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Banca Popolare di Sondrio
Quarterly Report • Jul 6, 2023
4182_rpt_2023-07-06_edad1b81-f639-475a-a498-ead8c73b7b89.pdf
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| Informazione Regolamentata n. 0051-27-2023 |
Data/Ora Inizio Diffusione 06 Luglio 2023 17:52:30 |
Euronext Milan | |
|---|---|---|---|
| Societa' | : | BANCA POPOLARE DI SONDRIO | |
| Identificativo Informazione Regolamentata |
: | 179055 | |
| Nome utilizzatore | : | BPOPSONN01 - ROVEDATTI | |
| Tipologia | : | REGEM | |
| Data/Ora Ricezione | : | 06 Luglio 2023 17:52:28 | |
| Data/Ora Inizio Diffusione |
: | 06 Luglio 2023 17:52:30 | |
| Oggetto | : | Rating | |
| Testo del comunicato |
Vedi allegato.
______________________________________________________________________________________________
COMUNICATO STAMPA
FITCH RATINGS CONFERMA TUTTI I RATING DI BANCA POPOLARE DI SONDRIO
IL RATING EMITTENTE DELLA BANCA È AL LIVELLO "BB+", CON OUTLOOK "STABILE"
Banca Popolare di Sondrio informa che, in data odierna, l'agenzia Fitch Ratings, a conclusione del processo di revisione annuale del giudizio, ha mantenuto invariati tutti i rating assegnati.
In particolare, il rating emittente Long-term Issuer Default Rating ("IDR") della Banca è stato confermato a "BB+", con outlook "stabile".
Di seguito, il dettaglio dei rating assegnati alla banca:
- Long-term Issuer Default Rating ("IDR"): "BB+"
- Short-term Issuer Default Rating ("IDR"): "B"
-
Viability Rating: "bb+"
-
Government Support Rating: "ns"
- Long-term Deposit Rating: "BBB-"
- Short-term Deposit Rating: "F3"
- Senior Preferred Debt: "BB+"
- Subordinated Tier 2 Debt: "BB-"
- Outlook: "Stabile"
Si allega il comunicato stampa pubblicato da Fitch Ratings.
Sondrio, 6 luglio 2023
Contatti societari:
Investor Relations Michele Minelli 0342-528.745 [email protected] Relazioni esterne Paolo Lorenzini 0342-528.212 [email protected]
______________________________________________________________________________________________
Image Building
Cristina Fossati
Anna Pirtali
02-890.11.300
______________________________________________________________________________________________
PRESS RELEASE
FITCH RATINGS CONFIRMS ALL RATINGS OF BANCA POPOLARE DI SONDRIO
THE BANK'S LONG-TERM ISSUER DEFAULT RATING IS AT "BB+", OUTLOOK "STABLE"
Banca Popolare di Sondrio informs that today the agency Fitch Ratings, at the conclusion of the annual rating review process, has kept all the ratings assigned unchanged. In particular, the Bank Long-term Issuer Default Rating ("IDR") was confirmed at "BB+", with "stable" outlook.
Below are the details of the ratings assigned to the bank:
- Long-term Issuer Default Rating ("IDR"): "BB+"
- Short-term Issuer Default Rating ("IDR"): "B"
-
Viability Rating: "bb+"
-
Government Support Rating: "ns"
- Long-term Deposit Rating: "BBB-"
- Short-term Deposit Rating: "F3"
- Senior Preferred Debt: "BB+"
- Subordinated Tier 2 Debt: "BB-"
- Outlook: "Stable"
Please find attached the press release issued by Fitch Ratings.
Sondrio, 6 July 2023
Company contacts:
Investor Relations Michele Minelli 0342-528.745 [email protected] Relazioni esterne Paolo Lorenzini 0342-528.212 [email protected]
______________________________________________________________________________________________
Image Building Cristina Fossati Anna Pirtali
02-890.11.300
The English translation is provided only for the benefit of the reader and in the case of discrepancies the Italian version shall prevail.
