Outlook on the standalone BFSR changed to stable
London, 08 April 2014 -- Moody's Investors Service has today affirmed Intesa Sanpaolo Spa's Baa2
long-term senior debt and deposit ratings, its Prime-2
short-term ratings and its D+ standalone bank financial strength
rating (BFSR), equivalent to a baseline credit assessment (BCA)
of baa3. Moody's has also changed to stable from negative
the outlook on the bank's BFSR.
The affirmation of the standalone BFSR reflects the rating agency's
view that Intesa's financial fundamentals remain compatible with
the current rating level, with capital adequacy continuing to provide
a considerable buffer to offset the bank's mounting profitability
and asset quality pressures. Furthermore, Moody's change
of outlook to stable on the BFSR reflects Moody's expectations of a gradual
recovery in Intesa's profitability from the low point in 2013 and a stabilisation
of asset quality from 2015. The affirmation of Intesa's Baa2
senior debt and deposit ratings reflects the unchanged incorporation of
one notch of uplift from government (systemic) support, from the
bank's baa3 unsupported credit assessment.
The outlook on all the bank's long-term ratings and BFSR is now
stable. A full list of rating actions -- including
Intesa's subsidiaries -- follows at the end of this
release.
RATINGS RATIONALE
--- DEPOSIT RATINGS
Moody's affirmation of Intesa's Baa2 deposit rating reflects the
continuing incorporation of one notch of uplift for the debt ratings from
the bank's unsupported credit assessment of baa3, based on the rating
agency's very high expectation of systemic support from the Italian government
(rated Baa2 stable -- i.e., one notch
higher than the bank's BCA) in the event of need. This uplift,
which is constrained by the Italian government bond rating, reflects
Intesa's position as one of the leading Italian banks, with a market
share of loans of around 15%, and a domestic systemically
important financial institution (SIFI).
The outlook for Intesa's deposit ratings is stable, reflecting the
stable outlooks on the bank's standalone rating and on the Italian sovereign
rating.
--- CAPITAL ADEQUACY REMAINS SUFFICIENT RELATIVE
TO PROFITABILITY AND ASSET QUALITY PRESSURES
In Moody's opinion, Intesa will maintain a sufficient capital buffer,
relative to the bank's current baa3 unsupported credit assessment
considering the mounting profitability and asset quality pressures it
is facing, and also in light of the ECB's forthcoming comprehensive
assessment.
Intesa's Basel III fully phased Common Equity Tier 1 ratio was 12.3%
at December 2013, a level above those of many European peers.
Moody's notes that this ratio includes 86 bp from the revaluation of Intesa's
stake in the Bank of Italy, which the ECB will likely not recognise
in its asset quality review. Intesa's problem loans however --
as adjusted by Moody's -- as a proportion of equity and
loan loss reserves grew to 60% in 2013 (2012: 53%),
which exceeds that of the bank's European peers.
--- PROFITABILITY NEGATIVELY IMPACTED BY ASSET-QUALITY
CHALLENGES
Intesa's profitability is weak, and under mounting pressure.
This is mainly attributable to high loan loss provisions, as evidenced
by the bank's recently published 2013 results, which were significantly
above the level reported in 2012.
Intesa's EUR4.6 billion net loss in 2013 was primarily driven by
(1) EUR5.8 billion goodwill and other intangible impairments,
which does not affect regulatory capital and is excluded by Moody's from
its historical profitability assessment; and (2) EUR7.1 billion
loan loss provisions (up by 51% on 2012). The loan loss
provisions were driven both by a deterioration of Intesa's loan book,
and by the bank's decision to strengthen its reserve coverage, which
improved to 65% according to Moody's adjustments (from 60%
in 2012), which is higher than the Italian average.
Moody's expects the bank to report persistently modest earnings for 2014,
as a result of continuing pressure on revenues and a still-elevated
loan loss provisions. In this respect, problem loans (defined
by Moody's as non-performing loans-sofferenze;
30% of watchlist-incagli; restructured and past due
loans) grew to 12.1% of loans in 2013 (2012: 9.9%).
Moody's expects asset quality to deteriorate further during 2014,
albeit at a slower rate, against the background of the moderate
economic recovery in Italy. Moody's anticipates recovery in Intesa's
profitability only from 2015, and the rating agency believes that
the bank will be challenged to achieve the EUR4.5 billion net profit
target in 2017, as this objective reflects significantly reduced
cost-of-credit assumptions of 80 bp (from 207 bp in 2013).
WHAT COULD MOVE THE RATING UP/DOWN
Moody's could change the outlook to positive in the event of an improvement
in net profitability, broadly in line with business plan targets,
and an easing of problem loans as a proportion of equity and loan loss
reserves. Moody's could upgrade the deposit rating if the bank's
unsupported credit assessment is raised or if Italy's sovereign creditworthiness
improves.
