Moody’s downgrades Banco Votorantim

Moody's Investors Service said it downgraded Banco Votorantim SA's (BV) baseline credit assessment to ba2 from ba1, long-term local- and foreign-currency deposit and debt ratings to Ba1 from Baa3; short-term local- and foreign-currency deposit ratings to Not Prime from Prime 3; the long-term foreign-currency senior debt ratings to its Nassau branch to Ba1 from Baa3; foreign-currency subordinate debt rating to Ba2 from Ba1; and long-term Brazilian national scale deposit rating to Aa2.br from Aa1.br.

The outlook on all ratings remains negative.

The long and short-term counterparty risk assessments of both Banco Votorantim and its Nassau branch were downgraded to Baa3(cr)/Prime 3(cr), from Baa2(cr)/Prime 2(cr), respectively.

Moody’s said the downgrade of the baseline credit assessment to ba2 from ba1 and the maintenance of the negative outlook on the ratings are driven by the continuing pressures on asset risk, capital and profitability, which remain vulnerable to the recessionary economic environment.

The challenging operating conditions, expected to continue through 2016, will likely demand the bank to increase provisions because of loan exposures to segments that are particularly sensitive in a downturn. This will threaten its already modest profitability and will delay efforts to strengthen its capitalization, the agency said.

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