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I AGREE
Rating Action:

Moody's affirms the ratings of Intesa Sanpaolo and BPER Banca, and places UBI Banca's ratings on review for upgrade

20 Feb 2020

Actions follow acquisition announcements

Madrid, February 20, 2020 -- Moody's Investors Service, ("Moody's") today affirmed the baa3 Baseline Credit Assessment (BCA) and all long-term ratings and assessments of Intesa Sanpaolo S.p.A. ("Intesa Sanpaolo"). The rating agency maintains a stable outlook on the Baa1 long-term deposit and senior unsecured debt ratings.

At the same time, Moody's placed on review for upgrade the ba2 BCA, the Baa2 long-term deposit rating, the Baa3 long-term senior unsecured rating, and all other long-term ratings of Unione di Banche Italiane S.p.A. ("UBI Banca"). The bank's long-term Counterparty Risk Assessment (CRA) was affirmed at Baa2(cr) and its short-term ratings and assessments are unaffected by today's rating action.

Moody's also affirmed the ba2 BCA and all ratings and assessments of BPER Banca S.p.A. ("BPER") and maintained a stable outlook on the Baa3 long-term deposit and Ba3 senior unsecured debt ratings.

The rating actions reflect (1) Intesa Sanpaolo's announcement on 17 February 2020 that it had launched an exchange offer for 100% of the capital of UBI Banca; and (2) BPER's announcement on the same day that it had signed an agreement with Intesa Sanpaolo for the acquisition of a portion of the Intesa Sanpaolo and UBI Banca's branch network and related assets and liabilities.

The affirmation of Intesa Sanpaolo's ratings captures Moody's view that the bank's standalone credit profile would be little changed following the integration of UBI Banca. The review for upgrade of UBI Banca's ratings indicates the likely benefit to its creditors of the potential acquisition. The affirmation of BPER's ratings reflects Moody's view that the bank's financial profile will be broadly unchanged should the acquisition be finalized.

A list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

-- DETAILS OF THE TRANSACTION

On 17 February 2020, Intesa Sanpaolo launched a voluntary exchange offer for all of UBI Banca's shares, with the aim of delisting and subsequently merging the entities. At the same time, Intesa Sanpaolo convened an extraordinary shareholders' meeting to which it will submit for its approval a capital increase to finance the offer. Intesa Sanpaolo expects to close the exchange offer by the end of July 2020, subject to a minimum acceptance offer of at least 66.67% of UBI Banca's share capital or upon its own discretion if it achieves at least 50% plus one share. The transaction is subject to the relevant regulatory approvals.

As part of the deal and in order to prevent competitive issues, Intesa Sanpaolo has agreed with BPER to sell between 400 and 500 branches as well as related assets and liabilities. BPER convened an extraordinary shareholders' meeting to approve a capital increase of up to €1 billion to finance the acquisition. Additionally, Intesa Sanpaolo has reached an agreement with UnipolSai Assicurazioni Group to sell certain insurance activities related to the disposal of branches agreed with BPER.

-- RATIONALE FOR THE AFFIRMATION OF INTESA SANPAOLO's RATINGS

The affirmation of Intesa Sanpaolo's standalone BCA is based on Moody's view that the combined entity's credit profile, following the integration of UBI Banca and the proposed capital increase to finance the acquisition, remains commensurate with a BCA of baa3. This is underpinned by the rating agency's consideration of limited execution risks to the integration process, given the similar business profiles of the two banks as well as Intesa Sanpaolo's track record of successfully integrating acquired institutions.

The combined entity will display a similar asset risk profile to that of Intesa Sanpaolo, with an estimated proforma non-performing loan (NPL) ratio of 7.6% based on reported figures at year-end 2019, in line with the NPL ratio reported by the Italian lender as of the same date. Intesa Sanpaolo has also disclosed that it intends to dispose €4 billion of UBI Banca's gross NPLs in 2021 from a reported €6.8 billion at year-end 2019 and will continue working to reduce the combined group's NPLs to less than 5% in 2021 (less than 4% based on the European Banking Authority definition). This will be supported by the €1.2 billion (net of taxes) additional loan loss provisions that the combined entity will make in 2020 as part of the transaction. Intesa Sanpaolo has also estimated that the acquisition will generate badwill of around €2 billion that will absorb the impact of the additional credit provisions and further integration costs of around €0.9 billion (net of taxes).

