Unipol Banca S.p.A.
Fitch Upgrades Unipol Banca to 'BB+' Following Parent Upgrade
14 MAY 2018 10:55 AM ET
Fitch Ratings-Milan/London-14 May 2018: Fitch Ratings has upgraded Unipol Banca S.p.A.'s (Unipol Banca) Long-Term Issuer Default Rating (IDR) to 'BB+' from 'BB'. The Outlook is Stable. A full list of rating actions is at the end of this rating action commentary.
The rating action follows the upgrade of the bank's ultimate parent company Unipol Gruppo S.p.A.'s (UG) Long-Term IDR to 'BBB' from 'BBB-' (see "Fitch Upgrades Unipol's IDR to 'BBB'; Affirms IFS at 'BBB'" dated 09 May 2018 at
www.fitchratings.com).
Unipol Banca's Viability Rating (VR) of 'b' is unaffected.
KEY RATING DRIVERS
IDRS AND SUPPORT RATING (SR)
Unipol Banca's IDRs and SR reflect Fitch's view of a moderate probability that support would be provided, in case of need, from UG. The upgrade reflects UG's increased ability to provide support to Unipol Banca, as reflected by the upgrade of its Long-Term IDR.
We believe that any support required by Unipol Banca would be manageable for UG, given its significant capital cushion compared with the size and potential capital needs of its subsidiary. A default of Unipol Banca would carry high reputational risk for UG as they operate in the same jurisdiction and share the same brand. The bank and its parent are regulated and supervised as a single entity by the Italian regulator, the Banca d'Italia, who in our opinion would favour such support. UG and its primary insurance subsidiary, UnipolSai Assicurazioni S.p.A., injected EUR900 million in Unipol Banca in July 2017 to facilitate its balance sheet clean-up and restore its viability, which Fitch views as evidence of UG's propensity to support the bank subsidiary.
The two-notch difference between Unipol Banca and UG's ratings reflects Fitch's opinion that the bank does not play a strategic role in the group, and synergies developed so far have been weak. Unipol Banca's performance track record to date has been a drag on UG's financial profile, in Fitch's view. We believe that UG will continue to evaluate strategic options for Unipol Banca and that the subsidiary's recently completed restructuring will possibly make it more attractive to integrate it with other domestic banks.
Unipol Banca's Stable Outlook is in line with that on UG.
RATING SENSITIVITIES
IDRS, NATIONAL RATINGS AND SENIOR DEBT
Unipol Banca's IDRs and SR are sensitive to a change in UG's ability and propensity to support the bank subsidiary. This means that the bank's IDRs are primarily sensitive to changes in UG's ratings. The ratings would also be affected by a change in our assessment of UG's propensity to support Unipol Banca. A sale of the bank or a reduction in UG's stake in the subsidiary would likely diminish the parent's propensity to provide support.
The rating actions are as follows:
Long-Term IDR: upgraded to 'BB+' from 'BB'; Outlook Stable
Short-Term IDR: affirmed at 'B'
Viability Rating: unaffected at 'b'
Support Rating: affirmed at '3'
