S&P: Banco Itau, Banco Bradesco ratings actions unusual

Standard & Poor's said in a report that the recent rating actions on Banco Itau SA and Banco Bradesco SA that raised the credit ratings on the banks above those on the sovereign should be seen as unusual and deserve some further consideration.

While country risks continue to weigh heavily on bank ratings, the agency said that its assessment of the country risks affecting the Brazilian bank industry improved, allowing it to differentiate the ratings of Itaś and Bradesco from those of their peers.

S&P added that it believes that Itaś and Bradesco, while similar to their peers in many aspects of our credit analysis, have distinct characteristics that would allow both banks to show more resilience to sovereign stress.

"These banks have the strongest private retail franchises in Brazil, which has helped them to capture an increased retail funding base and maintain high diversification of assets and results. These characteristics should help them present lower volatility and maintain adequate liquidity under a sovereign stress scenario," said S&P credit analyst Tamara Berenholc.

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