Actions follow Italy's downgrade to Baa2, negative outlook
Milan, July 16, 2012 -- Moody's Investors Service has today downgraded by one to two notches the
long-term debt and deposit ratings for 10, and the issuer
ratings for 3, Italian financial institutions, prompted by
the weakening of the Italian government's credit profile, as captured
by Moody's downgrade of Italy's government bond rating to Baa2 from
A3 on 13 July 2012. The long-term debt and deposit ratings
of one bank were affirmed.
Please click this link (http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_143798)
for the list of Affected Credit Ratings. This list is an integral
part of this press release and identifies each affected issuer.
For additional information on bank ratings, please refer to the
webpage containing Moody's related announcements: http://www.moodys.com/bankratings2012.
Details of the ratings rationale for each affected bank is provided below.
RATINGS RATIONALE
Today's actions follow the weakening of the Italian government's credit
profile, as captured by Moody's downgrade of Italy's government
bond rating to Baa2 from A3, with a negative outlook. For
more details on the rationale for the sovereign downgrade, refer
to the press release "Moody's downgrades Italy's government bond
rating to Baa2 from A3, maintains negative outlook",
published on 13 July, 2012 (http://www.moodys.com/research/Moodys-downgrades-Italys-government-bond-rating-to-Baa2-from-A3--PR_250567).
The ratings declined by one notch for 7 of the affected institutions,
and by two notches for remaining 6. The short-term ratings
for 3 banks have also been downgraded by one notch, triggered by
the long-term ratings changes.
Along with the increase in the risk of sovereign bond defaults,
the downgrade of Italy's long-term ratings to Baa2 also indicates
a similarly increased risk that the government might be unable to provide
financial support to its banks in financial distress. As a consequence,
Italian banks with standalone ratings at or close to the Baa2, and
higher debt and deposit ratings as a result of an expectation of systemic
support , have seen the support uplift in their debt ratings reduced
by one or two notches.
The reduced expectation of systemic support that prompted today's
rating actions follows downgrades of several Italian banks taken on 14
May, 2012 ("Moody's downgrades Italian banks; outlooks
remain negative" http://www.moodys.com/research/Moodys-downgrades-Italian-banks-outlooks-remain-negative--PR_244732).
The revised standalone credit assessments announced on 14 May were set
to be resilient to a degree of further stress, and reflected the
banks' substantial exposures to the Italian economy and the Republic's
credit worthiness. As a result, those earlier actions largely
limited the extent of the rating actions taken today to changes in the
credit enhancement associated with systemic support. Accordingly,
the standalone ratings, in almost all cases, proved resilient
to the sovereign downgrade.
Banks are typically rated on a standalone basis no higher than the government's
rating due to multiple channels of shared exposure and contagion.
Limited exceptions are possible where there is external support or where
a bank has substantial assets, revenues and financing resources
domiciled outside their home environment, and where direct and indirect
credit exposure to the sovereign is limited. However, Italian
banks' substantial exposure to the domestic economy --
coupled with high direct exposure to sovereign debt -- have
resulted in standalone credit assessments that are no higher than the
sovereign rating. As a result of these considerations, any
further sovereign downgrade would likely result in a commensurate lowering
of many banks standalone and debt and deposit ratings (see Moody's Sector
Comment "How Sovereign Credit Quality May Affect Other Ratings" published
13 February, 2012).
For the two affected Government-related issuers (GRIs), Cassa
Depositi e Prestiti and Ismea, their debt and issuer ratings were
lowered to the same rating level as the sovereign given their high default
correlation with the Italian government. For further details of
the rating actions, see the specific sections for the two GRIs later
in the press release.
WHAT COULD MOVE THE RATINGS UP/DOWN
Upgrades of the banks' ratings are unlikely in the near term, given
the negative outlooks on the ratings as well as the sovereign's
rating. However, a limited amount of upwards rating pressure
could develop if any bank substantially improves its credit profile and
resilience to the prevailing conditions. This may occur through
increased standalone strength, e.g. bolstered capital
and liquidity buffers, work-out of asset quality challenges
or improved earnings. Improved credit strength could also result
from external support; for example, through a change in ownership
or the receipt of extra capital or liquidity injections.
