Moody's affirms Banco Itau Europa

Moody's Investors Service said it affirmed the Baa1 long- and Prime-2 short-term deposit ratings and C- financial strength rating of Banco Itau Europa, SA with a stable outlook following the announcement that the bank has reached an agreement to acquire BankBoston International, BankBoston Trust Co. Ltd. and BankBoston Trust Co. from Bank of America Corp.

In affirming the ratings, the agency said it views the acquisition positively and that the bank's credit profile should benefit from the resulting expansion of its private banking operations, with its private banking client base more than doubling in size. According to Moody's, the deal - which will also provide Banco Itau Europa with a good platform for the development of cross-border business - will materially contribute to further reduce the weight of its concentration on a wholesale business focused on intermediating trade and investment flows with Brazil.

Nonetheless, Moody's noted the sizeable nature of the proposed operation, with a total value equivalent to 20% of Banco Itau Europa's total capital funds and over twice its net profit. Given that the BankBoston International brand is excluded from the agreement, the agency believes it may be difficult for the bank to retain and manage its newly enlarged client base.

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