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3 years ago
Fitch Rates UniCredit's CRD IV Compliant Additional Tier 1 Capital Instruments 'BB-(EXP)'
March 26, 2014 / 5:22 PM / 3 years ago

Fitch Rates UniCredit's CRD IV Compliant Additional Tier 1 Capital Instruments 'BB-(EXP)'

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(The following statement was released by the rating agency) MILAN/LONDON, March 26 (Fitch) Fitch Ratings has assigned UniCredit's (BBB+/Negative/F2/bbb+) planned issue of additional Tier 1 capital notes an expected rating of 'BB-(EXP)'. The final rating is contingent upon the receipt of final documents conforming to information already received. KEY RATING DRIVERS The notes are CRD IV compliant, deeply subordinated additional Tier 1 fixed rate resettable debt securities, with a call after 10 years. The notes are subject to write-down if UniCredit's consolidated or unconsolidated Common Equity Tier 1 (CET1) ratio falls below 5.125% (end-2013 consolidated CET1 ratio was 9.36% on a fully-loaded basis and the parent-only Core Tier 1 Basel 2.5 ratio was 26.6% at the same date), and any coupon payments may be cancelled at the full discretion of the issuer. In accordance with Fitch's criteria for 'Assessing and Rating Bank Subordinated and Hybrid Securities', the rating assigned to the notes is notched off UniCredit's stand-alone creditworthiness as represented by its Viability Rating (VR), currently at 'bbb+'. The notching reflects the notes' higher expected loss severity relative to senior unsecured creditors (two notches) and higher non-performance risk (three notches). The 5.125% trigger only refers to a write-down of the notes and Fitch believes that the Italian regulator would demand coupon deferral well before UniCredit hits the 5.125% threshold. However, Fitch believes that UniCredit's current fully-loaded CET1 ratio combined with its plans to return to profitability in the next three years, provide a sufficient CET1 capital buffer to limit the notching for non-performance risk to three notches. Fitch views the targeted profitability plans as viable, particularly given the significant loan impairment charges expensed in 2013 to reduce the underlying credit risk of its impaired exposure and which are likely to be a one-off. Fitch has assigned 50% equity credit to the securities. This reflects Fitch's view that the 5.125% trigger is not so distant to non-viability, which limits the instrument's "going concern" characteristics. It also reflects the notes' full coupon flexibility, their permanent nature and the subordination to all senior creditors. RATING SENSITIVITIES As the notes are notched from UniCredit's VR, the expected rating assigned to the notes is broadly sensitive to the same factors as those that would affect UniCredit's VR. The notes' rating is also sensitive to any change in notching that could arise if Fitch changed its assessment of the probability of the notes' non-performance risk relative to the risk captured in UniCredit's VR. Contact: Primary Analyst Francesca Vasciminno Senior Director +39 02 87 90 87 225 Fitch Italia S.p.A. Via Privata Maria Teresa, 8 20123 Milan Secondary Analyst Manuela Banfi Associate Director +39 02 87 90 87 202 Committee Chairperson Claudia Nelson Senior Director +44 20 3530 1191 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: Additional information is available at Applicable criteria, "Assessing and Rating Bank Subordinated and Hybrid Securities", dated 31 January 2014, and "Global Financial Institutions Rating Criteria," dated 31 January 2014, are available at Applicable Criteria and Related Research: Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status 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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