S&P Global Ratings on June 12 affirmed its B-/B global scale and brB-/brC Brazilian national scale issuer credit ratings on Banco Fibra SA, while keeping the outlook at negative.
In addition, the rating agency lowered the bank's stand-alone credit profile to "ccc+" from "b-" as it views the bank's capital as being at risk.
The ratings reflect the decline in Banco Fibra's Basel III ratio to 10.8% in March from 12.5% three months earlier due to regulatory deductions related to deferred tax assets, which added to the bank's weak internal capital generation, S&P said.
At this capital ratio level, the agency believes the Brazil-based bank's capital ratio is at risk of dipping to a regulatory minimum of 10.5%, which sharply increases Banco Fibra's vulnerability to a regulatory breach.
However, S&P considers the bank has enough liquid assets to cope with its obligations within the next 12 months.
Meanwhile, the negative outlook considers S&P's view that the bank's financial profile could further weaken, as Brazil's challenging conditions hit its capital and liquidity position, S&P stated.
Under this scenario, S&P noted the bank would likely require additional capital to maintain its regulatory ratios above the required minimum, increasing its vulnerability to nonpayment.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.