Milan, June 13, 2011 -- Under list of rating actions for Intesa Sanpaolo Spa substitute 'Senior
Unsecured Regular Bond/Debenture, Downgraded to Aa3 from Aa2 '
for 'Senior Unsecured Regular Bond/Debenture, Downgraded to
a range of A1 to Aa3 from Aa2 '
Revised release follows.
Moody's Investors Service today downgraded Intesa Sanpaolo's (Intesa)
stand-along bank financial strength rating (BFSR) to C+,
mapping to A2 on the long-term scale, from B- (which
maps to an A1). The bank's long-term debt & deposit
ratings were downgraded to Aa3 from Aa2, while the Prime-1
short-term debt & deposit ratings were unaffected by this rating
action. The outlook on all ratings is now stable. Moody's
also downgraded to A1 with a stable outlook from Aa3 the long-term
deposit rating of Banca Infrastrutture Innovazione e Sviluppo (BIIS),
Intesa's Italian subsidiary involved in lending to the public sector.
RATING RATIONALE
Moody's said that the downgrade of the Bank's standalone rating by one
notch reflects Intesa's weakened profitability and deteriorated asset
quality, which are now at levels more compatible with a BFSR of
C+. The stable outlook reflects the rating agency's expectation
that the performance weakening is bottoming out, but that any improvement
is likely to be limited, in the still difficult operating environment
the bank faces in its core market Italy. The rating agency also
noted that the bank's Aa3 long-term deposit rating continues to
benefit from two notches of uplift, as a result of a very high expectation
of systemic support. The downgrade of the debt ratings in line
with the BFSR rating action however also reflects Moody's view that the
likely support from the Italian government may no longer fully compensate
for weaker standalone profiles, resulting in this parallel rating
action.
Moody's said that Intesa Sanpaolo's C+ BFSR remains underpinned (i)
by the bank's leading position in Italy, with a market share for
deposits and lending of around 17%, as well as (ii) by the
diversification provided by its activities in Central and Eastern Europe.
The rating agency also noted the successful completion of the integration
of the merger of Banca Intesa and Sanpaolo IMI, which created Intesa
Sanpaolo in 2007, despite having to complete this process during
a period of financial and economic crisis, and without impairing
the group's position of leadership in the Italian banking market.
Intesa reported a net profit of EUR 2.7 billion for 2010,
3.6% lower than 2009, reflecting a 7% reduction
in net interest income, and a 59% reduction in trading income.
This was to some extent offset by lower operating costs and a 16%
reduction in loan loss charges. In its new business plan,
published in April 2010, Intesa targets a net profit of EUR 4.2
billion by 2013, an increase of 55% compared to 2010.
Moody's said that it does see potential for some improvement in profitability,
given the expectation of rising interest rates which could lead to wider
net interest margins, and further reduction in loan loss charges.
However the rating agency said that considerable challenges remain to
achieve the significantly higher levels of profitability targeted by the
bank, given the still modest growth, and uncertain outlook,
for the Italian economy.
Despite the reduction in loan loss charges recorded in 2010, Intesa's
stock of non-performing loans increased further during 2010.
The rating agency noted that these stand at a level significantly higher
than pre-crisis levels, and in its business plan the bank
states that it expects their level to fall by just 1.5%
by 2013, also reflecting the long timescales required to work-out
problem loans in Italy. Moody's said that despite the prospect
for modest improvement, the degree of deterioration as well as the
absolute level of these asset quality indicators are more compatible with
a C+ BFSR, with a trend reversal unlikely over the short-to
medium term.
In April 2011 Intesa announced a EUR 5 billion capital increase,
which is fully underwritten, and is due to be completed by July
2011. This would bring the Core Tier 1 capital ratio to around
9.4%, compared to 7.9% at 2010 year-end.
Intesa has been strengthening its capital adequacy through the crisis,
with the Core Tier 1 ratio having stood at just 5.9% in
2007. Moody's said that it views positively this capital increase,
bringing capital adequacy to a level that provides a significantly higher
buffer to absorb potential losses, and positions the bank more favourably
for the introduction of Basel III. The bank's business plan projects
the Tier 1 ratio remaining at around 10% in coming years.
Any excess capital generated beyond this would therefore be returned to
shareholders, with this payout estimated by the bank at EUR 5.3
billion in the period from 2011 to 2013. As such the current capital
is effectively "up fronting" the achievement of the target 10%
Tier 1 ratio. Moody's said that this rating action factors in the
successful completion of the underwritten capital increase, and
maintaining at least the target of 10% Core Tier 1 ratio.
Moody's said that Intesa's BFSR could be upgraded in the event that the
bank's profitability improves at least to the level envisaged in its business
plan, while also reducing non-performing loans significantly,
and maintaining a core Tier1 ratio higher than the 10% targeted.
Moody's said that the bank's BFSR could be downgraded further in the event
that profitability was to deteriorate beyond its 2010 level, and
should asset quality fail to show an improving trend. Failure to
complete the capital increase or maintain the targeted core Tier 1 capital
ratio of 10% could also put downward pressure on the ratings.
Moody's also downgraded to A1 from Aa3 the long-term deposit rating
of BIIS, Intesa's Italian subsidiary involved in lending to the
public sector. BIIS has a BFSR of C, mapping to A3 on the
long-term scale. BIIS' long-term deposit rating benefits
from a very high expectation of parental support, and as a result
of the downgrade of the parent this now results in two notches of uplift,
rather than three as was previously the case.
