Fitch Affirms Ratings of Santander & Subsidiaries in Brazil

SAO PAULO & NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has today affirmed all the ratings of Santander Group in Brazil, as listed below:

Banco Santander (Brazil) S.A.

--Foreign currency Issuer Default Rating (IDR) at 'BBB'; Outlook Positive;

--Short-term foreign currency IDR at 'F2';

--Local currency IDR at 'BBB+'; Outlook Positive;

--Short-term local currency IDR at 'F2';

--Individual rating at 'C';

--Support rating at '2';

--National long-term rating at 'AAA(bra)'; Outlook Stable;

--National short-term rating at 'F1+(bra)'.

Santander Leasing S.A. Arrendamento Mercantil

--National long-term rating at 'AAA(bra)'; Outlook Stable;

--National short-term rating at 'F1+(bra)'.

Santander Leasing S.A. Arrendamento Mercantil- 4th and 5th Debentures Issue

--National long-term rating at 'AAA(bra)'.

Santander Leasing Leasing S.A. Arrendamento Mercantil (Ex ABN AMRO Arrendamento Mercantil S.A.) - 4th, 5th and 6th Debentures Issue

--National long-term rating at 'AAA(bra)'.

Banco Santander USD500million notes due 2015

--Long-term Foreign Currency rating at 'BBB'.

The Local-Currency IDRs for Banco Santander S.A. (Brazil) (BS), above those of the sovereign, and its National Ratings reflect the strength of the controlling shareholder, Banco Santander (SAN, Long-Term IDR 'AA'/Stable Outlook), and the importance of the Brazilian operation to the group, amplified by the recent acquisition of Banco ABN Real (ABNR) and the BRL 13 billion IPO concluded in 2009. Its Foreign Currency IDRs are constrained by Brazil's Country Ceiling.

With net profit of EUR8.8 billion in FY08 and EUR8.9 billion in FY09 despite rising credit costs, SAN has been among the best performing banks during the global financial crisis. As of the first quarter or 2010 (1Q'10), Latin America represents 35% of SAN's global profits and 20% assets, and the Brazilian subsidiary represents 55% of assets and 59% of profits in this region. In 2008 BS doubled in size due to the acquisition of ABN operations in Brazil, attesting to the importance of Brazil in the group's strategy.

The Individual Rating reflects the group's growing local franchise, SAN's proven oversight in risk management, and an operating platform with solid prospects for growing operational returns as the benefits of the ABNR acquisition begin to flow through to results. The franchise produces diversifying sources of recurring revenue and allows the consistent expansion in loan operations, funded principally by deposits and local money markets, with the distribution capacity of one of Brazil's leading branch networks. On the other hand, the rating also considers the impairment of BS's capital by the goodwill generated in the ABNR acquisition (BRL23.7 billion, or 37% of net worth) and tax credits. Capital ratios, after deducting goodwill, were significantly boosted by the IPO and compare favorably regionally and globally; Fitch expects, however, that planned growth in Brazil will lead these to converge to tighter historical levels over time.

With the full integration of senior management positions, risk and commercial areas, compliance, marketing, human resources and accounting departments completed, BS expects to finalize ABNR's absorption with branches brand conversion by the end of 2010. In addition to the BRL1.3 billion in savings already recorded, BS expects another BRL1.1 billion by 2011. While revenue growth is already benefiting from the bank's greater heft, operating results under Brazilian GAAP are still heavily influenced by the amortization of hefty goodwill; under IFRS accounting rules, to be adopted in Brazil in 2011, the bank recorded improving ROA and ROE of 16.6% and 2.2% as of 1Q'10, respectively.

SAN controls 83.6% of BS. BS is the third-largest Brazilian private bank in terms of assets and is present in all segments of the Brazilian economy.

The main methodology used for this rating action is outlined in 'Global Financial Institutions Rating Criteria', dated Dec. 29, 2009, which is available at 'www.fitchratings.com' and 'www.fitchratings.com.br'.

Additional information is available at 'www.fitchratings.com'.

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CONTACT:

Fitch Ratings
Edgard Dias, +55 11 4504 2600, Sao Paulo
Peter Shaw, 212-908-0553, New York
or
Media Relations:
Brian Bertsch, 212-908-0549, New York
Email: brian.bertsch@fitchratings.com

KEYWORDS:   United States  North America  New York

INDUSTRY KEYWORDS:   Professional Services  Banking

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