Fitch Affirms Ratings of Banco Societe Generale Brasil, Banco Cacique and Banco Pecunia

  Fitch Affirms Ratings of Banco Societe Generale Brasil, Banco Cacique and
  Banco Pecunia

Business Wire

RIO DE JANEIRO & NEW YORK -- March 19, 2014

Fitch Ratings has affirmed the Issuer Default Ratings (IDRs) and National
ratings of Banco Societe Generale Brasil S.A. (SGBr) and its two wholly-owned
subsidiaries, Banco Cacique S.A. (Cacique) and Banco Pecunia S.A. (Pecunia).
All the Rating Outlooks remain Stable. A full list of rating actions can be
found at the end of this release.

The IDRs and the National ratings of all three banks are based on support from
their ultimate parent Societe Generale (SG, Long-term IDR 'A'/Outlook Stable).
The Support Rating of '2' of each bank reflects Fitch's belief that the
probability of support by SG, in case of need, would be high. Fitch does not
assign a Viability Rating to any of the three banks, due to their significant
reliance on parental support and relatively small franchises.

KEY RATING DRIVERS

SGBr:

The affirmation of SGBr's ratings reflects the continued support from its
parent SG. Fitch considers SGBr as a strategically important subsidiary of SG,
given their common branding, the unquestioned support from the parent as
evidenced by the capital injections in the recent years, high proportion of
parental non-equity funding, strong operational synergies, and high level of
managerial and commercial integration with SG.

SG remains SGBr's main source of funding (78% and 70% of consolidated funding,
in 2013 and 2012, respectively). In 2013, SGBr's funding needs declined in
line with the deleveraging of its subsidiaries. As a result of this, SGBr
reduced local funding and pre-paid part of its funding from SG. The mix of
funding is not expected to change significantly in 2014.

In 2013, SG injected BRL300 million of capital into SGBr (BRL317 million in
2012) in order to support growth of the treasury activities that consume
capital mainly through market risk. With this, SGBr's Fitch core capital ratio
improved to 19.85% (11.89% in 2012). The Central Bank of Brazil supervises and
monitors the regulatory capital ratios of SGBr and its two subsidiaries on a
consolidated basis (19.69% and 11.96%, in 2013 and 2012, respectively).

In 2013, SGBr's performance continued to be dragged down by Cacique and
Pecunia (net consolidated loss was BRL30 million). Its individual operating
result, excluding those of it subsidiaries, was positive. The bulk of its
revenues is generated by its treasury unit, which is active in the foreign
exchange, fixed income, derivatives and equity markets. In 2013, the bank
established a closed equity fund fully funded by SG and has become its
manager. Meanwhile, SGBr's individual corporate loan portfolio expanded 2.5
times, reaching BRL246 million in 2013, although it still represents only 9%
of the consolidated loan portfolio (3% in 2012).

Cacique and Pecunia:

The affirmation of the ratings of Cacique and Pecunia also reflects the
continued support from their ultimate parent, SG, which owns the banks through
SGBr. Fitch considers both banks as subsidiaries of limited importance for SG,
as their contribution to the group's results has been minimal and is unlikely
to increase in the near future (considering their small franchise), and as
there are limited synergies between the banks and parent. However, Fitch
recognizes that SG's support to both banks has been unquestioned, as evidenced
by the timely capital injections in 2011 and 2012, high proportion of parental
non-equity funding, and high managerial integration. Considering the
relatively low cost of potential support, Fitch does not expect a change in
this stance. In addition, the agency views SGBr and its subsidiaries as a
group; thus, the ratings of the three banks are equalized.

Almost all of Cacique and Pecunia's non-equity funding comes from SGBr, which
transfers the funds it receives both from SG and from the domestic market. The
funding needs of the two banks eased significantly as outstanding loans
continued to fall. Cacique's loans continued to decrease (BRL1.1 billion and
BRL1.6 billion, in 2013 and 2012, respectively), following its decision to
exit a number of segments in 2011 and 2012, and the closure of two-thirds of
its points of sale in 2013. Pecunia's loans registered a smaller decline (BRL1
billion and BRL1.1 billion, in 2013 and 2012, respectively).