Conversely, Moody's could lower Intesa's unsupported
credit assessment if (1) the bank is unable to return to net profit generation
in 2014; and (2) there is significant further deterioration of the
ratio of problem loans to equity and loan loss reserves. Moody's
could downgrade Intesa's long-term deposit and debt ratings as
a result of a downgrade of the Italian government bond rating.
LIST OF AFFECTED RATINGS
Issuer: Intesa Sanpaolo Spa
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Maintained baa3
.... Baseline Credit Assessment, Maintained
baa3
.... Bank Financial Strength Rating,
Affirmed D+ STA
.... Issuer Rating, Affirmed Baa2 STA
.....Long-term Deposit Ratings,
Affirmed Baa2 STA
.... Short-term Deposit Ratings,
Affirmed P-2
....Junior Subordinated Regular Bond/Debenture,
Affirmed Ba2 (hyb) STA
....Junior Subordinated Medium-Term
Note Program, Affirmed (P)Ba2
....Subordinate Medium-Term Note Program,
Affirmed (P)Ba1
....Tier III Debt Medium-Term Note
Program, Affirmed (P)Ba1
....Short-term Medium-Term Note
Program, Affirmed (P)P-2
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Baa2
....Pref. Stock Preferred Stock,
Affirmed Ba3 (hyb) STA
....Pref. Stock Non-cumulative
Preferred Stock, Affirmed Ba3 (hyb) STA
....Subordinate Regular Bond/Debenture,
Affirmed Ba1 STA
....Senior Unsecured Deposit Program,
Affirmed P-2
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa2 STA
....Outlook, Stable
Issuer: Banca Commerciale Italiana S.p.A.
..Affirmations:
....Subordinate Regular Bond/Debenture,
Affirmed Ba1 STA
....Outlook, STA
Issuer: Intesa Bank Ireland p.l.c.
..Affirmations:
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa2 STA
....Outlook, Stable
Issuer: Intesa Funding LLC
....Senior Unsecured Commercial Paper,
Affirmed P-2
Issuer: Intesa Sanpaolo Bank Ireland plc
..Affirmations:
....Subordinate Medium-Term Note Program,
Affirmed (P)Ba1
....Short-term Medium-Term Note
Program, Affirmed (P)P-2
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Baa2
....Senior Unsecured Commercial Paper,
Affirmed P-2
....Senior Unsecured Commercial Paper,
Affirmed Baa2
....Senior Unsecured Regular Bond/Debenture,
Affirmed P-2
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa2 STA
....Outlook, Stable
Issuer: Intesa Sanpaolo SpA Hong Kong Branch
..Affirmations:
....Senior Unsecured Deposit Program,
Affirmed (P)P-2
....Senior Unsecured Deposit Program,
Affirmed (P)Baa2
....Outlook, Stable
Issuer: Intesa Sanpaolo Spa, NY Branch
..Affirmations:
....Long-term Deposit Rating,
Affirmed Baa2 STA
....Short-Term Deposit Rating,
Affirmed P-2
....Senior Unsecured Deposit Note/Takedown,
Affirmed Baa2 STA
....Outlook, Stable
Issuer: Sanpaolo IMI S.p.A.
..Affirmations:
....Subordinate Regular Bond/Debenture,
Affirmed Ba1 STA
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa2 STA
....Outlook, Stable
Issuer: Societe Europeenne de Banque SA
..Affirmations:
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Baa2
....Short-term Medium-Term Note
Program, Affirmed (P)P-2
....Senior Unsecured Deposit Program,
Affirmed P-2
....Senior Unsecured Commercial Paper,
Affirmed P-2
....Senior Unsecured Regular Bond/Debenture,
Affirmed P-2
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa2 STA
....Outlook, Stable
Issuer: Banca CR Firenze S.p.A.
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Maintained baa3
.... Baseline Credit Assessment, Maintained
baa3
.... Bank Financial Strength Rating,
Affirmed D+ STA
.... Issuer Rating, Affirmed Baa2 STA
....Long-term Deposit Rating,
Affirmed Baa2 STA
.... Short-term Deposit Ratings,
Affirmed P-2
....Outlook, Stable
Issuer: Banca IMI Spa
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Maintained baa3
.... Baseline Credit Assessment, Maintained
baa3
.... Bank Financial Strength Rating,
Affirmed D+ STA
....Long-term Deposit Ratings,
Affirmed Baa2 STA
....Short-term Deposit Rating,
Affirmed P-2
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa2 STA
....Outlook, Stable
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was Global Banks published
in May 2013. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Carlo Gori
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Johannes Felix Wassenberg
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's affirms Intesa Sanpaolo's Baa2/P-2 debt and deposit ratings; stable outlook
