Moody's lowers Bndes, Caixa

Moody's Investors Service said it downgraded the long-term issuer rating of Banco Nacional de Desenvolvimento Economico e Social (Bndes) to Baa2 from A3 and lowered its standalone baseline credit assessment to Ba1 from Baa2.

The agency also said it downgraded Caixa Economica Federal's long-term local-currency deposit ratings to Baa2 from A3 and lowered its baseline credit assessment to Ba2 from Baa3.

The outlook on Caixa is stable, while its local-currency deposit rating has a positive outlook.

The foreign-currency senior unsecured debt ratings of Bndes and Caixa were downgraded to Baa2 from Baa1 with a positive outlook, in line with the positive outlook on Brazil's government bond rating, Moody's said.

Moody's also affirmed Bndes's and Caixa's long-term foreign-currency deposit ratings of Baa2 with a positive outlook.

Bndes and Caixa are wholly-owned by the Brazilian government and they are engaged in supporting the government's countercyclical economic policies, which resulted in significant growth rates of assets and loans, the agency said, and leaner capital ratios.

At the same time, the government requires Bndes and Caixa to contribute an increasing amount of dividends, while it replenishes the banks' capital with non-cash capital injections, the agency said.

This practice has resulted in relatively low core capital levels, which limits the banks' ability to absorb losses in situations of stress, thus weakening their standalone credit strength, Moody's said.

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