OREANDA-NEWS. Fitch Ratings has affirmed Banestes S.A. - Banco do Estado do Espirito Santo's and Banco de Brasilia S.A.'s (BRB) Long-term Foreign and Local Currency Issuer Default Ratings (IDRs), as well as their Long-term National Ratings. The Rating Outlook for the IDRs was revised to Negative from Stable. A full list of rating actions follows at the end of this press release.

Key Rating Drivers - IDRs, National Ratings and Support Rating
The rating actions reflect Fitch's expectation of the weaker financial strength of Banestes and BRB's controlling states - Espirito Santo (EES) and the Government of the Federal District (GDF) - over the next 12-24month period. This expectation follows the recent rating Outlook revision to the Federal Republic of Brazil (see 'Fitch Revises Brazil's Rating Outlook to Negative and Affirms IDRs at 'BBB'', dated April 9, 2015, at www.fitchratings.com and www.fitchratings.com.br). In Fitch's opinion, the probability of such controlling shareholders providing support to these banks, if necessary, is moderate, which results in a Support Rating of '3'. The Viability Ratings of these banks are not affected by this rating action.

Banestes and BRB's IDRs and National Ratings reflect the support from their controlling shareholders. In Fitch's opinion, Banestes and BRB are strategically important for EES and GDF. Both are tax-collecting agents for their States, carry out transfers to municipalities, and are responsible for the cash management of the state. In addition, they have strong operations in state public entities to which they provide services and grant credit to suppliers and public servants, via special payroll deductible loans.

EES controls 92% of Banestes' capital. The bank's activities are concentrated in EES, where it holds around 30% of the deposits and 17% of loan operations, with a network of 133 agencies, in all 78 municipalities.

GDF holds 96.8% of BRB's voting shares. The bank's representativeness in the Government of the Federal District (GDF) has been gradually increasing. BRB acts as a retail commercial bank. Its activities are concentrated in the Federal District (DF), and it operates with a network of 122 agencies, which cover all DF administrative regions.

Rating Sensitivities - IDRs, National Ratings and Support Rating
Fitch carries out internal analysis on the State of Espirito Santo and the FD, and the ratings on Banestes and BRB, respectively, are strongly influenced by this analysis. Therefore, its ratings would be impacted by any change in these states' financial strength and/or in its willingness to provide support to these subsidiaries.

The rating actions were the following:

Banestes
-- Long-Term Local and Foreign Currency IDRs affirmed at 'BB'; Outlook revised to Negative from Stable;
-- Short-Term Foreign and Local Currency IDRs affirmed at 'B';
-- Long-Term National Rating affirmed at 'A+(bra)', Outlook Stable;
-- Short-Term National Rating affirmed at 'F1(bra)';
-- Support Rating affirmed at '3';
-- Viability Rating unaffected at 'bb-'.

BRB
-- Long-Term Local and Foreign Currency IDRs affirmed at 'BB+(bra)'; Outlook Revised to Negative from Stable;
-- Short-Term Foreign and Local Currency IDRs affirmed at 'B'
-- Long-Term National Rating affirmed at 'AA-(bra)', Outlook Stable;
-- Short-Term National Rating affirmed at 'F1+(bra)';
-- Support Rating affirmed at '3';
-- Viability Rating unaffected at 'bb-'.