OREANDA-NEWS. S&P Global Ratings said today it affirmed its 'BB/B' global scale and 'brAA-/brA-1' national scale ratings on Itau Unibanco Holding S. A. (Itau) and on its core subsidiary, Itau Unibanco S. A. The outlook on the global and national scale ratings remains negative. We also affirmed our 'BB' issue-level ratings on the bank's senior unsecured notes maturing on May 26, 2018.

"Our negative outlook on the bank reflects that on Brazil," said S&P Global Ratings credit analyst Jose Perez-Gorozpe. "The ratings on the latter constrain those on Itau, given its relevant exposure to sovereign risk. Therefore, we expect the ratings on the bank to move in tandem with the sovereign ratings."

The negative outlook on Brazil reflects a greater than one–in–three likelihood that we could lower our ratings on the sovereign again. We anticipate that within the next year a downgrade could stem, in particular, from potential key policy reversals given Brazil's fluid political dynamics, including lack of cohesion within the cabinet, inconsistent policy initiatives, and uncertainties during or following the impeachment process. A downgrade could also result from greater economic turmoil than we currently expect, either due to governability issues or the weakened external environment.

We could revise our outlook on Brazil, and therefore our outlook on Itau, to stable if political uncertainties and conditions for consistent policy execution improve across branches of government to stanch fiscal deterioration and strengthen GDP growth prospects. We expect that these improvements would support a quicker turnaround and could help Brazil exit from the current recession, facilitating improved fiscal performance and providing more room to maneuver in the face of economic shocks.