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Correction - Fitch Places Banco ABC Brasil S.A. on Rating Watch Negative
NEW YORK & SAO PAULO, Brazil-(Business Wire)-May 6, 2008 - (This is a correction to the release that went out earlier on May 6, 2008. It corrects the list of rating actions.)
Fitch Ratings has today placed the following ratings of Banco ABC Brasil S.A.'s (ABCbr) on Rating Watch Negative:
—Long-Term Foreign Currency Issuer Default Rating (IDR) 'BB+';
—Long-Term Local Currency IDR 'BB+';
—National Long-Term rating 'AA-(bra)';
—National Short-term rating 'F1+(bra)'.
The ratings were placed on Watch Negative following a similar action taken on the ratings of its parent, Arab Banking Corporation (ABC).
In addition, the following ratings have been affirmed:
—Support Rating at '3';
—Individual Rating at 'C/D';
—Short-Term Foreign Currency IDR 'B';
—Short-Term Local Currency IDR 'B'.
The Negative Rating Watch reflects Fitch's concerns that the level of ongoing willingness by the major shareholders to provide support to the bank in the future, in case of need, may have weakened slightly. These concerns are driven by the damaging effect structured credit market-related losses in the first quarter of 2008 and second half of 2007 could have on ABC's franchise, profitability, funding and prospects. The Watch will be resolved following a review by Fitch of the level of financial support available to ABC from its major founding shareholders. These are the Abu Dhabi Investment Authority (27% of ABC's shares), the main investment arm of the emirate of Abu Dhabi (rated 'AA', with a Stable Outlook by Fitch); the Kuwait Investment Authority (29%), the main investment arm of the state of Kuwait (rated 'AA-'(AA minus), with a Stable Outlook), and the Central Bank of Libya (28%).
While Fitch continues to believe that the propensity to support ABCbr remains, the rating action taken on ABC has an impact on its ultimate capacity to support ABCbr. As the latter's national and international IDRs are driven by potential support from ABC, these ratings have also been placed on Watch Negative. The Watch status of ABCbr will be resolved following the resolution of the Watch status of ABC.
ABCbr's Individual rating reflects its good asset quality, historically above that of its peer average, good credit controls, expertise in its main business segments, and a strategy consistent with the macroeconomic climate. On the other hand, the ratings also consider the fact that ABCbr is moderate in size, with little diversification, presenting asset and liability concentrations, as well as having profitability below that of its peers.
ABCbr, established in 1989, is controlled by the ABC Group (equity of USD2 billion at fiscal year-end 2007) through Marsau Uruguay Holdings. The bank operates mainly in lending to medium-sized and large companies. In May 2007, ABCbr substantially boosted its capital base when it went public by placing non-voting preferred shares at the Bovespa Level 2 on the New Brazilian Stock Market, which has strong corporate governance rules and a 'tag-along' giving minority shareholders 100% of the value of the block of controlling shares in the event of the sale of the institution.
Fitch's national ratings provide a relative measure of creditworthiness for rated entities in countries where the sovereign's foreign and local currency ratings are below 'AAA'. National ratings are not internationally comparable since the best relative risk within a country is rated 'AAA' and other credits are rated only relative to this risk. They are signified by the addition of an identifier, for the country concerned, such as 'AAA (bra)' for national ratings in Brazil.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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