Moody’s downgrades Banrisul

Moody’s Investors Service said it downgraded Banco do Estado do Rio Grande do Sul SA (Banrisul)’s long-term local- and foreign-currency deposit ratings to Ba1 from Baa3 and short-term deposit ratings to not-prime from prime-3.

Moody’s also downgraded Banrisul’s long-term Brazilian national scale deposit rating to Aa2.br from Aaa.br and foreign-currency subordinated debt rating to Ba2 from Ba1.

The outlook also was changed to negative from stable.

The downgrades consider the gradual deterioration of asset quality indicators at the bank over the last few quarters, which affected profitability in a weakening economic environment, Moody’s said.

Asset risks are compounded by Banrisul’s narrow geographic focus on a single state of Rio Grande do Sul and significant indirect exposure to the agribusiness industry, the agency said.

These credit challenges are somewhat offset by the bank’s adequate reserve buffer, which covered bad loans by 1.7x, Moody’s said, and through a capital cushion of 11.9%.

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