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Fitch Affirms Ratings of Banco Societe Generale Brasil, Banco Cacique and Banco Pecunia
February 12, 2015 / 4:58 PM / 3 years ago

Fitch Affirms Ratings of Banco Societe Generale Brasil, Banco Cacique and Banco Pecunia

(The following statement was released by the rating agency) RIO DE JANEIRO/SAO PAULO, February 12 (Fitch) Fitch Ratings has affirmed the Issuer Default Ratings (IDRs) and National ratings of Banco Societe Generale Brasil S.A. (SGBr) and its two wholly-owned subsidiaries, Banco Cacique S.A. (Cacique) and Banco Pecunia S.A. (Pecunia). The Rating Outlooks on the Local Currency long-term IDRs of all three banks remain Negative, while all the other Rating Outlooks are Stable. A full list of rating actions can be found at the end of this release. KEY RATING DRIVERS The IDRs and the National ratings of all three banks are based on support from their ultimate parent Societe Generale (SG, long-term IDR 'A'/Outlook Negative). Their Local Currency long-term IDRs are maintained one notch below SG's IDR, and the Outlooks on these ratings are aligned with that on SG's IDR, as per Fitch's criteria 'Rating FI Subsidiaries and Holding Companies'. The Negative Outlook on the Local Currency long-term IDRs mirrors that on SG's IDR, which, in turn, reflects Fitch's expectation that the probability that SG would receive support from the French state, if ever required, is likely to decline in the first half of 2015. The banks' Foreign Currency long-term IDRs are constrained by Brazil's country ceiling (BBB+) and remain two notches below SG's IDR. Therefore they are on Stable Outlook. The Support Rating of '2' of each bank reflects Fitch's belief that the probability of support by SG, in case of need, would be high. Fitch does not assign a Viability Rating to any of the three banks, due to their significant reliance on parental support and relatively small franchises. Cacique and Pecunia: The affirmation of Cacique and Pecunia's ratings reflects Fitch's belief that SG, which owns the banks through SGBr, will continue to provide support to the banks, in case of need. In February 2015, SG announced that it would exit the consumer finance segment in Brazil and discontinue the loss-making operations of Cacique and Pecunia. The loan books of the two banks will be allowed to runoff through amortization, while SG will also consider the potential sale of the existing loan portfolios. Fitch believes that the runoff process of the two banks will be orderly and will be backed by the full operational and financial support of SG. The agency still considers both banks as subsidiaries of limited importance for SG and does not expect any change in SG's propensity to support the two banks until the completion of their divestment. This view is reinforced by SG's historically unquestioned support for the two banks and by the fact that almost all of their non-equity funding comes from SGBr, which, in turn, has a sizeable portion of its funding provided by SG. Furthermore, the agency continues to view SGBr and its subsidiaries as a group, similar to the Central Bank of Brazil which monitors the regulatory ratios of the group on a consolidated basis. Outstanding loans at two banks continued to fall through 2014. At September 2014, Cacique's loans totaled BRL1 billion (BRL1.1 billion and BRL1.6 billion, in 2013 and 2012, respectively), while Pecunia's loans shrank to BRL0.8 billion in the same period (BRL1 billion and BRL1.1 billion, in 2013 and 2012, respectively). SGBr: The affirmation of SGBr's ratings reflects the continued support from its parent SG. Fitch considers SGBr as a strategically important subsidiary of SG, given their common branding, the unquestioned support from the parent as evidenced by the timely capital injections in the recent years, high proportion of parental non-equity funding, strong operational synergies, and high level of managerial and commercial integration with SG. SGBr's consolidated results will be negatively affected by the expenses related to Cacique and Pecunia's divestment. The bank expects the bulk of the expenses to be registered in the first quarter of 2015, and SG to fully replenish its capital base, ensuring its compliance with the local regulatory capital limits. SG remains SGBr's main source of non-equity funding (80% of consolidated funding, at June 2014). SG's most recent capital injection into SGBr was in 2013. Since then the bank has preserved its regulatory capital ratio at comfortable levels (18.02% and 19.69% at June 2014 and December 2013, respectively). The bulk of SGBr's individual revenues is generated by its treasury unit, which is active in the foreign exchange, fixed income, derivatives and equity markets. Meanwhile, SGBr's individual corporate loan portfolio, including guarantees, continues to grow, reaching BRL1.3 billion at June 2014 (BRL775 million and BRL454 million, respectively, in 2013 and in 2012). RATING SENSITIVITIES Negative Rating Drivers: A one-notch downgrade of SG's IDR would lead to a downgrade of the local currency IDRs of the Brazilian subsidiaries, while a more than one-notch downgrade of SG's IDR would affect both the local currency and the foreign currency IDRs of the Brazilian subsidiaries. The banks' National ratings may be affected by a multi-notch downgrade of the parent. In addition, a change in Fitch's evaluation of the strategic importance of the three banks for SG could result in changes to their ratings. A Brazilian sovereign rating downgrade or revision of its Outlook could also lead to a similar change in the international ratings of all three banks. Positive Rating Drivers: A Brazilian sovereign rating upgrade could lead to a similar change in the foreign currency IDRs of all three banks, which are currently limited by the country ceiling. The unlikely scenario of an upgrade of SG's ratings or revision of its Outlook to Positive would not have an impact on the ratings, as long as the Brazilian sovereign rating remains unchanged. Fitch has affirmed the following ratings: SGBr: --Foreign Currency Long-term IDR at 'BBB+', Outlook Stable; --Local Currency Long-term IDR at 'A-', Outlook Negative; --Foreign Currency Short-term IDR at 'F2'; --Local Currency Short-term IDR at 'F1'; --Support Rating at '2'; --National Long-term rating at 'AAA(bra)', Outlook Stable; --National Short-term rating at 'F1+(bra)'. Cacique: --Foreign Currency Long-term IDR at 'BBB+', Outlook Stable; --Local Currency Long-term IDR at 'A-', Outlook Negative; --Foreign Currency Short-term IDR at 'F2'; --Local Currency Short-term IDR at 'F1'; --Support Rating at '2'; --National Long-term rating at 'AAA(bra)', Outlook Stable; --National Short-term rating at 'F1+(bra)'. Pecunia: --Foreign Currency Long-term IDR at 'BBB+', Outlook Stable; --Local Currency Long-term IDR at 'A-', Outlook Negative; --Foreign Currency Short-term IDR at 'F2'; --Local Currency Short-term IDR at 'F1'; --Support Rating at '2'; --National Long-term rating at 'AAA(bra)', Outlook Stable; --National Short-term rating at 'F1+(bra)'. Contact: Primary Analyst Esin Celasun Director +55 21 4503 2626 Fitch Ratings Brasil Ltda. Praca XV de Novembro, 20 - 401 B Rio de Janeiro, RJ, Brasil Secondary Analyst Robert Stoll Director +1-212-908-9155 Committee Chairperson Franklin Santarelli Managing Director +1-212-908-0739 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'National Scale Ratings Criteria' (Oct. 30, 2013); --'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012); --'Global Financial Institutions Rating Criteria' (Jan. 31, 2014); --'Fitch Affirms Societe Generale at 'A'; Outlook Negative' (Nov. 25, 2014). Applicable Criteria and Related Research: National Scale Ratings Criteria here Rating FI Subsidiaries and Holding Companies here Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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