Milan, October 05, 2011 -- Moody's Investors Service has today downgraded the senior debt and
deposit ratings of Italian banks and Italian government-related
financial institutions (GRIs), by between one and three notches.
These rating actions follow yesterday's downgrade of the Republic
of Italy's government bond rating to A2 from Aa2. The rating
action also incorporates a readjustment of our support assumptions for
Italian banks to reflect a weakening of the support environment for banks.
These rating actions conclude the reviews for downgrade initiated on 23
June 2011, which were triggered by the review for possible downgrade
of the Republic of Italy's ratings on 17 June 2011. The banks'
financial strength ratings (BFSRs), which were not part of the review,
have not been affected by the rating action on the Republic of Italy,
except in the case of UniCredit and Intesa Sanpaolo. For these
banks, separate press releases are being issued that detail the
actions being taken with regard to their respective BFSRs.
A full list of all the affected ratings can be found at the following
link: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_136445.
Please find the press release on the sovereign rating action including
the key rating rationale here: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_227333.
RATINGS RATIONALE
The key driver of today's rating actions is the downgrade of the
Republic of Italy to A2 from Aa2. The downgrade implies that the
government has less financial flexibility and would likely face more challenging
and difficult policy choices if multiple institutions were to need its
financial support at the same time.
The other consideration behind today's rating actions is the increased
uncertainty over the medium term regarding the willingness of European
Union member states to support senior creditors of institutions;
this uncertainty is heightened for banks below the first tier in their
domestic markets. This had already prompted Moody's to reduce the
levels of support in other European countries. Today's rating
actions are consistent with this broader reassessment. Please refer
to the "Systemic Support for Banks" link on the Topics page of www.moodys.com
for related articles.
It is important to note that Moody's continues to assume that support
will be forthcoming for Italian banks if support is needed. However,
today's action removes the extraordinarily high systemic support
of up to 4 notches assumed earlier in the crisis for the weaker institutions,
returning support uplifts to a level more appropriate with the evolving
support environment. The debt and deposit ratings of many Italian
banks continue to have one or two notches of rating lift over their baseline
credit assessments (i.e., standalone financial strength)
due to their importance to the banking system, and therefore high
likelihood of support.
Moody's believes that Italian banks can be categorised into three groups
that differ by how much "systemic uplift" they may be expected to receive
based on the size and nature of their franchises.
?Group 1: Banks with a very high likelihood of support,
which receive up to two notches of systemic uplift. This group
comprises the country's largest banks with high national market
shares in key banking products: Unicredit, Intesa San Paolo
and Banca Monte dei Paschi di Siena. The ratings of Intesa Sanpaolo
are constrained at the rating level of the Italian government despite
having one of the highest stand alone financial strength ratings in Italy
(C+ mapping to an A2 on the long-term scale) given the high
correlation with the Italian government's credit worthiness.
This is as a result of the bank's direct exposure to Italian government
debt and the very domestic focus of its business model.
? Group 2: Banks with a moderate to high likelihood of support.
This group receives up to one notch ratings uplift and comprises eight
smaller national banks or larger multi-regional banks with lower,
but still significant domestic market share. This group comprises
Banca Carige, Banca delle Marche, Banca Popolare di Milano,
Banca Sella Holding, Banco Popolare, Credito Emiliano,
Credito Valtellinese and Unione di Banche Italiane (UBI).
? Group 3: Banks with a low or no likelihood of support which
receive no systemic uplift. The rating agency believes that there
is insufficient certainty surrounding the likelihood and extent of support
available over the medium term to most banks with low domestic market
shares to warrant any uplift of their standalone credit strength.
? Furthermore, 17 banks are either subsidiaries of larger Italian
banks, the ratings of which already incorporate an uplift due to
systemic support, or of cooperative groups. As such,
they may receive parental or cooperative support, and their ratings
have, in most cases, been affected indirectly by the impact
on their parent's/cooperative's ratings .
Two GRIs (Cassa Depositi e Prestiti and ISMEA) have been downgraded to
A2, i.e., to the same level as the Italian government,
given their government ownership and the strong financial and operational
linkages with the government.
RATINGS RATIONALE FOR SENIOR SUBORDINATED AND TIER III DEBT
Moody's has downgraded the senior subordinated debt ratings of 18
Italian banks and the Tier III debt of 13 Italian banks (the latter being
rated one notch below these banks' senior subordinated debt),
in line with the downgrade of these banks' senior unsecured debt
ratings. This rating approach implies that if a bank's senior
debt rating benefits from an assumption of systemic support, its
subordinated debt and Tier III debt will benefit similarly. Moody's
does, however, intend to reassess its systemic support assumptions
for subordinated debt and Tier III debt in Italy , alongside other
European countries, during the remainder of this year in response
to prospective European banking legislation. This reassessment
is not captured in today's rating actions.
WHAT COULD CHANGE THE RATINGS UP
An improvement in the banks' standalone BFSRs could exert upward
pressure on the banks' debt and deposit ratings; please refer
to www.moodys.com for a more detailed discussion of each
individual bank's key rating drivers. However, in the
current difficult operating environment, the opportunity for this
appears very limited. An upgrade of the Italian government bond
rating could also exert upward pressure on the banks' debt and deposit
ratings; however, this too is unlikely given the negative outlook
on the ratings of the Italian government.
WHAT COULD CHANGE THE RATINGS DOWN
The ratings of those banks that continue to benefit from systemic support
remain linked to the creditworthiness of the Italian government and to
a further reduction in Moody's systemic support assumptions.
In that context, any further developments relating to the legislation
governing the resolution powers regarding banks -- i.e.,
developments that increase the likelihood of senior creditors incurring
losses -- could exert downward pressure on the deposit and
debt ratings of those banks which currently benefit from systemic support.
Any downgrades of the BFSRs on the individual banks -- for example
in the case of further escalating funding difficulties - could
also lead to additional negative rating pressures, particularly
given the reduced level of systemic support.
PRINCIPAL METHODOLOGIES
The principal methodologies used in this rating were 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. 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/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
a rating.
In addition to the information provided below please find on the ratings
tab of the issuer page at www.moodys.com, for each
of the ratings covered, Moody's disclosures on the lead rating
analyst and the Moody's legal entity that has issued each of the
ratings.
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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure page
on our website www.moodys.com for further information.
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.
Johannes Wassenberg
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Gregory W. Bauer
MD - Global Banking
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Moody's takes rating actions on Italian banks following Italy's downgrade to A2
