Moody's Investors Service has today confirmed Cassa di Risparmio di Parma e Piacenza S.P.A's (Cariparma) Baa2 long-term debt and deposit ratings and its Prime-2 short term ratings. At the same time, Moody's lowered Cariparma's standalone baseline credit assessment to baa3 from baa2. The confirmation of the debt and deposit ratings reflects Moody's incorporation of one notch of parental support from Credit Agricole SA (CASA, rated A2 stable; adjusted BCA baa2 stable). However, the lowering of the BCA is triggered by Cariparma's somewhat weaker financial flexibility, which aligns its standalone profile more with baa3-rated peers. This action concludes the review initiated on 20 September 2013 . The outlook on the bank's ratings is negative. RATINGS RATIONALE DEPOSIT RATING Moody's confirmation of Cariparma's Baa2 deposit ratings incorporates one notch of uplift for the deposit ratings from the bank's standalone BCA, reflecting the high likelihood of parental support from CASA being forthcoming in the event of need. The outlook for Cariparma's deposit ratings is negative. This reflects ongoing pressure on the bank's BCA from the operating environment, in line with other Italian banks. LOWERING OF BCA The lowering of Cariparma's standalone BCA reflects the bank's somewhat weaker profitability and asset quality, more commensurate with the bank's baa3-rated peers in Italy . -- LOWER PROFITABILITY Moody's expects the bank's profitability to remain somewhat low throughout 2014 -- although above its similarly rated Italian peers - given (1) a likely need for high loan-loss provisions, also in view of the CASA's group comprehensive assessment by the ECB and (2) challenges to increase revenues. Profitability improvements beyond 2014 appear achievable, primarily based on a planned re-design of the branch network and a modest reduction of cost of credit. Cariparma's reported net income declined by 49% to EUR85 million in June 2013, with loan-loss provisions rising by 31%. Cost-to-income was a modest 67%. -- WEAKER ALTHOUGH ABOVE AVERAGE ASSET QUALITY In Moody's opinion, Cariparma's problem loans will remain relatively elevated, although below Italian peers, over the medium term considering (1) the weak economic growth in Italy : Moody's forecasts modest GDP growth in Italy of around 0.5% in 2014 and 2015, after around -1.5% in 2013; (2) the still relatively high inflows of new problem loans and the persistence of high inflows for some time after the economy turns and 3) the long work-out times in Italy . Cariparma's gross problem loans -- as adjusted by Moody's -- increased to 7.6% of loans in June 2013 (from 6.5% in December 2012 ), although this remains below the peer average. Problem loans were 47% of equity and loan-loss reserves in June 2013 ( December 2008 : 41%), which is better than the peer average. However, Moody's acknowledges Cariparma's sufficient capital adequacy and sound liquidity which, according to Moody's, should provide the bank with some flexibility to manage the effects of the weak economic environment. Moody's considers the bank's 9.3% Core Tier 1 ratio in June 2013 sufficient relative to its risk profile and its status as a group subsidiary. Moody's expect capital ratios to increase this year, as the adoption of internal models will likely more than offset Basel III implementation. This level of capital provides a degree of resilience in Moody's adverse scenario. The bank's liquidity is underpinned by considerable retail funding, excess of deposits over loans and significant unencumbered assets with no LTRO usage. WHAT COULD MOVE THE RATING -- UP/DOWN Moody's might stabilise Cariparma's outlook if the operating environment in Italy were to improve, resulting in improvements in the banks' profitability and a stabilisation in asset quality. Conversely, further deterioration in the bank's profitability and asset quality could exert downward pressure on the bank's BCA and therefore its long-term rating. A downgrade of the Italian government bond rating - which is Baa2 negative in line with the bank's ratings -- would not necessarily lead to a downgrade of the bank's long-term ratings. LIST OF AFFECTED RATINGS The following ratings were confirmed - Senior unsecured debt and bank deposits of Baa2 with negative outlook -Short-term deposit rating of Prime-2 The following rating was downgraded - Bank Financial Strength Rating/BCA to D+ with negative outlook/baa3 from C- with negative outlook/baa2 Cariparma is headquartered in Parma (Italy ). The bank had consolidated total assets of EUR49 billion as at June 2013 .
Most Popular Stories
- Diplomatic, Financial Fix Sought for Ukraine Crisis
- 2 Million Long-term Jobless Have No Benefits
- Las Vegas Casino Wants 'Blackout Drunk' Gambler to Pony up $500,000
- Florida Insurers Reach Out to Hispanics
- Disney Lays Off 700 From Interactive Unit
- Last Call for Hispanic Health Care Signups
- Staples Closing Stores, Moving Online
- Stocks Get Green Light on Weekly Jobless Claims
- Costco Revenue Up, Profits Down in Q2
- Where Are the World's Most Expensive Cities?