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May 16 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has revised Cassa Depositi e Prestiti’s (CDP) Outlook to Stable from Negative and affirmed its Long-Term Issuer Default Rating (IDR) at ‘BBB+’ and Short-term IDR at ‘F2’. A full list of rating actions is at the end of this comment.
The revision of the Outlook reflects the corresponding action on the Republic of Italy (see ‘Fitch Revises Italy’s Outlook to Stable, Affirms at ‘BBB+’ on www.fitchratings.com, issued on 25 April 2014). The sovereign is CDP’s sponsor under Fitch’s ‘Rating of Public Sector Entities Outside the United States” criteria top down-approach in light of the government guarantee of the majority of the issuer’s liabilities, as well as CDP’s strong integration with government policy.
Despite CDP’s involvement in the repayment of regional and local governments’ arrears, Fitch believes that the relative funding need will not materially alter CDP’s debt structure. Fitch continues to expect non-guaranteed debt to hover around 20% over the medium term (14% in 2013). Therefore, CDP’s rating will most likely continue to reflect the high probability of support from the Italian government.
CDP continues to perform broadly in line with Fitch’s expectations with a EUR2.5bn interest margin at end-2013, or 30% of revenue, feeding through to the bottom line for a net profit of EUR2.3bn, and an ROE of 14%. Total assets and liabilities increased by 3% to EUR315bn driven by an 8% growth in retail deposits, reflecting the growing diversification of products as well as the one-off effect from the new regulation limiting the use of cash on pension and salary payments. Postal savings increased by 4% to EUR242bn, partly offsetting EUR9bn ECB loans repayment.
The rating could be downgraded if CDP’s dividend pay-out ratio substantially exceeds its past average of 25%, thereby slowing internal generation of capital after the 2012 round of debt-funded acquisitions and suggesting weaker government support, or if there was a dilution of the guarantee via an increase in the non-guaranteed (non-postal savings) liabilities towards one-third of the total. The rating could also be downgraded if there was a dilution of financial support from the government as a result of unexpected growth in non-interest bearing assets, and/or loss of pricing power evidenced by a structural decline in core profitability with the interest rate margin halving from the 30% average in 2011-2013.
The rating actions are as follows:
Long-term IDR: affirmed at ‘BBB+'; Outlook Stable
Short-term IDR: affirmed at ‘F2’
Senior debt: affirmed at ‘BBB+’
EMTN programme and senior unsecured bonds: affirmed at ‘BBB+’
Commercial Paper programme affirmed at ‘F2’