Scope Ratings today upgraded Unicredit’s long-term ratings to BBB+ with Stable Outlook. These ratings were initially assigned in June 2014 with Positive Outlook and were placed on review for a possible upgrade on 10 September 2015. Unicredit’s S-2 short-term ratings and their Stable Outlook remain unchanged.

Explaining the rating action, Scope noted as positive the improvement in the group’s asset quality, with net impaired-loan outflows in the first half of 2015 and with sales of non-performing asset portfolios reducing the stock of non-performing loans from EUR 84.4bn to EUR 81.7bn. According to Scope’s estimates, the gross impaired-loan ratio stood at 15.8% at the end of June, below its December peak of 16.3%, an encouraging trend which is expected to continue over the coming years.

Scope believes that profitability is still weighed down by the high level of loan loss provisions as well as by some pressure on revenue generation stemming from the low rate environment. In the first half of the year, however, Unicredit reported over EUR 1bn in profits. Here Scope highlights the good contribution from asset management fees, which is an activity helping Unicredit as well as other large Italian banks’ revenue base.

Among the factors supporting the rating, Scope mentions the solid and diversified commercial banking franchise in Italy and several other geographies in Europe, as well as the improved capital position over the years. While improving, asset quality remains the main weakness of the Italian group.

The rating agency added that it sees the macroeconomic environment in Italy to be on an improving trend, with growth expected to further accelerate next year. Under normal circumstances the positive macro trends should help Unicredit’s revenue growth and asset quality improvement.

Upgraded to BBB+ with Stable Outlook from BBB were Unicredit’s Issuer Credit-Strength Rating (ICSR) and senior unsecured debt ratings.