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
