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Fitch Affirms Banco Industrial e Comercial S.A. (Bicbanco) Ratings
February 12, 2015 / 6:38 PM / 3 years ago

Fitch Affirms Banco Industrial e Comercial S.A. (Bicbanco) Ratings

(The following statement was released by the rating agency) SAO PAULO, February 12 (Fitch) Fitch Ratings has affirmed Banco Industrial and Comercial S.A.'s (Bicbanco) national ratings as follows: --Long-term National Rating at 'AAA(bra)'; Outlook Stable --Short-term National Rating at 'F1+(bra)'. Fitch classifies Bicbanco as a 'strategically important' subsidiary for China Construction Bank Corporation (CCBC; Fitch foreign currency long-term Issuer Default Rating 'A'; Outlook Stable) due to the strong integration (centralized credit approval processes, limits setting, etc.) and the high reputational risks for the parent in case of Bicbanco's default. The subsidiary currently has a limited impact on the group's performance, comprising less than 0.4% of consolidated assets. CCBC holds a 72% stake in Bicbanco and has announced a tender offer to acquire the shares owned by minority shareholders and take the bank private. Bicbanco has been listed in BM&FBovespa (Sao Paulo Stock Exchange) since 2007. Under the new control and management, Bicbanco has retained the experienced executive team of market professionals which along with executives appointed by the parent will carry out a shift towards corporate and large corporate names. The local bank is expected to receive funding support from its parent and maintain a certain degree of independence as its operations and the Brazilian market characteristics are different from other overseas ventures of CCBC, which are basically concentrated on Asia and Russia. The new controller has implemented strict provisioning rules for Bicbanco's loan portfolio, reclassifying several loan operations into lower risk levels and resulting in expressive BRL 929 million in Provisioning Expenses that impacted Bicbanco's results in the 2Q'14 and 3Q'14, resulting in a BRL 512 million Net Loss in the first nine months of 2014 and reducing the bank's Fitch Core Capital to a tight 8.2% at September 2014 (12.1% in December 2013). Fitch expects to continue to see some volatility in the Bicbanco's results during 2015 as the new controller implements its strategy and also due to the unfavorable economic scenario. KEY RATING DRIVERS Bicbanco's ratings are based on Fitch's view that the bank would receive support from CCBC, should this be required. CCBC's IDR reflects Fitch's opinion that there is an extremely high probability that the Chinese authorities will support CCBC if needed. CCBC is 57% owned by the Chinese Government, and is an important player in the Chinese banking system in addition to being the eighth largest bank in the world. Bicbanco's ratings reflect the fact that Fitch sees it as a strategically important subsidiary to CCBC. The Brazilian operation will be the second largest CCBC's overseas operation after only CCBC Asia. Under the new control, funding and capital support from its parent are expected to be forthcoming. Also, the Brazilian subsidiary should start operating under its parent name in the near future. Brazil is seen as a key market for China and Chinese corporations given the growing size of trade volume between the two countries The entrance in the Brazilian market therefore is an important strategic move for CCBC on its international expansion. RATING SENSITIVITIES Multiple downgrades in CCBC's IDRs or its propensity to support Bicbanco would lead to a negative rating action of Bicbanco's ratings; currently not Fitch's base case scenario. Contact: Primary Analyst Eduardo Ribas Director +55 11 4504-2213 Fitch Rating Brasil Ltda. Alameda Santos 700 Sao Paulo, Brazil Secondary Analyst Pedro Gomes Director +55 11 4504-2604 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 on www.fitchratings.com. Applicable Criteria and Related Research: --'Global Financial Institutions Rating Criteria' (January 2014); --'Rating FI Subsidiaries and Holding Companies' (August 2012); --'National Ratings Criteria' (October 2013). Applicable Criteria and Related Research: 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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