The last rating action on Intesa Sanpaolo SpA was in June 2009 when the
bank's BFSR was affirmed with negative outlook, and all other ratings
were affirmed with stable outlook.
The principal methodologies used in this rating were Bank Financial Strength
Ratings: Global Methodology published in February 2007, and
Incorporation of Joint-Default Analysis into Moody's Bank Ratings:
A Refined Methodology published in March 2007.
Intesa Sanpaolo Spa is headquartered in Milan, Italy. At
December 2010 it had total assets of EUR 659 billion.
The following ratings were downgraded:
..Issuer: Banca Commerciale Italiana S.p.A.
....Multiple Seniority Medium-Term
Note Program, Downgraded to a range of (P)A1 to (P)Aa3 from a range
of (P)Aa3 to (P)Aa2
....Subordinate Regular Bond/Debenture,
Downgraded to A1 from Aa3
..Issuer: Banca Infrastrutture Innovazione e Sviluppo
....Senior Unsecured Deposit Rating,
Downgraded to A1 from Aa3
..Issuer: Banca Intesa Spa, Hong Kong Branch
....Senior Unsecured Deposit Program,
Downgraded to (P)Aa3 from (P)Aa2
..Issuer: Banca Intesa, New York branch
....Multiple Seniority Deposit Program,
Downgraded to (P)Aa3, (P)A1 from (P)Aa2, (P)Aa3
..Issuer: Intesa Bank Ireland p.l.c.
....Multiple Seniority Medium-Term
Note Program, Downgraded to (P)Aa3, (P)A1 from (P)Aa2,
(P)Aa3
....Senior Unsecured Medium-Term Note
Program, Downgraded to (P)Aa3 from (P)Aa2
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Aa3 from Aa2
..Issuer: Intesa Sanpaolo Bank Ireland plc
....Multiple Seniority Medium-Term
Note Program, Downgraded to a range of (P)A3 to (P)Aa3 from a range
of (P)A2 to (P)Aa2
....Senior Unsecured Conv./Exch.
Bond/Debenture, Downgraded to Aa3 from Aa2
....Senior Unsecured Commercial Paper,
Downgraded to Aa3 from Aa2
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Aa3 from Aa2
..Issuer: Intesa Sanpaolo Spa
.... Bank Financial Strength Rating,
Downgraded to C+ from B-
.... Issuer Rating, Downgraded to Aa3
from Aa2
....Junior Subordinated Regular Bond/Debenture,
Downgraded to A3 from A2
....Multiple Seniority Medium-Term
Note Program, Downgraded to a range of (P)A3 to (P)Aa3 from a range
of (P)A2 to (P)Aa2
....Preferred Stock Preferred Stock,
Downgraded to Baa2 from Baa1
....Subordinate Regular Bond/Debenture,
Downgraded to A1 from Aa3
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Aa3 from Aa2
....Senior Unsecured Deposit Rating,
Downgraded to Aa3 from Aa2
..Issuer: Intesa Sanpaolo Spa, NY Branch
....Senior Unsecured Deposit Note/Takedown,
Downgraded to Aa3 from Aa2
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Aa3 from Aa2
....Senior Unsecured Deposit Rating,
Downgraded to Aa3 from Aa2
..Issuer: Sanpaolo IMI Bank (International) S.A.
....Senior Unsecured Medium-Term Note
Program, Downgraded to (P)Aa3 from (P)Aa2
..Issuer: Sanpaolo IMI S.p.A.
....Multiple Seniority Medium-Term
Note Program, Downgraded to a range of (P)A3 to (P)Aa3 from a range
of (P)A2 to (P)Aa2
....Subordinate Regular Bond/Debenture,
Downgraded to A1 from Aa3
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Aa3 from Aa2
Outlook Actions:
..Issuer: Banca Commerciale Italiana S.p.A.
....Outlook, Changed To Stable From
Stable(m)
..Issuer: Banca Intesa Spa, Hong Kong Branch
....Outlook, Changed To Stable From
Stable(m)
..Issuer: Banca Intesa, New York branch
....Outlook, Changed To Stable From
Stable(m)
..Issuer: Intesa Bank Ireland p.l.c.
....Outlook, Changed To Stable From
Stable(m)
..Issuer: Intesa Funding LLC
....Outlook, Changed To Stable From
Stable(m)
..Issuer: Intesa Sanpaolo Bank Ireland plc
....Outlook, Changed To Stable From
Stable(m)
..Issuer: Intesa Sanpaolo Spa
....Outlook, Changed To Stable From
Stable(m)
..Issuer: Intesa Sanpaolo Spa, NY Branch
....Outlook, Changed To Stable From
Stable(m)
..Issuer: Sanpaolo IMI Bank (International) S.A.
....Outlook, Changed To Stable From
Stable(m)
..Issuer: Sanpaolo IMI S.p.A.
....Outlook, Changed To Stable From
Stable(m)
..Issuer: Societe Europeenne de Banque SA
....Outlook, Changed To Stable From
Stable(m)
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, and public information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Milan
Henry MacNevin
Senior Vice President
Financial Institutions Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100
London
Johannes Wassenberg
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Correction to Text, May 6, 2011 Release: Moody's downgrades Intesa Sanpaolo to Aa3/C+; outlook stable
