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Moody's Downgrades Brazil Banks On Nation's Negative Stance

Published 06/01/2017, 08:57 AM
Updated 07/09/2023, 06:31 AM

Moody's Investors Service, the rating services arm of Moody's Corporation (NYSE:MCO) , downgraded outlooks assigned to 19 Brazilian banks, and the Brazilian stock and futures exchange – BM&FBovespa S.A – to negative from stable. The change in outlook followed the downgrade of Brazil's Ba2 government bond rating to negative from stable, last week. However, affected issuers' ratings and assessments were affirmed by Moody’s.

The outlook was revised by Moody’s on local currency deposit and/or foreign currency senior unsecured debt ratings of 15 domestically-owned banks having the same rating as of Brazil's sovereign rating. Moreover, outlook for four foreign-owned banks and BM&FBovespa was revised having rating above the sovereign rating.

Itau Unibanco Holding S.A. (NYSE:ITUB) , Banco Bradesco S.A. (NYSE:BBDO) , Banco do Brasil S.A. (OTC:BDORY) and Banco Santander (MC:SAN) (Brasil) S.A. (NYSE:BSBR) are among the 19 banks, outlooks of which were lowered by Moody's. Among these, Itau Unibanco carries a Zacks Rank #3 (Hold), while Banco Santander has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

This move comes on the heels of the country's deteriorating macroeconomic and political environment. It also reflects the lack of progress made by the government in achieving its fiscal and economic reform objectives. Further, slowdown in the Brazilian economic recovery will impact borrowers' repayment capacity, thereby increasing risks for the nation’s banks.

Rating outlook is valuable for banks since these preserve investors’ confidence in the stock and boost its creditworthiness in the market. However, a downgrade in the same brings down investors’ confidence, as well as underlines the company’s weak financials.

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Moody's Corporation (MCO): Free Stock Analysis Report

Itau Unibanco Banco Holding SA (ITUB): Free Stock Analysis Report

Banco Santander Brasil SA (BSBR): Free Stock Analysis Report

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