MILAN, Nov 27 (Reuters) - Moody's Investors Service placed Italian bank Banco Popolare's ratings on review for downgrade on Tuesday, citing deteriorating assets quality and weak capital generation amid a deep recession in Italy.
"Banco Popolare (BP)'s asset quality is weak and likely to deteriorate well into 2013, given that the Italian economy is likely to remain in recession through much of 2013," it said.
Moody's said he was reviewing for downgrade Banco Popolare's Baa3/Prime-3 long and short-term debt and deposit ratings.
"The review will focus on BP's ability to stabilise its asset quality and to ensure sufficiently high capital levels above regulatory requirements via internal capital generation in the case of a further decline in asset quality," it said.
Banco Popolare, Italy's fourth-largest bank, reported a nine-month net loss of 54 million euros ($70 million) earlier this month and said it was very unlikely that it would pay a dividend on its 2012 accounts.
The bank also had to pull a bond in October due to low demand, even at a time when several Italian banks have regained access to wholesale debt markets.
Moody's cited the bank's "lacklustre performance" in terms of profitability and said it reported gross problematic loans of 16 percent of total loans in September, significantly above the banking sector's average.
Bad loans have become a major concern for investors as Italy's recession leads to a deterioration in credit quality.
Bad debts at Italian banks rose to nearly 118 billion euros at the end of September and lenders continued to cut loans to businesses.
Moody said he also put on review the ratings of Banco Popolare's subsidiary Banca Italease.
$1 = 0.7733 euros Reporting by Antonella Ciancio; Editing by David Gregorio