UBI BANCA S.P.A. COMUNICATO STAMPA
STANDARD & POOR'S CONFERMA I RATING DI UBI BANCA
Bergamo, 19 dicembre 2014 - L'Agenzia internazionale Standard & Poor's, in seguito al recente downgrade del rating sovrano, ha esaminato gli impatti sul sistema bancario dell'accresciuto rischio economico in Italia.
In tale contesto, i rating assegnati a UBI Banca sono stati confermati (BBB- / A-3, in linea con il rating Italia), con outlook negativo.
Alla base della conferma vi è il livello di patrimonializzazione del Gruppo UBI Banca che S&P's ha ritenuto in grado di assorbire gli impatti di uno scenario in ulteriore deterioramento.
Copia del comunicato stampa di S&P's è allegato al presente documento.
***
PRESS RELEASE
STANDARD & POOR'S CONFIRMS UBI BANCA RATINGS
Bergamo, 19 December 2014 - Following the recent downgrade of the Italian sovereign rating, the international agency Standard & Poor's has examined the impacts on the banking system of the increased economic risk in Italy.
In this context, the ratings assigned to UBI Banca have been affirmed (BBB- / A-3, in line with rating
on Italy), with negative outlook.
The action reflects Standard & Poor's view on UBI Banca Group capability to cushion the impact on its solvency position of the higher credit losses they anticipate in a more fragile economic environment.
Copy of S&P's press release is attached here below.
Per ulteriori informazioni / For further information please contact: UBI Banca - Investor Relations - tel. +39 035 3922217
E-mail: investor.relations@ubibanca.it
UBI Banca - Relazioni con la stampa - Cell +39 335 8268310; +39 335 7819842
E-mail: relesterne@ubibanca.it
Copia del presente comunicato è disponibile sul sito www.ubibanca.it
Copy of this press release is available on the website www.ubibanca.it
STANDARD & POOR'S RATINGS SERVICES
McGRAW HILL FINANCIAL
ResearchResearch Update:
Unione di Banche Italiane 'BBB-/ A-3' Ratings Affirmed Despite Increased Economie Risk In Italy; Outlook Negative
Primary Credit Analyst:
Francesca Sacchi, Milan (39) 02-72111-272; francesca.sacchi@standardandpoors.com
Secondary Contact:
Luigi Motti, Madrid (34) 91-788-7234; luigi.motti@standardandpoors.com
Table Of Contents
Overview Rating Action Rationale Outlook
Ratings Score Snapshot
Related Criteria And Research
Ratings List
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Research Update:
Unione di Banche Italiane 'BBB-/A-3' Ratings Affirmed Despite Increased Economie Risk In Italy; Outlook Negative Overview• In our view, economie prospects in Italy are likely to be weaker than we had previously anticipated and weak overall in the next couple of years. We believe this will likely continue to dampen Italian banks' asset quality and profitability, and, specifically, lead to high credit losses in the Italian banking system aver the next two years significantly exceeding our previous expectations.
• We nevertheless expect Unione di Banche Italiane (UBI) to be able to
cushion the impact on its solvency position of the higher credit losses we anticipate.
• We are therefore affirming our 'BBB-/A-3' long- and short-term counterparty credit ratings on UBI.
• The negative outlook reflects the possibility that we could lower the ratings if we anticipate that UBI's capital position could weaken further because of higher-than-expected pressures on its profitability.
Rating ActionOn Dee. 18, 2014, Standard & Poor's Ratings Services affirmed its 'BBB-/A-3' long- and short-term ratings on Italy-based Unione di Banche Italiane Scpa (UBI). The outlook remains negative.
RationaleThe affirmation reflects our view that UBI will be able to cushion the impact on its solvency position of the higher credit losses we anticipate in a more fragile economie environment.
Persistently weak economie conditions in Italy are likely, in our opinion, to continue to undermine the creditworthiness of the private sector and, consequently, banks' asset quality and profitability prospects. We therefore believe that Italian banks' credit losses will likely be high aver the next couple of years, significantly exceeding our previous expectations, and that they will start to normalize only in the medium-to-long term. In this context, our expectations for losses in the banks' credit portfolios are affected by
our view that problematic assets will likely continue to grow and credit
recovery processes will remain long. We forecast that cumulative credit losses for the Italian banking sector will account for about 4.0%-4.5% of total loans in 2014-2016, with peak losses of about 1.5%-1.8% on average in both 2014 and
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Research Update: Unione di Banche Italiane 'BBB-/A-3' Ratings Affirmed Despite Increased Economie Risk In
Italy; Outlook Negative
2015, with a gradual decline from 2016.
We therefore consider that the likely impact of the ongoing economie
correction on the Italian banking system will be more severe than anticipated, reflecting higher economie risk far Italian banks than previously.
As a result of the heightened economie risk we now see in the domestic environment far Italian banks, we have revised down our anchor--the starting point far assigning a bank a long-term rating--for banks operating predominantly in Italy, including UBI, to 'bb+' from 'bbb-'.
