MPS Capital Services also on review
Milan, February 02, 2012 -- Moody's Investors Service has today placed on review for downgrade
the Baa1/Prime-2 senior debt and deposit ratings as well as the
D+ standalone bank financial strength rating (BFSR, mapping
to Baa3 on the long-term rating scale) of Banca Monte dei Paschi
di Siena (MPS).
The review for downgrade of the ratings of various subordinated debt instruments
of MPS, initiated on 7 November 2011, has been extended.
RATINGS RATIONALE
Moody's says that the key drivers for today's BFSR review
are:
i) the uncertainty in the bank's plan to meet its regulatory capital
shortfall calculated by the European Banking Authority (EBA). Moody's
notes that the bank's plan to raise the EUR3.3 billion mandated
by EBA to reach the 9% Core Tier 1 capital ratio includes joint
ventures and disposals, which may be challenging to implement in
the current environment and which carry some execution risk;
ii) MPS' weak internal capital generation capacity, which
would allow it to meet such increased capital requirements or to absorb
external shocks from its own earnings. This weak organic capital
generation capacity is becoming more prevalent as we expect pressure on
asset quality and earnings to increase for MPS as a result of the overall
challenging macroeconomic outlook in Italy, thus increasing the
possibility that MPS may require capital support from third parties.
Based on unchanged support assumptions by the Italian government,
the debt and deposit ratings of MPS have also been placed on review for
downgrade as they would most likely also be affected negatively in case
that MPS' standalone rating should be downgraded.
FOCUS OF THE REVIEW
Moody's says that the review will focus primarily on i) the short-term
measures that can be taken to improve the group's capital levels
to meet any EBA capital requirements, as well as ii) management's
strategy to significantly enhance its operational flexibility and earnings
generation capacity in view of the limitations of asset sales/disposals
or deleveraging as an ongoing source of capital generation.
WHAT COULD CHANGE THE RATING UP/DOWN
As the ratings of MPS have been placed on review for downgrade,
there is a significant possibility that the ratings of MPS may deteriorate.
Please refer to the rationale above which explains key downward rating
drivers.
On the positive side, MPS's ratings could be confirmed if the bank
demonstrates that it can achieve a further significant strengthening in
its financial profile, including (i) removing any uncertainty that
it can achieve its required capitalisation levels, together with
(ii) significantly higher profitability (using metrics such as Pre-Provision
and Net Income as a percentage of total or risk weighted assets,
or return on assets and return on equity); (iii) an improvement in
its cost-to-income ratio below 65% and evidence that
MPS can more flexibly adapt its cost base to fluctuating earnings;
(iii) demonstrating resilient asset quality levels.
LIST OF RATING ACTIONS
The ratings of the following entities were also placed on review for possible
downgrade as a result of the action on their parent:
- MPS Capital Services
- Banca Monte dei Paschi di Siena, London
- MPS Capital Trust I
- Monte Paschi Ireland Limited
Banca Monte dei Paschi di Siena SpA, affected ratings:
- Bank Financial Strength Rating: D+
- Long Term Bank Deposits: Baa1
- Senior Unsecured: Baa1
- Senior Unsecured MTN: (P)Baa1
- Short Term: P-2
- Other Short Term: (P)P-2
- Preferred stock: (P)Ba3
MPS Capital Services, affected ratings:
- Bank Financial Strength Rating: D+
- Long Term Bank Deposits: Baa2
- Short Term: P-2
Banca Monte dei Paschi di Siena, London, affected ratings:
- Short Term Deposit Note/CD Program: P-2
MPS Capital Trust I, affected ratings:
- Backed Preferred Stock non-cumulative: Ba3
Monte Paschi Ireland Limited, affected ratings:
- Backed Senior Unsecured: Baa1
- Backed Senior Unsecured MTN: (P)Baa1
The methodologies used in this rating were Bank Financial Strength Ratings:
Global Methodology published in February 2007, Incorporation of
Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology published in March 2007, and and Moody's Guidelines
for Rating Bank Hybrid Securities and Subordinated Debt published in November
2009. Please see the Credit Policy page on www.moodys.com
for copies 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 rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, and public information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
this review.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating 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
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for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%)
and for (B) further information regarding certain affiliations that may
exist between directors of MCO and rated entities as well as (C) the names
of entities that hold ratings from MIS that have also publicly reported
to the SEC an ownership interest in MCO of more than 5%.
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Please see Moody's Rating Symbols and Definitions on the Rating
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Consequently, Moody's provides a date that it believes is
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for further information.
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.
Carlo Gori
Vice President - Senior Analyst
Financial Institutions Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Johannes Wassenberg
MD - Banking
Financial Institutions Group
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Moody's reviews for downgrade Banca Monte dei Paschi di Siena's ratings