Iccrea Banca Affirmed At 'BB' On Shareholder Approval For Becoming Group Parent And Capital Increase; Outlook Stable


  • On Jan. 10, 2019, Iccrea Banca SpA announced the modification of its bylaws and a €250 million capital increase from its owners, a group of Italian cooperative banks.
  • Once implemented and approved by regulators, these measures would formalize the longstanding process of creating a single banking group, with Iccrea Banca becoming the group parent.
  • We have already anticipated the formation of the group in our ratings, and consider the capital increase at Iccrea to be a group internal transaction.
  • We are therefore affirming our 'BB/B' ratings on Iccrea.
  • The stable outlook reflects balanced risks to our ratings on Iccrea over the next 12 months.
MILAN (S&P Global Ratings) Jan. 11, 2019--S&P Global Ratings today affirmed 
its 'BB' long- and 'B' short-term issuer credit ratings on Italy-based Iccrea 
Banca SpA and its core subsidiary Iccrea BancaImpresa SpA (together Iccrea). 
We also affirmed our issue ratings on Iccrea's senior unsecured debt and 
subordinated debt at 'BB' and 'B', respectively. The outlooks on both banks 
are stable.


The affirmation reflects our view that the formation of a single banking 
group--comprising 142 Italian cooperative banks under Iccrea Banca--is 
progressing as we anticipated. The affirmation further reflects that we had 
already considered Iccrea and its associated cooperative banks to be a group, 
of which Iccrea is a core entity, ahead of yesterday's announcements. 
Therefore, although the approved measures are important steps for legally 
forging a single group, we see the reorganization and capital increase at 
Iccrea as intra-group transactions. As such, they do not change our view on 
the group's consolidated solvency and its overall creditworthiness (group 
credit profile), nor the degree of integration of Iccrea into the group. 

The affirmation follows Iccrea's extraordinary shareholders meeting on Jan. 
10, 2019. The meeting approved a modification of its statute, turning Iccrea 
into the group's operating holding company. Currently, the cooperative banks 
jointly own Iccrea. In the next few days, we understand Iccrea and the 142 
cooperative banks will also sign a cohesion contract (Contratto di Coesione). 
The signatures will ratify the creation of the new group that will become 
legally effective after receiving regulatory approval. Following its 
transformation, the group will adopt the name Gruppo Bancario Cooperativo 
Iccrea (GBCI).

We expect the capital increase to be finalized by the end of first-quarter 
2019, after receiving the regulatory approval and when the administrative 
procedures have been completed. This transaction will strengthen Iccrea's 
stand-alone capital ratios. We now project Iccrea's risk-adjusted capital 
(RAC) ratio to increase to 5.5% by end-2020, from our previous forecasts of 
4.7%. However, this does not change our ratings on its subordinated debt 
obligations, which we notch down from its stand-alone credit profile (SACP). 
The SACP remains 'bb', the same level as the group credit profile of the 
entire GBCI group. Given the ongoing integration process and role of Iccrea as 
group parent, we expect Iccrea's stand-alone creditworthiness to become 
indistinguishable from the overall creditworthiness of the GBCI group.

Moreover, we see some costs and risks related to the completion of the 
integration process that might limit the immediate benefits of the capital 
strengthening action. We also view Iccrea's asset quality metrics as still 
weaker-than-domestic peers, despite recent improvements. Therefore, our 
combined view of Iccrea's capitalization and risk position remains unchanged 
despite the capital increase.

Our ratings on Iccrea continue to benefit from the stability of its role as 
the central bank for GBCI's cooperative banks. Yesterday's shareholder 
decisions have reinforced the integration of Iccrea into the group. 
Importantly, the cohesion contract includes a cross-guarantee scheme under 
which each GBCI group member bank will guarantee the external obligations of 
other GBCI members, including those of Iccrea. We continue to see Iccrea 
providing a complete range of financial services to the GBCI member banks 
including leasing, factoring, credit cards, payments, and capital market 
brokerage. It focuses on all supporting activities, including risk management 
and controls. It also expects to intervene to solve crises at the single GBCI 
cooperative bank level.


The stable outlooks on Iccrea Banca and its core subsidiary Iccrea 
BancaImpresa reflect the balanced risks to our ratings over the next 12 
months. We expect the ratings to move in parallel with our view of the overall 
creditworthiness of the GBCI group. In particular, we expect the GBCI group to 
successfully progress in reaping the benefits of closer integration while 
maintaining a strong funding and liquidity position and its RAC ratio above 
5%. We factor in our expectation that the group will increase efforts to 
reduce the high stock of nonperforming exposures, thereby narrowing the gap 
with peers.


We could lower the ratings if we perceived that market volatility was going to 
rise further and for longer, eroding the group's already modest profitability. 
This could lead GBCI's RAC ratio to decline to below 5.0%, without a material 
improvement in asset quality. Similarly, we could lower our ratings if the 
group's outstanding funding and liquidity profile deteriorated or if the group 
members failed to agree on a joint strategy that enabled strong risk 
governance and reaping of cost synergies.


An upgrade is less likely in the current environment. We could take this 
action if market pressure abated and the GBCI's combined solvency and risk 
profiles strengthened. For example, this could happen if we expected the RAC 
ratio to increase comfortably above 7% or asset quality materially improved to 
a level more akin to the rest of the domestic sector. As a result of the 
transformation, we would also need to observe the following in the new group:
  • Effective strengthening of operational relationship and risk-sharing between the individual cooperative banks and Iccrea;
  • Better efficiency; and
  • Improved corporate governance, enabling the GBCI group to truly operate as a single group in the market.
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