Impact limited on deposit ratings -- more pronounced on BCAs
Milan, September 09, 2009 -- Moody's Investors Service today concluded its rating review for
5 Italian banks. These rating reviews had been initiated on June
18th, at which time the ratings of 21 Italian banks had been placed
on review for possible downgrade. With the conclusion of these
reviews all the rating actions initiated on June 18th have now been concluded.
The outcome of these rating actions was varied. One institution,
UniCredit Leasing, saw its issuer rating confirmed. The remaining
banks saw downgrades of the Bank Financial Strength Ratings (BFSR) which
resulted in their Baseline Credit Assessments (BCA) lowered by two to
three notches. However all five institutions are subsidiaries of
larger banking groups, and as a result, our expectation of
parental support in most cases had a limiting effect on the extent to
which the deposit and debt ratings were downgraded.
"The extent to which the BCAs of these banks have been lowered is
somewhat greater than was seen in our other recent rating actions on Italian
banks. However this is due to the specific circumstances of these
banks, as detailed later in this press release, and does not
affect our general view that the Italian banking system has been significantly
less affected by the financial and economic crises than has been the case
in other markets" said Henry MacNevin, a Moody's Senior Vice
President and Team Leader for Italian bank ratings, based in Milan.
The rating actions on the five banks are explained below:
Banca CR Firenze (Carifirenze): The BFSR was lowered to C-
(Baseline Credit Assessment or BCA of Baa2) from C (BCA of A3),
while the long-term deposit rating was lowered to A1 from Aa3.
The Prime-1 short-term deposit rating was unaffected.
All ratings have a stable outlook. According to Moody's the downgrade
of the BFSR reflects the risks associated with the potential losses which
may arise on the bank's loan portfolio, in the current economic
downturn, and the impact this may have on the bank's financial fundamentals,
including capital adequacy, although the rating agency added that
it believes that the bank's parent, Intesa Sanpaolo (rated Aa2/P-1/B-),
will at all times take steps to ensure that Carifirenze has sufficient
capital to continue to operate normally. Carifirenze has taken
on the role of providing the Intesa Sanpaolo group's commercial
banking activities in Central Italy, and is undergoing considerable
restructuring and change as a result of this, with the effect that
the bank's current financials are not representative of the likely
performance of the bank going forward. As a result of Carifirenze's
strategic role for the group, Moody's factors in a very high
expectation of parental support into the bank's deposit and debt
ratings. This results in the bank's A1 long-term deposit
rating benefiting from four notches of uplift from the Baa2 BCA.
Interbanca: the BFSR was lowered to D (BCA of Ba2) from D+
(BCA of Baa3), while the long-term deposit rating was lowered
to Baa1 from A3. The Prime-2 short-term deposit rating
was unaffected. All ratings have a negative outlook. Moody's
said that the downgrade reflects Interbanca's impaired business
model, with significant net losses in 2008 and in the first half
of 2009. The bank expects that it will return to profitability
only in the medium term, while Moody's said that it believes
that considerable uncertainty exists with regard to the success with which
the bank can indeed be restructured and returned to profitability.
The rating agency added, however, that Interbanca is being
integrated in the General Electric Capital Corporation group (GECC,
rated Aa2/P-1), for which Interbanca is being refocused to
provide selected corporate banking services to mid-sized companies
in the Italian market. As such GECC sets capital ratios for Interbanca,
which Moody's believes are satisfactory and likely to be maintained.
The Baa1 deposit ratings incorporate a very high expectation of support
from the parent GECC, resulting in four notches of uplift from the
Santander Consumer Bank (SCB): the BFSR was lowered to D+ (BCA
of Baa3) from C (BCA of A3), while the long-term deposit
and senior debt ratings were lowered to Baa1 from A1 and the short-term
debt and deposit ratings were downgraded to Prime-2 from Prime-1.
