Moody's on June 4 changed the outlook of Banco Fibra SA to stable from negative, reflecting modest improvements in the bank's profitability driven by lower credit costs and controlled operating expenses.

The rating agency expects the Brazilian bank's asset quality to stabilize, albeit at high levels, due to improved loan origination quality and a growing share of loans backed by receivables to medium-sized companies.

However, Moody's said the bank's capitalization level continues to be "weak and well below" that of other medium-sized banks.

Moody's affirmed the bank's ratings, including its B3 long-term and Not Prime short-term global local and foreign currency deposit ratings, B2 long-term and Not Prime short-term global local and foreign currency counterparty risk ratings, B2.br long-term and BR-4 short-term Brazilian national scale deposit ratings, as well as Ba2.br long-term and BR-4 short-term Brazilian national scale counterparty risk ratings.

The rating agency also maintained the bank's "b3" baseline credit assessment and adjusted baseline credit assessment as well as its B2(cr) long-term and Not Prime(cr) short-term counterparty risk assessments.

The rating affirmation also incorporates the bank's relatively steady funding profile, Moody's said.