Fitch Affirms Banco Votorantim's Ratings at 'BBB-'; Outlook Negative
A full list of rating actions follows at the end of this release.
KEY RATING DRIVERS
IDRS, NATIONAL RATINGS, SUPPORT RATING, SUBORDINATED AND SENIOR DEBT
BV's IDRs, Support Rating and National ratings are based on the support Fitch Ratings believes that the bank would receive from its minority shareholder, Banco do Brasil S.A. (BdB, rated 'BBB'/Negative Outlook by Fitch), if needed. The Negative Outlook for BV's Long-term IDRs mirrors that of BdB's IDRs, which in turn is aligned with the outlook for Brazil's sovereign ratings.
Fitch believes that BV is a strategically important subsidiary for BdB, as BV complements BdB's retail lending segment, with a special focus on used light vehicle financing. Furthermore, BdB made available to BV a special liquidity line of around BRL7 billion that has not been used. Therefore, Fitch affirmed the Support Rating of '2', which reflects the high probability of support from BdB to BV, should it be needed.
The national ratings for BV Leasing's subordinated issuances, which are one notch down from BV's supported long-term National Rating, reflects the loss severity of the instrument given its subordination to senior creditors in case of liquidation of the entity. Fitch considers the support to those issuances will be available from the parent, BV. Therefore, the current notching incorporates only the loss severity in case of liquidation.
The rating of BV's senior unsecured notes due May 2016 corresponds to its Long-term IDR.
VIABILITY RATING
The 'bb-' VR reflects the consistent recovery of the bank's earnings since late 2013 and the maintenance of a stable capital base. The VR is also supported by its moderate risk appetite, with adequate credit underwriting procedures in place, particularly in its main segment of used vehicle financing. The VR is limited by the cyclical nature of auto lending, the challenging operating environment that could affect its corporate credit portfolio negatively, and its profitability that is still lower than peers.
After reporting losses for three years, mainly due to a combination of credit write-offs and cost cuts, BV has had positive results since third-quarter 2013. During the three months ended March 2015, BV reported net income of BRL121.9 million, generating ROAE of 6.5% and ROAA of 0.5%. The adverse macroeconomic environment is the main challenge for BV to continue posting positive results, in Fitch's opinion.
At March 31, 2015, loans in the 'D-H' classes still remained high at 10.5% of the total portfolio, fairly stable compared with year-end 2014, pressured by a one-time corporate credit problem. Nonperforming loans (past due over 90 days) reached 6.5% as of March 2015, versus 5.5% in December 2014. BV expects this ratio to decline to levels lower than 5.0% by late 2015, reflecting some credit recovery and adequate performance of its retail credit portfolio. Reserve coverage was adequate at 72%.
Recent improvement on BV's underwriting policies and risk control tools should help the bank to navigate the current challenging operating environment and preserve the advances seen on its asset quality metrics; further consolidation of this trend may benefit BV's viability rating in the future.
BV benefits from an adequate capital base, with Fitch Core Capital (FCC) ratio rising to 8.6% in March 2015, compared with 8.4% in December 2014. The Tier 1 capital ratio was at a level compatible with its profile (9.0%), reflecting recent positive results. BV doesn't expect meaningful loan growth in 2015, which should support capitalization in the short run.
RATING SENSITIVITIES
IDRS, NATIONAL RATINGS SUBORDINATED AND SENIOR DEBT
The bank's IDRs, National and senior debt ratings are sensitive to a change in BdB's ratings and/or to any changes in BdB's willingness to support BV.
The national long-term rating of the 1st and 2nd debenture issuances of BV Leasing would be reviewed in the case of changes in BV's long-term national rating.
VIABILITY RATING
Continued improvement in BV's profitability, characterized by an Operating ROAA around 1.0% and leading to an improvement in FCC ratio to above 10%, as well as the maintenance of moderate risk appetite, would lead to an upgrade of BV's VR. Conversely, the VR could be downgraded if deterioration in the credit portfolio reduces profitability and capitalization, as expressed by a negative Operating ROAA and an FCC of lower than 7.0%.
SUPPORT RATING
The SR is potentially sensitive to any change in assumptions around the propensity or ability of BdB to provide timely support to the bank. Fitch does not expect a change in these assumptions over the rating horizon.
Fitch affirms Banco Votorantim as follows:
--Long-term foreign and local currency IDRs at 'BBB-'; Outlook Negative;
--Short-term foreign and local currency IDRs at 'F3';
--Viability Rating at 'bb-';
--Long-term national rating at 'AA+(bra)'; Outlook Stable;
--Short-term national rating at 'F1+(bra)';
--Support Rating at '2';
--Senior unsecured BRL notes due May 2016, long-term foreign currency rating 'BBB-'.
BV Leasing:
--1st and 2nd debentures issuances ratings at 'AA(bra)'.
Комментарии