Fitch Takes Rating Actions on Italian Banks Following Sovereign Downgrade

Mon Mar 18, 2013 1:18pm EDT

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(The following statement was released by the rating agency) MILAN/BARCELONA/LONDON, March 18 (Fitch) Fitch Ratings has taken rating actions on seven Italian parent banks and one non-bank financial institution to reflect the direct impact of the downgrade of Italy to 'BBB+'/Negative on 8 March 2013 (see "Fitch Downgrades Italy to 'BBB+'; Outlook Negative" at www.fitchratings.com). The rating actions affected issuers with Long-term Issuer Default Ratings (IDR) at or above the previous 'A-' sovereign IDR and banks with Support Rating Floors (SRF) in the 'BBB' range. The sovereign rating downgrade was partly driven by Fitch's expectation that the domestic recession in Italy is deeper than previously expected, which is likely to put the creditworthiness of Italian banks under further pressure because of heightened concerns about asset quality deterioration together with weak earnings prospects. The agency has downgraded Intesa Sanpaolo SpA's and UniCredit S.p.A.'s Long-term IDRs to 'BBB+' from 'A-' and Viability Ratings (VR) to 'bbb+' from 'a-'. The Outlook on the Long-term IDRs is Negative. Intesa Sanpaolo's and UniCredit's Short-term IDR have been affirmed at 'F2' and their Support Rating at '2'. The banks' Support Rating Floors (SRF) have been revised to 'BBB' from 'BBB+'. Agos Ducato SpA's (Agos) and Banca Nazionale del Lavoro's (BNL) Long-term IDRs have been downgraded to 'A-' from 'A'. The Outlooks are Negative. BNL's and Agos's Short-term IDRs have been affirmed at 'F1'. Fitch has affirmed the Support Ratings of Banca Monte dei Paschi di Siena (MPS), Banco Popolare, ICCREA Holding (ICCREAH) and Unione di Banche Italiane - UBI Banca (UBI Banca) at '2' and SRFs at 'BBB'. The Long-term IDRs of MPS and Banco Popolare have been affirmed at 'BBB' and their Outlooks revised to Negative from Stable. A full list of rating actions is at the end of this rating action commentary. RATING ACTION RATIONALE The downgrades of Intesa Sanpaolo's VR and Long-term IDR reflect Fitch's view that the bank's credit profile is closely correlated with the sovereign's. These close links include the bank's exposure to a deteriorating operating environment and direct exposure to the Italian sovereign through sizeable holdings of sovereign debt instruments. Therefore, Fitch considers that Intesa Sanpaolo's VR and therefore IDR cannot be above Italy's sovereign rating. Despite Intesa Sanpaolo's moderate degree of international diversification, its domestic core business remains the main driver of the rating. The downgrade of UniCredit's VR and Long-term IDR reflects Fitch's view that despite UniCredit's significant international diversification, the correlation between the risk profile and ratings of UniCredit and the Italian sovereign is too high to rate UniCredit above the sovereign at the current rating level. UniCredit's direct exposure to the Italian sovereign is smaller than its peers but in Fitch's view is still a significant rating driver. The downgrade of the Italian sovereign also mirrors Italy's worsening operating environment. Fitch expects credit demand to be more muted and loan impairment charges to be higher than previously anticipated. This will make turning around the bank's underperforming Italian operations more challenging and Fitch therefore expects the performance of UniCredit's domestic businesses to be weak in the medium term. The revision of Intesa Sanpaolo's and UniCredit's SRFs to 'BBB' from 'BBB+' reflects the weakened ability of the sovereign to provide support following the downgrade of Italy's rating, while Fitch believes that the propensity to provide support remains high. The downgrades of Agos's and BNL's Long-term IDRs, which are driven by institutional support from Credit Agricole ('A+'/Negative) and BNP Paribas ('A+'/Stable), respectively, underline Fitch's view that the uplift above the sovereign