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Global Credit Research - 23 Dec 2010
Milan, December 23, 2010 -- Moody's Investors Service has today placed the A2/Prime-1 long-term
and short-term deposit ratings and the C- standalone bank
financial strength rating (BFSR) of UniCredit MedioCredito Centrale (MCC)
on review for possible downgrade.
Today's rating action was triggered by the recent announcement by
UniCredit of an agreement to sell its 100% stake in MCC to Poste
Italiane (rated Aa2/P-1, stable). The agreement with
Poste Italiane is part of a project by the Italian Ministry of Economy
and Finance, under which MCC will become the vehicle for the creation
of Banca del Mezzogiorno. The transaction is expected to close
in spring 2011, subject to regulatory approvals.
As defined in Italy's national budget law for 2010, the aim
of Banca del Mezzogiorno will be to provide lending services to small
enterprises in the less developed region of southern Italy, continue
the activity of MCC as provider of government-subsidised funding
schemes to SMEs, as well as develop advisory activities.
Moody's notes that the lending activity will be an important new
business line that would raise the risk profile of MCC over the medium
term. To date, MCC has benefited from the low-risk
activities and strong ongoing support for its operations and financials
from UniCredit. However, according to Moody's,
the bank's standalone financial strength will be challenged going
forward because of the economic weakness of the southern region of Italy
in which the planned lending activity will be concentrated, the
more limited underwriting expertise of Poste Italiane as well as implementation
Following the recent reorganisation of MCC by its parent earlier this
year, MCC effectively became UniCredit's specialised vehicle
for the management and provision of government-subsidised funding
schemes to SMEs in Italy, a small segment of the public-sector
business in which the bank has a strong and long-established position.
To date, this commission-driven business was also backed
by a very high capital buffer allocated by the parent.
Moody's notes that the project of the Banca del Mezzogiorno is still
at an initial stage and that there are significant strategic elements
that are still undefined or undisclosed. In particular, although
this initiative is public in nature, the relevant law stipulates
that the future shareholding of the bank should change in favour of private
banks entering the capital share of MCC together with Poste Italiane.
The Banca del Mezzogiorno will initially operate as a second-level
bank, using Poste Italiane's networks in southern Italy and
potentially also those of other banking groups. The Italian government
will participate in the project with a minimal direct stake, and
would provide funding support with the possibility of the bank issuing
government-guaranteed bonds in the initial years of its operations.
Moody's review for possible downgrade of MCC's ratings will
primarily focus on the bank's stand-alone strength after
its sale to Poste Italiane, and the extent to which MCC will retain
a sustainable business model, characterized by good levels of profitability,
an adequate risk profile and sufficient capitalisation. Moody's
says that gaining a clearer visibility of these factors in the creation
of the Banca del Mezzogiorno, combined with a detailed business
plan, will be important inputs to the review process.
A possible downgrade of the standalone BFSR would also weaken the standing
of the deposit ratings, which currently incorporate three notches
of uplift as a result of the application of Moody's joint default
analysis methodology. "With respect to the deposit ratings
of MCC, Moody's currently perceives as unclear the long-term
balance between the public policy mandate of this new institution and
the economic interest of the private banks which could become part of
this initiative, and how this would be also reflected in the shareholding
composition of the bank in the future," says Simone Zampa,
a Milan-based Moody's Vice President - Senior Analyst,
and lead analyst for this issuer.
The following ratings of UMCC were affected by today's rating action:
- Long-term bank deposit ratings of A2 placed under review
for possible downgrade
- Short-term bank deposit ratings of Prime-1 placed
under review for possible downgrade
- Bank Financial Strength Rating of C- placed under review
for possible downgrade
The last rating action on UMCC was implemented in July 2010, when
the bank's long-term deposit rating was downgraded and the BFSR
The principal methodology used in rating this issuer was Moody's "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, available on www.moodys.com. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
Headquartered in Rome, Italy, UniCredit MedioCredito Centrale
had total assets of EUR1.2 billion as at 30 September 2010.
Vice President - Senior Analyst
Financial Institutions Group
Moody's Italia S.r.l
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Italia S.r.l
Moody's reviews UniCredit MedioCredito Centrale for possible downgrade (Italy)
Corso di Porta Romana 68
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