Fitch Upgrades Banco Industrial e Comercial S.A.'s National Ratings; Resolves Positive Watch

SAO PAULO--()--Fitch Ratings has upgraded Banco Industrial and Comercial S.A.'s (Bicbanco) National Ratings and resolved the Positive Rating Watch following the conclusion of its acquisition by China Construction Bank Corporation (CCBC; Fitch foreign currency long-term Issuer Default Rating of 'A', Outlook Stable) as follows:

--Long-term National Rating to 'AAA(bra)' from 'A+(bra)', assigned Stable Outlook;

--Short-term National Rating to 'F1+(bra)' from 'F1(bra)'.

The rating action follows the conclusion on Aug. 29, 2014 of the transfer of Bicbanco's control to CCBC. The acquisition was announced on Oct. 31 2013 and was finalized after regulatory approvals in Brazil and China were granted and CCBC carried out the payment to Bicbanco's former shareholders.

Fitch classifies Bicbanco as a 'strategically important' subsidiary for CCBC due to the strong integration (centralized credit approval processes, limit-setting, etc.) and the high reputational risks for the parent in case of Bicbanco's default. The subsidiary currently has a limited impact on the group's performance, comprising less than 0.4% of consolidated assets.

CCBC now holds a 72% stake in Bicbanco and has announced a tender offer to acquire the shares owned by minority shareholders and take the bank private. Bicbanco has been listed on BM&FBovespa (Sao Paulo Stock Exchange) since 2007.

Under the new control and management, Bicbanco will retain the experienced executive team of market professionals which, along with executives appointed by the parent will carry out a shift toward the corporate and large corporate segments.

The local bank is expected to have a certain degree of independence as its operations and the Brazilian market's characteristics are different from other overseas ventures of CCBC, which are basically concentrated on Asia and Russia.

KEY RATING DRIVERS

Bicbanco's ratings reflect Fitch's view that it would receive support from CCBC, should this be required. CCBC's IDR reflects Fitch's opinion that there is an extremely high probability that the Chinese authorities will support CCBC if needed. CCBC is 57% owned by the Chinese Government, and is an important player in the Chinese banking system in addition to being the eighth largest bank in the world.

Bicbanco's ratings reflect the fact that Fitch sees it as a strategically important subsidiary to CCBC. The Brazilian operation will be the second largest of CCBC's overseas operations, after CCBC Asia. Under the new control, funding and capital support from its parent are expected to be forthcoming. Brazil is seen as a key market for China and Chinese corporations given the growing size of trade volume between the two countries. The entrance into the Brazilian market therefore is an important strategic move for CCBC in its international expansion.

RATING SENSITIVITIES

Multiple downgrades in CCBC's IDRs or its propensity to support Bicbanco would lead to a negative rating action of Bicbanco's ratings, but this is not currently Fitch's base case scenario.

Additional information is available on www.fitchratings.com.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' dated January 2014,

--'Rating FI Subsidiaries and Holding Companies' dated August 2012;

--'National Ratings Criteria' dated October 2013.

Applicable Criteria and Related Research:

National Scale Ratings Criteria

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

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

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=873774

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Contacts

Fitch Ratings
Primary Analyst:
Eduardo Ribas, +55 11 4504-2213
Director
Fitch Rating Brasil Ltda.
Alameda Santos 700
Sao Paulo, Brazil
or
Secondary Analyst:
Pedro Gomes, +55 11 4504-2604
Director
or
Committee Chairperson:
Franklin Santarelli, +1-212-908-0739
Managing Director
or
Elizabeth Fogerty, +1-212-908-0526
Media Relations, New York
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Eduardo Ribas, +55 11 4504-2213
Director
Fitch Rating Brasil Ltda.
Alameda Santos 700
Sao Paulo, Brazil
or
Secondary Analyst:
Pedro Gomes, +55 11 4504-2604
Director
or
Committee Chairperson:
Franklin Santarelli, +1-212-908-0739
Managing Director
or
Elizabeth Fogerty, +1-212-908-0526
Media Relations, New York
elizabeth.fogerty@fitchratings.com