The affirmation of the standalone BCA, also reflects Moody's expectation that Intesa Sanpaolo will be able to fulfill its announced target of a Common Equity Tier 1 ratio above 13% by 2021, despite maintaining its policy of high dividend distribution.

Moody's does not apply any corporate behaviour adjustment to Intesa Sanpaolo, and does not have any specific concerns about its corporate governance, which is nevertheless a key credit consideration, as for most banks.

The affirmation of Intesa Sanpaolo's deposit and senior unsecured debt ratings reflects: (1) the affirmation of the bank's BCA and Adjusted BCA of baa3; (2) the rating agency's Advanced Loss Given Failure (LGF) analysis which would lead to two notches of uplift for the long-term deposit and senior unsecured debt ratings; and (3) Moody's assessment of a moderate probability of government support for Intesa Sanpaolo, resulting in no uplift for the deposit and senior unsecured debt ratings given that these ratings, prior to government support, are already two notches above the sovereign rating.

The long-term deposit and senior unsecured debt ratings for Intesa Sanpaolo carry stable outlooks, indicating the rating agency's expectation that the combined entity's credit profile and degree of protection for its senior creditors from the stock of bail-in-able liabilities will not materially change over the next 12-18 months. The stable outlook also reflects Intesa Sanpaolo's plan to issue around €5-€7 billion of senior non-preferred debt over the next two years as well as the stable outlook on Italy's Baa3 government bond ratings.

-- BANCA IMI'S RATINGS AND OUTLOOKS REMAIN IN LINE WITH INTESA SANPAOLO'S

Moody's said that the ratings, assessments, and rating outlooks of Banca IMI S.p.A. (Banca IMI), remain in line with those of Intesa Sanpaolo, reflecting Banca IMI's high integration with its parent, and the group's plan to merge the two entities.

-- RATIONALE FOR THE REVIEW FOR UPGRADE ON UBI BANCA's RATINGS

Moody's placed UBI Banca's ba2 BCA and long-term ratings on review for upgrade, as it expects UBI Banca's ratings and assessments to converge with those of Intesa Sanpaolo after the acquisition is finalized and the legal merger is complete. The long-term CRA was affirmed at Baa2(cr) as Moody's does not typically rate a bank's long-term CRA more than one notch above the sovereign rating.

Moody's expects that UBI Banca will be fully integrated into the Intesa Sanpaolo group after the acquisition and UBI Banca's creditors to benefit from the greater financial strength of Intesa Sanpaolo. The rating agency anticipates to conclude the ratings review once there is better visibility about the timeline to completing the merger.

Moody's does not apply any corporate behaviour adjustment to UBI Banca and does not have any specific concerns about its corporate governance, which is nevertheless a key credit consideration, as for most banks.

-- RATIONALE FOR THE AFFIRMATION OF BPER's RATINGS

The affirmation of BPER's ratings and assessments reflects Moody's view that the bank's financial profile will remain broadly unchanged should the potential acquisition of branches and related assets and liabilities from Intesa Sanpaolo be finalized.

BPER reported a NPL ratio of 11.1% at end-2019, which the bank planned to reduce to below 9% through a securitization of NPLs with gross book value of €1.2 billion to be completed in Q2 2020. BPER disclosed that the loans it will acquire from Intesa Sanpaolo will consist of both performing and non-performing loans, and the bank now forecasts a gross NPL ratio of around 8% by end-2020, which in Moody's view remains consistent with the current BCA level. BPER's NPL ratio will remain high compared to the European Union average (2.9%) and will be in line with the Italian average (circa 8%).

The affirmation of the BCA also reflects Moody's view that BPER's capitalization will remain overall stable following the acquisition of branches from Intesa Sanpaolo, as the bank plans to launch a capital increase up to €1 billion to offset the impact on capital from the acquisition. BPER's disclosed a fully-loaded CET1 ratio of 12% at end-2019 and the bank forecasts a 12.5% ratio by end-2020.

Moody's does not apply any corporate behaviour adjustment to BPER and does not have any specific concerns about its corporate governance, which is nevertheless a key credit consideration, as for most banks.

