Ouribank receives high-quality rating from Moody's with Rating A.br

The ratings assigned to Ouribank reflect strong and consistent liquidity and profitability metrics, backed by a solid franchise of operations in the foreign exchange market. The ratings also incorporate conservative capitalization, reflected in their appropriate level 1 regulatory capital ratio for risk-weighted assets. The bank's business model is centered on foreign exchange operations, with low exposure to credit risk, resulting in a low need for market funding. The quality of the credit portfolio reflects low levels of default and high levels of provision coverage for overdue loans, supported by a prudent credit granting policy and a robust guarantee structure. On the other hand, the ratings are limited by the still small size of the bank, which is in the phase of expansion and gradual diversification of operations. Although the bank's main sources of revenue are exposed to foreign exchange activities, which Moody's Local normally considers to be potentially volatile, Ouribank has demonstrated the ability to sustain its results, supported by a well-consolidated operation.

Ouribank has been in the market for over 44 years and has a solid track record, with a portfolio specialized in foreign exchange services and personalized service. Among the services offered are international exchange, hedging and credit operations, trust management of real estate funds, and distribution of own-issued securities and real estate securities, as well as a hub for payment solutions and FXaaS (Foreign Exchange as a Service).

The bank's credit portfolio is concentrated on products of Supply Chain Finance, Trade Finance and Capital Giro aimed at legal entities. The bank's strategy is to operate mostly with secured loans, including credit insurance, surety guarantees, trust disposal, and assignment of credit rights to fixed and variable income financial investments. In June 2023, overdue loans, considered in our analyses to be abnormal ongoing transactions classified between E and H by resolution 2,682, represented 0.4% of the total portfolio at the end, compared to 0.3% a year earlier. In the same period, the gross loan portfolio coverage ratio was 413% compared to 423% the previous year.

Ouribank has reported adequate capital levels, close to 16% of risk-weighted assets (RWA). The capital level provides a comfortable cushion for absorbing losses, in addition to supporting Ouribank's plans to expand its activities. The capital ratio in June 2023 was 15.7%, well above the regulatory minimum of 8.5% for level 1 capital. Because of its business model, the bank's largest capital allocation has been for operational risk, which represented 60% of RWA in June 2023. We expect that with the bank's intention to expand its credit portfolio, credit risk will represent a more significant part of the composition of risk-weighted assets, which represented 27% in the period.

The annualized return, measured by Moody's Local by the net profit index on tangible assets, was 5.6% in June 2023, compared to 2.8% a year earlier. These levels are above those of the main pairs, which, in the period, were around 2.5%. Net income up to June 2023 was R$ 57.1 million, compared to R$ 24.6 million the previous year. The result was reinforced by the expansion of the results of foreign exchange operations and of securities and real estate securities.

The bank's business model, focused on foreign exchange operations, results in a low need for market funding. Ouribank's funding amounted to R$ 458.7 million in June 2023, comprised mainly of term deposits, representing 83% of total funding. In June 2023, the market capture index for tangible assets was 1.5%. The bank's net asset ratio, measured by net bank assets to tangible assets, was 43.0% in June 2023 compared to 50.4% in December 2022 and 51.2% a year earlier. Ouribank has been able to maintain an adequate level of liquidity for its operations, benefiting mainly from the availability of no foreign currency inherent to its exchange operation.

The stable outlook incorporates our expectation that Ouribank will continue a gradual and prudent expansion of credit operations, preserving its capital and profitability metrics over the next 12-18 months.

Ouribank is headquartered in São Paulo (SP) and in June 2023, it reported a total of assets of R$ 2.0 billion and a net worth of R$ 194 million.

Ouribank ratings may experience positive pressures with a history of generating recurring and sustainable results that support the maintenance of profitability and capitalization metrics, while further diversifying its revenue sources through new partnerships. Ratings would also be under positive pressure if overdue loans to the gross loan portfolio consistently remain at levels below 1.5% and level 1 capital rises above 20%.

On the other hand, ratings may suffer negative pressure if there is a significant deterioration in credit operations that reverses the positive trend in results, with overdue loans on the gross loan portfolio above 4.5% and returns below 1.3% and a significant reduction in capital levels to levels consistently below 13%, increasing our perception of risk for the bank in relation to its expanding business model.

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