Banco PanAmericano capital increase good for financial profile - Fitch

Brazilian bank Banco PanAmericano's planned 3bn-real (US$1.35bn) capital increase is positive for the bank's financial profile but neutral for its 'b' viability rating (VR) in the short term, Fitch said in a report.

The capital increase, led by controlling shareholders BTG Pactual and Caixa, will involve the issuance of 1.5bn reais in new shares and up to 1.5bn reais of redeemable preferred shares, subject to shareholder approval.

According to Fitch, BTG and Caixa are committed to subscribe to the capital injections up to their 71% ownership stake and all remaining unsubscribed shares, eventually.

The issuance of new shares would positively affect the bank's regulatory capital ratio and core capital, the rating agency said.

"Capital injections should allow PanAmericano to accelerate the achievement of its operational breakeven point through the retention of a larger portion of its loan originations and reduce its reliance on credit sales under the agreements with Caixa," said Fitch.

However, for a positive VR action, the bank's profitability and capital ratio improvements need to be sustained, the report added.