Fitch lowers Banrisul to A+(bra)

Fitch Ratings said it downgraded Banco do Estado do Rio Grande do Sul SA's (Banrisul) long-term national rating to A+(bra) from AA-(bra).

The outlook is negative.

The agency also affirmed the bank's long-term foreign and local currency issuer default ratings at BB-. The outlook for the issuer default ratings remains negative.

Fitch said the downgrade of Banrisul's national ratings reflects the deterioration in its capitalization and profitability ratios, as a result of its purchase of the exclusive rights to be provide banking services to Estado do Rio Grande do Sul's (ERS) active and retired employee base for a period of 10 years, for R$1.3 billion, in June 2016.

From 2007 until May 2016, Banrisul had an exclusivity agreement with ERS free of charge to the bank.

Intangible assets resulting from this transaction has negatively affected Banrisul's capitalization ratios, whereby its Fitch Core Capital (FCC) declined to 13% in June 2016, from 14.8% in December 2015, the agency added.

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