Moody's on March 25 changed its outlook on Banco Votorantim SA to stable from negative, reflecting gradually improving asset quality and the subsequent growth in revenue.
The rating agency anticipates a continuous improvement in the bank's financial metrics, mainly profitability and capitalization over the next 12 to 18 months, owing to lower credit costs and a more diverse revenue structure, backed by growing noninterest income from services.
In its ratings action, Moody's added that the bank's "strategy to focus on lending to corporate and commercial segments, specifically in the form of secured loans to mid-size companies, ensures gradual reduction in asset risk and yields better risk adjusted returns."
Following the affirmation of the lender's "ba3" baseline credit assessment, the rating agency affirmed the long- and short-term local currency deposit ratings at Ba2 and Not Prime, respectively, and the long- and short-term global foreign currency deposit ratings at Ba3 and Not Prime, respectively.
Moody's also affirmed the lender's long- and short-term Brazilian national scale deposit rating at Aa3.br and BR-1, respectively.
Other ratings that were affirmed include the long- and short-term global local currency counterparty risk rating of Banco Votorantim and its Nassau branch at Ba1 and Not Prime, respectively, and the long- and short-term global foreign currency counterparty risk ratings of Ba1 and Not Prime, respectively.
Moody's could downgrade the bank's BCA and other ratings if capitalization ratio of the lender declines in the event of a deterioration of asset quality and profitability.
"A deterioration in funding and a meaningful reduction in liquid resources could also pressure its financial profile downward," the rating agency added.