SAO PAULO & RIO DE JANEIRO & NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the Long-Term foreign and local currency Issuer Default Ratings (IDRs) of Banco Santander Brasil S.A. (Santander Brasil) at 'BBB+', Outlook Negative. Fitch also affirmed the bank's other ratings and the National Ratings of Santander Leasing S.A. - Arrendamento Mercantil (Santander Leasing) at 'AAA(bra)', Outlook Stable. A complete list of rating actions for the bank and its leasing subsidiary is included at the end of this press release.
KEY RATING DRIVERS - IDRS, NATIONAL RATINGS, SUPPORT RATINGS (SRs), DEBT RATINGS, VIABILITY RATINGS (VRs)
Santander Brasil's IDRs are driven by the support that Fitch believes the bank would receive from its parent, Banco Santander S.A. Spain (SAN), should it be needed. The Support rating, affirmed at '2', reflects Fitch's view that there is high probability of support to Santander Brasil from SAN, if needed. Fitch views the Brazilian subsidiary as very important for SAN for earnings diversification; Santander Brasil shares the same brand, and is highly integrated with its parent, having contributed 20%-26% of the group's consolidated net income over the past few years. Growth prospects for Brazil have been revised down, but it is expected that profits from this market will continue to contribute significantly to the group's earnings. Fitch is maintaining a one-notch differential in view of Santander's size relative to SAN according to Fitch Criteria: 'Rating FI Subsidiaries and Holding Companies'.
Santander Brasil's VR was affirmed at 'bbb' reflecting its strong capitalization, extensive local franchise, and its diversified, self-funded nature that is mostly sourced within its home market. Santander Brasil does not rely on the parent for funding its day-to-day business. Its management team and board of directors enjoy a high degree of operating independence. Santander Brasil's VR also reflects the challenges to improve profitability, despite improvement seen during recent semesters in terms of credit costs - especially considering the challenging operating environment. The bank's profitability still does not compare as well to that of its peers. The bank's diversified funding, supported by its large branch network and client base, enables the bank to remain liquid and independent. Despite a special dividend of BRL6 billion to existing shareholders in 2014, Santander Brasil's capital metrics still compare well to those of its peer group. During the last few semesters the bank also showed significant improvement in asset quality ratios which now compare well with those of its domestic private-sector peers.
Fitch has also affirmed the National Ratings of Santander Leasing S.A.-Arrendamento Mercantil (Santander Leasing)
The ratings are driven by potential support from Santander Brasil, since Fitch views the leasing subsidiary as an integral part of Santander Brasil's franchise as it shares management, policies and strategies with its direct parent. As a result, Santander Leasing's National scale ratings are equalized with those of Santander Leasing.
The National ratings of Santander Leasing's subordinated issuances are one notch below the National ratings of Santander Brasil, as they incorporate Fitch's loss severity assumption in case of liquidation.
RATING SENSITIVITIES - IDRS, NATIONAL RATINGS, SRs, DEBT RATINGS, VRs
Changes in the willingness and capacity of SAN to provide support to Santander Brazil may result in changes in the IDR's of Santander Brasil. The Negative Outlook on the Foreign Currency IDR reflects Fitch's recent revision of the Outlook for Brazil's sovereign ratings to Negative from Stable, since Santander Brasil's Foreign Currency IDR is at the country ceiling (see 'Fitch Revises Brazil's Rating Outlook to Negative; Affirms IDRs at 'BBB'', dated April 9, 2015 at 'www.fitchratings.com'). The Outlook on its local currency IDR, in turn, remains Stable because of the expected support from its parent and the fact that such rating is not constrained by the local currency sovereign rating.
If Santander Brasil is able to consistently improve the quality of its results to a level where its return on average assets (ROAA) is above 1.5%, while sustaining the recent improvement in its asset quality indicators so that they remain similar to those of its peers, the VR could be upgraded. If asset quality becomes relatively inferior to its peers and ROAA is consistently below 0.5%, negatively affecting its comfortable capital ratios, the result could be a negative action on the VR.
Fitch has affirmed the following ratings:
Santander Brasil:
--Long-term foreign currency IDRs at 'BBB+', Outlook Negative;
--Long-term local currency IDRs at 'BBB+'; Outlook Stable;
--Short-term foreign and local currency IDRs at 'F2';
--Viability rating at 'bbb';
--Support rating at '2';
--National Long-term rating at 'AAA(bra)'; Outlook Stable;
--National short-term rating at 'F1+(bra)'.
Santander Brasil Senior notes due 2015, 2016 and 2017:
--Long-term foreign currency rating at 'BBB+'.
Santander Leasing:
--National long-term rating at 'AAA(bra)'; Outlook Stable;
--National short-term rating at 'F1+(bra)'.
Santander Leasing 4th and 5th Debentures due 2017:
--National long-term rating at 'AA+(bra) .
Santander Leasing (Ex-ABN AMRO Arrendamento Mercantil S.A.) - 4th, 5th and 6th Debentures due 2015 and 2016:
--National long-term rating at 'AA+(bra)'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Bank Rating Criteria' (20 March 2015),
--'Macro-Prudential Risk Monitor' (3 March 2015).
Applicable Criteria and Related Research:
Macro-Prudential Risk Monitor - February
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=861312
Global Bank Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863501
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985118
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