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April 8, 2008 |
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BANCO ABC: Moody's Assigns Ba2 Foreign Currency Deposit Rating Moody's Investors Service assigned a bank financial strength rating of D+ to Banco ABC Brasil S.A. At the same time, Moody's assigned ratings for both long- and short-term local-currency deposits of Baa2 and Prime-2, respectively, in addition to ratings for both long- and short-term foreign currency deposits of Ba2 and Not Prime. Moody's also gave the bank a Brazilian national scale deposit rating of Aaa.br in the long term and a BR-1 in the short term. The outlook on all of these ratings is stable. Moody's D+ bank financial strength rating for Banco ABC Brasil derives from its well-established operation as a lender to the upper-middle market commercial segment and also from the company's ingrained risk culture, which has supported consistently adequate asset quality ratios relative to the average bank peers'. Management's disciplined cost control ensures that Banco ABC's operating efficiency indicators are aligned to its business model and to peers'. The rating agency adds that the rating is underpinned by its current capital base -- which reflects the company's recent initial public offering -- that could accommodate the intended expansion initiatives, primarily to the segments of payroll lending and low middle market. Moreover, the bank's funding access -- and to foreign funding, in particular -- allows management to support Banco ABC's traditional trade-finance operations at competitive costs. Ultimately, this access reflects both the bank's adequate risk profile and the commitment of Banco ABC Brasil's foreign controlling shareholder, Arab Banking Corporation B.S.C.. Unlike the managements of its local peer group, Banco ABC chose to establish corporate governance practices more than a decade ago which is now a positive rating factor. Moody's also identifies management's portfolio diversification, its targeting of the middle market, and the bank's entry into the low-risk public payroll-lending segments as positive steps in the creation of recurring and higher-yielding income streams. Such a move would also help diversify a somewhat poor granularity of its loan book On the other hand, Moody's points out that the bank is exposed to increasing competition in its targeted business segments, which may reflect in narrowing financial margins, and slower pace of growth. The rating agency believes that greater demands on performance are powerful influences that could steer Banco ABC's management away from its currently rigid credit policy, thereby moving it in the direction of gaining more scale. The Baa2 local currency deposit rating assigned to Banco ABC Brasil, incorporates Moody's assessment of a high probability of support from its committed foreign controlling shareholder, Arab Banking Corporation B.S.C. (rated A3/Prime-2, with a stable outlook). In Moody's assessment, Banco ABC would not be eligible to regulatory support, however, given its modest participation in the Brazilian deposit market. These ratings were assigned to Banco ABC Brasil S.A.: -- Bank Financial Strength Rating: D+, stable outlook. -- Global Local-Currency Rating: Baa2 long-term local-currency deposit rating and Prime-2 short-term local-currency deposit rating. Stable outlook. -- Foreign Currency Deposit Rating: Ba2 long-term foreign- currency deposit rating and Not Prime short-term foreign- currency deposit rating. Stable outlook. -- Brazilian National Scale Deposit Ratings: Aaa.br long-term deposit rating and BR-1 short-term deposit rating. Stable outlook. Established in 1983 and headquartered in Sao Paulo, Brazil, Banco ABC Brasil SA, controlled by the Arab Banking Corporation and with a branch on the Cayman Islands, is a multiple bank endowed to operate with commercial, investment, financial, housing loan and exchange portfolios. As of December 2007, the bank had total assets of approximately BRL5.67 billion and equity of BRL1.09 billion. |
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