Banco Fibra S.A.

The positive outlook reflects our view that the bank's revamped strategy could lead to an upgrade in the next 12 months. In our view, Fibra should keep benefiting from the momentum of financing backed by receivables, while seeking to diversify revenue and improve further its financial performance without denting its asset quality. Moreover, we expect the bank's capitalization to remain weaker than the industry average, with a RAC ratio of 4.0% on average in the next two years, and Basel III capital at least 100 basis points above the minimum regulatory requirements. We also expect the bank to continue managing its liquidity in a conservative matter in the same period. We can raise the ratings on Fibra if it continues

...The ratings on Banco Fibra S.A. are based on its concentrated business profile and its track record of weak profitability, but which has been strengthening after years of strategic repositioning. Over the past few years, Fibra turned around its operations due to a strategic shift towards less risky business segments. The revised business model, aiming to reduce the credit risk, and focus on loans backed by receivables to mid-size companies and agrobusinesses have enabled Fibra to stabilize its revenue and margins, improving its earnings. The bank improved its underwriting standards, and consequently, the risk profile of its portfolio. After adopting tighter underwriting standards, credit losses narrowed and nonperforming loans (NPLs) plummeted, enabling the portfolio to cope well with the COVID-19 pandemic. We also believe the bank benefitted from the rising commodities prices given its exposure to agribusiness, and from financing operations of suppliers to companies that are within the...

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