Quarterly Report • Jul 27, 2022
Quarterly Report
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| Informazione Regolamentata n. 0051-39-2022 |
Data/Ora Ricezione 27 Luglio 2022 17:49:25 |
Euronext Milan | ||
|---|---|---|---|---|
| Societa' | : | BANCA POPOLARE DI SONDRIO | ||
| Identificativo Informazione Regolamentata |
: | 165336 | ||
| Nome utilizzatore | : | BPOPSONN01 - ROVEDATTI | ||
| Tipologia | : | 3.1 | ||
| Data/Ora Ricezione | : | 27 Luglio 2022 17:49:25 | ||
| Data/Ora Inizio Diffusione presunta |
: | 27 Luglio 2022 17:49:26 | ||
| Oggetto | : | Rating | ||
| Testo del comunicato |
Vedi allegato.
______________________________________________________________________________________________
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".
A seguito della pubblicazione da parte dell'agenzia nel novembre 2021 della metodologia aggiornata riguardante i criteri dei rating bancari, il Support Rating pari a "5" e il Support Rating Floor pari a "No Floor" sono stati ritirati in quanto non più rilevanti ed è stato assegnato il nuovo Government Support Rating (GSR) pari a "no support" (ns).
Di seguito, il dettaglio dei rating assegnati alla banca:
Si allega il comunicato stampa pubblicato da Fitch Ratings.
______________________________________________________________________________________________
Sondrio, 27 luglio 2022
Investor Relations
Michele Minelli
0342-528.745
Paolo Lorenzini
0342-528.212
Relazioni esterne
[email protected] [email protected]
Image Building Cristina Fossati Anna Pirtali 02-890.11.300 [email protected]
______________________________________________________________________________________________
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.
Following the agency's publication in November 2021 of its updated methodology for Bank Rating Criteria, the Support Rating of '5' and the Support Rating Floor of 'No Floor' were withdrawn as no longer relevant and the new Government Support Rating (GSR) of 'no support' (ns) was assigned.
Below are the details of the ratings assigned to the bank:
Please find attached the press release issued by Fitch Ratings.
______________________________________________________________________________________________
Sondrio, 27 July 2022
| Investor Relations | Relazioni esterne |
|---|---|
| Michele Minelli | Paolo Lorenzini |
| 0342-528.745 | 0342-528.212 |
| [email protected] | [email protected] |
Image Building Cristina Fossati Anna Pirtali 02-890.11.300 [email protected]
The English translation is provided only for the benefit of the reader and in the case of discrepancies the Italian version shall prevail.
Wed 27 Jul, 2022 - 11:10 ET
Fitch Ratings - Milan - 27 Jul 2022: Fitch Ratings has affirmed Banca Popolare di Sondrio'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.
Fitch has withdrawn Sondrio's Support Rating of'5' and Support Rating Floor of'No Floor' as they are no longer relevant to the agency's coverage following the publication of its updated Bank Rating Criteria in November 2021. In line with the updated criteria, Fitch has assigned Sondrio a Government Support Rating (GSR) of'no support' (ns).
Second-Tier Regional Bank: Sondrio's ratings reflect its second-tier franchise as a regional bank with small national market shares and traditional commercial-banking business model. They also consider the bank's satisfactory regulatory capitalisation and buffers, a sound funding and liquidity profile as well as our expectations that asset quality will improve to levels that are fully commensurate with its 'bb+' VR.
Moderate Risk Profile: Sondrio's risk profile benefits from operating mostly in the wealthy region of Lombardy, where default rates are below the national average. Its lending exposure to SMEs and companies is well-diversified by sector and borrower. Risktaking and control processes are in line with market standards. Sondrio's risk appetite features sizeable own sovereign direct exposure through securities holdings.
Asset Quality Near Industry Average: Sondrio has reduced its impaired loan ratio to 5.8% at end-1Q22 from 13% at end-2019, closer to the industry average of about 4.5% at end-2021, on tightened underwriting and monitoring and small impaired loan sales.
Fitch expects impaired loan disposals to continue and compensate for likely asset-quality deterioration resulting from rising inflation and weaker economic growth.We forecast Sondrio's impaired loan ratio to remain stable over the next two years, moderately above the target set by the bank under its strategic plan.