In 2013, the performance of Cacique and Pecunia remained poor (net losses were
BRL59 million and BRL57 thousand, respectively). This was mainly the result of
continued high loan impairment charges, and in the case of Cacique, also due
to significant provisioning expenses (about BRL50 million) related to a
reduction in headcount. Pecunia's bottom-line result was affected positively
by the reversal of provisions (BRL36 million) following its adherence to the
government's tax recovery program (Refis).

RATING SENSITIVITIES

Positive rating drivers:

A Brazilian sovereign rating upgrade or change in its Rating Outlook could
lead to a similar change in the foreign currency IDRs of all three banks,
which are currently limited by the country ceiling. An upgrade of SG's ratings
or change in its Outlook would not have an impact on the ratings, as long as
the sovereign rating remains unchanged.

Negative rating drivers: A Brazilian sovereign rating downgrade or change in
its Outlook could lead to a similar change in the ratings of all three banks.
A one-notch downgrade of SG's IDR would lead to a downgrade of the local
currency IDRs of the Brazilian subsidiaries, while a more than one-notch
downgrade of SG's IDR would affect both the local currency and the foreign
currency IDRs of the Brazilian subsidiaries. The banks' National ratings may
be affected by a multi-notch downgrade of the parent. In addition, a change in
Fitch's evaluation of the strategic importance of the three banks for SG could
result in changes to their ratings.

Fitch has affirmed the following ratings:

SGBr:

--Foreign Currency Long-term IDR at 'BBB+', Outlook Stable;

--Local Currency Long-term IDR at 'A-', Outlook Stable;

--Foreign Currency Short-term IDR at 'F2';

--Local Currency Short-term IDR at 'F1';

--Support Rating at '2';

--National Long-term rating at 'AAA(bra)', Outlook Stable;

--National Short-term rating at 'F1+(bra)'.

Cacique:

--Foreign Currency Long-term IDR at 'BBB+', Outlook Stable;

--Local Currency Long-term IDR at 'A-', Outlook Stable;

--Foreign Currency Short-term IDR at 'F2';

--Local Currency Short-term IDR at 'F1';

--Support Rating at '2';

--National Long-term rating at 'AAA(bra)', Outlook Stable;

--National Short-term rating at 'F1+(bra)'.

Pecunia:

--Foreign Currency Long-term IDR at 'BBB+', Outlook Stable;

--Local Currency Long-term IDR at 'A-', Outlook Stable;

--Foreign Currency Short-term IDR at 'F2';

--Local Currency Short-term IDR at 'F1';

--Support Rating at '2';

--National Long-term rating at 'AAA(bra)', Outlook Stable;

--National Short-term rating at 'F1+(bra)'.

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

Applicable Criteria and Related Research:

-- National Ratings Criteria (Oct. 30, 2013);

-- Rating FI Subsidiaries and Holding Companies (Aug. 10, 2012);

-- Global Financial Institutions Rating Criteria (Jan. 31, 2014).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=824335

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Contact:

Fitch Ratings
Primary Analyst
Esin Celasun,+55 21 4503 2626
Director
Fitch Ratings Brasil Ltda.
Praca XV de Novembro, 20 - 401 B
Rio de Janeiro, RJ, Brasil
or
Secondary Analyst
Robert Stoll,+1 212-908-9155
Director
or
Committee Chairperson
Franklin Santarelli,+1 212-908-0739
Managing Director
or
Media Relations
Jaqueline Carvalho, +55 21 4503 2623
Rio de Janeiro
jaqueline.carvalho@fitchratings.com
or
Elizabeth Fogerty, +1 212-908-0526
New York
elizabeth.fogerty@fitchratings.com
 
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