TEXT-Fitch affirms BNDES ratings; outlook stable

Thu Jan 24, 2013 11:37am EST

Jan 24 - Fitch Ratings today affirmed all the ratings assigned to Banco
Nacional de Desenvolvimento Economico e Social (BNDES). A full list of ratings
follows at the end of this release.

RATING RATIONALE
The affirmation of the Issuer Default Ratings (IDRs) at 'BBB', which are equal
to Brazil's sovereign ratings, and the national ratings of BNDES, reflects the
federal government's control, high probability of support, and the key role it
plays as Brazil's main development bank in implementing government policies
aimed at national economic development and employment generation. The Stable
Outlook for the IDRs reflects that of the sovereign rating. Fitch did not assign
a Viability Rating because of the bank's development bank status.

BNDES is a development bank with ample access to government resources, part of
which is guaranteed by the constitution. Its importance has grown since the
economic crisis of 2008 and 2009, when the bank was used as a key instrument in
the execution of the anti-cyclical policies of the government.

BNDES played an active role in the implementation of stimulus measures of the
government in 2012 by reducing lending interest rates, and increasing tenors and
maximum participation limits in various stages. The changes were implemented
across a range of products with a special focus on the industry and
infrastructure sectors. Total disbursements reached BRL156 billion in 2012
(BRL140 billion in 2011). Fitch Ratings does not expect these anti-cyclical
initiatives to undermine asset quality ratios in the short term.

As of 3Q12, total net loans reached BRL457 billion (BRL429 billion at YE11),
composed of direct (52%) and indirect operations (48%). The latter represent
lending to financial institutions for on-lending. The proportion of the 10
largest borrowers to total loans remained high at 39.4% at 1H12 (38.7% at YE11).
Fitch does not have access to individual credit risks and was unable to assess
the quality of the portfolio or the adequacy of its provisions, but reported
asset quality metrics are sound.

BNDES reported a slight decline in net income for the first six months of 2012,
with its return on average assets (ROAA) falling to 0.88% from 1.54% and 2.14%
in 2011 and 2010, respectively. This was due to the relatively lower investment
income and slightly higher impairment charges. The persistence of this trend, as
a result of slower than expected economic recovery, is a risk for the
performance indicators, given the limited upside potential for net interest
income. This is mitigated by BNDES's favourable track record for net charge-offs
and asset quality ratios.

The National Treasury (Tesouro Nacional) remains the largest provider of funds
to BNDES and transferred BRL55 billion in 2012. The Fundo de Amparo ao
Trabalhador (FAT), the unemployment insurance fund, remains the second largest
source of funding. At 1H12, funding from the Treasury and FAT corresponded to
57% and 26% of total liabilities respectively.

BNDES's Fitch core capital ratio decreased to 10.98% as at 1H12 (12.66% at
YE11). This is mainly explained by the decrease in the revaluation reserves for
the fair value of its equity portfolio, of BRL73 billion, classified as
'available for sale'. Capital measures tend to be volatile since revaluation
reserves make up 20% of Fitch core capital.

SENSITIVITY/RATING DRIVERS
Changes in Brazil's sovereign ratings or in the propensity and willingness of
the government to provide support would directly affect BNDES' ratings, although
this is currently an unlikely scenario.

Fitch has affirmed the following ratings on BNDES:

--Foreign and local currency long-term IDRs at 'BBB'; Outlook Stable;
--Foreign and local currency short-term IDRs at 'F2';
--Support rating at '2';
--Support rating floor at 'BBB';
--National long-term rating at 'AAA(bra)'; Outlook Stable;
--National short-term rating at 'F1+(bra)';
--Foreign currency long-term rating of the USD1 billion unsecured notes maturing
in 2019 at 'BBB'.

Created in 1952 as a development agency, BNDES was converted into a bank in
1971. It is the main administrator of resources for the government's development
efforts and an important supplier of development credit to the Brazilian
economy.

Additional information available at 'www.fitchratings.com'. The ratings above
were unsolicited and have been provided by Fitch as a service to investors.

Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'National Ratings Criteria' (Jan. 19, 2011).

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
National Ratings Criteria
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