Scope Ratings has today assigned a first-time issuer rating of BBB to IBL Banca Spa (IBL), with a Stable Outlook.

According to Scope, IBL is a market leader in Italian cessione del quinto loans, an attractive niche product with high margins and limited credit risk. While technically a consumer credit product, these loans are directly deducted from payroll, partly secured against the employees’ termination fund, and are subject to borrowers being insured against job loss and death. This product is specific to the Italian market, and Scope notes that IBL is the market leader, with a share of ca. 15%.

The rating agency highlights IBL’s good financial fundamentals, especially in the context of the Italian banking sector. Asset quality metrics are strong, with a non-performing loan ratio of 1.7% in 2016 and insignificant levels of loan losses (8 bps in 2016). IBL has a good track record of profitability, with a return on assets of over 1% and a return on equity of over 20% in 2017. Scope believes that IBL is well capitalised with a CET1 ratio of 11.6%.

IBL’s core business is funded primarily with deposits, but the bank also makes use of securitisation. The majority of TLTRO funds will need to be repaid in 2018, and Scope expects IBL to fund itself more via securitisation.

The BBB rating also recognises IBL’s high exposure to Italian government bonds, which Scope considers a materially large credit concentration (Scope rates the Italian sovereign at A-). The government bonds are primarily financed via repos.

Regarding IBL’s ownership and governance, Scope notes that the bank remains held and controlled by its management. The agency has a positive view of this situation with respect to business continuity and financial stability. At the same time, Scope highlights the inherent key-man risk related to IBL’s CEO who has held this position since 1998.

Among potential positive rating change drivers, Scope mentions a material reduction in the carry trade on government securities, as volatility in the value of governemnt bonds constitutes a potential negative rating change driver. Scope also cautions that riskier diversification away from the current core business of cessione del quinto lending could prove negative for the rating, as would a material increase in funding costs that could arise from substituting central bank funding with private funding sources.

The following rating was assigned with Stable Outlook:

IBL Banca Spa                Issuer rating                         BBB

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed

Methodology
The methodology used for this rating(s) and/or rating outlook(s) Bank rating methodology is available on www.scoperatings.com.
Historical default rates of Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA Please also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s definition of default as well as definitions of rating notations can be found in Scope’s public credit rating methodologies on www.scoperatings.com.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The rated entity and/or its agents participated in the rating process.
The following substantially material sources of information were used to prepare the credit rating: public domain, the rated entity and third parties.
Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the rating or outlook action, the rated entity was given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.

Regulatory Disclosures
This credit rating and/or rating outlook is issued by Scope Ratings GmbH.
Lead analyst Marco Troiano, Executive Director
Person responsible for approval of the rating: Samuel Theodore, Group Managing Director
The ratings/outlooks were first released by Scope on 12.03.2018 

Potential conflicts
Please see www.scoperatings.com. for a list of potential conflicts of interest related to the issuance of credit ratings.

Conditions of use / exclusion of liability
© 2018 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstrasse 5 D-10785 Berlin.

Scope Ratings GmbH, Lennéstrasse 5, 10785 Berlin, District Court for Berlin (Charlottenburg) HRB 192993 B, Managing Director(s): Dr. Stefan Bund, Torsten Hinrichs.