The stable outlook on BPER's long-term deposit and issuer ratings reflects Moody's expectation that BPER's financial profile will not change materially over the next 18-24 months. The acquisition of branches from Intesa Sanpaolo will generate higher revenues, but BPER's risk profile will continue to be affected by a high level of problem loans, which will be disposed of gradually.

WHAT COULD CHANGE RATINGS UP

An upgrade of Intesa Sanpaolo's BCA is unlikely as long as the Italian government's bond rating remains at Baa3. A bank's BCA would not typically exceed the sovereign rating under Moody's methodology unless the interdependence between the creditworthiness of this bank and that of the sovereign is limited.

The Baa1 long-term deposit ratings are capped two notches above Italy's Baa3 sovereign debt rating.

The ratings and assessments of UBI Banca could be upgraded following the completion of the acquisition by Intesa Sanpaolo.

BPER's BCA could be upgraded if (1) the bank further materially reduced its stock of problem loans while maintaining strong levels of capitalization; and (2) showed a sustained increase in profitability. An upgrade in the BCA would likely lead to an upgrade of all ratings.

BPER's long-term ratings could also be upgraded following the issuance of material amount of bail-in-able debt.

WHAT COULD CHANGE RATINGS DOWN

Intesa Sanpaolo's BCA could be downgraded as a result of weaker-than-expected capitalization, liquidity or a failure to deliver targeted asset quality improvements.

The bank's senior unsecured debt ratings could be downgraded if it reduces the cushion of bail-in-able debt issued by itself or its guaranteed funding vehicles.

Given the review for upgrade on UBI Banca, a downgrade is unlikely. However, the ratings and assessments could be confirmed at current level if the acquisition by Intesa Sanpaolo were not to take place. A downgrade of UBI Banca's BCA could result from (1) a reversal in the current asset-risk trends, with an increase in the stock of problem loans; (2) a weakening of UBI Banca's risk-absorption capacity as a result of its deteriorating profitability and/or capital levels; and/or (3) a significant deterioration in the bank's liquidity profile. UBI Banca's senior debt rating could be downgraded if a reduction in the volume of senior debt outstanding were not offset by the new issuance of senior and/or subordinated debt, thereby increasing loss given failure for these instruments.

BPER's BCA could be downgraded if: (1) problem loans did not decline materially; or (2) the bank reported material capital-eroding losses. A downgrade in the BCA would likely lead to a downgrade of all ratings. The long-term deposit ratings could also be downgraded if the stock of bail-in-able debt decreased materially, increasing loss-given-failure for creditors.

LIST OF AFFECTED RATINGS

Issuer: Intesa Sanpaolo S.p.A.

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Baa1

....Short-term Counterparty Risk Ratings, affirmed P-2

....Long-term Bank Deposits, affirmed Baa1, outlook remains Stable

....Short-term Bank Deposits, affirmed P-2

....Long-term Counterparty Risk Assessment, affirmed Baa2(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Long-term Issuer Rating, affirmed Baa1, outlook remains Stable

....Baseline Credit Assessment, affirmed baa3

....Adjusted Baseline Credit Assessment, affirmed baa3

....Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook remains Stable

....Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook remains Stable

....Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1

....Backed Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1

....Subordinate Regular Bond/Debenture, affirmed Ba1

....Subordinate Medium-Term Note Program, affirmed (P)Ba1

....Preferred Stock Non-cumulative, affirmed Ba3(hyb)

....Preferred Stock Non-cumulative Medium-Term Note Program, affirmed (P)Ba3

....Other Short Term, affirmed (P)P-2

..Outlook Action:

....Outlook remains Stable

Issuer: Banca IMI S.p.A.

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Baa1

....Short-term Counterparty Risk Ratings, affirmed P-2

....Long-term Bank Deposits, affirmed Baa1, outlook remains Stable

....Short-term Bank Deposits, affirmed P-2

....Long-term Counterparty Risk Assessment, affirmed Baa2(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Baseline Credit Assessment, affirmed baa3

....Adjusted Baseline Credit Assessment, affirmed baa3

....Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook remains Stable

..Outlook Action:

....Outlook remains Stable

Issuer: Intesa Funding LLC

..Affirmation:

....Backed Commercial Paper, affirmed P-2

..No Outlook assigned

Issuer: Intesa Sanpaolo Bank Ireland p.l.c.

