Fitch Rates Banco Daycoval S.A.'s Senior Unsecured Notes 'BBB-'

SAO PAULO--()--Fitch Ratings assigns a long-term foreign currency rating of 'BBB-' to Banco Daycoval's (Daycoval) issue of senior unsecured notes in U.S. Dollars in the amount of USD500 million with a maturity of five years.

The notes were issued by Daycoval's Cayman branch. Interest payments will be made semiannually and the principal will be paid at the maturity of the issuance. The notes are part of a global medium-term notes program of up to USD2 billion and proceeds shall be used to enable new business generation.

KEY RATING DRIVERS

The rating assigned to Daycoval's issuance corresponds to Fitch's Long-Term IDR ('BBB-; Outlook Stable) for the bank and ranks equal with its other senior unsecured debt.

Daycoval's ratings reflect its consistent track record of performance, maintained in different cycles of the local economy, higher business diversification, and comfortable liquidity and capitalization positions. The bank has recorded consistent profitability, even during stress scenarios, sustained by adequate asset pricing, strong cost control and low funding cost. It also profits from its prudent liquidity management and adequate assets and liabilities management which help to mitigate the burden of a less diversified funding base compared to larger peers.

Given its current business model, with asset and liability concentrations inherent to its size, including its wholesale funding nature, further upgrades to Daycoval ratings may be limited. Such positive changes will be contingent on significant reduction of the concentration in its funding and a successful diversification of its lending activities.

RATING SENSITIVITIES

The ratings of the bank and its issuance could be negatively affected by continued asset quality deterioration that results in pressure on the bank's results (ROA below 2%) and on capital (Fitch core capital lower than 11%), which may be triggered by larger than expected asset quality deterioration and/or aggressive asset growth or cash dividend policy.

Additional information available at 'www.fitchratings.com' or 'www.fitchratings.com.br'.

Applicable Criteria and Related Research:

-- Global Financial Institutions Criteria (Jan. 31, 2014);

-- National Scale Ratings Criteria (Oct. 30, 2013).

Applicable Criteria and Related Research:

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=823652

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Contacts

Fitch Ratings
Primary analyst
Eduardo Ribas, +55-11-4504-2213
Director
Fitch Ratings Brasil Ltda.
Alameda Santos 700 - 7th floor, Sao Paulo, SP, Brazil
or
Secondary analyst
Claudio Gallina, +55-11-4504-2216
Director
or
Committee Chairperson
Franklin Santarelli, +1-212-908-0379
Senior Director
or
Media Relations
Jaqueline Carvalho, +55 21 4503 2623
jaqueline.carvalho@fitchratings.com
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary analyst
Eduardo Ribas, +55-11-4504-2213
Director
Fitch Ratings Brasil Ltda.
Alameda Santos 700 - 7th floor, Sao Paulo, SP, Brazil
or
Secondary analyst
Claudio Gallina, +55-11-4504-2216
Director
or
Committee Chairperson
Franklin Santarelli, +1-212-908-0379
Senior Director
or
Media Relations
Jaqueline Carvalho, +55 21 4503 2623
jaqueline.carvalho@fitchratings.com
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com