rating is limited to one notch to reflect that the strategic importance of the Italian subsidiaries could decline if the operating environment deteriorated further, and that in an extreme scenario the parents could be prevented from effectively providing support. BNL's 'bbb' VR is unaffected by the rating action. The affirmation of the Support Ratings and SRFs of MPS, Banco Popolare, ICCREAH and UBI Banca reflects Fitch's view that despite the sovereign's reduced ability to provide support following the downgrade, its propensity to support Italy's largest banks remains high. The VRs of these banks are unaffected by today's rating action. The revision of the Outlook on MPS and Banco Popolare is a direct consequence of the sovereign downgrade. For MPS, whose 'b' VR on Rating Watch Negative (RWN) is unaffected by today's rating action, the Negative Outlook indicates that a downward revision of its SRF would result in a downgrade of the Long-term IDR. For Banco Popolare, whose 'bbb' VR is unaffected by today's rating action, the Negative Outlook reflects that a downward revision of the SRF would only result in a downgrade of the Long-term IDR if its VR was also downgraded. The SRF of six Italian banks is at 'BBB'. This compression of the SRFs reflects the agency's view that the propensity of the sovereign to support systemically important banks remains high. INTESA SANPAOLO KEY RATING DRIVERS - VR, IDRS AND SENIOR DEBT Intesa Sanpaolo's ratings reflect its sound capitalisation, solid funding in the current market context, adequate operating profitability and its leading domestic franchise. The downgrade reflects that Italy's rating effectively caps Intesa Sanpaolo's VR. Intesa Sanpaolo's performance has suffered in the weak operating environment, but the bank's profitability has remained more resilient than many of its domestic peers. The bank generated EUR3.6bn pre-tax profit excluding a EUR299m post-tax impact of purchase price allocation and a EUR134m post-tax charge for a staff reduction programme. Fitch expects the group's profitability to remain under pressure in 2013 as earnings generation, particularly in domestic retail banking, will remain difficult and loan impairment charges high, but Intesa Sanpaolo has demonstrated that it is able to generate sufficient earnings to absorb high loan impairment charges. The VR is underpinned by the bank's sound capitalisation with a core Tier 1 ratio of 11.2% at end-2012 and a 'fully-loaded' Basel III common equity Tier 1 ratio of 10.6%, which compares well with international peers. Liquidity also remains sound as the bank had EUR90bn unencumbered eligible assets at end-February 2013, of which EUR20bn in cash invested in short-term repurchase transactions. RATING SENSITIVITIES - VR, IDRS, AND SENIOR DEBT Intesa Sanpaolo's Long-term IDR is based on its VR, therefore a downgrade of its VR would result in a downgrade of its Long-term IDR. The Outlook on its Long-term IDR is Negative, which indicates that an upgrade of Intesa Sanpaolo's IDRs and VR is currently unlikely. Intesa Sanpaolo's IDR is at the same level as the sovereign and is therefore sensitive to a change in the sovereign rating. A further downgrade of the sovereign would likely result in a downgrade of Intesa Sanpaolo's VR and IDRs as Fitch considers the bank's credit profile closely linked to the sovereign's and to the operating environment in Italy, where the bulk of the group's operations are located. An upgrade of the sovereign rating, which given its Negative Outlook is unlikely, would put upward pressure on the bank's VR and Long-term IDR. Fitch expects the bank's profitability and asset quality to remain under pressure given the weak outlook for the domestic economy. However, the agency expects that Intesa Sanpaolo will continue to generate adequate operating profit as its operating performance to date has remained more resilient than that of many of its domestic peers. Weaker profitability that would erode the bank's good capitalisation would put the