June 28 (Bloomberg) -- Banco Itau Unibanco SA and Banco Bradesco SA declined after their credit ratings were cut by Moody’s Investors Service.
The banks fell after the ratings company cut standalone financial strength ratings or baseline credit assessments for them and six other Brazilian lenders, citing their exposure to government debt. The cuts, part of a global review of banks rated higher than their home countries, also reflect a dependence on the local economy and the influence of market sentiment on their funding base, Moody’s said in a statement.
“There are little, if any, reasons to believe that these banks would be insulated from a government debt crisis,” Moody’s said in the statement. “We note their significant direct exposure to the Brazilian government securities, equivalent to 167 percent of tier 1 capital on average.”
Itau fell 0.9 percent to 27.25 reais at 11:28 a.m. in Sao Paulo, while Bradesco slid 1.1 percent to 29.29 reais. Banco do Brasil SA, the country’s largest lender, was little changed at 18.78 reais after earlier dropping as much as 1.4 percent.
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