Agriculture

Fitch Expects to Rate Banrisul's Tier II USD Subordinated Notes 'BB-exp'

  2012 FEB 2 - (VerticalNews.com) -- Fitch Ratings expects to assign Banco do Estado do Rio Grande do Sul's (Banrisul) upcoming subordinated notes a rating of 'BB-(exp)'. The final rating is contingent upon the receipt of final documents conforming to information already received.

  The notes will be for an amount not to exceed USD$500 million and will mature in January 2022; interest payments will be made semi-annually. The notes will carry a fixed interest rate to be defined. The net proceeds will be used by Banrisul for general corporate purposes.

  The notes will rank at least equally with similar subordinated debt and carry a cumulative coupon deferral mechanism that can be exercised. This deferral would only occur if Banrisul is in noncompliance with its regulatory capital requirement.

  As per Fitch's new rating criteria, the expected rating of this Tier II subordinated debt should be two notches below Banrisul's Viability Rating (VR) of 'bb+', one notch reflecting loss severity features and its subordinated status and one notch due to the moderate risk of non-performance.

  Banrisul's VR considers its regional importance, with strong franchise in its home state of Rio Grande do Sul (RS), above-average profitability, adequate liquidity, and stable retail funding structure. The VR also reflects its moderate credit quality, modest nationwide market share, fierce competition in the domestic banking sector, a rather undiversified funding structure and risk concentration on RS, Brazil's fourth largest state, whose economy is largely focused on the agricultural sector.

  Controlled by the State of Rio Grande do Sul, Banrisul is the largest bank within the state with prevalent market share in credits and deposits. With 399 branches, Banrisul operates as a retail bank, focusing on companies and individuals.

  Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

  Keywords: Fitch Ratings.

  This article was prepared by VerticalNews Agriculture editors from staff and other reports. Copyright 2012, VerticalNews Agriculture via VerticalNews.com.