VR under pressure. Fitch expects Intesa Sanpaolo's funding and liquidity to remain solid as the bank's funding sources are diversified and wholesale funding maturities for 2013 have already been refinanced. The bank estimated a Basel III NSFR and LCR above 100% at end-2012 even excluding the benefit from its European Central Bank funding. Deteriorating liquidity, which Fitch currently does not expect, would put ratings under pressure. SUBSIDIARY AND AFFILIATED COMPANY KEY RATING DRIVERS AND SENSITIVITIES Intesa Sanpaolo's subsidiaries' ratings, Banca IMI and Cassa di Risparmio di Firenze, reflect Fitch's view of the core function of these subsidiaries in the group. As their ratings are based on their parent's Long-term IDR, they are sensitive to changes in Intesa Sanpaolo's Long-term IDR. This rating action does not address the ratings of Intesa Sanpaolo's foreign subsidiaries. Any potential impact of this rating action on Intesa Sanpaolo's foreign subsidiaries' ratings will be announced in separate rating action commentaries. KEY RATING DRIVERS AND RATING SENSITIVITIES- SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt and other hybrid capital issued by Intesa Sanpaolo and its subsidiaries are all notched down from Intesa Sanpaolo's VR in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles, which vary considerably. Their ratings are primarily sensitive to any change in Intesa Sanpaolo's VR UNICREDIT KEY RATING DRIVERS - VR, IDRS AND SENIOR DEBT UniCredit's VR and IDRs remain underpinned by the bank's broad international franchise with significant operations in well-performing and highly-rated markets, a diversified and resilient funding profile, improved capitalisation following a EUR7.5bn capital increase in Q112 and progress made implementing the bank's 2011 strategic plan. The bank's VR also takes into account UniCredit's below-average asset quality, in particular in Italy, reliance on resilient collateral values for loan loss coverage, poor profitability in its Italian business and challenges facing the bank's pan-European business model in light of increasing regulatory scrutiny of cross-border funding and capital flows. RATING SENSITIVITIES - VR, IDRS, AND SENIOR DEBT The Negative Outlook on UniCredit's IDR reflects the bank's challenge to improve the performance of its Italian businesses in the current adverse macroeconomic climate. The bank's IDRs and VR are sensitive to a change in Fitch's assumptions around the development of UniCredit's asset quality and profitability, notably in Italy. Currently, Fitch expects new impaired loans formation to slow down towards the end of 2013 and collateral values, notably Italian real estate, to remain broadly resilient in 2013. UniCredit's IDRs and VR are also sensitive to Fitch's assumptions regarding the risk profile and profitability of UniCredit's significant foreign operations, which are supportive of UniCredit's ratings given the poor operating environment in Italy. While Fitch notes that internationally deployed funding and capital is not fully fungible due to increasing regulatory tendencies by local regulators to "ring-fence" the subsidiaries in their respective jurisdictions, UniCredit's risk profile nonetheless benefits from various well-performing foreign subsidiaries with significant dividend payment potential and sound internal capital generation. The latter is evidenced for example by the announcement that its German subsidiary UniCredit Bank AG will pay a dividend of EUR2.5bn, including 100% of 2012 results and EUR1bn out of reserves. Progress on banking union may also reverse the ring-fencing trend. As a result of its international diversification, UniCredit's risk profile is somewhat less correlated to the sovereign's risk profile than that of its domestic peers. Should the Italian sovereign rating be downgraded further, depending on the interplay between domestic performance and benefits from its international presence, UniCredit could potentially be rated one notch above the sovereign