Fitch Ratings has today affirmed the following Banco Original S.A. (Original) ratings:

--Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at B+;

--Short-Term Foreign and Local Currency IDRs at 'B';

--Viability Rating at b+;

--National Long-Term Rating at BBB+(bra).

--National Short-Term Rating at 'F2(bra)';

--Support Rating at '5';

--Support Rating Floor at 'NF'.

The Rating Outlook remains Stable. Original's IDRs are driven by its VR.

KEY RATING DRIVERS - IDRs, VR, NATIONAL RATINGS

The affirmation of Original's IDRs and National Ratings reflects the bank's still modest profitability, and the need to further consolidate its recently launched retail banking project in order to achieve adequate and recurring profitability. Original's ratings also take into account its whole-sale based funding profile. However, conservative asset and liability management and solid liquidity considerably mitigate potential risks arising from the concentrated nature of its funding base.

Conversely, Fitch recognizes that the national ratings could benefit in the short-term from Original's successful steps towards the consolidation of a more competitive franchise in the corporate and agribusiness segment. Fitch also expects that this will lead to incrementally improving results going forward, while maintaining adequate underwriting standards, capitalization and liquidity. Over the past three years, after the launch of a full revision of its organizational structure, Original has managed to strengthen its customer base, which has placed its corporate franchise in a better and more comparable position to other midsize banks with longer-track records in the market.

Original's total assets reached BRL7.4 billion as of June 2016, up from BRL3.0 billion at the end of 2013. During this period, the bank managed to strengthen its competitive position as a niche player, while most of its competitors have been forced to adopt a more defensive approach due the economic crisis and reduce their size and scope in order to protect their franchises.

Profitability, on the other hand, remains one of the bank's main weaknesses, and is lower than 'BB' category rated-banks. This reflects not only Original's high capital adequacy ratios and its need to further mature its overall franchise, but also its significant investments in the digital banking segment, which has yet to bear fruit. This in turn, may prove challenging under the current economic scenario and fierce competitive landscape. As of June 2016, the bank's operating profit to risk weighted assets decreased to 0.05% from 1.14% in December 2015. Fitch expects profitability to remain relatively modest in the short term, although it should start to improve gradually from 2017 onwards, when the bulk of the major expenses related to the retail segment will already have been incurred and provisioning expenses and funding costs should decline.

Meanwhile, Fitch expects the bank to maintain its above average capitalization ratios and preserve a prudent liquidity position. Capitalization is comfortable, and in spite of the bank's aggressive growth plans, management has stated it aims to keep regulatory capital in excess of 16%. The bank's Fitch Core Capital (FCC) ratio of 23.04% at June 2016 dropped significantly from 41.72% at December 2014, as a result of rapid loan growth. Fitch believes that capitalization will remain adequate to support the bank's medium-term goals, despite modest profitability and until the bank's business plans are fully implemented and mature.

SR and SRF

Original's Support Rating and Support Rating Floor were affirmed at '5' and 'NF', respectively, in view of the bank's low systemic importance. In Fitch's view, external support cannot be relied upon.

RATING SENSITIVITIES

IDRs, VR AND NATIONAL RATINGS

Original's IDRs would benefit from a sustained improvement in its recurring operating profitability, diversification of its funding base, and the maintenance of its FCC ratio above 15%. The ratings could also be positively affected in the near term if the positive trend of the implementation of the bank's business plan (including achieving a longer and positive track-record in its nascent digital banking segment) continues and results in a further consolidation of the bank's franchise, while the currently robust capital and liquidity profile and adequate asset-quality is maintained.

In turn, if performance deteriorates and remains very weak for a sustained period, or in case of a deterioration of the quality of its corporate or agribusiness loan portfolio, Original's IDRs could be downgraded. A deterioration of the FCC ratio to below 15% or a longer than expected implementation of the business plan and modest sustained performance could all trigger a rating downgrade.

SR and SRF

A potential upgrade of Original's Support Rating and Support Rating Floor is unlikely in the foreseeable future, since this would arise from a material gain in systemic importance.

Additional information is available on www.fitchratings.com.

Applicable Criteria

Global Bank Rating Criteria (pub. 25 Nov 2016)

https://www.fitchratings.com/site/re/891051

National Scale Ratings Criteria (pub. 30 Oct 2013)

https://www.fitchratings.com/site/re/720082

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1015800

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015800

Endorsement Policy

https://www.fitchratings.com/regulatory

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Fitch RatingsPrimary AnalystRaphael NascimentoAssociate Director+55-11 3957-3664Fitch Ratings Brasil Ltda.,Alameda Santos, 700 - 7th floor,Sao Paulo, SP, BrazilorSecondary AnalystEsin CelasunDirector+55-21 4503-2626orCommittee ChairpersonAlejandro GarciaManaging Director+1-212-908-9137orMedia RelationsElizabeth Fogerty, +1 212-908-0526elizabeth.fogerty@fitchratings.com