November 5, 2012 / 3:30 PM / 5 years ago

TEXT-Fitch expects to rate Itau Unibanco Holding S.A.

Nov 5 - Fitch Ratings expects to assign Itau Unibanco Holding S.A.’s (IUH) upcoming 2023 subordinated notes a rating of ‘BBB(exp)'. The final rating is contingent upon the receipt of final documents conforming to information already received. The notes will be issued by IUH’s Grand Cayman branch. Principal will mature in 2023, and interest payments will be made semi-annually. The notes, part of a USD10 billion global medium-term note program, will carry a fixed interest rate. The interest rate and principal amount should be set at time of issuance. The net proceeds will be used by IUH for general corporate purposes. The notes will rank at least equally with similar subordinated debt and carry a cumulative coupon deferral mechanism that can be exercised if necessary. A deferral will only occur if IUH is noncompliant with its regulatory capital requirement. As per Fitch’s rating criteria, the expected rating of this Tier II subordinated debt should be two notches below IUH’s Viability Rating (VR) of ‘a-', one notch lower due to Loss Severity features and its subordinated status, and a one-notch deduction due to moderate risk of non-performance. IUH’s VR reflects Fitch’s assessment of its high credit quality and strong prospects for ongoing viability. The ratings also reflect IUH’s broad and diversified franchise, which is ranked among the leaders of various segments of the Brazilian financial system. The ratings also consider IUH’s track record for solid performance, its robust risk controls, its ample liquidity and greater diversification compared with local peers as a result of its overseas presence. Controlled by the Egydio de Souza Aranha and Moreira Salles families, IUH is the largest private financial conglomerate in Brazil and Latin America. Its main subsidiary, Itau Unibanco S.A., is one of Brazil’s leading retail banks.

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