Banca Popolare di Sondrio

Regulatory Filings • Nov 18, 2019

Informazione Regolamentata n. 0051-45-2019		Data/Ora Ricezione 18 Novembre 2019 18:24:01	MTA
Societa'	:	BANCA POPOLARE DI SONDRIO
Identificativo Informazione Regolamentata	:	124937
Nome utilizzatore	:	BPOPSONN01 - ROVEDATTI
Tipologia	:	3.1
Data/Ora Ricezione	:	18 Novembre 2019 18:24:01
Data/Ora Inizio Diffusione presunta	:	18 Novembre 2019 18:24:02
Oggetto	:	Rating
Testo del comunicato

Vedi allegato.

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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 € € 983.893.092 (dati approvati dall'Assemblea dei soci del 27/4/2019)

COMUNICATO STAMPA

DBRS Morningstar assegna per la prima volta il rating a Banca Popolare di Sondrio. Il merito di credito a lungo termine viene valutato investment grade "BBB (low)", con trend stabile.

Si informa che in data odierna l'agenzia di rating DBRS Morningstar, a conclusione del processo di valutazione, ha assegnato per la prima volta a Banca Popolare di Sondrio S.C.p.A. i seguenti rating:

• Long-Term Issuer Rating: "BBB (low)"
• Short-Term Issuer Rating: "R-2 (middle)"
• Intrinsic Assessment: "BBB (low)"

• Support Assessment: "SA3"

• Long-Term Deposit Rating: "BBB"

• Short-Term Deposit Rating: "R-2 (high)"

La prospettiva riguardante tutti i rating assegnati è valutata Stabile.

Si allega il comunicato stampa pubblicato da DBRS Morningstar.

Sondrio, 18 novembre 2019

BANCA POPOLARE DI SONDRIO SCPA

CONTATTI SOCIETARI:

Investor Relations Dott. Michele Minelli 0342-528.865 michele.minelli@popso.it Relazioni esterne Rag. Paolo Lorenzini 0342-528.212 paolo.lorenzini@popso.it

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Indirizzo internet aziendale: www.popso.it

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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 € € 983.893.092 (dati approvati dall'Assemblea dei soci del 27/4/2019)

PRESS RELEASE

DBRS Morningstar assigns first-time ratings to Banca Popolare di Sondrio. Senior Long-Term Debt is rated investment grade "BBB (low)", with Stable trend.

It is hereby made known that today the credit rating agency DBRS Morningstar, having completed the evaluation process, has assigned to Banca Popolare di Sondrio S.C.p.A. the following first-time ratings:

• Long-Term Issuer Rating: "BBB (low)"
• Short-Term Issuer Rating: "R-2 (middle)"
• Intrinsic Assessment: "BBB (low)"

• Support Assessment: "SA3"

• Long-Term Deposit Rating: "BBB"

• Short-Term Deposit Rating: "R-2 (high)"

The trend on all ratings is Stable.

Please find attached the press release published by DBRS Morningstar.

Sondrio, 18th of November 2019

BANCA POPOLARE DI SONDRIO SCPA

COMPANY CONTACTS:

Investor Relations Dott. Michele Minelli 0342-528.865 michele.minelli@popso.it Relazioni esterne Rag. Paolo Lorenzini 0342-528.212 paolo.lorenzini@popso.it

Company website address: www.popso.it

The English translation is provided only for the convenience of the reader. In the case of discrepancies the Italian version will prevail.

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PRESS RELEASE NOVEMBER 18, 2019

DBRS Morningstar Assigns BBB (low)/R-2 (middle) Issuer Ratings to Banca Popolare di Sondrio

BANKING ORGANIZATIONS

DBRS Ratings GmbH (DBRS Morningstar) assigned rst-time ratings to Banca Popolare di Sondrio S.C.p.A. (BPS or the Bank). These ratings include a Long-Term Issuer Rating of BBB (low) and a Short-Term Issuer Rating of R-2 (middle). The trend on all ratings is Stable. Concurrently, DBRS Morningstar assigned an Intrinsic Assessment (IA) to the Bank of BBB (low) and a support assessment of SA3, which reects the low likelihood of timely systemic support for the Bank in case of need. DBRS Morningstar also assigned Long-Term and Short-Term Deposit ratings of BBB and R-2 (high), one notch above the IA, to reect the legal framework in place in Italy which has full depositor preference in bank insolvency and resolution proceedings. A full list of rating actions is included at the end of this press release.

KEY RATING CONSIDERATIONS

The Assigned Long-Term Issuer rating of BBB (low) and the Stable trend reect the Bank's small national position but solid franchise in the region of Lombardy, especially in the province of Sondrio, with a robust retail funding base, its modest but resilient protably, as well as ample capital buffers over the supervisory requirements. The ratings also take into account the Bank's large, albeit reducing, stock of non-performing exposures (NPEs) and the challenges that the bank may face to complete its pending legal transformation into a joint stock company, expected by end-2020.

RATING DRIVERS

Upward rating pressure would require a signicant further reduction in the NPE stock beyond the planned GACS transaction, supported by adequate capital levels.

Downward rating pressure could arise if the Bank faces challenges in reducing NPEs. A material deterioration in protability and capital could also lead to downward rating pressure.

