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S&P ups outlook on Brazil's BDMG as asset quality improves

S&P Global Ratings on Dec. 19 revised its outlook on Brazilian state-run development Banco de Desenvolvimento de Minas Gerais SA, or BDMG, to stable from negative, saying that the company's delinquency levels have improved significantly amid the country's economic recovery.

At the same time, the rating agency affirmed the bank's long-term global and national scale issuer credit ratings at B and brA-, respectively.

"In our view, considering economic trends and the bank's high loan loss reserves, it's less likely that lower asset quality could impair BDMG's bottom-line results and capitalization levels," S&P Global Ratings said.

Banco de Desenvolvimento's nonperforming loan and charge-off ratios decreased to 2.7% and 2.4%, respectively, as of September from 5.0% and 7.4% a year earlier. In addition, the bank's high coverage ratio of about 386% as of September illustrates that its capitalization is well protected against unexpected volatility, S&P Global Ratings said.

Brazil's economic recovery over the next two years will support the bank's efforts to stabilize asset quality metrics and reduce the need for additional provisions, according to the rating agency. However, competitive pressures may continue to threaten the company's capacity to generate stable revenues, which may impact operating performance in the next few years.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.