OREANDA-NEWS. Fitch Ratings views yesterday's announcement by Banco BMG S. A. (BMG, IDR 'BB-'/LT National Rating 'A(bra)') that it will sell its 40 percent ownership in Itau BMG Consignado S. A. as a credit positive. BMG plans to sell the shares to its joint venture partner, Itau Unibanco Holding S. A. (Itau Unibanco, IDR 'BB+'/'AAA(bra)'), which owns the remaining 60% balance.

As per the share sale and purchase agreement announced by both partner banks, BMG will receive approximately BRL 1.28 billion updated by CDI interest rate since December 31, 2015 from Itau Unibanco upon the closing of the sale. The sale and proceeds are expected to strengthen BMG's credit metrics, mainly the capitalization ratios, while it continues to grow its core business of credit card lending backed by payroll deduction (cartao de credito consignado).

Despite the sale of all its shareholdings to Itau Unibanco, the two banks will continue to maintain an association via a 10-year agreement for the distribution of payroll-backed loans of Itau BMG Consignado on an exclusive basis through distribution channels linked to BMG.

Fitch views both these developments as credit positives for BMG and will continue to monitor the sale as it develops. The conclusion of the sale is expected to take place during the fourth quarter of this year following the obtainment of applicable regulatory authorizations.

Founded in 1930 and controlled by Flavio Pentagna Guimaraes, BMG is a mid-sized bank focused in payroll credit card, as well as operations for small and mid-size enterprises and other consumer products.