Moody’s upgrades Banco Modal

Moody’s Investors Service said it upgraded Banco Modal SA’s long-term Brazilian national scale deposit ratings to Baa2.br from Baa3.br.

The agency also said it affirmed the bank’s short-term Brazilian national scale deposit rating of BR-3, long-term local- and foreign-currency deposit ratings of B1 and short-term local-and foreign-currency deposit ratings of not-prime.

Moody’s also affirmed its baseline credit assessment and adjusted baseline credit assessment of B1, along with the long- and short-term counterparty risk assessments of Ba3(cr) and not-prime(cr), respectively.

The outlook remains stable.

The upgrade reflects the bank’s enhanced loss absorption capacity following the conversion of its tier 2 debt into common equity, which took place in March 2016, the agency said.

Moody’s also noted that the bank’s profitability also is showing signs of improvement after recording net losses in 2014.

But the business environment for investment banking remains challenging and the bank remains highly exposed to its merchant banking investments, the agency said.

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