S&P downgrades 13 Brazil financial companies

By Ben Tavener, Wednesday, March 26, 2014

Ratings agency S&P cuts the rating of 13 major Brazilian financial companies barely two days after cutting the country's sovereign rating to one notch above junk.

Ratings agency S&P cuts the rating of 13 major Brazilian financial companies barely two days after cutting the country's sovereign rating to one notch above junk.

SAO PAULO - Ratings agency Standard & Poor's (S&P) cut the credit rating of 13 of Brazil's biggest financial companies on Wednesday, including major Brazilian banks Itaú, Banco do Brasil (BB), Bradesco and the country's national development bank, BNDES.

The list also includes local divisions of global banks HSBC, Santander and Citibank. The new ratings are, however, on stable outlook, thought to rule out further ratings changes this year.

The agency also put a further 17 financial institutions on global credit watch negative, and 26 others on domestic negative outlook, meaning future rating downgrades are possible.

It means virtually every well-known bank in Brazil has fallen a notch or been put on negative outlook. These include state-owned giant Banco do Brasil and BTG Pactual, one of largest investment banks in Latin America.

The news comes after S&P cut the country's sovereign debt rating on Monday night from BBB to BBB-, categorizing it at just one notch above junk but maintaining it in “investment grade” territory.

S&P said the ratings cuts were down to an array of factors, but were heavily influenced by the country's lackluster economic performance, mediocre mid-term outlook, mixed government policy signals and growing deficit in its current account.

The agency also said the concern over the country's energy systems was mounting; the corporative ratings for Brazil's state-run oil giant Petrobras and electric utilities company counterpart Eletrobras were also cut on Monday.

However, S&P analyst Lisa Schineller told reporters in a telephone conference call that a new cut in Brazil's rating by the agency was “really a scenario that we are not contemplating” and that the agency was “confident with Brazil inside the 'investment grade' category.”

Agencies are looking to see whether the government will implement what they see as needed fiscal policy change but with elections billed for October, there is little political appetite for this and, with President Dilma Rousseff heading for a second term, little hope of such changes happening afterwards either.

Although Brazil's key stock exchange, the São Paulo-based Bovespa, appeared to dismiss Monday night's sovereign debt rating downgrade, with the benchmark index up 0.39 percent on Tuesday in a seventh consecutive day of gains, on Wednesday it was down just over 0.3 percent in late trading.

Copyright © 2014 Anadolu Agency