil's viability rating was affirmed at "bb-."

Regional government-owned Banco Regional de Desenvolvimento do Extremo Sul and Desenvolve SP - Agência de Fomento do Estado de São Paulo S.A. saw their long-term issuer default ratings come down to BB- from BB, with the outlook revised to stable from negative. Their short-term issuer default ratings were affirmed at B.

In addition, Fitch downgraded BRB-Banco de Brasília SA's long-term issuer default ratings to B+, with a stable outlook, from BB-, with a negative outlook. The bank's viability rating was affirmed at "b+."

Fitch holds a stable sector outlook for Brazil and expects continued stability in the main credit ratios of the Brazilian banking system, capitalization and funding and liquidity as well as profitability and asset quality.