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A Closer Look at Brazilian Banks' Capital Apr 04
Standard & Poors, April 2004
Abstract
Brazilian banks are generally perceived as adequately capitalized. The ratio of capital to risk-weighted assets is well above the local regulatory requirement, with the average ratio for private retail banks comfortably at around 19% as of December 2003. Nevertheless, a closer look at capitalization shows that a deterioration in the intrinsic quality of capital is gradually taking place, mostly as a result of Tier II capital increasing at a faster pace than Tier I capital by means of the Brazilian banks' increasingly common practice of issuing subordinated debt, which is accepted for regulatory capital calculations. In addition to the influence of subordinated debt, other sources of concern over the banks' capitalization are the high amount of tax credits and goodwill...
Companies mentioned in this report are: Unibanco-Uniao de Bancos Brasileiros, S.A.,Itau Unibanco Holding S.A.,HSBC Bank Brasil S.A.,Banco do Brasil S.A
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
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