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S&P affirms BNDES' ratings despite rising business pressures

S&P GlobalRatings on July 12 affirmed the ratings of Brazil's state-owned despite facing pressures posed by the country's lingering recession.

The rating agencyaffirmed the bank's BB foreign and local currency global scale ratings as well asits brAA- national scale issuer credit rating, all of which have a negative outlook.S&P also affirmed the brAA- issuer credit rating, with a negative outlook, ofcore subsidiary BNDESPAR.

While BNDES'business position in Brazil's investment forays remains strong, it is pressuredby potential volatility in the bank's revenue and greater lending concentrationamong its peers amid the country's prolonged recession, S&P said.

The bank alsohas weak capital and earnings due to "higher risk-weighted assets" froma "weaker banking industry country risk assessment on Brazil" and thesovereign's downgrades over the past few years, S&P said.

"Due tothe volatility and large losses in the bank's equity positions from its investmentsin companies such as Petrobras and Eletrobras, among others, we identified increasedpressure over the bank's earnings position as management classified some of theselosses as permanent, affecting the bank's results," the rating agency noted.

S&P stillsees BNDES as having a strong risk position, above-average funding and strong liquidity.However, it is not sure if the Treasury's plans to withdraw 100 billion Brazilian reais from BNDES will affectits view of the bank's above-average funding.

Brazil's interimpresident, Michel Temer, announced in May that BNDES will pay the federal governmentdebts as a way for the Treasury to save up funds.

Meanwhile, thenegative outlook reflects the outlook on Brazil, as S&P expects the bank's ratingsto move in line with those of the sovereign.

As of July 12, US$1 was equivalent to 3.28 Brazilianreais.

S&P Global Ratings and S&P Global MarketIntelligence are owned by S&P Global Inc.