Rating action

Scope Ratings GmbH (Scope) has today affirmed IBL Banca’s issuer rating of BBB and short-term debt rating of S-2, both with a Stable Outlook.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business model assessment: Consistent (Low). The issuer rating is anchored by the Consistent (Low) business model assessment. IBL is a small bank with total assets of just below EUR 10bn, specialised in Italian payroll-deducted loans (PDL), a low-risk segment of the credit market.

PDLs are a special type of personal loan where the credit risk lies not with the borrower, but with either the employer or the state (in the case of civil servants and pensioners). In PDL contracts, insurance against loss of employment or death is mandatory; this drastically reduces the sensitivity of asset quality to economic downturns. Over the years, IBL has maintained a leading market share of around 12–15% in the PDL market. However, pricing power is limited due to sector fragmentation and increased competition.

Over the past seven years, the group has diversified beyond its core business through bolt-on acquisitions. It has been investing in non-performing exposures (NPEs) through its subsidiary BCA for secured NPEs and through its joint venture Credit Factor for unsecured ones. Since 2023, the group has also held a 39% equity stake in Net Insurance, a small company with over 20 years' experience in the PDL segment and other niches. IBL is keen to expand its consumer credit offerings, such as personal loans. In February 2025, it announced the acquisition of Creditis, a consumer credit company with total assets of around EUR 600m and 60,000 customers.

Operating environment assessment: Supportive (Low). IBL operates in Italy (Supportive low). Italy is the EU’s third largest economy and second largest manufacturer, with a significant average trade surplus over the past decade. The average GDP per capita is in line with the EU average. High level of public debt may constrain the government’s ability to deploy countercyclical measures in downturns in the context of the rigid European fiscal framework. The banking sector is performing strongly, with high margins and low cost of risk driving high profitability in 2023 and 2024. Following a decade of balance sheet cleanup, NPLs are no longer a credit concern and appear well under control.

Italy is part of the European Banking Union, which has brought about a significant strengthening and harmonisation in bank regulation and supervision under the ECB’s Single Supervisory Mechanism, which we consider to be supportive of financial stability. The European Central Bank also shares with national central banks the role of lender of last resort, which limits illiquidity risks to the banks.

Scope arrives at an initial mapping of bbb- based on a combined assessment of the issuer’s operating environment and business model.

Long-term sustainability assessment (ESG factor): Developing. The assessment reflects Scope’s view that the issuer is embracing changes to ensure the long-term sustainability of its business model. Progress made may be tangible but does not warrant further credit differentiation.

The assessment considers IBL’s efforts to improve digitalisation in order to boost efficiency and respond to competitive pressures. Over the past few years, IBL has streamlined its back- and front-office processes to reduce time to market and cut costs permanently.

IBL has an adequate governance structure that provides checks and balances in decision-making. Its long record of positive results and measured growth points to a prudent approach to risk-taking. However, Scope notes that the CEO, who has led the firm for almost 30 years and owns 50% of its shares, represents a key person risk. His departure could lead to uncertainties if a succession strategy is not adequately planned for.

The long-term sustainability assessment leads to an adjusted rating anchor of bbb-.

Earnings capacity and risk exposures assessment: Supportive (+1). The assessment reflects Scope’s view that earnings capacity is stable through economic cycles and provides a strong buffer against losses. Risks are well managed and are highly unlikely to lead to losses capable of undermining the issuer’s viability.

Historically, IBL enjoyed strong earnings driven by high margins and low cost of risk. But in a higher interest rate environment, core profitability has come under pressure due to the slow repricing of the PDL portfolio and soaring funding costs. However, IBL has managed to partly mitigate the fall in PDL profitability through diversification (growing contribution of the NPE business and the stake in Net Insurance), achieving a return on average equity between 5% and 8% since 2022.

Scope expects earnings to rebound in the next three years, as the PDL portfolio will be fully repriced and funding cost decline. Cost savings via several management initiatives will also support the bottom line. Scope expects the group’s return on average equity to be above 10% throughout 2025-27.

