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Announcement:

Moody's reviews for downgrade UniCredit's A2/C- ratings (Italy)

Global Credit Research - 16 Nov 2011

Milan, November 16, 2011 -- Moody's Investors Service has today placed on review for downgrade UniCredit's C- standalone bank financial strength rating (BFSR; mapping to Baa1 on the long-term rating scale), its A2 long-term/Prime-1 short-term deposit and senior debt ratings, as well as all other junior debt ratings. The debt ratings and certain standalone BFSR's of some of UniCredit's subsidiaries were also placed under review for downgrade. Please refer to the list at the bottom of this Press Release for further details.

RATINGS RATIONALE

RATIONALE FOR REVIEW OF STANDALONE BFSR

Moody's said that the decision to review UniCredit's standalone rating for possible downgrade was triggered by its third quarter results announcement made on November 14th, 2011. Results for the third quarter of 2011 showed a net loss of EUR 10.6 billion for the period. The principal cause of this loss was a EUR 10.2 billion write down of goodwill and certain other assets. Additionally, the bank's operating profit declined, affected by trading losses and higher loan loss charges.

In its review of UniCredit's ratings, Moody's will focus on the goodwill impairment and the extent to which it signals lower earnings expectations in UniCredit's core markets, especially Italy, as also indicated by the bank's declining operating profit.

At the same time as it announced its results for the third quarter of 2011, UniCredit announced its new strategic plan, and plans to raise EUR 7.5 billion of equity through a fully underwritten rights issue. The strategic plan focuses on strengthening the bank's financial fundamentals over the period running to 2015, through a number of measures including greater focus on core activities, improved efficiency, and turning around the performance of the Italian business. With the fully underwritten EUR 7.5 billion rights issue the bank has targeted capital adequacy at a level compatible with both current requirements and Basel III.

Moody's said that both the announcement of third quarter loss and the strategic plan will be taken into consideration during the review process.

More specifically, Moody's says that the review of UniCredit's standalone rating will focus on:

(i) the group's new strategic plan, and the extent to which this may strengthen the group's key franchises and restore financial fundamentals to stronger levels;

(ii) the current financial performance of the group, and the potential for this to further deteriorate in the coming quarters, given the difficult operating environment, particularly in Italy; and

(iii) the nature of, and impact on the group's financials, of the write downs of goodwill and other assets announced with the group's results for the third quarter of 2011

Moody's noted positively the planned capital increase, and also the fact that UniCredit continues to have considerable liquidity, despite current market conditions. The rating agency also noted, however, the relatively long time required to achieve the goals of the strategic plan and the considerable challenges to achieving these, given the difficult and highly uncertain operating environment in which these goals must be delivered.

RATIONALE FOR REVIEW OF LONG-TERM RATINGS

Moody's says that the review for downgrade of UniCredit's long- and short-term deposit and debt ratings is driven by the review for possible downgrade of the bank's standalone ratings.

WHAT COULD CHANGE THE RATINGS UP

The standalone rating could be upgraded in the event of a significant improvement in profitability, particularly in the group's core Italian business, and of a reduction in the level of non-performing loans. However, as indicated by the current review for possible downgrade, Moody's considers this quite unlikely in the short- to medium-term. An upgrade of the standalone rating could also lead to an upgrade of the bank's debt and deposit ratings.

WHAT COULD CHANGE THE RATING DOWN

Further to the reasons identified in the review for possible downgrade, the volatilities in the Italian and European operating environment could put additional pressure on UniCredit. Any notable weakening in its funding and liquidity profile, or any significant impact of the current operating environment challenges on its franchise, business activities, profitability or asset quality could put further negative pressure on the standalone rating. A downgrade of the standalone rating would likely lead to a downgrade of the long-term deposit and debt ratings.

The ratings of the following subsidiaries of UniCredit were also placed on review for possible downgrade as a result of the action on their parent:

- UniCredit Leasing

- UniCredit Bank AG

- UniCredit Bank Austria

- UniCredit Luxembourg S.A.

- ATF Bank

- UniCredit Bank Slovakia a.s.

- Bank Polska Kasa Opieki S.A.

- Yapi ve Kredi Bankasi AS

Full details of these rating actions is given in separate press releases for each bank.

UniCredit SpA, affected ratings:

- Bank Financial Strength Rating: C-

- Senior Unsecured: A2

- Senior Unsecured MTN: (P)A2

- LT Bank Deposit: A2

- LT Deposit Note/ CD Program: (P)A2

- Subordinate: A3

- Subordinate MTN: (P)A3

- Junior Subordinate: Baa2(hyb)

- Junior Subordinate MTN: Baa2

- Tier III Debt MTN: (P)A3

- Pref. Stock Non-cumulative: Ba1(hyb)

- ST Bank Deposit: P-1

- Other Short Term: (P)P-1

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 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 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 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 an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com 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%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com 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.

Henry MacNevin
Senior Vice President
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
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100

Moody's reviews for downgrade UniCredit's A2/C- ratings (Italy)
No Related Data.
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