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 sources 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 the RAC ratio averaging 4.0% in the next two years, and Basel III capital at least 100 basis points above the minimum regulatory requirements. We also expect Fibra to maintain its prudent liquidity management in the same period. We can raise the ratings on Fibra if it continues improving its financial performance without

...The ratings on Banco Fibra S.A. are based on its narrow business profile and volatile profitability, which is gradually improving after years of strategic repositioning. Over the past few years, Fibra turned around its operations, shifting towards less risky business segments, strengthening earnings. Nevertheless, tightening credit conditions and lower margins due to rising basic interest rates caused Fibra's 2021 net income to plummet to R$6.1 million from R$49 million in 2020. For 2022, we expect Fibra's portfolio growth to remain sluggish, but its profitability to recover amid increasing margins as the bank attempts to reprice its loans while reducing funding costs. The bank improved its underwriting standards, and consequently, the risk profile of its portfolio. After adopting tighter underwriting standards and a significant change in its client profile, Fibra's credit losses and nonperforming loans (NPLs) plummeted from an average of 6% until 2019 to 0.5% at the end of 2021. However,...

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