Moody\'s Investors Service assigned a bank
financial strength rating of D- (D minus) to Banco Industrial do Brasil
S.A. (BIB). Moody\'s also assigned long- and short-term global
local-currency deposit ratings of Ba3 and Not Prime, as well as long- and
short-term foreign-currency deposit ratings of Ba3 and Not Prime, both
at Brazil\'s country ceiling. At the same time, Moody\'s assigned long- and
short-term national scale deposit ratings of A3.br and BR-2. The outlook
on all ratings is stable.
Moody\'s D- bank financial strength rating for BIB reflects its
traditionally secured middle-market- lending strategy. The D- also
incorporates the growth brought by opportunities in the
payroll-deductible-lending business and management\'s efforts to diversify
product lines. In addition, the rating is supported by an agile operating
structure within a flexible business model, which is in turn bolstered by
a strong credit-risk management platform. Moody\'s believes that this
arrangement could accommodate some future pressure on margins.
In addition, Moody\'s ratings highlight BIB\'s adequate financial metrics
and good profitability -- two positive factors that are boosted by
consumer-lending operations and by adequate asset quality indicators.
Both compare well with the operations and indicators of similarly rated
peers\'.
Moody\'s explained that BIB\'s margins might be squeezed by aggressive
market conditions in the future and by falling domestic interest rates.
Management\'s has attempted to mitigate concentrated funding sources;
nevertheless, the bank\'s ratings are constrained by BIB\'s expensive
funding structure and by its small capital base.
Both the bank\'s small footprint and limited competitive capacity in
consumer-banking activities, when seen in the context of current fierce
competition, exacerbated by the likely entrance of big players, might
require BIB to search for other businesses to sustain its earnings
diversification.
Improving profitability ratios would strongly suggest management\'s ability
to expand operations within the bank\'s defined niche markets, even under
pressure. Management\'s ability to sustain funding diversification would
be a positive factor for its ratings. Conversely, BIB\'s ratings might
suffer from the effects of deteriorating asset quality or poor
profitability -- both of which could derive from overly aggressive
lending practices or from tougher competition. The limited governance
structure currently constrains the bank\'s ratings.
Moody\'s Ba3 global local-currency deposit rating reflects BIB\'s modest
participation in the deposit market, and translates, in Moody\'s view,
into a low probability of regulatory support. Frequent dividends
reinvestments by the controlling shareholder -- Carlos Alberto Mansur --
have demonstrated commitment and support to the bank\'s expansion
strategy. Moody\'s believes that shareholders should continue to provide
support.
BIB is headquartered in Săo Paulo, Brazil. As of December 2006, the bank
had total assets of approximately R$1.6 billion (US$764 million) and
equity of R$177 million (US$83 million). | 
