Market Overview

Correction: Fitch Rates Banco Industrial do Brasil SA's Long-Term IDRs 'BB-'

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SAO PAULO--(BUSINESS WIRE)--

(This is a correction of a release issued earlier today which incorrectly stated that BIB was assigned an Individual Rating. This version also includes the assignment of a 'bb-' Viability Rating to BIB.)

Fitch Ratings has assigned international scale ratings to Banco Industrial do Brasil S.A. (BIB) as follows:

--Long-term Foreign Currency Issuer Default Rating (IDR) 'BB-';

--Long-term Local Currency IDR 'BB-';

--Short-term Foreign Currency IDR 'B';

--Short-term Local Currency IDR 'B';

--Viability Rating 'bb-';

--Support Rating Floor 'no floor'.

The Rating Outlook on the long-term IDRs is Stable.

Fitch has also withdrawn BIB's 'D' Individual Rating, which was previously assigned in error.

BIB's IDRs and its Viability Rating are driven by its conservative credit culture, low risk appetite and leverage, consistent performance, as well as its focus on the SME market. The ratings also reflect its small size, lower profitability than its peers, and the inherent assets and liabilities concentration that stems from its size and business model.

The bank's limited risk appetite has allowed it to present a consistent performance over the last few years and along the changes on the economic cycle. However, though less volatile, BIB's profitability remains lower than its local peers' average.

Over the last few years, the bank has decided to intensify its focus on the SME segment and to scale back its payroll deductible loan business (reaching its target of an 85/15 split on its loan portfolio), although, leading to a higher asset concentration. Fitch deems the focus on the SME segment as an adequate strategy for BIB, given the bank's small size and expertise in this competitive market niche.

Despite the recent loan growth, higher credit costs associated with the seasoning of the SME portfolio (inherent of this business segment) and some margin compression, have moderately reduced the bank profitability ratios, despite its controlled operating costs. A less vigorous economic activity environment may result in a sustained pressure on credit costs; although, Fitch expects BIB overall profitability will hold close to historic averages.

In spite of its funding profile being largely concentrated in short term time and interbank deposits (80% of Total Funding), alike its local SME-oriented peers, the bank counts on positive gap between its funding and loan book. During recent volatile periods, funding was mildly constrained but with no impact on liquidity as the bank was able to reduce its loan origination at the same pace. Funding diversification is still a challenge for the bank in spite of recently obtaining credit facilities with multilateral agencies, such as BID and IFC (only 5% of Total Funding). Non-deposit short-term maturities are moderate and aligned with BIB's conservative liquidity.

The bank's conservative risk management is also reflected in its traditionally high liquid assets position and its fairly comfortable Fitch core capital ratio (19.1% as of June 2011).

If BIB is able to translate the growth of its loan portfolio into a more profitable performance closing the gap with its peers, ratings could be positively affected. Significant upside for the bank is constrained by its business model and inherent assets and liabilities concentrations.

Deterioration in the bank's asset quality indicators and a subsequent drop in the bank's performance could lead to a downgrade in BIB's ratings.

BIB is a SME-oriented bank 100% owned by Mr. Carlos Alberto Mansur.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 16, 2011);

--'National Ratings Criteria' (Jan. 19, 2011).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

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Fitch Ratings
Eduardo Ribas, + 55 21 4503 2600
Associate Director
Fitch Ratings Brasil Ltda., Rua Bela Cintra 904 - Fourth Floor, Sao Paulo, SP, Brazil
or
Secondary Analyst
Luiz Claudio Vieira, + 55 21 4503 2600
Associate Director
or
Committee Chairperson
Franklin Santarelli, +1-212-908-0739
Managing Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
Email: brian.bertsch@fitchratings.com

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