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Fitch Expects to Rate Banco Daycoval S.A.'s 4th Issuance of Letras Financeiras 'AA(bra)'
August 12, 2014 / 3:01 PM / 3 years ago

Fitch Expects to Rate Banco Daycoval S.A.'s 4th Issuance of Letras Financeiras 'AA(bra)'

(The following statement was released by the rating agency) SAO PAULO/RIO DE JANEIRO, August 12 (Fitch) Fitch Ratings expects to assign Banco Daycoval S.A.'s (Daycoval) upcoming issue of Brazilian Real denominated (BRL) fourth issuance of Letras Financeiras a national long-term rating of 'AA(bra)'. The amount of the fourth issuance will be up to BRL400. million in two series, one with maturity within two years and one day, and the other with maturity within three years, the amount allocated to each of the two series will be defined by the end of the bookbuilding process. Interest rate and principal will be paid at maturity for both series. The interest rate will be defined during the bookbuilding process and will not exceed will be 113% over the Depositos Interfinanceiros (DI) rate in the series with maturity in the two-years and one day series and not exceed 116% over the DI rate in the three-years series and the net proceeds will be used by Daycoval to generate new businesses. KEY RATING DRIVERS The expected rating assigned to Daycoval's issuance of Letras Financeiras corresponds to Fitch's long-term national rating ('AA(bra)'; Outlook Stable) for the bank and ranks equal with its other senior unsecured debt. Daycoval's ratings reflect the bank's consistent track record of performance, maintained through different cycles of the local economy, along with higher business diversification and comfortable liquidity and capitalization positions. The bank has recorded consistent profitability, even under stress scenarios, sustained by adequate asset pricing, strong cost control and low funding cost. It continues to adopt prudent liquidity management and adequate asset and liability management strategies that help to mitigate the burden of a less diversified funding base compared to larger peers. Business diversification to payroll deductible loans have allowed the bank to compensate the impact on margins of its more limited risk appetite for SME loans over the last two periods. RATING SENSITIVITIES Given its current business model, with asset and liability concentrations inherent to its size, including its wholesale funding nature, the potential for an upgrade to Daycoval's ratings is limited. The ratings could be negatively affected by continued asset quality deterioration which result in pressure on the bank's results (operating income to average asset ratio below 2%) and on capital (Fitch core capital ratio lower than 11%), which could be triggered by larger than expected asset quality deterioration and/or aggressive asset growth or cash dividend policy. Originated in 1968, Daycoval is controlled by the Dayan family and has been listed on the Sao Paulo's exchange (BM&FBovespa) since 2007. Contact: Primary Analyst Eduardo Ribas Director +55-11-4504-2213 Fitch Ratings Brasil Ltda. Alameda Santos, 700 - 7th floor Cerqueira Cesar - Sao Paulo - SP - CEP: 01418-100 Secondary Analyst Claudio Gallina Director +55-11-4504-2213 Committee Chairperson Franklin Santarelli Managing Director +1-212-908-0739 Media Relations: Jaqueline Carvalho, Rio de Janeiro, Tel: +55 21 4503 2623, Email:; Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information available at '' or '' Applicable Criteria and Related Research: --'Global Financial Institutions Rating Criteria' (Jan. 31, 2014); --'National Scale Ratings Criteria' (Oct. 30, 2013). Applicable Criteria and Related Research: National Scale Ratings Criteria here Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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