Several factors could exert further downwards rating pressure, such
as (i) increasing funding stress and reliance on central bank support,
which could raise pressure on banks to deleverage, with adverse
consequences for asset quality; (ii) a prolonged recession,
which could similarly further exacerbate already adverse asset-quality
trends and impair capital; or (iii) further weakening of the Italian
government's credit strength.
BANK-SPECIFIC RATING CONSIDERATIONS
UniCredit
The long-term deposit and debt ratings were downgraded to Baa2,
in line with the Italian sovereign rating, from A3. The C-
BFSR, mapping to a standalone credit assessment of baa2 was affirmed
at its current level, which is in line with the sovereign rating.
The outlook is negative on all ratings, in line with the sovereign,
and with other Italian banks. Moody's notes that despite
UniCredit's substantial international activities, its important
exposure to its domestic market means that its standalone rating is constrained
by the level of the sovereign rating, as is the case for other Italian
banks rated by Moody's.
UniCredit Leasing
UniCredit Leasing's long and short-term issuer ratings were
downgraded to Baa3/Prime-3 from Baa2/Prime-2. The
outlook remains negative and reflects that of the parent UniCredit (Baa2;
C-/baa2, negative).
According to Moody's, the downgrade follows the downgrade
of the parent bank, which reduces the ratings uplift for the issuer
rating, despite Moody's view of a very high probability of parental
support from UniCredit.
Intesa Sanpaolo
The long-term deposit and debt ratings were downgraded to Baa2,
in line with the Italian sovereign rating, from A3, thus eliminating
the notch of systemic support applied previously. The standalone
BFSR was affirmed at C-, however this now maps to a standalone
credit assessment of baa2 (previously baa1), also in line with the
sovereign rating. The outlook is negative on all ratings,
in line with the sovereign. Moody's notes that Intesa's
business is almost entirely domestic in nature, and as such its
standalone rating is constrained by the sovereign rating, resulting
in the lowering of the standalone credit assessment.
Banca CR Firenze (Carifirenze)
The long-term deposit and debt ratings were downgraded to Baa2
with negative outlook. This is in line with both the parent's
(Intesa Sanpaolo) and the sovereign's ratings. This rating
action eliminated the two notches of parental support from Intesa Sanpaolo,
previously incorporated into CR Firenze's long-term deposit
and debt ratings, given the now lower long-term rating of
the parent, which forms the basis for assessing parental support.
The bank's C- BFSR, mapping to a standalone credit
assessment of baa2, was not affected. The outlook is negative
on all ratings, in line with the sovereign, and with other
Italian banks.
Banca IMI
The long-term deposit and debt ratings were downgraded to Baa2
from A3. This is in line with both the parent's (Intesa Sanpaolo)
and the Italian sovereign's ratings. This rating action eliminated
the two notches of parental support from Intesa Sanpaolo, previously
incorporated into Banca IMI's long-term deposit and debt
ratings, given the now lower long-term rating of the parent,
which forms the basis for assessing parental support. The bank's
C- BFSR, mapping to a standalone credit assessment of baa2,
was not affected. The outlook is negative on all ratings,
in line with the sovereign, and with other Italian banks.
Banca Monte Parma
Banca Monte Parma's long-term deposit rating was downgraded to
Baa2 from Baa1, directly following the downgrade of the ratings
of its parent Intesa Sanpaolo. This rating action reduces to one
from two notches the level of parental support from Intesa Sanpaolo,
given the now lower long-term rating of the parent, which
forms the basis for assessing parental support. The bank's D+
BFSR, mapping to a standalone credit assessment of baa3, was
unaffected. The outlook on all ratings remains negative,
in line with the sovereign, and with other Italian banks.
Banca Nazionale del Lavoro
Banca Nazionale del Lavoro's long-term Baa2 deposit rating
was affirmed. The other ratings and the negative outlook are unaffected.
The affirmation is based on Moody's assessment of a very high probability
of parental support from BNP Paribas (A2; BFSR C-/BCA baa2,
stable) and a high probability of systemic support, which results
in two-notches of rating uplift from the ba1 standalone credit
assessment. The uplift has not changed and now stems from parental
support only -- from one notch of parental support and one
notch of systemic support previously -- following the downgrade
of Italy's rating.
