Federally controlled Brazilian bank Banco do Brasil (BB) has room to issue tier II securities to strengthen its capital base, Fitch senior analyst Paulo Fugulin told BNamericas.
"According to Brazilian regulations, subordinated debt cannot represent more than 50% of tier I. As of March, BB's subordinated debt represented 36% of its tier I capital," he said.
BB has ample access to capital markets and a target dividend payout ratio of 40%. The higher the payout ratio, the less the retained earnings that could be allocated to strengthen its capital base, Fugulin noted.
The bank's capital base remains tight for its long-term development and well below that of its peers, Fugulin wrote in a report earlier this week.
"Moderate dependency on hybrid capital, relatively higher dividend payments and constant expansion will continue to pressure capital quality," the report reads.
Fitch affirmed BB's long-term foreign and local currency issuer default ratings (IDRs) at BBB with a stable outlook, as well as its short-term foreign and local currency IDRs at F2.
BB is the largest Brazilian financial conglomerate and market leader in deposits, credit, foreign trade operations and asset management.
To read the full report, in English, go to this link
To read the full report, in Portuguese, go to this link