RATING ACTION COMMENTARY
Fitch Affirms Banca Popolare di Sondrio at 'BB+'/Stable
Thu 06 Jul, 2023 - 11:38 AM ET
Fitch Ratings - Milan - 06 Jul 2023: Fitch Ratings has affirmed Banca Popolare di Sondrio - Societa per Azioni's (Sondrio) Long-Term Issuer Default Rating (IDR) at 'BB+' and Viability Rating (VR) at 'bb+'. The Outlook on the Long-Term IDR is Stable. A full list of rating actions is below.
KEY RATING DRIVERS
Second-Tier Regional Bank: Sondrio's ratings reflect its second-tier franchise as a regional bank with a traditional commercial banking business model and small national market shares. The ratings also consider the bank's adequate capitalisation and funding and liquidity profile, the latter underpinned by its stable customer deposits. Fitch believes that the bank's ability to support structural improvements in its earnings generation and sustainability over the cycles will largely depend on its delivery on strategic initiatives aimed at strengthening its business profile.
Moderate Risk Profile: Sondrio's franchise in wealthy Lombardy somewhat mitigates risks from lending mainly to SMEs and small retail businesses. Its tightened loan underwriting and risk monitoring should reduce the risk of a significant inflow of new impaired loans from higher interest rates and economic slowdown. These, together with the proactive management of impaired loans, have improved asset quality over the past four years.
Nevertheless, our assessment considers our expectation that the bank will keep an impaired loans ratio above industry level. Sondrio's exposure to the Italian sovereign in its securities holdings will remain sizeable, but unrealised losses in the portfolio are moderate and are unlikely to materialise given the bank's sound funding and liquidity profile.
Above-Sector-Average Impaired Loans: Sondrio's impaired loans ratio of 4.4% at end-March 2023 (4.3% at end-2022) was broadly stable thanks to benign default rates, effective collections and small portfolio sales. However, the ratio still lags behind the
domestic industry of about 3%. This improvement, however, provides Sondrio a margin of maneuver to navigate expected asset-quality deterioration from higher interest rates and inflation and weaker economic growth.
We expect the impaired loans ratio to remain broadly stable at about 4.5% for the next two years, helped by continued inorganic actions. Our forecasts are moderately above the target set by the bank under its strategic plan.
Improving Operating Profitability: Sondrio is well positioned to benefit from higher interest rates, and we expect the bank to continue improving its operating profit/riskweighted assets (RWAs) in 2023 and 2024 heading towards the 2% level. This will also be supported by greater revenue diversification through the higher distribution of wealth and insurance products, although their contribution will likely lag behind the bank's direct domestic peers. Higher revenue should help offset higher funding costs and the likely increase in loan impairment charges.
Adequate Capital Buffers: Sondrio maintains sound capital ratios and we expect it to operate with a common equity Tier 1 (CET1) ratio of at least 15% in the next two years, sustained by organic capital generation despite increased dividend distribution compared with the past. We expect capital encumbrance by Italian government bonds to remain high at about 1.7x of CET1 capital, while encumbrance by net impaired loans should remain under control close to current levels (nearly 13% at end-March 2023) over the medium term.
Stable Funding, Ample Liquidity: Customer deposits are a large and stable source of funding, due to the bank's established franchise in its home region and strong client relationships, and fully fund the loan book. Wholesale funding sources are adequately diversified given Sondrio's business profile, although access to markets is less frequent and more price-sensitive than at higher-rated domestic peers. Liquidity is sound (liquid assets were 30% of total assets at end-March 2023), with the bank's LCR at 155% at end-March 2023.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Sondrio's ratings are vulnerable to a significant weakening of the operating environment in Italy, due for example to a much slower economic growth than our forecasts, and persistently high inflation, negatively affecting the bank's overall financial performance.
The ratings will likely be downgraded if the impaired loans ratio increases above 6% and operating profitability falls below 1% of RWAs without the prospect of recovery in the
short term. This is especially the case if the CET1 ratio falls closer to 13% and capital encumbrance by unreserved impaired loans rises on a sustained basis with no signs of reversion.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
An upgrade would require a broader and more diversified business model, resulting in more resilient earnings generation through the interest rate cycle, for instance by increasing the contribution of commission income to total revenue, more in line with peers'.
