MOODY'S LOWERS TO A1 FROM Aa3 THE LONG-TERM DEPOSIT RATING, AND TO C+ FROM B THE FINANCIAL STRENGTH RATING OF ISTITUTO MOBILIARE ITALIANO (IMI);CONFIRMS, WITH A POSITIVE OUTLOOK, THE A1 LONG-TERM DEPOSIT RATING AND THE C+ FINANCIAL STRENGTH RATING OF SAN
Moody's Investors Service lowered to A1 from Aa3 the deposit rating, and to C+ from B the financial strength rating of Istituto Mobiliare Italiano (IMI). Moody's confirmed the A1 deposit rating and the C+ financial strength rating of Istituto Bancario San Paolo di Torino (San Paolo) which were on review for possible upgrade. IMI's Prime-1 short-term deposit rating which was not under review was also confirmed. The ratings of both IMI and San Paolo have a positive outlook. These rating actions conclude the reviews initiated in February of this year, when plans for the integration and merger of San Paolo and IMI were announced. The rating agency said that the merger has received both shareholder and regulatory approvals, and that the remaining formal juridicial approvals are expected to be received shortly. At that time the ratings of IMI will be withdrawn to reflect completion of the merger.
Moody's said that the decision to lower IMI's ratings to the level of San Paolo's ratings reflects the competitive pressures being experienced across many of the resulting group's businesses, as well as the uncertainty surrounding possible further expansion within the increasingly dynamic Italian banking sector. At the same time, the positive outlook on the ratings reflects Moody's favourable view of the strategic rationale behind the creation of the San Paolo-IMI banking group, its strong position within the Italian market, and its sound financial position on a pro forma basis.
When completed, the merger of IMI and San Paolo will create the largest Italian bank by assets, with additional leading positions in asset management and investment banking. The rating agency added that although IMI has no retail banking network, its leading positions in medium/long-term corporate lending, personal financial services and investment banking add valuable depth to San Paolo's franchises in these areas. Moody's noted however that ongoing profitable development of these franchises is increasingly challenged by growing competitive pressures within the Italian banking system.
Moody's said that in its view the financial profile of the combined group should leave it well-positioned to meet this challenge. The combination of IMI, which has long been one of the most profitable Italian banking groups, with San Paolo, which has taken significant steps to improve its own profitability, should be reflected in sound group profitability going forward. Moody's added that the San Paolo-IMI Group should rank as one of the stronger large Italian banking groups in terms of asset quality and economic capitalization. The operational challenge of merging the banks' product ranges and workforces, should be facilitated by the complementary nature of their activities, as well as the longstanding ties between the two banks.
Finally Moody's noted that both IMI and San Paolo have indicated that their merger is seen as an initial step towards creating a leading position in Italy, and an important one in Europe. In this context, Moody's said that it would monitor the post merger strategy of the combined group, including its plans for further growth within the consolidating Italian financial services market.
The following ratings were lowered:
Istituto Mobiliare Italiano SpA -- the long-term deposit and debt rating to A1 from Aa3, the counterparty rating to A1 from Aa3, and the financial strength rating to C+ from B.
IMI Bank (International) SA -- the guaranteed debt rating, to A1 from Aa3.
The following ratings were confirmed:
Banque San Paolo SA -- the long-term deposit rating of A3 and the short-term deposit rating of Prime-2.
Istituto Bancario San Paolo di Torino SpA -- the long-term deposit and debt ratings of A1, the subordinated debt rating of A2 and the financial strength rating of C+.
Istituto Bancario San Paolo di Torino (Amsterdam Branch) -- the eurodepositary receipt rating of A1.
Istituto Bancario San Paolo di Torino (London Branch) -- the eurodepositary receipt rating of A1, and the subordinated debt rating of A2.
Istituto Bancario San Paolo di Torino (Nassau Branch) -- the subordinated debt rating of A2.
The following ratings which were not under review were also confirmed:
Banque San Paolo SA-- the financial strength rating of D+.
Crediop SpA -- the long-term deposit and debt ratings of Aa3, the short-term deposit rating of Prime-1, and the bank financial strength rating of B.
Crediop Overseas Bank -- the guaranteed long-term debt rating of Aa3.
Istituto Bancario San Paolo di Torino SpA -- the Prime-1 short-term deposit rating.
Istituto Mobiliare Italiano SpA -- the Prime-1 short-term deposit rating.
IMI Bank (International) SA -- the Prime-1 commercial paper rating.
IMI Funding Corporation USA -- the Prime-1 commercial paper rating.
San Paolo US Financial Company -- the Prime-1 commercial paper rating.
IMI, headquartered in Rome, had total group assets of Lit 90 trillion (approximately US$55 billion) at 30 June 1998. San Paolo, headquartered in Turin, had total group assets of Lit 251 trillion (approximately US$154 billion) at 30 June 1998.
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