The outlook on all ratings is negative. According to Moody's the
downgrade of the BFSR reflects the expectation of further asset quality
deterioration in the context of the riskier consumer finance business
compared to traditional retail banking, leading to higher credit
losses than previously incorporated in the institution's ratings and straining
its profitability and already modest capitalisation. In addition,
Moody's said that its expectation of weaker revenue generation capacity
could also affect SCB's profitability going forward. The rating
agency added that it continues to see a moderate likelihood of parental
support from its ultimate parent, Spain's Banco Santander
(rated Aa2/P-1/B-), and a low likelihood of systemic
support, for SCB, thus resulting in a two-notch uplift
from its BCA of Baa3 to its Baa1 long-term deposit rating.
UniCredit Family Financing Bank SpA(UCFF): the BFSR was lowered
to C- (BCA of Baa1) from C+ (BCA of A2), while the long-term
deposit rating was lowered to A1 from Aa3. All ratings have a stable
outlook. Moody's said that the downgrade of the BFSR reflects
the likelihood that, in the current recession in Italy, there
is likely to be a sharp deterioration in asset quality, which will
also affect the residential mortgage sector, in which UCFF operates,
and that this is likely to impact the bank's profitability and capital
adequacy. The rating agency however added that the current BCA
reflects its expectation that UCFF's parent, UniCredit (rated
Aa3/P-1/C), will ensure that the bank remains well capitalised
at all times. The bank's A1 long-term deposit rating
factors in a very high expectation of parental support from UniCredit,
resulting in three notches of uplift from the bank's Baa1 BCA.
Unicredit Leasing: the issuer rating was confirmed at A1 while the
Prime-1 short-term issuer rating was unaffected.
All ratings have a stable outlook. According to Moody's,
however, Unicredit Leasing has become more weakly positioned within
its rating category, given its deteriorating asset quality and profitability
and sensitivity to a worse-than-expected scenario for loan
losses. The rating agency added that confirmation of Unicredit
Leasing's rating reflects Moody's belief that Unicredit (rated
Aa3/P-1/C) will maintain its subsidiary adequately capitalised.
Rating action summary:
Banca CR Firenze Spa: long-term deposits and senior unsecured
debt downgraded to A1 from Aa3; subordinated debt downgraded to A2
from A1; Tier III debt downgraded to A2 from A1; bank financial
strength rating downgraded to C- from C.
Interbanca Spa: long-term deposits and senior unsecured debt
downgraded to Baa1 from A3; subordinated debt downgraded to Baa2
from Baa1; bank financial strength rating downgraded to D from D+.
Santander Consumer Bank Spa: long term deposit rating downgraded
to Baa1 from A1; senior unsecured debt downgraded to Baa1 from A1;
subordinated debt downgraded to Baa2 from A2; bank financial strength
rating downgraded to D+ from C; short-term debt and deposit
ratings downgraded to Prime-2 from Prime-1.
UniCredit Family Financing Bank SpA: long-term deposits downgraded
to A1 from Aa3; bank financial strength rating downgraded to C-
Unicredit Leasing: A1 issuer rating confirmed.
The principal methodologies used in rating the issuers mentioned in this
press release are "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. They are available on www.moodys.com
in the Rating Methodologies sub-directory under the Research and
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating these issuers can also be found in
the Ratings Methodologies sub-directory on Moody's website.
The last rating action on these five banks was on June 18th 2009,
when their ratings were put under review for possible downgrade.
Banca CR Firenze is headquartered in Florence, Italy. At
December 31st 2008 it had total assets of EUR 40 billion.
Interbanca is headquartered in Milan, Italy. At June 30th
2009 it had total assets of EUR 6.5 billion.
Santander Consumer Bank is headquartered in Turin, Italy.
At December 31st 2008 it had total assets of about EUR 8 billion.
UniCredit Family Financing Bank SpA is headquartered in Milan, Italy.
At December 31t 2008 it had total assets of EUR 100.2 billion.
Unicredit Leasing is headquartered in Milan, Italy. At December
31st 2008 it had total assets of EUR 21 billion.
Senior Vice President
Financial Institutions Group
Moody's Investors Service
Moody's concludes reviews on 5 Italian banks
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service