Moody's on Sept. 27 downgraded 's long-termnational scale deposit rating to Aa2.br from Aa1.br, while placing a negative outlookon the bank's ratings.

The rating agency said that it affirmedBanco PSA's long-term local- and foreign-currency deposit ratings at Ba2 and Ba3,respectively, while changing the outlook to negative from positive.It also affirmed the bank's short-term local- and foreign-currency deposit ratingsat Not Prime, and its short-term national scale rating at BR-1. Inaddition, Moody's affirmed the bank's baseline credit assessment at ba3, its adjustedbaseline credit assessment at ba2, as well as its long- and short-term counterpartyrisk assessments at Ba1(cr) and Not Prime(cr).

The ratings action follows the completionof a joint venture underwhich Banco Santander (Brasil) SAbought 50% share of the company from BanquePSA Finance SA. Banque PSA Finance expects the bank to benefit fromlower funding costs as well as from increased fee income.

The negative rating on Banco PSA'sratings reflects that on Banco Santander (Brasil), while the downgrade on the bank'snational scale rating reflects its positioning versus its peers, Moody's said.

The affirmation of the bank's baselinecredit assessment "reflects the challenges it faces in maintaining healthyprofitability in a low loan growth environment, notwithstanding lower funding costsand product cross selling," Moody's noted.