Announcement of Periodic Review: Moody's announces completion of a periodic review of ratings of B3 S.A. - Brasil, Bolsa, Balcao
Global Credit Research - 03 Sep 2020
New York, September 03, 2020 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of B3 S.A. - Brasil, Bolsa, Balcao and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since 1 January 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Key rating considerations are summarized below.
B3 S.A. -- Brasil Bolsa Balcao's (B3) Ba1 issuer and senior unsecured ratings reflect its strong financial performance, high pretax margins and cash flow generation and manageable leverage and coverage ratios. B3 earns revenues from a variety of sources while offering services for which it has limited competition, particularly in cash equities trading and post trading. B3 has a fully vertically integrated business model as the preeminent financial market infrastructure company in Brazil, providing trading, clearing and depository services in cash equities and derivatives, as well as the registration of over-the counter derivatives, fixed-income securities, car liens and real estate financing. B3`s financial performance began to benefit from significant operating leverage, defined by change in revenue to change in operating expenses net of depreciation and amortization, from 2018 onwards as it was able to realize all cost synergies post the merger BM&F Bovespa S.A. and Cetip S.A., a Brazilian market infrastructure provider, which completed in March 2017. Brazil's even lower interest rate environment will continue to bolster B3's core business leading to higher equity trading and post trading revenues and allowing B3 to report strong financial results over the next 12 -18 months.
B3's leverage and coverage remain at manageable levels, commensurate with B3's Ba1 rating, and are backed by strong cash flow coverage. B3's ratings are though constrained by its strong linkages with the Brazilian sovereign risk whereby the majority of the collateral it accepts in its central counterparty clearing house and the liquid assets it holds are in Brazilian sovereign bonds, which means its ratings are positioned only one notch above Brazil's Ba2 sovereign rating.
This document summarizes Moody's view as of the publication date and will not be updated until the next periodic review announcement, which will incorporate material changes in credit circumstances (if any) during the intervening period.
The principal methodology used for this review was Securities Industry Service Providers Methodology published in November 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
This announcement applies only to EU rated and EU endorsed ratings. Non EU rated and non EU endorsed ratings may be referenced above to the extent necessary, if they are part of the same analytical unit.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Farooq Khan Asst Vice President - Analyst Financial Institutions Group Moody's America Latina Ltda. Avenida Nacoes Unidas, 12.551 16th Floor, Room 1601 Sao Paulo, SP 04578-903 Brazil JOURNALISTS: 0 800 891 2518 Client Service: 1 212 553 1653 M. Celina Vansetti-Hutchins MD - Banking Financial Institutions Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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