SÃO PAULO-- Moody's Investors Service reduced its outlook for
Brazilian major banks to negative from stable following a cut in
the outlook for the country's sovereign rating, citing tepid
economic activity, among others factors.
Moody's said the change in outlook includes state run banks
Banco do Brasil and Caixa Economica Federal, as well as private
sector giants Itau Unibanco SA, Banco Bradesco SA and Banco
Santander Brasil SA.
"The bank ratings are constrained by the sovereign rating, and
therefore, a change in outlook on the Baa 2 government bond rating
also affects the outlook on these banks' stand-alone, debt and
deposit ratings," Moody's said in a statement.
The rating agency Tuesday lowered its outlook of Brazil's
sovereign rating, saying deteriorating government accounts and a
decline of investor confidence contributed to the decision.
Brazil's rating remains at investment grade, two levels above
junk.
Brazil's gross domestic product shrank 0.6% in the second
quarter from the previous three months, and first-quarter data was
revised to a 0.2% contraction, the Brazilian statistics agency said
at the end of August. Recession is frequently defined as two
consecutive quarters of GDP contraction.
Economists expect Brazil's economy to expand only about 0.5%
this year, after 2.5% growth last year.
Moody's rating for Brazil is more optimistic than rival ratings
company Standard & Poor's, which in March cut Brazil's
long-term bonds to one notch above junk, citing similar
problems.
Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com
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