Fitch acts on 14 Italian banks

Fitch considers the risks to 14 Italian banking groups' credit profiles to be clearly skewed to the downside and this has driven rating actions. Fitch's baseline is for Italian GDP to contract by 2% this year, before recovering in 2021.

The groups impacted are Intesa San Paolo Spa and subsidiaries, Unicredit SpA and subsidiaries, Mediobanca SpA and subsidiaries, Credito Emiliano (Credem), Banca Nazionale Del Lavoro SpA (BNL) Unione Di Banche Italiane SpA (UBI), Banca Popolare di Sondrio ScpA, Banca Popolare Dell'alto Adige (Volksbank), Banco Di Desio E Della Brianza (Desio), Banca IFIS (IFIS), BPER Banca (BPER), Banca Monte dei Paschi di Siena (MPS), Banca Carige SpA - Cassa di Risparmio di Genova e Imperia (Carige), Gruppo Bancario Cooperativo Iccrea (GBCI).

“Fiscal support measures for the private sector and financial markets have mixed first order implications for banks. Italian government guarantees on loans to SMEs will support borrowers' viability and hence banks' asset quality. Mortgage loan relief programs will have negative first order implications for banks, but compensation by the state for direct Covid-19 related losses appears to be approved by EU state aid authorities, so it is probable that the full financial impact for banks will ultimately be mitigated,” Fitch said.

The ratings agency expects asset quality to weaken relative to our previous expectations and for earnings challenges to intensify due to weaker business volumes and rising loan impairment charges.

Higher wholesale funding costs (a combination of Italian spread widening and bank debt repricing) represent an additional downside risk in the event monetary policy support packages.

We consider the risks to funding profiles to be a longer-term (e.g. term debt refinancing and market issuance), rather than near-term risk, given limited use by Italian banks of short-term wholesale funding and extensive monetary policy support facilities, including targeted longer-term refinancing operations.

© 2015 Prospect News.
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