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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (7406)	9/10/1998 9:38:00 PM
From: Steve Fancy	Respond to of 22640

S&P revises outlook on 3 Brazil banks to negative Reuters, Thursday, September 10, 1998 at 17:16 ( PRESS RELEASE PROVIDED BY STANDARD & POOR'S ) NEW YORK, Sept 10 - Standard & Poor's today affirmed its ratings and revised the outlook on three Brazilian banks, Banco Citibank S.A., Banco HSBC Bamerindus S.A., and Unibanco-Uniao de Bancos Brasileiros S.A. (foreign currency outlook), to negative from stable (see list below). The action follows the outlook revision on the Republic of Brazil to negative from stable. The outlook revisions are directly attributable to the outlook revision of the Republic of Brazil (see related press release). The negative outlook reflects the risks to financial stability posed by a public sector deficit equal to 7% of GDP in the face of tightening global market conditions. Four years into the Real Plan, the failure to significantly reduce fiscal imbalances -- notwithstanding structural adjustment at the state level and a very successful privatization program -- has left governmental and external finances significantly more exposed to shifts in market confidence than is the case with all other Latin sovereigns except Venezuela (single-'B'-plus foreign currency rating/Negative/single-'B'), and could ultimately jeopardize exchange rate policy continuity. Accelerating capital outflows prompted the Central Bank to hike interest rates to 29.75% effective Sept. 8, which will add R$2 billion per month to the fiscal deficit. That will be offset only partially by budget cuts announced Sept. 8. Those measures may be more effective overall than last November's spending cuts because they also target the fiscal bottom line -- a 1998 federal primary surplus of R$5 billion. Also, they should strengthen significantly the budget implementation capacity of the Finance Ministry. OUTLOOK: NEGATIVE The negative outlook reflects Standard & Poor's view that the government's economic measures may be insufficient to stabilize market expectations and in turn external finances. While the government is expected to announce its medium-term fiscal adjustment program by November 15, and to take emergency steps in the interim if necessary, now even this delay will be costly in terms of both credibility and finances. As Brazil's external flexibility diminishes, creditworthiness could deteriorate further and a ratings downgrade result unless a comprehensive, credible and timely fiscal package is implemented. While Standard & Poor's expects Brazilian banks' past profitability, as well as their generally adequate capitalization, to cushion the potential downturn, further downward revisions in the banks' ratings of Brazilian banks are possible if negative effects of the worsening operating environment exceed those already factored into their current ratings, Standard & Poor's said. OUTSTANDING RATINGS AFFIRMED Rating Banco Citibank S.A. Counterparty credit rating BB- $300 mil global Brazil-related medium-term note program BB- Banco HSBC Bamerindus S.A. Counterparty credit rating BB-/B CDs BB-/B Unibanco-Uniao de Bancos Brasileiros S.A. Foreign currency counterparty and CDs BB-/B $250 million 7.75% senior unsecured due 8/14/2000 BB- $2 billion senior unsecured medium-term note program BB- Copyright 1998, Reuters News Service

To: Madharry who wrote (7406)	9/15/1998 3:36:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Brazil's Banks Remain Attractive Despite Turmoil: Goldman Dow Jones Newswires RIO DE JANEIRO -- The Brazilian banking sector remains attractive to international banks looking to expand in Latin America despite the market turmoil that has all but vaporized local banks' share prices, a Goldman, Sachs & Co. partner said Tuesday. "Can you give me any reason for Unibanco's ADRs to go from $42 to $7 1/2 on the New York Stock Exchange?" said John Oros, who is in charge of Latin American financial institutions at the U.S. securities firm. "That has to do with American investors' panic, not Unibanco." Oros said that Spanish banks, which have made an aggressive push into Brazil and are now being punished for their exposure here, will eventually be rewarded for their strategy. "I think the long-term expansion by Spanish banks will prove to be a wise move," he said. "Their moves are careful, they are appropriate and they are moving earlier than others." Goldman and Brazil's Banco Pactual SA advised Brazil's Minas Gerais state government in the Monday sale of state-run bank Bemge. Banco Itau SA, Brazil's No. 2 private bank, outbid No. 1 Banco Bradesco SA to acquire Bemge for a premium of 85.6% over the minimum bid price. "One of the reasons (Bemge's price was so high) is because there's not a lot that one can buy in Brazil with good franchises and clean balance sheets," Oros said. The next large transaction in the sector will be the privatization of Banco do Estado de Sao Paulo SA, known as Banespa (E.BEP), which is scheduled to take place in the first quarter of 1999. "Bradesco and Itau will be very tough competition," Oros said. "It's going to be very difficult for international banks, though not impossible." He said U.S. banks have a lot of room for expansion via mergers and acquisitions in their domestic market, especially interstate banking. Brazilians will eventually see U.S. banks making a push into retail, but not immediately. "It's on their list of priorities but it's not the highest priority," Oros said. -By Geraldo Samor; 55-21-580-9394; gsamor@ap.org