BANCO BRADESCO S.A.
Fitch Ratings has affirmed
The Rating Outlook is Stable. In addition, Fitch has affirmed Bradesco's Long-Term National Rating at '
Key Rating Drivers
Bradesco's Long-Term Foreign and Local Currency IDRs are driven by its 'bb' Viability Rating (VR). Bradesco's VR reflects its stable business profile with diversified revenue and consistent performance throughout economic cycles, even in times of economic crisis. The ratings also capture the conservative risk profile, funding base, strong liquidity, adequate asset quality and good capitalization. Bradesco has high market share in several segments in the domestic financial system. The company has a vast network of service points that covers the whole country and all economic classes with a segmented customer base.
Operating Environment Outlook Revised to Stable: The operating environment score for Brazilians Banks is bb- and is in line with the implied assessment based on
However, growth is cooling following the lagged effect of substantial monetary tightening, and the expected global deceleration will be an additional drag. High policy rates should be supportive for banks' interest revenue but will also continue to moderately pressure asset quality and credit volumes, as households' resilience and business prospects weaken.
Robust Credit Profile: Bradesco's ratings are one notch above the sovereign's IDRs, reflecting its robust credit profile and its relevant role in the Brazilian financial system, which provides the bank more headroom to absorb potential risks from macroeconomic conditions compared with lower rated peers. Bradesco's business profile strongly benefits from its banking and insurance franchises in
Well-Balanced Risk Profile: Bradesco has a relatively moderate and well-controlled risk appetite, including in its exposure to securities. The granting and monitoring of credit are very well controlled and performed by sophisticated and segmented systems. During the last cycle, the bank showed greater volatility in its credit risk indicators, due to greater exposure to unsecured credit portfolios, especially when compared to its main peers. The market risk inherent to its interest rate and foreign currency positions can be volatile, though internal limit exposures are relatively low. However, Bradesco's risk profile is sensitive to the concentration of activities in
Some Asset Quality Deterioration: Bradesco's loans past due more than 90 days/ gross loans ratio, increased to 3.9% in
Solid Earning and Profitability: Bradesco's recurring profitability remained better than the local retail bank average, as its adjusted core metric (to account for the tax effects of the hedges on investments abroad) of operating profits to risk-weighted assets, has averaged 3.4% over the past four years (3.6% on 9M12 annualized).
Satisfactory Capitalization: Bradesco's capitalization is maintained with satisfactory buffers over regulatory minimum requirements, with the regulatory Common Equity Tier 1 (CET1) ratio at 12.1% at
Excess Liquidity and Stable Funding: Bradesco's liquidity remains solid, supported by the historical stability of its deposits, significant securities portfolio and the bank's capacity to access long-term financing. The bank's ample distribution network allows it to continuously capture deposits at an attractive cost. During stress periods, the bank has benefited from flight-to-quality movements, due to its position as one of the largest banks in the sector.
NCF PARTICIPACOES - NATIONAL RATINGS
One Notch Below Bradesco: NCF's National Long-Term Rating and the rating on its issuance of its debentures are one notch below the rating of its main operating subsidiary, Bradesco, reflecting the holding company's minority ownership. NCF is a pure holding company and the ownership is low, at only 5.36% of Bradesco's total capital, its main source of support.
The company's double leverage (investments in subsidiaries and intangible assets/equity) was low at around 80% in
NCF is a pure holding company, with no operating activities, controlled by the holding companies:
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
BRADESCO
IDRs and VR
Bradesco's Long-Term IDRs and VR are limited by
Bradesco's VR may be adversely affected if its loss-absorbing capacity decreases, or if there is a sustained reduction in its CET1 ratio to less than 10%. A sustained decline in the bank's operating Profits/RWA ratio to less than 2.5% may also lead to a downgrade of Bradesco's ratings.
NATIONAL RATING
Bradesco's National Ratings are sensitive to changes in their creditworthiness relative to other Brazilian issuers.
NCF PARTICIPACOES
NATIONAL RATINGS
A negative rating action on Bradesco's ratings would result in a similar action on NCF Participacoes. Additionally, a substantial increase in the holding's double leverage ratio, or deterioration of its debt service indicators could also lead to a negative rating action.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
BRADESCO
IDRs and VR
Maintenance or improvement of Bradesco's current financial profile in the context of a positive rating action on the sovereign could lead to a similar action on Bradesco.
NATIONAL RATING
Bradesco's National Ratings are sensitive to changes in their creditworthiness relative to other Brazilian issuers.
NCF PARTICIPACOES
NATIONAL RATINGS
An upgrade is possible should NCF Participacoes increase its ownership of Bradesco.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
BRADESCO - SENIOR UNSECURED
Bradesco's senior unsecured debt is rated in line with its IDRs as the likelihood of default on these obligations reflects the likelihood of default of the entity.
NCF - SENIOR UNSECURED
NCF's senior unsecured debt is in line with its National Ratings as the likelihood of default on these obligations reflects the likelihood of default of the entity.
Bradesco's 'b+' GSR reflects a limited probability of support from the Brazilian authorities, if required. Despite contagion risks stemming from Bradesco's position as a domestic systemically important bank with dominant market shares, the government's limited financial flexibility and capacity to provide support as indicated by its sovereign rating, highly influence its GSR.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Bradesco's senior unsecured debt ratings is sensitive to a change in its IDR.
NCF's senior unsecured debt ratings is sensitive to a change in its National Rating.
GSR
The Support Rating is sensitive to any change in assumptions of propensity or ability of the sovereign to provide support to the bank.
VR ADJUSTMENTS
The Asset Quality of 'bb-' has been assigned above the 'b' category implied score (which considers the D-H ratings for Impaired Loans) because of the following adjustment reasons: collateral and reserves (positive)
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Sources of Information
NA
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visitwww.fitchratings.com/esg.
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