An upgrade would also require an operating profit of at least 2% of RWAs on a sustained basis, an impaired loans ratio consistently below 4% and reduced capital encumbrance by Italian government bonds, while maintaining a CET1 ratio of at least 14%. An improvement in the operating environment would also be rating positive.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
DEPOSIT RATINGS
Sondrio's long-term deposit rating is one-notch above its Long-Term IDR, reflecting full depositor preference in Italy and the protection offered by the combined buffers of junior and senior debt to deposits given the compliance with minimum requirement for own funds and eligible liabilities (MREL).
The short-term deposit rating of 'F3' maps to a 'BBB-' long-term deposit rating.
SENIOR PREFERRED DEBT
Sondrio's senior preferred (SP) debt is rated in line with the bank's Long-Term IDR because the bank uses SP debt to meet its MREL.
SUBORDINATED DEBT
The subordinated debt is rated two notches below its VR for loss severity to reflect poor recovery prospects. No notching is applied for incremental non-performance risk because a write-down of the notes will only occur once the point of non-viability is reached, and there is no coupon flexibility before non-viability.
No Support: Sondrio's Government Support Rating (GSR) of 'ns' reflects Fitch's view that although external extraordinary sovereign support is possible, it cannot be relied upon. Senior creditors can no longer expect to receive full extraordinary support from
the sovereign in the event that the bank becomes non-viable. The EU's Bank Recovery and Resolution Directive and the Single Resolution Mechanism for eurozone banks provide a framework for resolving banks that requires senior creditors participating in losses, if necessary, instead of or ahead of a bank receiving sovereign support.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
The senior debt and deposit ratings are primarily sensitive to changes in Sondrio's Long-Term IDR.
The deposit ratings could be downgraded by one notch and be aligned with the IDRs in the event of a reduction in the size of the senior and junior debt buffers, although we view this as unlikely in light of Sondrio's current and future MREL.
Sondrio's senior debt ratings could also be upgraded by one notch if at some point the bank is expected to meet the resolution buffer requirements with non-preferred instruments.
An upgrade of the GSR would be contingent on a positive change in the sovereign's propensity to support the bank. In Fitch's view, this is highly unlikely, although not impossible.
VR ADJUSTMENTS
The business profile score of 'bb+' is below the 'bbb' category implied score because of the following adjustment reason: Market position (negative).
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/esg.
| ENTITY / DEBT |
RATING |
PRIOR |
|---|---|---|
| Banca Popolare di Sondrio - Societa per Azioni |
LT IDR BB+ Rating Outlook Stable Affirmed |
BB+ Rating Outlook Stable |
| ST IDR B Affirmed |
B | |
| Viability bb+ Affirmed |
bb+ | |
| Government Support ns Affirmed |
ns | |
| long-term deposits |
LT BBB- Affirmed |
BBB |
| Senior preferred |
LT BB+ Affirmed |
BB+ |
| subordinated | LT BB- Affirmed |
BB |
| short-term deposits |
ST F3 Affirmed |
F3 |
RATING ACTIONS
VIEW ADDITIONAL RATING DETAILS
FITCH RATINGS ANALYSTS
Valeria Pasto Director Primary Rating Analyst International +39 02 9475 8304 [email protected]
Fitch Ratings Ireland Limited Sede Secondaria Italiana
Via Morigi, 6 Ingresso Via Privata Maria Teresa, 8 Milan 20123
Manuela Banfi
Associate Director Secondary Rating Analyst +39 02 9475 6226 [email protected]
Cristina Torrella Fajas
Senior Director Committee Chairperson +34 93 323 8405 [email protected]
MEDIA CONTACTS
Peter Fitzpatrick London +44 20 3530 1103 [email protected]
Stefano Bravi Milan +39 02 9475 8030 [email protected]
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
APPLICABLE CRITERIA
Bank Rating Criteria (pub. 07 Sep 2022) (including rating assumption sensitivity)
ADDITIONAL DISCLOSURES
Dodd-Frank Rating Information Disclosure Form Solicitation Status Endorsement Policy
ENDORSEMENT STATUS
Banca Popolare di Sondrio - Societa per Azioni EU Issued, UK Endorsed
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