Fitch Assigns First-Time Ratings to Banco Original S.A.

Fitch Ratings has assigned the following ratings to Banco Original S.A. (Original):

--Long-term foreign currency Issuer Default Rating (IDR) 'B+'; Outlook Stable;

--Long-term local currency IDR 'B+'; Outlook Stable;

--Short-term foreign currency IDR 'B';

--Short-term local currency IDR 'B';

--Viability Rating 'b+';

--Support Rating '5';

--Support Rating Floor 'NF';

--National long-term rating 'BBB+(bra)'; Outlook Stable

--National short-term rating 'F2(bra)'.

KEY RATING DRIVERS

The ratings assigned to Original reflect its large capital base, comfortable liquidity position, adequate asset quality and its growing funding base. Original's ratings also take into account the bank's ambitious business plan that will result in expressive investments over the next few years and should result in limited profitability over the next two or three years.

Fitch views the bank's plan to develop a retail bank, focused on high-end individuals as an ambitious undertaken that will require disciplined risk management given the challenging operating environment. The bank's revamped management team composed of professionals with vast experience in leading local financial institutions will be essential for the successful implementation of the bank's plan to build a solid franchise and become a relevant midsized bank in the Brazilian market.

Even so, the bank's plan to enter the competitive retail banking market will face tough competition of larger and more established banks with larger client base and a more complete product offer. Investments in marketing and on IT platform and on training and hiring a qualified team will also be expensive and will add pressure to the bank's performance, which should lead to at least two periods of limited profitability.

Since the new management took on the bank, a massive revamp of its operations has been carried out, including a complete revision of the credit risk framework that resulted in a clean-up of the bank's loan portfolio; such positive changes on its risk controls tools will need to be tested along the expansionary business plan and the challenges of the operating environment. The expansion of the funding base and the enhancing of its commercial banking platform have already started to show some results and if managed properly could help the bank build a solid franchise.

Capitalization is vastly comfortable and in spite of the bank's aggressive growth plans, the bank's management has stated that it aims to keep regulatory capital on excess of 16%. The implementation of the bank's business plan should result in higher recurring earnings generation but given the weak operating environment, the bank's expansion plans may be halted by the challenging economic scenario. Developing and achieving the proposed business plan may prove challenging under the current scenario and competence levels and Fitch acknowledges that such expansion may come with certain degree of volatility on the banks operating results, common of banks in this stage of development.

As is the case with wholesale funded bank and midsized banks in general, the bank presents concentrations on both its assets and liabilities, which are offset by its very comfortable liquidity and capitalization position. The project of building an innovative retail bank and competitive corporate lending and investment banking platforms results in an investment plan of USD200 million that will require the bank's client acquisition strategy to be successful in order to generate results that will cover the higher level of administrative and personnel expenses.

RATING SENSITIVITIES

Positive Rating Action: Ratings could benefit from a less concentrated funding base and by a successful implementation of the proposed business plan that result in consistent operating profitability. Also, preserving capital levels along the target of 16% set up by management would be important to enhance the financial profile of the bank while it grows. However, given the intensive investment plan, this is an unlikely scenario in the medium term.

Negative Rating Action: A longer than expected development of its business plan or a deterioration of its corporate lending or agribusiness loan portfolio that result in negative results could lead to a downgrade of Original's ratings. Operating ROAA below 0.5% and a deterioration of Fitch Core Capital to levels below 15% could trigger a downgrade on the ratings.

Additional information is available on www.fitchratings.com.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (January 2014);

--'National Scale Ratings Criteria' (October 2013).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=978679

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