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Moody's: Investment banking deal with UBS is credit positive for Banco do Brasil

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Moody's: Investment banking deal with UBS is credit positive for Banco do Brasil

The newly signed investment banking partnership between Banco do Brasil SA and Switzerland-based UBS Group AG is credit positive for the Brazilian bank as it will allow the commercial lender to strengthen fee generation through investment banking, Moody's said.

The preliminary agreement paves the way for the two companies to provide investment banking services in Brazil, Argentina, Chile, Paraguay, Peru and Uruguay. If a final agreement is executed, the Swiss bank would be the majority shareholder in the partnership with a 50.01% stake.

Banco do Brasil, a retail financial institution with a nationwide footprint in Brazil, can contribute its access to a large pool of potential investors to the partnership, Moody's said, adding that the bank had 1.05 billion Brazilian reais of assets under management as of June.

The partnership will also help state-run Banco do Brasil focus on its core retail activity and social duty as a rural loan provider, while preserving revenue generation and financial strength, according to the rating agency. This would be in line with the government's strategic plan to reduce the presence of state-owned banks in the local financial system.

For UBS, the proposed deal will facilitate the Swiss bank's re-entry into the region and subsequently offer it opportunities for cross selling.

"If executed successfully, the partnership would help UBS gain access to the regional markets' corporate clientele, offering meaningful opportunities to cross-sell asset and wealth management products at a later stage," Moody's said. "It would also offer some additional scale to UBS' existing product and brokerage platform."

As of Sept. 24, US$1 was equivalent to 4.17 Brazilian reais.