Our assessment of heightened economie risk in Italy and our view that the prolonged recession will heighten UBI's credit losses also have a negative impact on our view of UBI's capitalization. That said, we expect UBI to mitigate the effect on capitalization by loan deleveraging and divesting its noncore insurance business, which we consider consumes capital. As a result, our assessment of UBI's capital and earnings remains "moderate". In line with our criteria, this counterbalances the impact of a lower anchor on our assessment of UBI's stand-alone credit profile (SACP).
We now expect our risk-adjusted capital (RAC) ratio for UBI to be 5.0%-5.5% during 2014-2016 (compared with our previous RAC forecast of 6.0%-6.5% far end-2015). As a result of the increased economie risk we expect in Italy, we
lowered our RAC ratio estimates (our measure of a bank's solvency) far UBI by about 100 basis points (bps).
Our forecast far UBI's RAC before diversification adjustments far year-end
2016 incorporates our expectation that the costs savings generated by the network and staff's downsizing will likely support a gradual increase in UBI's preprovision earnings from 2014 onward, but that UBI's profitability prospects will likely remain modest overall amid the still-difficult economie
conditions. UBI has announced that in the last quarter of 2014, it will
recognize the entire amount of the one-off costs related to staff redundancies (roughly €110 million before taxes). We anticipate that this will partially offset the benefits of some extraordinary capital gains, including about €84 million of income--net of taxes--that UBI gained on the disposal of its 100% stake in UBI Assicurazioni and of 30% of its stake in Aviva Assicurazioni and Aviva Vita.
Our RAC forecast also takes into account the negative effect of still-high credit losses on UBI's organic capital generation aver the next 18-24 months in the context of the heightened economie risk we now see far Italian banks.
In 2014-2016, we anticipate that UBI will likely accumulate net new nonperforming assets of about a cumulative 5% of customer loans as of
end-2013. We also estimate that in 2014-2016, UBI's cumulative credit losses
will be about 4% of its average customer loans in 2012-2013. Although still high, these levels remain somewhat below our expectations far the Italian banking sector average. We therefore continue to assess UBI's risk position as "adequate."
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Research Update: Unione di Banche Italiane 'BBB-/ A -3' Ratings Affirmed Despite lncreased Economie Risk In
Italy; Outlook Negative
Our view of other stand-alone rating factors, and therefore UBI's 'bbb-' stand-alone credit profile (SACP), are unchanged. We continue to assess UBI's business position as "strong," funding profile as "average," and liquidity as "adequate."
OutlookThe negative outlook reflects the possibility that we could lower the ratings if we anticipate that UBI's internal capital generation over the next few quarters will not be sufficient to maintain our RAC ratio before diversification adjustments sustainably above 5%. Higher-than-expected pressures on UBI's already modest profitability could negatively affect our view of its ability to sustain a "moderate" capital position.
We do not currently expect to revise the outlook on UBI to stable. However, we could do so if we expected an easing in the downside risk we currently see in UBI's internal capital generation capacity, and therefore in its solvency position.
Ratings Score SnapshotTo From
Issuer Credit Rating
SACP Anchor
Business Position Capital and Earnings Risk Position
Funding and
Liquidity
Support
GRE Support
Group Support
Sovereign Support
BBB-/Negative/A-3 bbb-
bb+
Strong (+l) Moderate (O) Adequate (O) Average and Adequate (O)
o o o o
BBB-/Negative/A-3 bbb-
bbb-
Strong (+l) Moderate (-1) Adequate (O) Average and Adequate (O)
o o o o
Additional Factors o o
Related Criteria And ResearchRelated Criteria
• Bank Hybrid Capital And Nondeferrable Subordinated Debt Methodology And
Assumptions, Sept. 18, 2014
• Group Rating Methodology, Nov. 19, 2013
• Quantitative Metrics For Rating Banks Globally: Methodology And
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Research Update: Unione di Banche Italiane 'BBB-/A-3' Ratings Affirmed Despite Increased Economie Risk In
Italy; Outlook Negative
Assumptions, July 17, 2013
• Banks: Rating Methodology And Assumptions, Nov. 9, 2011
• Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
• Bank Capital Methodology And Assumptions, Dee. 6, 2010
• Revised Market Risk Charges For Banks In Our Risk-Adjusted Capital
Framework, June 22, 2012
• Use Of CreditWatch And Outlooks, Sept. 14, 2009
Related Research
• Ratings On Italian Banks Lowered On Rising Economie Risk And Sovereign
Downgrade, Dee. 18, 2014
• Ratings On Italy Lowered To 'BBB-/A-3'; Outlook Stable, Dee. 5, 2014
Ratings List
Ratings Affirmed
Unione di Banche Italiane Scpa Counterparty Credit Rating Certificate Of Deposit
Senior Unsecured
BBB-/Negative/A-3
BBB-/A-3
BBB-
UBI Banca International S.A.
Certificate Of Deposit* A-3
*Guaranteed by Unione di Banche Italiane Scpa.
Additional Contact:
Financiallnstitutions Ratings Europe; FIG_Europe@standardandpoors.com
Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at spcapitaliq.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44)
20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm
(46) 8-440-5914; or Moscow 7 (495) 783-4009.
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