rating. Conversely, should the risk profile and notably the profitability of the bank's activities in Germany (UniCredit Bank AG, which consolidated much of UniCredit's corporate and investment banking, 'A+'/Stable/'a-'), Austria and CEE (UniCredit Bank Austria AG, which consolidates UniCredit's CEE activities except Poland; 'A'/Stable/'bbb+') and Poland (Bank Pekao SA; 'A-'/Stable/'a-') worsen, this could be negative for UniCredit's ratings. SUBSIDIARY AND AFFILIATED COMPANY KEY RATING DRIVERS AND SENSITIVITIES This rating action does not address the ratings of UniCredit's foreign subsidiaries. Any impact of this rating action on UniCredit's subsidiaries' ratings will be announced in separate rating action commentaries. KEY RATING DRIVERS AND RATING SENSITIVITIES- SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt and other hybrid capital issued by UniCredit are all notched down from UniCredit's VR in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles, which vary considerably. Their ratings are primarily sensitive to any change in UniCredit's VRs. AGOS DUCATO KEY RATING DRIVERS -IDRS AND SUPPORT RATING Agos's IDRs and Support Rating are driven by support from its majority shareholder, CA Consumer Finance (CACF; 'A+'/Negative/'F1+'), and reflect Fitch's opinion that Agos is strategically important for Credit Agricole. The agency believes that Italy remains an important market for Credit Agricole, where as well as its majority 61% stake in Agos, the group has banking operations and also holds a 50% stake in FGA Capital S.p.A. ('BBB'/Negative/'F3'), a joint venture with car manufacturer Fiat Group Automobiles S.p.A. Credit Agricole's propensity to support Agos was demonstrated in 2012 when the parent participated in a EUR235m capital increase together with the company's 39% shareholder, Banco Popolare ('BBB'/Negative). Fitch expects that Credit Agricole will continue to provide support to Agos if needed, but the agency believes that its propensity to do so may be affected by market prospects, hence the downgrade. RATING SENSITIVITIES - IDRS AND SUPPORT RATING Agos's ratings are sensitive to changes in Credit Agricole's propensity and ability to provide support. The ratings would come under further pressure if Italy became a less strategically important market for Credit Agricole, which could arise if the operating environment in Italy further materially deteriorated. The ratings would also come under pressure if CACF's ability to support Agos, as indicated by its Long-term IDR, declined. An upgrade of Agos's ratings is currently unlikely as indicated by the Negative Outlook on its Long-term IDR, which is driven by the Negative Outlook on the sovereign rating and by Fitch's expectation that the operating environment in Italy will remain challenging. Agos's Short-term IDR would come under pressure if Fitch changed its assumption that short-term liquidity support from Agos's parent remains strong. BANCA NAZIONALE DEL LAVORO KEY RATING DRIVERS -IDRS, SENIOR DEBT AND SUPPORT RATING BNL's IDRs and Support Rating reflects institutional support from BNP Paribas. Fitch regards BNL as core to BNP Paribas' strategy but considers that in an extreme scenario, BNP Paribas could effectively be prevented from providing support to its subsidiary bank in Italy. Therefore, BNL's Long-term IDR remains effectively capped at one notch above the sovereign rating. RATING SENSITIVITIES - IDRS AND SUPPORT RATING BNL's IDRs and Support Rating are sensitive to changes in Italy's sovereign rating. The IDRs and Support Rating are also sensitive to changes in BNL's strategic importance for the group, which Fitch currently does not expect. A decline in BNP Paribas' ability to provide support, as indicated by its Long-term IDR, would only affect BNL's IDRs if its parent's Long-term IDR fell by more than two notches, as BNL's Long-term IDR is currently constrained by Italy's sovereign rating. BNL's Short-term IDR would come under pressure if there were signs of weakening short-term