Fitch Views Banco BMG's 2Q'13 Results as Credit Positive

  Fitch Views Banco BMG's 2Q'13 Results as Credit Positive

Business Wire

NEW YORK & SAO PAULO -- August 9, 2013

Fitch Ratings considers Banco BMG S.A.'s (Long-Term Foreign Currency Issuer
Default Rating 'B') recently released 2Q'13 results a credit positive.

The figures showed favorable performance especially when compared to a year
earlier. For the first half of 2013, the bank reported an adjusted net income
figure of BRL286 million versus a BRL280 million loss for the same period in
2012.

The 2Q'13 result was equivalent to a healthy annualized ROAA of 2.6%. The bank
saw a 45% yoy increase in new payroll deductible loans (known locally as
'Consignado').

While the bank still relies on asset sales, which, as of June 30, 2013,
accounted for nearly 51% of its funding, a relevant portion of these sales
were to Itau Unibanco S.A. following last year's funding agreement. Fitch
Ratings viewed that agreement as very positive for BMG's core business over
the next few years as it supports the bank with the funding it needs to
generate good recurring earnings in the face of the strong competition in this
niche. Further to asset sales and deposits, the bank also continues to
diversify its funding sources through the use of special purpose funding
vehicles known as 'FIDCs'. Another funding highlight was the greater use of
'Letra Financeiras' which enables the growth in long-term funding (average
tenor of 3.5 years).

Banco BMG S.A.'s partnership with Itau Unibanco S.A. in Banco Itau BMG
Consignado S.A. has generated BRL 9.2 million during the first half of 2013,
and this JV is expected to perform at an even higher level given the strong
demand and the strengths of its majority partner. The JV also recently
purchased BMG Seguradora S.A. which was partially owned by the shareholders of
Banco BMG. BMG Seguradora S.A. is expected to further grow the earnings
capacity of the JV and thus will contribute to Banco BMG's revenues via BMG's
30% ownership share of the JV.

The bank continues to focus on its product niche and even though asset quality
deteriorated from the levels shown a year earlier, the bank's asset quality
remains satisfactory. The bank reported a good efficiency ratio of 32.7%. In
addition to the further professionalization of its management, the bank is
also expected to complete the transfer of its headquarters to Sao Paulo over
the next 30 days.

Fitch views the above mentioned highlights and other recently announced
results as a credit positive and expects the bank to continue reporting this
positive trend in a sustained manner which should gradually result in an
improved Fitch Core Capital Ratio ('FCC'). As stated in our ratings
affirmation of March 22, 2013, a sustained recovery of recurring earnings and
good asset quality ratios that yields an improvement of its FCC ratio closer
to 6% could favorably impact the bank's viability rating. As of June 30, 2013,
BMG's FCC ratio improved to 5%. The ability of the bank to sustain current
positive results and a prudent dividend and growth strategy may pave the way
to achieve a less compromised capitalization.

Soon to be headquartered in Sao Paulo, Banco BMG S.A. is a mid-sized,
wholesale bank, which is a market leader in paycheck deductible loans. The
bank is privately owned by Mr. Flavio Pentagna Guimaraes and his family.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings
Primary Analyst
Robert Stoll, +1-212-908-9155
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Claudio Gallina, +55-11-4504-2216
Director
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com
 
Press spacebar to pause and continue. Press esc to stop.