Prospects of Higher Revenue: Fees from the sale ofinvestment and insurance products have been increasing over the past four years, contributing to revenue growth. Operating profitability was supported by acceptable cost efficiency.We expect this trend to continue in line with the bank's recently refreshed business strategy.We forecast the bank's operating profit to increase to about 1.5% of risk-weighted assets (RWAs) by 2023, as higher revenue should more than compensate for an expected increase in loan impairment charges (LICs) and despite inflation pressure affecting costs.
Lower Capital Encumbrance Expected: Sondrio's common equity Tier 1 (CET1) ratio of 15.3% at end-1Q22 had ample buffers over regulatory requirements.While we expect capital encumbrance by impaired loans to remain broadly stable over the next two years, capital encumbrance by Italian government bonds will start reducing as TLTRO facilities mature,to a more contained 170% ofCET1 by 2025, which nonetheless remains higher than at higher-rated banks.
Stable Funding, Ample Liquidity: The bank's funding and liquidity profile is sound. Customer deposits are a large and stable source offunding, due to the bank's adequate franchise in its home region and strong client relationships. Funding sources are increasingly diversified through access to wholesale funding markets, although less so than at higher-rated domestic peers. Sound liquidity is underpinned by adequate buffers of unencumbered eligible assets and access to ECB financing.
Sondrio's ratings and Outlook are vulnerable to a significant weakening ofthe operating environment in Italy, due for example to much slower economic growth than our forecasts, which could result in increased default rates and ultimately lead to deterioration ofthe bank's asset quality beyond our current expectations, and/or capital and profitability metrics that are weaker than our expectations.
The ratings could also be downgraded if Sondrio increases its risk appetite,for example due to a loosening of underwriting standards to pursue business growth, leading to material deterioration in its asset quality and causing significant capital erosion, including through higher-than-expected capital encumbrance by unreserved impaired loans.
In particular,the ratings could be downgraded if we expect its CET1 ratio to edge closer to 13%, its impaired loan ratio deteriorates towards 10% and capital encumbrance by unreserved NPLs rises close to 50%, without the prospect of recovery in the short term.
Rating upside is currently limited, unless Sondrio sees improvement in asset quality with an impaired loan ratio consistently below 4%, a more diversified business model resulting in operating profit sustainably above 1.5% of RWAs and stronger capitalisation in the form of stable regulatory ratios and reduced encumbrance by Italian government bonds.
Sondrio's long-term deposit rating of'BBB-' is one-notch above the bank's Long-Term IDR to reflect protection from lower-ranking senior preferred and Tier 2 debt buffers, given full depositor preference in Italy. The one-notch uplift also reflects our expectation that the bank will maintain these buffers over time, given the need to comply 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.
The subordinated debt of Sondrio is rated two notches below its VR for loss severity to reflect poor recovery prospects.
No Support: Sondrio's 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.
The long-term deposit rating is sensitive to changes in the Long-Term IDR. It would also be downgraded in the event of a reduction in the buffers of senior and junior debt, or if the bank fails to comply with its MREL.
The subordinated debt's rating is primarily sensitive to changes in theVR,from which it is notched. The rating is also sensitive to a change in the notes' notching, which could arise if Fitch changes its assessment oftheir non-performance relative to the risk captured in theVR.
An upgrade ofthe 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.
The business profile score of'bb+' is below the 'bbb' category implied score because of the following adjustment reasons: market position (negative).
The asset quality score of'bb' is above the 'b' category implied score due to the following adjustment reason: historical and future metrics (positive).
The capitalisation & leverage score of'bb+' is below the 'bbb' category implied score due to the following adjustment reason: risk profile and business model (negative).
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) ofthree 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) offour 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
The principal sources ofinformation used in the analysis are described in theApplicable Criteria.
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+ | |
| Support WD Withdrawn |
5 | |
| Support Floor WD Withdrawn |
NF | |
| Government Support ns New Rating |
||
| 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 |
Francesca Vasciminno Senior Director Primary Rating Analyst International +39 02 9475 7057 [email protected] Fitch Ratings Ireland Limited Sede Secondaria Italiana Via Morigi, 6 Ingresso Via Privata Maria Teresa, 8 Milan 20123
Associate Director Secondary Rating Analyst +39 02 9475 6226 [email protected]
Senior Director CommitteeChairperson +44 20 3530 1789 [email protected]
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
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.
Bank Rating Criteria (pub. 12 Nov 2021) (including rating assumption sensitivity)
Dodd-Frank Rating Information Disclosure Form Solicitation Status Endorsement Policy
Banca Popolare di Sondrio - Societa per Azioni EU Issued, UK Endorsed
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