liquidity support from its parent, which Fitch currently does not expect. BANCA MONTE DEI PASCHI DI SIENA KEY RATING DRIVERS - IDRs, SENIOR DEBT, SUPPORT RATING AND SUPPORT RATING FLOOR MPS's Long-term IDR is based on support from the Italian authorities and is at its SRF. The IDRs, Support Rating and SRF reflect Fitch's view that as one of Italy's largest banks, MPS would receive further support from the authorities if needed. The Negative Outlook on the bank's Long-term IDR reflects Fitch's view that a further downgrade of the sovereign rating would put pressure on the SRF. On 28 February 2013, the Italian government subscribed EUR4.1bn hybrid capital instruments issued by MPS, of which EUR1.9bn were earmarked to repay the hybrid capital instruments issued by the bank in 2009. The new instruments include terms that allow for coupon payment in the form of MPS's ordinary shares and for the conversion of the instruments into common equity. This means that the Italian state could become a shareholder of the bank, which underpins Fitch's view of a high probability of support for the bank. RATING SENSITIVITIES - IDRs, SENIOR DEBT, SUPPORT RATING AND SUPPORT RATING FLOOR MPS's Long-term IDR is at its SRF. Any change in the SRF, which could result from a further sovereign downgrade or a change in Fitch's assumption of the government's propensity and ability to provide support, would result in a change in the Long-term IDR and senior debt ratings. BANCO POPOLARE KEY RATING DRIVERS - IDRs, SENIOR DEBT, SUPPORT RATING AND SUPPORT RATING FLOOR Banco Popolare's VR, which is unaffected by today's rating actions, is at the same level as the bank's SRF. The Long-term IDR would therefore only be downgraded if the bank's VR and SRF were downgraded. The Negative Outlook on the Long-term IDR reflects pressure on Banco Popolare's VR (see "Fitch Affirms Four Large Italian Banks" dated 29 January 2013 for key rating drivers and sensitivities of Banco Popolare's VR) and Fitch's view that a further downgrade of the sovereign rating would put pressure on its SRF. The rating sensitivities of Banco Popolare's Support Rating and SRF are below. SUBSIDIARY AND AFFILIATED COMPANY KEY RATING DRIVERS AND SENSITIVITIES Banco Popolare's subsidiaries' ratings, Credito Bergamasco, Banca Aletti & C. S.p.A and Banca Italease, are based on Fitch's view that Banco Popolare would provide support if needed. Fitch considers Credito Bergamasco and Banca Aletti as core subsidiaries given their roles in the group. Fitch believes that Banco Popolare would also provide support to Banca Italease, as failure to do so would pose a significant reputation risk to Banco Popolare. As the ratings of the subsidiaries are based on their parent's Long-term IDR, the ratings are sensitive to changes in Banco Popolare's Long-term IDR. KEY RATING DRIVERS AND RATING SENSITIVITIES -SUPPORT RATINGS AND SUPPORT RATING FLOORS The 'BBB' SRFs of MPS, Banco Popolare, ICCREA Holding, Intesa Sanpaolo, UniCredit and UBI Banca reflect Fitch's opinion that in the current crisis the Italian authorities show a high propensity to support the country's largest banks. The SRFs assigned to Italian banks are based on Fitch's ranking of the banks, according to the agency's view of their systemic importance. ICCREA Holding's Support Rating and SRF factor in the ICCREA group's role in the mutual banking sector, which has an aggregate market share of about 7% of loans in Italy, and the agency's view that support for ICCREA Holding would be used to provide support for the sector banks if needed. The SRFs and Support Ratings are sensitive to changes in the propensity or in the ability of the government to provide support. A downgrade of Italy's sovereign rating would put pressure on the SRFs as it would indicate a reduced ability for the authorities to provide support. In a scenario where this ability reduced further, Fitch believes that the SRFs of the Italian banks could see a wider distribution, with the more regional banks' SRFs coming under