Cassa di Risparmio di Parma e Piacenza (Cariparma)
The long-term deposit and debt ratings were downgraded to Baa2,
in line with the Italian sovereign rating, from Baa1, thus
eliminating the current one notch of systemic support. The bank's
C- BFSR, mapping to a standalone credit assessment of baa2,
was not affected. The outlook is negative on all ratings,
in line with the sovereign, and with other Italian banks.
Our high expectation of parental support from Credit Agricole(CASA) does
not actually result in any uplift for the banks' ratings, given
that Cariparma's standalone credit assessment of baa2 is in line with
CASA's adjusted standalone credit assessment of baa2.
Banca Popolare Friuladria (Friuladria)
The long-term deposit and debt ratings were downgraded to Baa2,
in line with the Italian sovereign rating, from Baa1, so reducing
parental support from its parent, Cariparma, to one notch,
given the now lower long-term deposit rating of the parent,
which forms the basis for assessing parental support. The bank's
D+ BFSR, mapping to a standalone credit assessment of baa3
was not affected. The outlook is negative on all ratings,
in line with the sovereign, and with other Italian banks.
Banca Carige
Banca Carige's long and short-term deposit ratings were downgraded
to Baa3/Prime-3 from Baa2/Prime-2. The other ratings
and the negative outlook are unaffected.
The key driver for the one-notch downgrade of the deposit ratings
is the downgrade of Italy. At this Baa2 rating level of the government,
our assessment of a moderate probability of systemic support in the event
of a financial crisis results in no uplift from the baa3 standalone credit
assessment (from one notch of uplift previously), under our joint
default analysis (JDA) methodology.
Credito Emiliano
Credito Emiliano's long and short-term deposit ratings were
downgraded to Baa3/Prime-3 from Baa2/Prime-2. The
other ratings and the negative outlook are unaffected.
The one-notch downgrade of the deposit ratings follows the downgrade
of Italy. At this rating level of the Italian government,
our assessment of a moderate probability of systemic support in the event
of a financial crisis provides no uplift from the baa3 standalone credit
assessment (from one notch of uplift previously), under our joint
default analysis (JDA) methodology.
GE Capital SpA
GE Capital Spa's long-term deposit rating was downgraded
to Baa2 from Baa1. The outlook remains negative.
According to Moody's, the downgrade reflects the downgrade
of Italy. GE Capital's business is domestic and as such,
its rating is constrained by the sovereign rating, despite parental
support. In Moody's view, parental support from General
Electric Capital Corporation (rated A1/P-1) continues to be very
high, but is likely to be linked to the longer-term prospects
for the business in Italy. As a result, we have lowered the
parental support uplift provided to the bank's deposit rating to
three from four notches. This uplift is based on our expectation
of (i) a very high probability of parental support from General Electric
Capital Corporation ; and (ii) low probability of systemic support
for GE Capital Spa in the event of a financial crisis.
Cassa Depositi e Prestiti
The government-related issuer (GRI) Cassa Depositi e Prestiti's
long-term issuer and debt ratings have been downgraded to Baa2,
with a negative outlook. This is at the same level as the Italian
government, given its 70% government ownership and the strong
financial and operational linkages with the government, reflected
in its public policy function. The outlook is negative in line
with the negative outlook on the sovereign.
Istituto Servizi Mercato Agricolo Alimentare (ISMEA)
The GRI ISMEA's long-term issuer rating has been downgraded
to Baa2, with a negative outlook. This is at the same level
as the Italian government, given its full government ownership and
the strong financial and operational linkages with the government,
reflected in its public policy function. The outlook is negative
in line with the negative outlook on the sovereign.
The methodologies used in these ratings were Moody's Consolidated Global
Bank Rating Methodology published in June 2012, Finance Company
Global Rating Methodology published in March 2012, and Government-Related
Issuers: Methodology Update published in July 2010. Please
see the Credit Policy page on www.moodys.com for a copy
of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
The ratings have been disclosed to the rated entities or their designated
agents and issued with no amendment resulting from that disclosure.
Information sources used to prepare each of the ratings are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
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the two years preceding the credit rating action. Please see the
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for information on (A) MCO's major shareholders (above 5%) and
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Moody's downgrades Italian banks
