S&P: Banco de Brasilia’s credit ratings under review amid planned acquisition of Banco Master

Investing.com -- On March 28, 2025, BRB – Banco de Brasilia S.A. announced its intention to acquire 49% of the voting shares and all of the preferential shares of Banco Master S.A. The acquisition, which is still awaiting regulatory approval, will require a divestment of some of Banco Master’s assets.

The ratings agency, S&P Global Ratings, has placed BRB’s ’B’ long-term global scale and ’brA+/brA-1’ national scale issuer credit ratings on CreditWatch with developing implications. This is due to the need for more clarity on the consolidated group structure post-acquisition and details on Banco Master’s reorganization. The ’B’ short-term global scale issuer credit rating has been affirmed.

The ratings will be reassessed once the necessary approvals and conditions are met and the impact of the acquisition on BRB’s creditworthiness has been evaluated. If the acquisition does not go through, the ratings are likely to remain unchanged.

BRB’s plan to acquire Banco Master, which was announced on March 28, 2025, is still pending regulatory approvals. As of December 2024, Banco Master’s assets totaled Brazilian real (R$) 63 billion, with common equity of R$4.7 billion. In comparison, BRB’s total assets were R$55.4 billion and its common shareholder equity was R$2.9 billion as of September 2024.

The acquisition could significantly impact BRB’s credit fundamentals, including capitalization, risk exposure, integration challenges, revenue stability and diversification, and funding and liquidity shifts. The final capital structure of Banco Master is still undefined, as is the value of the assets that will be spun off.

Banco Master has undergone rapid non-organic asset growth and has issued high-yielding deposits through third parties. Its asset portfolio is complex and varied, including both traditional loans and unconventional high-yield assets.

BRB’s ratings take into account its solid market share in the Distrito Federal, recent robust growth, and stable funding base. However, the bank’s rapid asset growth and expansion into new asset types and regions pose potential risks to asset quality metrics and operational performance. Despite two capital injections in 2024, BRB’s capital ratios have tightened since 2022 due to the rapid increase in assets.

BRB’s profitability has declined in recent years due to tighter margins. However, asset quality metrics have remained manageable, thanks to a high share of payroll deductible loans and house financing on BRB’s balance sheet.

The CreditWatch listing reflects the uncertainty surrounding the impact of the acquisition on BRB’s revenue stability, governance, capital structure, risk exposures, and funding and liquidity profiles. The listing will be resolved once the necessary approvals are met and the impact of the acquisition on BRB’s creditworthiness has been assessed.

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