The solid asset quality reflects the low-risk nature of the PDL business. So far, the growth of unsecured consumer loans has been moderate and has had no impact on the group’s cost of risk or and asset quality. As of December 2024, the group’s gross NPE ratio stood at 2.8% (excluding purchased impaired assets), in line with national average.

The group’s exposure to Italian government bonds is material – more than eight times the Tier 1 capital - but does not constrain our assessment (Italy is rated BBB+/Stable by Scope). Bonds are used as collateral for short-term repo financing in the interbank market and with the Italian central counterparty (Cassa di Compensazione e Garanzia). Gains on the securities portfolio make a positive, albeit volatile, contribution to earnings.

Financial viability management assessment: Adequate. The assessment reflects Scope’s view that financial viability management provides some buffer and, under a base case scenario, could not imminently push any metric close to minimum requirements or jeopardise the issuer’s financial viability.

The group maintains a sound solvency profile, with a minimum buffer of more than 300 bps to regulatory requirements as of December 2024. The issuance of a EUR 65m Tier 2 bond in 2023 was instrumental in strengthening capital buffers in a period of sustained business growth. Scope expects the group to preserve the sound capital position notwithstanding high business growth and the increase in capital requirements with the implementation of a 1% systemic risk buffer on Italian credit and counterparty risk exposures.

IBL is primarily funded by a mix of repos, customer deposits, and self-securitisation. The extensive use of repos results in a high asset encumbrance ratio of about 60%. Scope notes that a rapid deterioration in Italian sovereign credit quality, accompanied by a widening of credit spreads, could negatively impact IBL’s ability to refinance government bonds.

The group’s liquidity position remains satisfactory, with an LCR ratio at 216% as of December 2024. At 107%, the NSFR represents a more pressing constraint to management. However, in its three-year plan, the group expects it to be above 110%.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s view that the risks to the current rating are balanced.

The upside scenario for the ratings and Outlooks:

1. A significant improvement in IBL’s financial profile, including stronger prudential ratios and a greater weight of stable retail funding.

The downside scenarios for the ratings and Outlooks are (individually or collectively):

1. Failure to materially improve profitability in the medium term, or evidence that the group’s risk appetite has increased in order to achieve its return targets could lead to a lower earnings capacity and risk exposures qualifier.
    
2. Tighter management of buffers to minimum capital requirements may trigger a downgrade of the financial viability management assessment.
    
3. Challenges to the bank’s funding profile, as market conditions may hinder the ability to extensively use Italian sovereign debt securities for repo funding purposes, could lead to a worse financial viability management assessment.

Debt ratings

Short-term debt: S-2. IBL’s short-term credit rating is derived from the long-term issuer credit rating. The rating is consistent with Scope’s long-term/short-term rating correspondence table. The choice of the highest possible short-term rating (S-2 given the BBB issuer rating) reflects IBL’s high liquidity coverage ratio, regular access to central bank funding and diversified funding mix.

Environmental, social and governance (ESG) factors

Please refer to the ‘long-term sustainability assessment’ under the ‘key rating drivers’ section above for the ESG analysis.

All rating actions and rated entities

IBL Banca SpA

Issuer rating: BBB/Stable, Affirmation

Short-term debt rating: S-2/Stable, Affirmation

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

Methodology
The methodology used for these Credit Ratings and Outlooks, (Financial Institutions Rating Methodology, 10 January 2025), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. 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 Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlooks are UK-endorsed.
Lead analyst: Alessandro Boratti, Associate Director
Person responsible for approval of the Credit Ratings: Marco Troiano, Managing Director
The issuer Credit Rating/Outlook was first released by Scope Ratings on 12 March 2018 The Credit Rating/Outlook was last updated on 10 June 2024.
The short-term Credit rating/Outlook was first released by Scope Ratings on 13 November 2020. The Credit Rating/Outlook was last updated on 10 June 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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