Moody’s changes Banco BMG to negative

Moody's Investors Service said it affirmed Banco BMG SA's long-term global scale ratings, including its B1 local- and foreign-currency deposit ratings; and the foreign currency senior debt ratings, as well as the long-term national scale deposit rating of Baa3.br.

The outlook was changed to negative from stable.

Moody’s said the outlook change reflects the challenges BMG continues to face to improve earnings generation and capitalization, while it refocuses its strategy toward a predominantly payroll credit card banking business.

“Moody's acknowledges BMG's leading position in this market segment, as well as the better risk profile of payroll credit card operations relative to riskier commercial lending. However, its business model has yet to prove capable of generating sustainable earnings, while the reliance on one line of business will likely reduce revenue diversification, potentially exposing the bank's earnings to volatility,” the agency explained in a news release.

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