Fitch Affirms 'A+(bra)' Rating for Banco Rendimento; Outlook Revised to Positive
In 2023, Fitch Ratings affirmed Banco Rendimento's Long-Term National Rating at 'A+(bra)' and Short-Term National Rating at 'F1(bra)', with a revision of the Long-Term National Rating Outlook to Positive from Stable. The revision to a Positive Outlook reflects the ongoing progress of the bank's repositioning efforts, adopting new business lines that strengthen its financial profile, particularly in terms of operational profitability, capitalization, and liquidity indicators.
Fitch believes that Banco Rendimento's business model will continue to be resilient and grow in the medium term, especially in the event of an improved operational environment, contributing to maintaining or enhancing its financial profile compared to higher-rated domestic peers.
Key Rating Drivers:
Intrinsic Profile-Based Ratings:
Banco Rendimento's national ratings consider its strong business profile, characterized by increasingly diversified revenue streams and growing economies of scale. The ratings also reflect the bank's moderate risk profile, supported by well-developed and monitored controls and systems. Additionally, they take into account the institution's robust financial profile, marked by high profitability in a service-oriented business model, strong liquidity indicators, and adequate capitalization ratios. The bank maintains a conservative approach to credit risk, with a decreasing credit portfolio and low delinquency levels.
Revenue Evolution: Banco Rendimento remains focused on financial solutions for foreign exchange activities, collaborating with its subsidiary Cotação Distribuidora de Títulos e Valores Mobiliários S.A. (Cotação). The bank offers international transfers, opening of foreign currency accounts, receipt of funds abroad, international PIX, import and export of currencies, and other services in this segment. It also operates in the small and medium-sized enterprises (SMEs) market, providing loans, receivables anticipation for medium and large enterprise suppliers (Confirme), guarantees, discounts, and transfers from the Banco Nacional de Desenvolvimento Econômico e Social (BNDES). Additionally, it has bank as a service (BaaS) and credit as a service (CaaS) platforms, complementing its revenue mix by providing banking, credit, payment, and foreign exchange services. The Rendimento group has restructured its brands, operating not only as a bank and Cotação but also with Rendimento Pay (Agillitas Soluções de Pagamentos Ltda), focusing on payment systems, and Rendimento Ventures, an investment company concentrating on startup participation.
Well-Managed Risk Profile: Banco Rendimento's risk profile is well-managed, with sophisticated systems and controls and prudent underwriting standards reflecting its expertise in the foreign exchange market. The bank's risk profile includes significant exposure to operational and reputational risks inherent in the foreign exchange market. Fitch also acknowledges Rendimento's conservative credit risk appetite, with a credit portfolio that has been decreasing, albeit with significant concentration among the top ten clients (44% of the total as of September 2023).
Satisfactory Asset Quality: The asset quality of Banco Rendimento is deemed satisfactory for its risk profile, considering its exposure to federal government securities, both in repurchase agreements and in Letras Financeiras do Tesouro do Brasil (BB/Stable). The credit portfolio is relatively small, representing 18% of the assets. Rendimento continues to reduce exposures according to its low-risk appetite strategy, and as of June 2023, the portfolio was 31% smaller than a year earlier. Credits classified as "D-H" on the Central Bank's risk scale accounted for 4.3% of the portfolio on the same date, compared to 1.9% in 2022 and a four-year average of 6.3% (2019-2022). The fluctuations in "D-H" credits are largely due to provision reinforcements made during the pandemic and the short average maturity of the portfolio. The credit portfolio of Banco Rendimento includes guarantees, mitigating some of the operational risks.
High and Stable Profitability: During the first half of 2023, the ratio of operating income to risk-weighted assets was 6.3%, up from 5.3% in 2022 and the four-year average of 5.1%. In June 2023, the group's net profit was BRL48 million, with operating income of BRL77 million. Results were driven by the growth of foreign exchange and financial services revenues, along with low provisions for the credit portfolio and controlled funding expenses.
Good Capitalization Levels: The capitalization remains strong and in line with its peers' average. In June 2023, the bank's Common Equity Tier 1 capital ratio was 16.0%, compared to 13.8% in 2022. The bank's capital is entirely composed of Tier 1. The robust levels reflect the bank's ability to internally generate capital and historically low credit risk appetite, resulting in slow growth in risk-weighted assets.
Strong Liquidity and Stable Funding Base: In the first half of 2023, net assets amounted to BRL1.7 billion, nearly 100% of the bank's deposit base. Funding sources consist of deposits, credit notes, and transfers. The bank finances a significant portion of its SME-focused credit portfolio through a combination of deposits and credit notes, representing 95% of funding as of June 2023. Similar to its main peers, Banco Rendimento maintains depositor concentrations, offset by high liquidity. In June 2023, the total credits-to-customer deposits ratio was 40.1%, compared to the four-year average of 63%.
Factors that could individually or collectively lead to a negative/rating downgrade action:
- The Outlook may be revised to Stable if there is a significant deterioration in the bank's asset quality and a decline in profitability that results in an average operating income/risk-weighted assets ratio below 5%.
- Substantial and permanent reductions in cash or capital position, with the Common Equity Tier 1 capital ratio falling below 12%.
Factors that could individually or collectively lead to a positive/rating upgrade action:
- Maintenance of profitability, with an average operating income/risk-weighted assets ratio above 5%, combined with economies of scale and increased revenue mix that do not compromise capitalization and liquidity. Additionally, if the bank consistently maintains "D-H" credits below 5%.
This publication is a credit rating report, for compliance with article 16 of CVM Resolution No. 9/20.
The information used in this analysis is sourced from Banco Rendimento.
Fitch takes all necessary measures to ensure that the information used in the credit rating is sufficient and from reliable sources, including, when appropriate, third-party sources. However, Fitch does not perform audit services and cannot, in all cases, independently verify or confirm the information received.
Date of first issuance of the national scale rating: May 13, 2003.
Date of the last update to the national scale rating: November 21, 2022.
The credit rating was communicated to the evaluated entity or related parties, and the assigned rating was not changed due to this communication.
Fitch's ratings are reviewed at least annually.
Fitch publishes a list of real and potential conflicts of interest in Annex X of the Reference Form, available at www.fitchratings.com/brasil.
For information on possible changes in credit rating, see the item: Rating Sensitivity.
Additional information is available at 'www.fitchratings.com' and 'www.fitchratings