more pressure than the SRFs of the very largest Italian banks with strong domestic market shares. The SRFs and Support Ratings would also come under pressure if Fitch considered that the propensity of the authorities to support the country's banks had changed, which is not currently factored into the agency's analysis. In particular, Fitch's view on support is sensitive to developments within the regulatory and legal framework, particularly emanating from the European Commission with regard to bail-ins, centralised regulatory oversight and adjustments to deposit insurance schemes. The rating actions are as follows: Agos Ducato Long-term IDR: downgraded to 'A-' from 'A'; Outlook Negative Short-term IDR: affirmed at 'F1' Support Rating: affirmed at '1' Banca Monte dei Paschi di Siena: Long-term IDR: affirmed at 'BBB'; Outlook revised to Negative from Stable Short-term IDR: affirmed at 'F3' VR: 'b' RWN; unaffected Support Rating: affirmed at '2' Support Rating Floor: affirmed at 'BBB' Debt issuance programme (senior debt): affirmed at 'BBB' Senior unsecured debt, including guaranteed notes: affirmed at 'BBB' Lower Tier 2 subordinated debt: 'B-' RWN; unaffected Upper Tier 2 subordinated debt: 'CCC'; unaffected Preferred stock and Tier 1 notes: 'CC'; unaffected Banca Antonveneta: Long-term IDR: affirmed at 'BBB'; Outlook revised to Negative from Stable Short-term IDR: affirmed at 'F3' Support Rating: affirmed at '2' Banca Nazionale del Lavoro Long-term IDR: downgraded to 'A-' from 'A'; Outlook Negative Short-term IDR: affirmed at 'F1' VR: 'bbb'; unaffected Support Rating: affirmed at '1' Senior debt: downgraded to 'A-' from 'A' Banco Popolare: Long-term IDR: affirmed at 'BBB'; Outlook revised to Negative from Stable Short-term IDR: affirmed at 'F3' VR: 'bbb'; unaffected Support Rating: affirmed at '2' Support Rating Floor: affirmed at 'BBB' Senior debt (including programme ratings and guaranteed notes): affirmed at 'BBB/F3' Commercial paper: affirmed at 'F3' Lower Tier 2 subordinated debt: 'BBB-'; unaffected Preferred stock and junior subordinated debt: 'BB-'; unaffected Banca Italease: Long-term IDR: affirmed at 'BBB'; Outlook revised to Negative from Stable Short-term IDR: affirmed at 'F3' Support Rating: affirmed at '2' Senior debt and programme ratings: affirmed at 'BBB' Market linked securities: affirmed at 'BBBemr' Lower Tier 2 subordinated debt: 'BBB-'; unaffected Trust preferred securities: 'C'; unaffected Banca Aletti & C. S.p.A.: Long-term IDR: affirmed at 'BBB'; Outlook revised to Negative from Stable Short-term IDR: affirmed at 'F3' Support Rating: affirmed at '2' Credito Bergamasco: Long-term IDR: affirmed at 'BBB'; Outlook revised to Negative from Stable Short-term IDR: affirmed at 'F3' Support Rating: affirmed at '2' Iccrea Holding S.p.A. Long-term IDR: 'BBB+'; Outlook Negative; unaffected Short-term IDR: 'F2'; unaffected VR: 'bbb+'; unaffected Support Rating: affirmed at '2' Support Rating Floor: affirmed at 'BBB' The ratings of Iccrea Banca S.pA. and Iccrea BancaImpresa are not affected by today's rating action. Intesa Sanpaolo S.p.A. Long-term IDR: downgraded to 'BBB+' from 'A-'; Outlook Negative Short-term IDR: affirmed at 'F2' VR: downgraded to 'bbb+' from 'a-' Support Rating: affirmed at '2' Support Rating Floor: revised to 'BBB' from 'BBB+' Senior debt (including debt issuance programmes and guaranteed notes): Long-term rating downgraded to 'BBB+' from 'A-'; Short-term rating affirmed at 'F2' Commercial paper/certificate of deposit programmes: affirmed at 'F2' Senior market-linked notes: downgraded to 'BBB+emr' from 'A-emr' Subordinated lower Tier II debt: downgraded to 'BBB' from 'BBB+' Subordinated upper Tier II debt: downgraded to 'BB+' from 'BBB-' Tier 1 instruments (XS0545782020, XS0371711663, XS0456541506, XS0388841669): downgraded to 'BB' from 'BB+' Cassa di Risparmio di Firenze: Long-term IDR: downgraded to 'BBB+' from 'A-'; Outlook Negative Short-term IDR: affirmed at 'F2' Support Rating: downgraded to '2' from '1' Senior debt (including