Banco Ribeirao Preto S.A. (BRP) -- Moody's affirms Banco Ribeirao Preto's ratings following Vinci's acquisition; changes outlook to negative

The ratings affirmation follows the recent announcement that Vinci Partners (Vinci/unrated) has negotiated the acquisition of 100% of BRP's shares. The acquisition remains subject to final regulatory approval.

The following ratings were affirmed with negative outlook:

Bank Financial Strength Rating: D

Long-term Global Local Currency Deposit Rating: Ba2

Short-term Local Currency Deposit Rating: Not Prime

Long-term Brazilian National Scale Deposit Rating: A1.br

Short-term Brazilian National Scale Deposit Rating: BR-1

RATINGS RATIONALE

In affirming BRP's ratings, Moody's noted that the bank's small size and limited business franchise continue to constrain earnings generation, in the context of modest product and client diversification, relatively concentrated funding sources, and modest capital base. These challenges have been balanced by management's strategy of focusing lending within the bank's geographic footprint and industry of expertise, particularly agribusiness, which is a dominant sector in the region, under adequate credit underwriting criteria. Such strategy has ensured BRP certain operational, asset quality and earnings stability over time. However, increasing competition in the region by larger banks and resulting pressures on financial margins, as well as decelerating economic activity, have constrained BRP's growth and earnings prospects, with negative implications for the ratings. These trends are reflected in recent decline in the bank's balance sheet and earnings.

The negative outlook on the ratings incorporates BRP's weakening financial strength as well as the risk implications of the Vinci acquisition and particularly the execution risks associated with its strategy for the bank. Moody's acknowledges the Vinci group's broader business scope and larger financial resources, which could help address the challenges the bank's franchise currently faces; however, because of the bank's modest capital base, additional resources may be needed to support prospects for continued growth.

Moody's explained that BPR's ba2 standalone credit assessment does not benefit from any uplift for support, and maps to a Ba2 deposit ratings, to reflect the bank's modest deposit franchise.

The last rating action on Banco Ribeirão Preto S.A. occurred on 13 September, 2010 when Moody's affirmed all the bank's ratings, on global and national scales. The outlook on all the ratings was also affirmed as stable.

The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Based in São Paulo, Banco Ribeirão Preto S.A. had consolidated assets of approximately BRL334.9 million (or approximately US$165.7 million) and equity of BRL68.7 million (or US$34.0 million) as of 30 June, 2012.

Moody's National Scale 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 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 ".br" for Brazil. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

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