S&P: Banco BMG on developing watch

Standard & Poor's said it placed the B/B global scale and brBBB- national scale ratings on Banco BMG SA on CreditWatch developing.

The developing watch follows news that the bank and Itau Unibanco SA will redirect 100% of the bank's payroll discounted loans portfolio to the Banco Itau BMG Consignado SA, concentrating all originations from this market into it, said Edgard Dias, an S&P analyst.

If regulators approve the transaction, the bank will sell its entire payroll discount loan portfolio without recourse, concentrating the portfolio's origination accounting and commercial structure into the joint venture, Dias said in a press release.

Since Itau enjoys one of the cheapest funding structures in the Brazilian market, the loans transferred to the joint venture have better profitability than those at the Banco BMG given the funding cost differences between the two banks, the agency said.

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