Moody's on May 31 changed the outlooks to negative from stable for the ratings of several Brazilian banks and their affiliates, as well as stock operator BM&FBOVESPA SA – Bolsa de Valores Mercadorias e Futuros, while affirming all of the affected ratings and assessments.
The actions follow the rating agency's outlook revision of Brazil's Ba2 government bond rating to negative from stable, due to the "rising uncertainty regarding the pace of reforms as political instability continues."
Aside from BM&FBOVESPA, the affected companies include:
* Banco ABC Brasil SA
* Banco Alfa de Investimento SA
* Banco BBM SA
* Banco Bradesco SA
* Banco Bradesco SA Grand Cayman Branch
* Banco Cooperativo Sicredi SA
* Banco Daycoval SA
* Banco do Brasil SA
* Banco do Brasil SA (Cayman)
* Banco do Estado de Sergipe SA
* Banco do Nordeste do Brasil SA
* Banco Industrial do Brasil SA
* Banco Nacional de Desenvolvimento Econômico e Social
* Banco PSA Finance Brasil SA
* Banco Safra SA
* Banco Safra (Cayman Islands) Ltd.
* Banco Santander (Brasil) SA
* Banco Santander (Brasil) SA - Cayman Branch
* Banco Sofisa SA
* Banco Votorantim SA (Nassau Branch)
* Banco Votorantim SA
* Caixa Econômica Federal
* Itaú Unibanco Holding SA
* Itaú Unibanco Holding SA (Cayman Islands)
* Itaú Unibanco SA
* Itaú Unibanco SA (Cayman Islands)
* BNDES Participações SA
* Itaúsa - Investimentos Itaú SA.
In performing the ratings actions, Moody's noted that any slowdown in Brazil's nascent economic recovery "will prolong the pressure on borrowers' repayment capacity and could lead to increasing asset risks for Brazil's banks, just as these risks looked to have peaked."
"In turn, the pace of loan loss recoveries will slow as rising delinquencies require banks to make additional provisions, which put pressure on profits that were expected to start improving thanks to resumed loan growth and declining funding costs," Moody's said. "Moreover, prospects for further reductions in funding costs could be hampered if a confidence-related shock to the exchange rate were to feed into higher inflation, limiting the Central Bank's ability to deliver further rate cuts."