programme ratings): downgraded to 'BBB+' from 'A-' Upper Tier 2 instruments: downgraded to 'BB+' from 'BBB-' Banca IMI S.p.A.: Long-term IDR: downgraded to 'BBB+' from 'A-'; Outlook Negative Short-term IDR: affirmed at 'F2' Support Rating: downgraded to '2' from '1' Senior debt (including programme ratings): downgraded to 'BBB+' from 'A-' Intesa Sanpaolo Bank Ireland plc Commercial Paper/Short-term debt affirmed at 'F2' Senior unsecured debt (guaranteed by Intesa Sanpaolo, including programme ratings): downgraded to 'BBB+' from 'A-' Societe Europeenne de Banque SA: Commercial Paper and Short-term debt (guaranteed by Intesa Sanpaolo): affirmed at 'F2' Intesa Funding LLC US Commercial Paper Programme: affirmed at 'F2' UBI Banca: Long-term IDR: 'BBB+'; Outlook Negative; unaffected Short-term IDR: 'F2'; unaffected VR: 'bbb+'; unaffected Support Rating: affirmed at '2' Support Rating Floor: affirmed at 'BBB' Senior debt (including programme ratings): 'BBB+'; unaffected Commercial Paper Programme/Short-term debt: 'F2'; unaffected Subordinated Lower Tier 2 debt: 'BBB'; unaffected Preference stock and hybrid instruments: 'BB'; unaffected UniCredit S.p.A.: Long Term IDR: downgraded to 'BBB+' from 'A-'; Outlook Negative Short Term IDR: affirmed at 'F2' VR: downgraded to 'bbb+' from 'a-' Support Rating: affirmed at '2' Support Rating Floor: revised to 'BBB' from 'BBB+' Senior unsecured debt: downgraded to 'BBB+' from 'A-' Guaranteed senior unsecured notes: downgraded to 'BBB+' from 'A-' Market-linked notes: downgraded to 'BBB+emr' from 'A-(emr)' Lower Tier 2 notes: downgraded to 'BBB' from 'BBB+' Upper Tier 2 notes: downgraded to 'BB+' from 'BBB-' Preferred stock: downgraded to 'BB' from 'BB+' UniCredit Bank (Ireland) p.l.c. (no issuer ratings assigned): Senior unsecured notes: downgraded to 'BBB+' from 'A-' Guaranteed senior unsecured notes: downgraded to 'BBB+' from 'A-' Any rating impact from the above rating actions on banks' mortgage covered bonds will be detailed in a separate comment. Contact: Primary Analyst (Banca Monte dei Paschi di Siena and subsidiaries, Banco Popolare and subsidiaries, Intesa Sanpaolo and subsidiaries,) Christian Scarafia Senior Director +39 02 87 90 87 212 Fitch Italia S.p.A. V.lo Santa Maria alla Porta, 1 20123 Milan Primary Analyst (UniCredit and subsidiary) Christian Kuendig Senior Director +44 20 3530 1399 Fitch Ratings Limited 30 North Colonnade London E14 5GN Primary Analyst (UBI Banca and ICCREA Holding) Manuela Banfi Associate Director +39 02 87 90 87 202 +39 02 87 90 87 225 Fitch Italia S.p.A. V.lo Santa Maria alla Porta, 1 20123 Milan Primary Analyst (Agos Ducato, Banca Nazionale del Lavoro) Fabio Ianno Associate Director +44 20 3530 1232 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst (UBI Banca, ICCREA Holding, Banca Nazionale del Lavoro, Agos Ducato) Christian Scarafia Senior Director +39 02 87 90 87 212 Secondary Analyst (UniCredit and subsidiary) Manuela Banfi Associate Director +39 02 87 90 87 202 Secondary Analyst (Banco Popolare and subsidiaries, Intesa Sanpaolo and subsidiaries) Fabio Ianno Associate Director +44 20 3530 1232 Committee Chairperson Maria Jose Lockerbie Managing Director +44 20 3530 1083 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available on www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable criteria "Global Financial Institutions Rating Criteria" dated 15 August 2012, "Evaluating Corporate Governance" dated 12 December 2012, "Assessing and Rating Bank Subordinated and Hybrid Securities" dated 5 December 2012 and "Rating Financial Institutions Above the Sovereign" dated 11 December 2012 are available at www.fitchratings.com. Applicable Criteria and Related Research Global Financial Institutions Rating Criteria here Evaluating Corporate Governance here Assessing and Rating Bank Subordinated and Hybrid Securities here Rating Financial Institutions Above the Sovereign here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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