U.S. markets close in 28 minutes
  • S&P 500

    3,849.32
    -3.75 (-0.10%)
     
  • Dow 30

    31,067.35
    -108.66 (-0.35%)
     
  • Nasdaq

    13,554.11
    +23.19 (+0.17%)
     
  • Russell 2000

    2,153.37
    +11.95 (+0.56%)
     
  • Crude Oil

    52.10
    -1.03 (-1.94%)
     
  • Gold

    1,855.40
    -10.50 (-0.56%)
     
  • Silver

    25.53
    -0.32 (-1.23%)
     
  • EUR/USD

    1.2173
    0.0000 (-0.00%)
     
  • 10-Yr Bond

    1.0910
    -0.0180 (-1.62%)
     
  • GBP/USD

    1.3680
    -0.0051 (-0.37%)
     
  • USD/JPY

    103.8150
    +0.3100 (+0.30%)
     
  • BTC-USD

    33,811.85
    +3,328.11 (+10.92%)
     
  • CMC Crypto 200

    668.34
    +58.35 (+9.57%)
     
  • FTSE 100

    6,695.07
    -20.35 (-0.30%)
     
  • Nikkei 225

    28,631.45
    -125.41 (-0.44%)
     

Banco Mizuho do Brasil S.A. -- Moody's affirms Banco Mizuho do Brasil's ratings, outlook stable

·16 min read

Rating Action: Moody's affirms Banco Mizuho do Brasil's ratings, outlook stable

Global Credit Research - 16 Dec 2020

New York, December 16, 2020 -- Moody's Investors Service, ("Moody's") has today affirmed all ratings and assessments of Banco Mizuho do Brasil S.A.'s (Mizuho Brazil), including the long-term global local and foreign currency deposit ratings at Baa3, the long-term global local and foreign currency counterparty risk ratings at Baa3 and the long-term counterparty risk (CR) assessment at Baa3(cr). Moody's also affirmed Mizuho Brazil's baseline credit assessment (BCA) at ba3, and adjusted baseline credit assessment (BCA) at baa3, which incorporates Moody's assessment of very high likelihood of support by the parent company, Mizuho Bank, Ltd. (A1 stable).

A full list of the affected ratings and assessments is provided at the end of this press release.

RATINGS RATIONALE

The ratings affirmation reflects Moody's unchanged view of the bank's standalone credit profile against the backdrop of the economic downturn in Brazil during 2020, caused by the coronavirus pandemic outbreak. At the same time, the ratings incorporate Moody's assessment of Mizuho Bank, Ltd's very high willingness to provide extraordinary financial support to Mizuho Brazil in case of need.

In affirming Mizuho Brazil's BCA of ba3, Moody's acknowledges its track record of solid asset quality metrics, supported by management's conservative underwriting policies and its targeting of select high quality and large corporations. Since the onset of its operations in Brazil in 2015, Mizuho Brazil has not reported delinquencies , and, even during the pandemic, it has had no restructurings nor deferrals. However, the nature of its corporate lending and balance sheet size result in sizable loan concentrations, with its top 10 borrowers accounting for roughly 70% of loans. In addition, the fast pace of growth, including both loans and private securities, over the past three years exposes it to asset quality volatility.

Mizuho Brazil leverages its expertise, global operations and balance sheet to foster bank businesses in Brazil, focusing on short-term trade financing, working capital loans and treasury services to large domestic companies and to subsidiaries of Japanese and other Asian companies operating in Brazil. Mizuho Brazil has also invested in local bonds issued by corporate customers, while leveraging cross-selling opportunities through capital market transactions. This strategy aims at diversifies earning generation and reducing certain reliance on intra-group fees, offsetting the impact of narrowing margins due to low interest rates. Mizuho Brazil has traditionally reported modest profitability metrics with net income averaging 0.9% of tangible banking assets over the past five years. In H1 2020, net income to tangible banking assets was 0.16%, further impacted by lower intragroup fees and compressed margins.

Mizuho Brazil's adequate capitalization and ample liquidity are also credit strengths. Moody's capitalization ratio was 11% in H1 2020, measured as tangible common equity relative to adjusted risk-weighted assets, while liquid assets equaled 42.6% tangible banking assets. However, both capitalization and liquidity ratios have declined over the past three years, following overall loan growth in the period. Risk weighted assets more than doubled since 2017, but the reinvestment of dividends mitigates pressure on capital adequacy. Mizuho Brazil's strict risk management limits and controls established by the parent helps reduce liquidity risk.

Mizuho Brazil's funding is inherently concentrated by investor and type of product, with strong reliance on funding from its parent, which has been used to maintain its competitiveness in the local market. About 50% of total funding was provided by the bank´s parent and the bank´s top ten depositors alone accounted for 73% of total deposits as of H1 2020, higher than 55% in December 2019. Mizuho Brazil's high level of integration and strategic coordination with its parent company with regards to funding and liquidity management as well as risk managements practices support Moody's view that there is a very high probability that the bank's ultimate parent would provide extraordinary support in an event of stress.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The ratings could be upgraded if Brazil's sovereign ratings and deposit ceilings were upgraded. An improvement in profitability and diversification of the bank´s earnings and funding could put upward pressure on its BCA, but this would not in and of itself lead to an upgrade of the bank´s deposit ratings.

Conversely, Mizuho Brazil's ratings could be downgraded if either Brazil´s sovereign rating or Mizuho Bank's adjusted BCA were to be downgraded. A reassessment of support from its parent bank could also affect ratings negatively. The ratings could also face downward pressure if aggressive growth were to lead to weakened asset quality and profitability.

METHODOLOGY USED

The principal methodology used in these ratings was Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Banco Mizuho do Brasil S.A. is headquartered in São Paulo, Brazil, with assets of BRL 7.7 billion and shareholders' equity of BRL 753 million as of 30 June 2020.

LIST OF RATINGS AND ASSESSMENTS

The following ratings and assessments of Banco Mizuho do Brasil S.A. were affirmed:

- Long-term global local-currency deposit rating at Baa3; stable outlook

- Long-term foreign-currency deposit rating at Baa3; stable outlook

- Short-term foreign-currency deposit rating at Prime-3

- Short-term global local-currency deposit rating at Prime-3

- Long-term Brazilian national scale deposit rating of Aaa.br

- Short-term Brazilian national scale deposit rating of BR-1

- Long-term local-currency counterparty risk rating at Baa3

- Long-term foreign-currency counterparty risk rating at Baa3

- Long-term Brazilian national scale counterparty risk rating of Aaa.br

- Short-term local-currency counterparty risk rating at Prime-3

- Short-term foreign-currency counterparty risk rating at Prime-3

- Short-term Brazilian national scale counterparty risk rating of BR-1

- Long-term counterparty risk (CR) assessment at Baa3(cr)

- Short-term counterparty risk (CR) assessment at Prime-3(cr)

- Adjusted baseline credit assessment at baa3

- Baseline credit assessment at ba3

- Outlook, Remains Stable

Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in May 2016 entitled "Mapping National Scale Ratings from Global Scale Ratings". While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216309.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Theresangela Araes Vice President - Senior 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

© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS,ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS,ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​