Banca Popolare di Sondrio

Regulatory Filings • Feb 23, 2016

Informazione Regolamentata n. 0051-11-2016		Data/Ora Ricezione 23 Febbraio 2016 09:49:02	MTA
Societa'	:	BANCA POPOLARE DI SONDRIO
Identificativo Informazione Regolamentata	:	69813
Nome utilizzatore	:	BPOPSONN01 - ROVEDATTI
Tipologia	:	IRAG 10
Data/Ora Ricezione	:	23 Febbraio 2016 09:49:02
Data/Ora Inizio Diffusione presunta	:	23 Febbraio 2016 10:04:03
Oggetto	:	Rating
Testo del comunicato

Vedi allegato.

Società cooperativa per azioni - fondata nel 1871 Sede sociale e direzione generale: I - 23100 Sondrio So - Piazza Garibaldi 16 Iscritta al Registro delle Imprese di Sondrio al n. 00053810149 Iscritta all'Albo delle Banche al n. 842 Capogruppo del Gruppo bancario Banca Popolare di Sondrio iscritto all'Albo dei Gruppi bancari al n. 5696.0 - Iscritta all'Albo delle Società Cooperative al n. A160536 Aderente al Fondo Interbancario di Tutela dei Depositi Codice fiscale e Partita IVA: 00053810149 Capitale Sociale € 1.360.157.331 - Riserve € 833.958.444 (Dati approvati dall'assemblea dei Soci del 18/04/2015)

COMUNICATO STAMPA

Banca Popolare di Sondrio : Dagong Europe conferma il rating di lungo termine a "BBB", di breve termine ad "A-3" e outlook "stabile".

La Banca Popolare di Sondrio informa che l'agenzia Dagong Europe – affiliata alla casamadre cinese "Dagong Global Credit Rating" - ha confermato i rating di Long-Term Credit Rating a "BBB", di Short-Term Credit Rating ad "A-3" e outlook "stable".

Si allega il comunicato stampa pubblicato da Dagong Europe.

Sondrio, 23 febbraio 2016

BANCA POPOLARE DI SONDRIO SCPA

CONTATTI SOCIETARI

• nome: Paolo Lorenzini
• ruolo: responsabile servizio relazioni esterne
• telefono: 0342 528212
• e-mail: paolo.lorenzini@popso.it
• indirizzo internet aziendale: www.popso.it

Dagong Europe Affirms 'BBB' Long-Term Credit Rating for Banca Popolare di Sondrio Scpa, Outlook Stable

Rating Action Report

Milan, 22 February 2016

Dagong Europe has affirmed the Long-Term Credit Rating at 'BBB', and equivalent Short-Term Credit Rating at 'A-3' for Italy-based Banca Popolare di Sondrio Scpa (BP Sondrio). The Outlook is 'Stable'.

RATING RATIONALE

The Long-Term Credit Rating takes into account the Individual Financial Strength Assessment (IFSA) at 'bbb', and our External Support Assessment (ESA) of 'Low' potential to receive National Systemic Support. The level of support changes to Low from Moderate, as from 1 January 2016 the bank has been under the Banking Recovery and Resolution Directive (BRRD), which does not allow any form of government support.

The IFSA reflects BP Sondrio's stable franchise in terms of loans and deposits in its home market of Lombardy in Northern Italy. It also reflects the bank's profitable and stable traditional banking model, retail-based funding, strong liquidity, strong capitalisation and satisfactory non-performing loans coverage. The IFSA is constrained by the bank's relatively small size which has largely grown organically, limiting any material changes in business outreach; its significant loan concentration in the real-estate sector; and still weak asset quality that remains better than its Italian peers.

Our credit opinion is based on the following factors:

• Sustainable and valued franchise, with traditional business model, and focus on lending and deposit-taking in Northern Italy: BP Sondrio's development strategy focuses on traditional banking services, with a target market related to Northern Italy, which historically has shown better growth prospects and asset quality performance than the Italian banking system on average.
• Stable funding structure, derived mainly from retail: BP Sondrio's funding is 86%-derived from its retail clients, which is a common strength of local traditional-based banking models, particularly in Italy. BP Sondrio's solid franchise is valued by its retail clients which make-up most of the deposit base, providing a particularly stable and sustainable funding structure in the long term.
• Strengthened capital with a Tier 1 ratio of 10.5% at YE15: BP Sondrio had successfully raised capital in the past, most recently with EUR 343Mn in July 2014 in anticipation of the ECB (European Central Bank) and the EBA's (European Banking Authority) Comprehensive Assessment, published in October 2014. With a Tier 1 ratio at 10.5% at YE15, the bank has a sufficient capital buffer for potential increases in credit risk, as well as for expected lending growth. In addition, the ECB recently informed the bank that the minimum CET 1 level to be

Press Release

Solicited Rating

Primary Analyst Carola Saldias Sector Head Senior Director Financial Institutions carola.saldias@dagongeurope.com

Back-up Analyst Linas Grigaliunas Director Financial Institutions linas.grigaliunas@dagongeurope.com

Committee Chairperson Richard Miratsky Sector Head Senior Director Corporates

Solicited Rating

maintained should stand at 9.25%, which based on its current capital position gives it a relatively large buffer to manage further growth.

