http://www.zerohedge.com/news/moodys-downgrades-26-italian-banks-full-report
Submitted by Tyler Durden on 05/14/2012 16:38 -0400
Moody's Downgrades 26 Italian Banks: Full Report
Just because it is never boring after hours:
- MOODY'S DOWNGRADES ITALIAN BANKS; OUTLOOKS REMAIN NEGATIVE
EURUSD sliding... even more. But that's ok: at some point tomorrow Europe will close and all shall be fixed, only to break shortly thereafter. And now.... Margin Stanley's $10 billion collateral-call inducing 3 notch downgrade is on deck.
Complete pre and post rating grid for italian banks:
Full report below:
Moody's downgrades Italian banks; outlooks remain negative
Global Credit Research - 14 May 2012
Actions conclude the review announcements of 15 February 2012 and other dates
Global Credit Research - 14 May 2012
Actions conclude the review announcements of 15 February 2012 and other dates
Milan, May 14, 2012 -- Moody's Investors Service has today downgraded by one to four notches the long-term debt and deposit ratings for 26 Italian banks, including five banks that are part of larger groups. In almost all cases, the rating actions reflect concurrent downgrades of these banks' standalone credit assessments, rather than changes in Moody's assumptions about levels of third party support, including Government support.
The debt and deposit ratings declined by one notch for 10 banks, two notches for eight banks, three notches for six banks, and four notches for two banks. The short-term ratings for 21 banks have also been downgraded by one to two notches, triggered by the long-term rating downgrades. The rating outlooks for all affected entities are negative; a Moody's rating outlook is an opinion regarding the likely direction of an issuer's rating over the medium term.
Furthermore, Moody's changed the rating outlooks for the standalone BFSR of five Italian banks to negative from stable. The debt and deposit ratings for nine more Italian banks remain on review for further downgrade, for reasons specific to each bank.
A full list of affected ratings can be found at this linkhttp://www.moodys.com/viewresearchdoc.aspx?docid=PBC_142105
For additional information on bank ratings, please refer to the webpage containing Moody's related announcements:http://www.moodys.com/bankratings2012
The ratings for Italian banks are now amongst the lowest within advanced European countries, reflecting these banks' susceptibility to the adverse operating environments in Italy and Europe. Today's rating actions reflect, to differing degrees for each affected bank, the following key drivers:
1.) Increasingly adverse operating conditions, with Italy's economy back in recession and government austerity reducing near-term economic demand;
2.) Mounting asset-quality challenges and weakened net profits, as problem loans and loan-loss provisions are rising; and
3.) Restricted access to market funding which, if persistent, will exert added pressure on banks to reduce assets, posing risks to their franchises and earnings.
Furthermore, recent events highlight the risks for creditors from potential weaknesses in governance, controls and risk management, especially at some smaller, privately-held banks. In addition, today's actions reflect drivers specific to some banks, which are detailed at the end of this release.
Moody's notes that several mitigating issues have limited the magnitude of the downgrades. Specifically, Moody's cites the substantial liquidity support that the European Central Bank (ECB) has made available, significantly reducing near-term default risk. Furthermore, many banks have strengthened their capital levels and continue to generate sizeable pre-provision earnings under difficult conditions.
Nevertheless, given already elevated problem loan levels and weakened profitability, Italian banks are particularly vulnerable to adverse operating conditions, which are likely to cause further asset quality deterioration, earnings pressure, and restricted market funding access. These risks are exacerbated by investor concerns over the sustainability of the Italian government's debt burden, which has contributed to the difficult wholesale funding conditions faced by Italian banks.
RATING OUTLOOKS ARE NEGATIVE
The rating outlooks for all banks affected by today's actions are negative. The revised rating levels reflect currently foreseen risks and the ratings are expected to be resilient to a degree of further stress. However, Moody's considers that there are several factors that could cause further downward adjustments, such as (i) increasing funding stress; (ii) a prolonged recession; (iii) crystallisation of corporate governance, control and risk management weaknesses; or (iv) further weakening of the Italian government's creditworthiness. Moody's noted that the potential for further rating transition is heightened by the possibility of rapid increases in problem loans, as has been evident following supervisory inspections of certain Italian banks.
Moody's has published a special comment today titled "Key Drivers of Italian Bank Rating Actions," (http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_141195) which provides more detail on the rationales for these rating actions. For more information on bank ratings, please refer to the webpage containing Moody's related announcements:http://www.moodys.com/bankratings2012.
RATINGS RATIONALE -- STANDALONE CREDIT STRENGTH
As stated, today's rating actions primarily reflect Moody's view that the standalone credit strength of the affected banks has weakened. Based on their standalone creditworthiness, the banks downgraded today now fall into the following four broad groups:
- The first group comprises UniCredit (deposit rating A3; bank standalone bank financial strength rating (BFSR) C- / baseline credit assessment (BCA) baa2) and Intesa Sanpaolo (deposits A3; BFSR C- / BCA baa1), which together account for almost one third of the Italian market by assets. Their standalone credit assessments reflect solid, diversified franchises that generate sizeable pre-provision earnings.
- The second group (six banks) comprises other Italian banks with standalone profiles of baa3 or higher -- including the fifth-largest bank, Unione di Banche Italiane (deposits Baa2; BFSR D+ / BCA baa3). Banks in this group are better positioned than most domestic peers to cope with the current recession, helped by overall solid franchises and above-average earnings capacity.
- The third group (seven banks) consists of banks with ba1 standalone credit assessments. These institutions -- including the fourth-largest Banco Popolare (deposits Baa3; BFSR D+ / BCA ba1) -- face more significant challenges, often including a combination of weak capital levels under Moody's adverse scenarios, insufficient internal capital generation and funding constraints.
- The fourth group (11 banks) comprises banks with standalone credit assessments below ba1, including the third-largest Banca Monte Dei Paschi (deposits Baa3; BFSR D / BCA ba2). This bank faces more substantial challenges, often due to asset quality, capital and/or funding issues.
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