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Brazilian banks improve CET1 ratios in Q2

The second quarter of 2019 yielded mixed results for the fully loaded common equity Tier 1 ratios of the largest banks in Latin America.

In a sample of 17 institutions analyzed by S&P Global Market Intelligence, nine reported a negative change in their CET1 ratios compared to the first quarter. Six of the remaining eight banks that posted higher ratios are based in Brazil.

The metric quantifies a bank's CET1 capital as a percentage of risk-weighted assets. Banks in the region must have a fully loaded CET1 ratio of at least 7% from 2019 onward under Basel III rules, comprising a minimum 4.5% common equity Tier 1 ratio and a 2.5% capital conservation buffer. Certain banks might be susceptible to supplementary local capital buffer obligations.

Colombia-based Banco Davivienda SA and investment bank Banco BTG Pactual SA reported the lowest ratios at 8.51% and 9.34%, respectively, making them the only banks in the sample group with CET1 ratios below 10%.

Meanwhile, Banco Santander Río SA, with a ratio of 10.75%, saw the biggest quarter-over-quarter improvement at 91 basis points. At the other end of the spectrum, BTG Pactual suffered the largest dip with its ratio falling 99 basis points.

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