Credito Emiliano S.p.A. — Moody’s upgrades Credito Emiliano S.p.A.’s deposit ratings to Baa2 and assigns Baa3 rating to senior unsecured debt issue
Rating Action: Moody’s upgrades Credito Emiliano S.p.A.’s deposit ratings to Baa2 and assigns Baa3 rating to senior unsecured debt issueGlobal Credit Research – 13 Jan 2022Outlook remains stableParis, January 13, 2022 — Moody’s Investors Service (Moody’s) has today upgraded Credito Emiliano S.p.A.’s (Credem) long-term deposit ratings to Baa2 from Baa3, the short-term deposit ratings to Prime-2 from Prime-3, and the long-term Counterparty Risk Ratings (CRRs) to Baa1 from Baa2. Moody’s has also assigned a Baa3 long-term rating to Credem’s E600 million senior unsecured debt issue and affirmed the bank’s long-term and short-term Counterparty Risk (CR) assessment of Baa2(cr) and Prime-2(cr). The outlook on Credem’s senior unsecured and long-term deposit ratings is stable.Credem’s Baseline Credit Assessment (BCA) and Adjusted BCA of baa3 are unaffected by today’s rating action.A full list of affected ratings can be found at the end of this press release.RATINGS RATIONALEThe upgrade of the long-term deposit ratings to Baa2 from Baa3 reflects Credem’s standalone BCA of baa3 and the result of Moody’s Advanced Loss Given Failure (LGF) analysis which incorporates the estimated severity of losses faced by the bank’s creditors in a resolution scenario. Owing to the issuance of E600 million of so-called preferred senior unsecured notes, which are subordinated to junior depositors in case of resolution, Credem’s depositors would face a low loss-given-failure. This translates in a one-notch uplift from the bank’s baa3 adjusted BCA. The newly assigned Baa3 senior unsecured debt rating reflects the moderate loss-given-failure under Moody’s LGF analysis, resulting in no uplift from the baa3 Adjusted BCA.Moody’s maintained its assessment of a low probability of government support from the government of Italy (Baa3 stable) for Credem as a medium size bank which translates into no further uplift to the senior unsecured and deposit ratings.RATIONALE FOR THE OUTLOOKThe stable outlook on Credem’s long-term senior unsecured and long-term deposit ratings reflects Moody’s expectation that the bank’s financials will remain broadly stable over the next 12-18 months.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSWHAT COULD CHANGE THE RATINGS UPCredem’s senior unsecured and deposit ratings could be upgraded if the bank were to significantly increase its stock of bail-in-able debt.An upgrade of the bank’s BCA is unlikely because it is already aligned with Italy’s sovereign rating (Baa3 stable). Moody’s does not typically rate a bank’s BCA above the sovereign rating.WHAT COULD CHANGE THE RATINGS DOWNCredem’s senior unsecured and deposit ratings could be downgraded following a downgrade of Credem’s BCA. This could be driven by a significant deterioration in the bank’s asset quality and profitability, by a much lower capital base or a significant deterioration in liquidity. Credem’s BCA could also be downgraded if Italy’s sovereign rating were to be downgraded.Credem’s senior unsecured and deposit ratings could also be downgraded following a significant reduction in the bank’s stock of bail-in-able debt.LIST OF AFFECTED RATINGS..Issuer: Credito Emiliano S.p.A.Assignment:….Senior Unsecured Regular Bond/Debenture, Assigned Baa3, Outlook Assigned StableUpgrades:….Long-term Counterparty Risk Ratings, Upgraded to Baa1 from Baa2….Long-term Bank Deposit Ratings, Upgraded to Baa2 from Baa3, Outlook Remains Stable….Short-term Bank Deposit Ratings, Upgraded to P-2 from P-3Affirmations:….Long-term Counterparty Risk Assessment, Affirmed Baa2(cr)….Short-term Counterparty Risk Assessment, Affirmed P-2(cr)….Short-term Counterparty Risk Ratings, Affirmed P-2….Junior Senior Unsecured Regular Bond/Debenture, Affirmed Ba1 Outlook Action: ….Outlook, Remains Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. 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