NEW YORK & SAO PAULO--(BUSINESS WIRE)--Fitch Ratings has affirmed Banco Bradesco S.A. (BRADESCO) ratings as detailed below. Also in the same rating action Fitch has upgraded its support rating and revised its rating floor to reflect the enhanced support capacity of the Brazilian government after a sovereign upgrade and considering the systemic importance of the bank within the Brazilian financial system. A detailed list of the rating actions is provided below:
Banco Bradesco S.A.
--Foreign currency long-term Issuer Default Rating (IDR) affirmed at 'BBB+'; Stable Outlook;
--Foreign currency short-term IDR affirmed at 'F2';
--Local currency long-term IDR affirmed at 'A-'; Stable Outlook;
--Local currency short-term IDR affirmed at 'F1';
--Individual rating at affirmed at 'B/C';
--Viability rating affirmed at 'a-';
--Support rating upgraded to '2' from '3';
--Support rating Floor revised to 'BBB-' from 'BB+';
--National long-term rating affirmed at 'AAA(bra)'; Stable Outlook;
--National short-term rating affirmed at 'F1+(bra)'.
--Subordinated notes due September 2019 longterm Foreign Currency rating affirmed at 'BBB';
--Subordinated notes due January 2021 longterm Foreign Currency rating affirmed at 'BBB'.
Fitch also recently affirmed the long-term National rating of 'AAA(bra)' of Bradesco Leasing S.A. Arrendamento Mercantil.
Bradesco's long-term local currency IDR of 'A-' and its long-term foreign currency IDR of 'BBB+' are above the IDRs of Brazil, while the long-term foreign currency IDR is constrained by the country ceiling.
Bradesco's ratings reflect its broad national franchise, where it is a market leader in most of its business lines. The ratings also consider its strong track record of consistent results even during turbulent economic cycles; its conservative management; its diversified revenue base; its strong local distribution capacity; and its solid liquidity.
Present in all segments of the financial and insurance markets, Bradesco has well-defined goals for continued growth, including strong profitability through volume expansion and cross selling, combined with cost controls and emphasis on maintaining strict liquidity risk management in all its operating niches. Expected favorable results will enable the continued achievement of these goals.
Bradesco's asset quality improved due in part to improvements in the Brazilian economy and to loan growth. Asset quality ratios remain at satisfactory levels and compare well with local and international peers. Non-performing loans over 90 days as of June 2011 were 3.7% with reserve coverage well over 100%; also considering local practices, impaired loans have remained below the average of the industry (7.5% as of June 2011; figures that considers loans impaired but not necessarily past due). Bradesco's strong revenue generation capacity and good level of existing reserves are expected to continue providing a good capacity to absorb future losses.
Profitability -- diversified and largely recurring -- remains healthy. While fiscal year (FY) 2010 pre-impairment operating income was relatively unchanged from FY2009 due to higher operating expenses offsetting higher revenues, the operating profit showed significant growth during 2010 due mainly to a sharp decrease in loan loss provision expenses due to stronger asset quality. First-half 2011 (1H'11) profitability continued to be favorable as evidenced by the return ratios (ROAA 1.7%, ROAE 22.1%. For the 1H'11 the bank reported a net profit of BRL5.6 billion (full-year 2010 net profit was BRL10.1 billion. Fitch expects that the bank will continue to benefit from its strong operating scale to generate returns that should continue to compare well to its peers.
Although the Fitch-calculated core capital ratio for Bradesco is currently at 7.8% of Fitch risk weighted assets, Fitch considers it to be at an appropriate level considering the good profitability track record and limited historical losses. The significant difference between Fitch-calculated core capital ratios and Bradesco's regulatory capital ratio of 14.7% arises principally from the deduction of the capital invested in the bank's insurance companies and intangibles. Fitch expects that consistent results will maintain adequate capitalization. Bradesco's insurance operations are strongly capitalized and are a key contributor to the bank's revenue stream.
Although Bradesco's IDRs are driven by its viability rating, its foreign currency IDR is constrained by the country ceiling. If the country ceiling is altered by Fitch, Bradesco's rating could be changed accordingly. In addition the viability rating could be influenced by change in credit metrics, such as significant increase in delinquencies, could put pressure on its ratings.
Bradesco is one of the largest financial conglomerates in Latin America. It is controlled by an entity managed by the bank's senior executives.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'National Ratings Criteria', dated Jan. 19, 2011;
--'Short-Term Ratings Criteria for Corporate Finance'; dated Nov. 2, 2010;
--'Global Financial Institutions Rating Criteria', dated Aug. 16, 2010.
-- 'Treatment of Hybrids in Bank Capital Analysis', dated Jul. 11, 2011.
Applicable Criteria and Related Research:
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Short-Term Ratings Criteria for Corporate Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=568726
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685
Treatment of Hybrids in Bank Capital Analysis
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=641269
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