RATING RATIONALE

BPS is a medium-sized mutual bank (Banca Popolare) focused on retail and commercial banking. Based in Sondrio (Lombardy), the Bank had EUR 43.6 billion in total assets as of end-September 2019 and 365 branches, primarily in the North of Italy. Outside Italy, BPS has a small presence in retail and commercial banking in neighboring Switzerland. BPS is the market leader for loans and deposits in the small province of Sondrio. However, the Bank's national market shares are more modest at around 2%. In addition, BPS has leading market position in Italy in the sector of payment systems with public administration and in the delivery of services for the internationalisation of enterprises. BPS' legal structure is expected to be transformed into a joint-stock company as per the Italian law for the reform of the mutual banking sector. However, the process is still pending a verdict from the European Court of Justice following an appeal from some shareholders.

DBRS Morningstar sees the Bank's protability as modest, due to ongoing revenue pressure and a high cost of risk, despite its good operating efciency compared to its domestic peers. In 9M19, the Bank posted net attributable prot of EUR 123.2 million, up 57.1% from EUR 78.4 million in 9M18, however results included higher results from nancial activities on the back of capital gains on the sale of sovereign bonds. Net interest income (NII), the Bank's main source of revenue, was down 8.3% YoY in 9M19, impacted by the low interest rate environment, whilst fees and commissions remained fairly stable YoY. Operating expenses grew by 2.0% YoY in 9M19 and the cost-income ratio was 57% in 9M19. Loan loss provisions were down 12.9% in 9M19 YoY, despite additional provisions to improve coverage levels ahead of the NPE disposal, and the cost of risk stood at 63 bps in 9M19 compared to 98 bps in 2018, in line with the average for most domestic peers.

The Bank's overall asset quality is weak with a large stock of NPEs. Deteriorating economic conditions for Italian SMEs, especially in real estate & construction, have contributed to the buildup of problem loans. At end-September 2019, the total stock of gross NPEs totaled EUR 3.9 billion, representing 13.0% of total gross loans at that date, which is signicantly higher than the European average. The Bank has recently announced additional measures to speed up its NPL reduction, including the approval in July of an NPL disposal of EUR 1 billion. The transaction, which will take place in 1Q20 via a securitisation with the government GACS scheme, should help to reduce BPS's gross NPE ratio to around 10%.

The Bank has a solid funding and liquidity position, underpinned by its large and stable deposit retail franchise. At end-September 2019, total customer deposits accounted for 76% of the Bank's total funding. A key consideration for the rating was that the Bank has started to increasingly diversify its funding sources through issuances in the wholesale markets in view of the upcoming MREL requirements. The Bank issued its inaugural EUR 200 million of Tier 2 in August 2019 and its rst senior debt issuance as part of its EMTN programme for EUR 500 million in March 2019. Moreover, the Bank has a sound liquidity position. At end-September 2019, the Bank 's liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) were well above regulatory requirements.

DBRS Morningstar views the Bank's capital remains pressured by the large stock of unreserved NPEs but considers the Bank has sound cushions over minimum regulatory requirements. In September 2019, the CET1 ratio (fully loaded) increased to 15.9% from 11.9% at end-2018, reecting the ECB approval in May to use Advanced IRB models. In addition, the Phased-in CET1 ratio was 15.9% and the phased-in total capital ratio stood at 18.7% at end-September 2019, which provide around 670 bps and 600 bps of cushions over the minimum requirements of 9.25% and 12.75%.

The Grid Summary Grades for BPS are as follows: Franchise Strength –Moderate; Earnings – Moderate; Risk Prole – Moderate/ Weak; Funding/Liquidity – Good/Moderate; Capitalisation – Moderate.

Notes:

All gures are in EUR unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (June 2019). This can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include Company Documents, the European Banking Authority, the European Central Bank and S&P Global Market Intelligence. DBRS Morningstar considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

This rating concerns a newly rated issuer. This is the rst DBRS Morningstar rating on this issuer.

DBRS Morningstar does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS Morningstar's outlooks and ratings are under regular surveillance

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Lead Analyst: Arnaud Journois, Vice President, Global FIG Rating Committee Chair: Elisabeth Rudman - Managing Director, Head of European FIG - Global FIG Initial Rating Date: November 18, 2019 Last Rating Date: Not applicable as no last rating date.

DBRS Ratings GmbH Neue Mainzer Straße 75 60311 Frankfurt am Main Deutschland Geschäftsführer: Detlef Scholz Amtsgericht Frankfurt am Main, HRB 110259

For more information on this credit or on this industry, visit www.dbrs.com.

Ratings

Banca Popolare di Sondrio S.C.p.A.

Date Issued	Debt Rated	Action	Rating	Trend	Issued
18-Nov-19	Long-Term Issuer Rating	New Rating	BBB (low)	Stb	EU
18-Nov-19	Short-Term Issuer Rating	New Rating	R-2 (middle)	Stb	EU
18-Nov-19	Long-Term Deposits	New Rating	BBB	Stb	EU
18-Nov-19	Long-Term Senior Debt	New Rating	BBB (low)	Stb	EU
18-Nov-19	Short-Term Debt	New Rating	R-2 (middle)	Stb	EU
18-Nov-19	Short-Term Deposits	New Rating	R-2 (high)	Stb	EU

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Contacts

Arnaud Journois Vice President - European Financial Institutions +49 69 8088 3526 ajournois@dbrs.com

Elisabeth Rudman Managing Director, Head of European FIG - Global FIG +44 20 7855 6655 erudman@dbrs.com

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