..Affirmations:

....Backed Short-term Deposit Note/CD Program, affirmed P-2

....Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook remains Stable

....Backed Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1

....Backed Commercial Paper, affirmed P-2

....Backed Other Short Term, affirmed (P)P-2

..Outlook Action:

....Outlook remains Stable

Issuer: Intesa Sanpaolo Bank Luxembourg S.A.

..Affirmations:

....Backed Short-term Deposit Note/CD Program, affirmed P-2

....Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook remains Stable

....Backed Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1

....Backed Commercial Paper, affirmed P-2

....Backed Other Short Term, affirmed (P)P-2

..Outlook Action:

....Outlook remains Stable

Issuer: Intesa Sanpaolo S.p.A., Hong Kong Branch

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Baa1

....Short-term Counterparty Risk Ratings, affirmed P-2

....Long-term Deposit Note/CD Program, affirmed (P)Baa1

....Short-term Deposit Note/CD Program, affirmed (P)P-2

....Long-term Counterparty Risk Assessment, affirmed Baa2(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

..No Outlook assigned

Issuer: Intesa Sanpaolo S.p.A., New York Branch

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Baa1

....Short-term Counterparty Risk Ratings, affirmed P-2

....Long-term Bank Deposits, affirmed Baa1, outlook remains Stable

....Short-term Bank Deposits, affirmed P-2

....Long-term Counterparty Risk Assessment, affirmed Baa2(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

..Outlook Action:

....Outlook remains Stable

Issuer: Intesa Sanpaolo S.p.A., London Branch

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Baa1

....Short-term Counterparty Risk Ratings, affirmed P-2

....Short-term Bank Deposits, affirmed P-2

....Long-term Counterparty Risk Assessment, affirmed Baa2(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Commercial Paper, affirmed P-2

..No Outlook assigned

Issuer: Sanpaolo IMI S.p.A.

..Affirmations:

....Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook remains Stable

....Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook remains Stable

..Outlook Action:

....Outlook remains Stable

Issuer: Intesa Bank Ireland p.l.c.

..Affirmations:

....Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook remains Stable

..Outlook Action:

....Outlook remains Stable

Issuer: BPER Banca S.p.A.

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Baa2

....Short-term Counterparty Risk Ratings, affirmed P-2

....Long-term Bank Deposits, affirmed Baa3, outlook remains Stable

....Short-term Bank Deposits, affirmed P-3

....Long-term Counterparty Risk Assessment, affirmed Baa2(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Long-term Issuer Rating, affirmed Ba3, outlook remains Stable

....Baseline Credit Assessment, affirmed ba2

....Adjusted Baseline Credit Assessment, affirmed ba2

....Senior Unsecured Regular Bond/Debenture, affirmed Ba3, outlook remains Stable

....Senior Unsecured Medium-Term Note Program, affirmed (P)Ba3

....Subordinate Regular Bond/Debenture, affirmed Ba3

....Subordinate Medium-Term Note Program, affirmed (P)Ba3

..Outlook Action:

....Outlook remains Stable

Issuer: Unione di Banche Italiane S.p.A.

..Placed on Review for Upgrade:

....Long-term Counterparty Risk Ratings, currently Baa2

....Long-term Bank Deposits, currently Baa2, outlook changed to Ratings under Review from Stable

....Long-term Issuer Rating, currently Baa3, outlook changed to Ratings under Review from Stable

....Baseline Credit Assessment, currently ba2

....Adjusted Baseline Credit Assessment, currently ba2

....Senior Unsecured Regular Bond/Debenture, currently Baa3, outlook changed to Ratings under Review from Stable

....Senior Unsecured Medium-Term Note Program, currently (P)Baa3

....Junior Senior Unsecured Regular Bond/Debenture, currently Ba3

....Junior Senior Unsecured Medium-Term Note Program, currently (P)Ba3

....Subordinate Regular Bond/Debenture, currently Ba3

....Subordinate Medium-Term Note Program, currently (P)Ba3

....Preferred Stock Non-cumulative, currently B2(hyb)

..Affirmation:

....Long-term Counterparty Risk Assessment, affirmed Baa2(cr)

..Outlook Action:

....Outlook changed to Rating under Review from Stable

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks Methodology published in November 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

The relevant office for each credit rating is identified in "Debt/deal box" on the Ratings tab in the Debt/Deal List section of each issuer/entity page of the website.

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.

Maria Jose Mori
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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