Moody's on April 26 assigned long- and short-term global localcurrency issuer ratings of Ba2 and Not-Prime, respectively, to ,or BRDE.
The outlook is negative.
Moody's also assigned long- and short-term Brazilian nationalscale issuer ratings of Aa3.br and BR-1, respectively, to BRDE, which is a developmentbank co-owned by the Brazilian states of Paraná, Rio Grande do Sul and Santa Catarina.
The rating agency noted the Ba2 rating reflects the bank's developmentrole in the relatively prosperous southern states of Brazil, along with "deterioratingbut still sound asset quality, as well as adequate capitalization and strong profitability."
Another key factor in the ratings is BRDE's stable but highlyconcentrated funding structure with resources from Banco Nacional de Desenvolvimento Econômico e Social. Moody'snoted that BRDE saw asset quality drop in 2015 due to challenges in the currentoperating environment given the concentrations in its loan book, but that delinquentloans remain relatively low.
Moody's said the negative outlook on the bank's ratings takeinto account challenges BRDE will face in maintaining low delinquency and high profitabilityas the national economy continues to deteriorate. BRDE's ratings could diminishif Moody's sees deterioration in its loan book quality, lower capitalization levels.A drop in Brazil's sovereign rating could also lead to a downgrade of the bank,the rating agency added.