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Moody's affirms Itaú, Citi Brazil following retail bank deal

In the wake of ItaúUnibanco SA's announced acquisitionBanco Citibank SA's retailbusiness, Moody's on Oct. 11 affirmed its ratings on both companies, noting thatthe deal will positively impact Citibank's capital and liquidity and has limitedimplications for Itaú financial fundamentals and business prospects.

Specifically, the rating agency affirmed Citibank's long-termglobal and short-term foreign-currency deposit ratings at Ba3 and Not Prime. Italso affirmed the bank's long- and short-term counterparty risk assessments at Baa3(cr)and Prime-3(cr), respectively.

The outlook on all ratings is negative.

For Itaú Unibanco, Moody's affirmed the company's global localand foreign currency deposit ratings at Ba2 and Ba3. The company's senior unsecuredratings and the Brazilian national scale deposit rating also were affirmed at Ba2and Aa1.br.

The baseline credit assessments for both companies were affirmedat ba2; additionally, Citibank's adjusted baseline credit assessment was affirmedat ba1.

Moody's also affirmed all rating assigned to and Itaú UnibancoSA Cayman Branch.

The outlook on the long-term global scale ratings of Itaú remainednegative.

Moody's said that the sale of retail-banking business will notaffect Citibank as it only accounted for 30% of its total loan portfolio and 10%of its total assets. Still, it noted that the bank's reliance on market funds willincrease, as it will no longer benefit from deposits from the retail operations.

The rating agency also noted that Itaú's market share will notincrease significantly as Citibank only has 0.4% of the market for consumer loans.However, the deal is aligned with the company's strategy of reinforcing its positionin the retail banking segment.