In line with Scope’s bank rating methodology, the ratings of Unicredit do not incorporate any additional notches for government support. The agency considers a potential state-bailout scenario in case of a large bank’s extreme stress to be increasingly unlikely as European Union banking systems move towards a resolution and recovery framework which includes creditor bailins. Also, based on the same methodology, Scope does not automatically link Unicredit’s ratings with a sovereign assessment on Italy itself, due to the group’s wide diversification.

Scope said that Unicredit’s ratings are supported by the group’s strong and diversified franchise in Europe, including being the second-largest bank in Italy and enjoying top-three market positions in several central and east European countries. It noted however that the profitable foreign franchises only partly offset the group’s challenges elsewhere, primarily the more difficult performance in Italy due to a high level of impaired loans. With the economic environment improving, Scope added that it expects impaired loans to stabilise and profitability to increase. This view supports the positive outlook for Scope’s long term ratings on Unicredit.

Scope also highlighted the significant improvement in Unicredit’s capital ratios in recent years, driven primarily by rights issues and asset de-risking. It added that it expects the group to be profitable this year.

Among negative-change rating drivers, the agency points to a scenario of diminishing access to market funds at acceptable prices, as well as to the potential for some earnings volatility coming from some of the bank’s more significant foreign subsidiaries.

Both the rating drivers and the rating-change drivers are detailed in Scope’s research on Unicredit which supports the ratings.

The following ratings were assigned:
- Issuer Credit-Strength Rating (ICSR) at BBB with a positive outlook. The ICSR represents a credit opinion on a bank’s ability to meet its contractual financial commitments on a timely basis and in full while remaining a going concern.
- Senior unsecured debt rating at BBB with a positive outlook.
- Short-term debt ratings at S-2 with a stable outlook.

The ratings assigned to Unicredit are (i) based on public information, (ii) not solicited by the issuer and (iii) without issuer participation in the process.

The methodology used for the rating assessment is “Bank Rating Methodology” published in February 2014. The methodology used for the financial-forecast part of the rating analysis is “Forecasting Bank Financials” published in February 2014. These methodologies are available on www.scoperatings.com.
 

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