• Credit risk remains the greatest challenge for BP Sondrio. We caution especially on the bank's real-estate portfolio, which accounts for about 20% of the loan book: Loan loss provision expenditure has increased substantially in the last three years, affecting profitability and hence the bank's internal capital generation. With the release of preliminary results for YE15, we see a confirmation of the positive trend with a reduction of 15% of loan loss provisions yoy, however with non-performing loans still increasing y-o-y to 7.0% as of 3Q15 (5.4% for 3Q14), increase that we will be monitoring carefully. While we expect the Italian economy to continue its recovery, there is a lagged effect that could further delay any asset quality improvement.
• Limitations in terms of geographic diversification and competitive positioning: We value BP Sondrio's entrenched position in Lombardy, a comparably strong region in terms of economic prospects. However, geographic diversification and competitive positioning is constrained by its small size and lack of international diversification. Because of the bank's growth strategy mainly in its home region, we expect these relative limitations to persist in the long term.

We assess the possibility of national systemic External Support to be 'Low' for BP Sondrio. Our view takes into account the application since 1 January 2016 of the BRRD. This directive gives the Single Resolution Committee (at EU level) the power to decide on resolution plans, and identify the most appropriate actions to preserve the financial stability of the Euro area in the need of implementing a resolution procedure for any bank. We recognise that for BP Sondrio – now under the direct supervision of the ECB and the BRRD – any forthcoming direct support is to be restructured through the Banking Resolution Mechanism, using the approved tools including the centralised Single Resolution Fund.

OUTLOOK - STABLE

BP Sondrio's ratings carry a 'Stable' outlook. This reflects our view on its expected stable financial performance, with internal capital generation sufficient to cover additional potential losses from current and expected problematic assets, while keeping capital ratios at their currently sufficient levels. The stable outlook incorporates what we expect will be a cautious organic growth strategy within the bank's current geographic outreach.

UPSIDE - DOWNSIDE POTENTIAL FOR THE RATING

The ratings could be upgraded if we see a material and sustainable improvement in core profitability levels in a more resilient and growing economic context, further strengthened capital, and/or by a material reduction of problematic assets.

The ratings could be downgraded if capital ratios weaken, most likely triggered by a worse-thanexpected evolution of the bank's asset quality and hence weaker-than-expected profitability. They could also be downgraded if we see a weakening of coverage levels of problematic assets.

BANCA POPOLARE DI SONDRIO BUSINESS PROFILE

BP Sondrio was established in 1871 in Sondrio and incorporated as a 'banca popolare'. The bank follows a traditional banking model, providing plain vanilla banking products mainly to households, and local small and medium-size corporates in its home region, Lombardy. Products are distributed

Solicited Rating

predominately through its 333 branches, which are located in 8 regions and 29 provinces, mainly in Northern Italy and Rome.

BP Sondrio has two important subsidiaries that help to complement its business on a consolidated basis: It controls 100% of Banca Popolare di Sondrio (SUISSE) SA, established in 1995 and headquartered in Lugano, Switzerland. It is incorporated under Swiss law and supervised by the Swiss National Bank. It provides lending to individuals and corporates, as well as private banking and asset management services, through its 20 branches in Switzerland and one branch in Monaco. BP Sondrio also holds 60.5% of Factorit, a factoring company which operates mainly in Italy. Other shareholders of Factorit are Banca Popolare di Milano (30.0%) and Banco Popolare (9.5%). Factorit was established in 1978 and distributes its factoring products through the Italian 'banche popolari' network of about 7,500 branches, and its 7 direct branches. BP Sondrio acquired the control in 2010.

FULL LIST OF RATINGS, SOLICITED AND DISCLOSED TO THE ISSUER(S):

Banca Popolare di Sondrio Scpa

Long-Term Credit Rating (FC&LC) BBB Outlook Stable Short-Term Credit Rating (FC&LC) A-3 IFSA bbb ESA Low, National Systemic

FC & LC: Foreign Currency and Local Currency

RATINGS HISTORY

Ratings assigned on 26 February 2015: Banca Popolare de Sondrio scpa BBB/A-3/Stable

CRITERIA APPLIED

• Dagong Europe Criteria for Rating Financial Institutions, published on 2 August 2013
• Dagong Europe Ratings Definitions, published on 13 May 2014

CONTACTS

Primary Analyst Carola Saldias Sector Head Senior Director Financial Institutions Tel +39 02 727460 29 carola.saldias@dagongeurope.com

Back-up Analyst Linas Grigaliunas Director Financial Institutions Tel. +39 02 72746041 linas.grigaliunas@dagongeurope.com

Committee Chairperson Richard Miratsky Sector Head Senior Director Corporates Tel + 39 02 727460 11 richard.miratsky@dagongeurope.com

Solicited Rating

OTHER REGULATORY DISCLOSURES

• The List of Ratings included in this Rating Action Report were solicited and disclosed to the issuer(s).
• Dagong Europe uses public and non-public information provided by the issuer, public information from reliable third-party sources and internally developed models and analytical tools. Dagong Europe analytical team does not take into consideration sources of information deemed not reliable.
• This Rating Action Report was disclosed to the rated entity before being issued. Dagong Europe had provided a one advance copy to the issuer to review factual errors and unintentional release of confidential information. Dagong Europe maintains editorial control over the Rating Action Report, representing its independent opinion.

For any further information on criteria and procedures, please refer to the following links:

http://www.dagongeurope.com/ratingcriteria http://www.dagongeurope.com/procedures

External Communications Sidney Shin-Yi Dung Chief Communications Officer Tel +39 02 727460 38 sidney.dung@dagongeurope.com

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Solicited Rating

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Fine Comunicato n.0051-11	Numero di Pagine: 8
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