TEXT - Fitch affirms Banco Barclays S.A. issuer default rating

Fri Feb 1, 2013 12:21pm EST

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(The following statement was released by the rating agency)
    Feb 1 - Fitch Ratings has affirmed Banco Barclays S.A.'s (BBSA)
foreign-currency long-term Issuer Default Rating (IDR) at 'BBB+'. The Rating
Outlook is Stable. A complete list of the rating actions follows this release.

RATING ACTION AND RATIONALE

The affirmation of BBSA's foreign currency and local currency IDRs and national 
ratings reflect the support from its parent, Barclays Bank Plc (BPLC; Fitch IDR 
'A'; Stable Outlook). Fitch views BBSA as a 'strategically important' subsidiary
of BPLC, as evidenced by the high integration, strong operational and managerial
synergies and the common branding.

BBSA's foreign currency rating remains constrained by Brazil's country ceiling 
('BBB+'). 

BBSA's Support Rating was affirmed at '2' and reflects Fitch's view about BPLC 
high probability of support to its subsidiary in Brazil if it should be 
required. 

BBSA has a relatively modest presence in the Brazilian investment banking 
market. It mainly focuses on securities operations and investment banking. It 
has an active proprietary trading desk and is also active in the derivatives, 
foreign exchange, government bonds and commodities markets. 

Investments in qualified personnel and technology were carried out over the last
years as to back up its growth plans and market share expansion. The recent 
addition of a new executive appointed as Country Manager aims to foster the 
integration between business areas and the implementation of the bank's global 
capabilities in BBSA. 

Fitch believes the bank will need to seek further business diversification, 
expand its local and foreign client based businesses to face the fierce 
competition from local and foreign-owned peers in the Brazilian investment 
banking market. 

The bank benefits from its parent's sound risk management framework which 
supports its derivatives and proprietary trading activities, which made up 
approximately 30% of all treasury income as at 3Q12. Overall risks are 
adequately measured, monitored and mitigated, with treasury activities fully 
adhering to the controls and guidelines established by parent.

Funding has become more diversified and less dependent on parent funding (18% of
the total non-equity funding as of June 2012). Given the low leverage of its 
balance sheet, deposits remains quite concentrated with top 10 depositors 
accounting for 99.5% of the total deposits. Majority of the third-party deposits
are collateral deposited by the clients for derivatives operations. The 
concentration risk is mitigated by the bank's very limited lending activity, 
very high liquidity and ample capital base.

BBSA continued to maintain very sound liquidity ratios (unencumbered government 
bonds were equivalent to almost 2x deposits as at June 30, 2012) and comfortable
capitalization ratios (Fitch Core Capital ratio of 22.1% as at June 30, 2012), 
benefiting from its limited lending activity and large capital base. According 
to Fitch, BBSA has plenty of room in case it intends to expand its activities, 
particularly as it would tend to grow in segments which do not require capital 
utilization. Tangible equity to tangible assets ratio remains above 10%, which 
is considered positive by Fitch.

SENSITIVITY/RATING DRIVERS

Given that BBSA FC IDR is constrained by Brazil's country ceiling; upside 
potential is limited. Negative changes in BPLC's IDRs, or its willingness and 
capacity to support BBSA, would negatively affect BBSA ratings.

Fitch has affirmed BBSA's ratings as follows:

--Long-term Issuer Default Rating (IDR) at 'BBB+'; Outlook Stable;
--Short-term IDR at 'F2';
--Long-term local currency IDR at 'A-'; Outlook Stable; 
--Short-term local currency IDR at 'F1';
--Support Rating at 2';
--National long-term rating at 'AAA(bra)'; Outlook Stable;
--National short-term rating at 'F1+(bra)'.

Banco Barclays S.A. (BBSA) is a 99.99% owned subsidiary of Barclays Bank Plc. 
that has been operating in Brazil since 1973. Currently, BBSA ranks among the 40
largest financial conglomerates operating in Brazil and is on the top 15 foreign
financial groups in terms of total assets operating in the Brazilian market.

 (Caryn Trokie, New York Ratings Unit)
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