Rating action

Scope Ratings GmbH (Scope) has affirmed Banca Agricola Popolare di Sicilia SCpA (BAPS)’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: Focused (High). The issuer rating is anchored by the Focused (High) business model assessment. With EUR 6bn as of June 2025, BAPS is a Italian cooperative bank with an established franchise in Sicily. The bank provides banking services primarily to households, self-employed professionals, and small companies. Revenues are mainly derived from lending activities, while market penetration of non-banking financial services is comparatively low. The acquisition of local peer Banca Popolare Sant’Angelo (BPSA), which was completed in 2024, adds scale to the bank’s activities and, more importantly, broadens its geographic reach in the region.

Scope considers BAPS’s deep-rooted franchise and extensive knowledge of its customers as important strengths that have allowed the bank to weather past crises and a prolonged period of ultra-low interest rates.

By 2027, BAPS aims to improve its commercial productivity, increasing lending origination and penetration of non-banking products (i.e., +36% in distributed AUM). Under its new strategic plan ‘Futura’ the bank envisages higher revenue diversification, supported by new strategic partnerships, some of which already started in 2025 (with Allianz for insurance products and Nexi for payments). Scope does not expect the new strategic plan to materially alter the bank’s risk profile.

Operating environment assessment: Supportive (Low). All of the bank’s operations are based in Italy (Supportive low). As the EU’s third largest economy and second largest manufacturer, Italy has had a significant average trade surplus over the past decade. The GDP per capita is EUR 38k, in line with the EU average. Weak public finances, including high government debt of around 137% of GDP in 2024 and elevated annual funding needs, may constrain the government’s ability to deploy countercyclical measures in downturns in the context of the rigid European fiscal framework. At the same time, structural challenges and an ageing and declining working population will continue to weigh on economic growth. In a higher interest rate environment, the banking sector has been performing strongly, with high margins and low cost of risk driving a rebound in profitability since 2022. Following a decade of balance sheet cleanup, asset quality is no longer a credit concern.

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 bb+ based on a combined assessment of the issuer’s operating environment and business model.

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

Since 2023, BAPS has started to update its business processes and define roles and responsibilities related to ESG. At the same time, the bank has set limits/targets for ESG risk within the ICAAP framework. The bank is integrating climate-related considerations in loan underwriting and has dedicated green products (e.g. eco-banking).

As a cooperative bank, BAPS is keen to promote its local franchise and expand its membership base. The bank has a loyalty and benefits program, 'Radici', designed for its members. It offers numerous advantages that grow along with the members' participation in the bank's equity. Benefits include favourable conditions on banking, financial and insurance products. Over the recent years, the bank has been keen to increase shareholders' satisfaction by increasing the remuneration through both dividends and share buy-backs.

Scope considers the bank’s good post-crisis track record and the absence of misconduct as evidence of sound risk governance.

There is room for improvement in the area of digitalisation. The bank recognises this and is highly committed to improving the customer experience and maximising cost efficiency through IT investments. Combining digital channels with a physical presence through branches is a strategic priority in the coming years.

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

Earnings capacity and risk exposures assessment: Neutral. The assessment reflects Scope’s view that the bank’s earning capacity may be variable over economic cycles but is sufficient to cover expected losses. Asset quality is broadly in line with peers. Risks are unlikely to generate losses that would undermine the issuer’s viability.

The bank’s focus on Sicily, which has a lower GDP per capita and a higher unemployment rate than the Italian average, may negatively impact growth and operating performance over time. That said, BAPS’s ability to generate earnings through the cycle is supported by its strong local market position, in-depth knowledge of its customers and prudent lending practices, which have limited historical credit losses. Average profitability remains low by national and international standards, primarily due to a high reliance on lending income and lower efficiency.

In H1 2025, the bank reported encouraging results, driven by fee and commission income growth, cost cuts, and relatively low impairments. The bank is managing the integration of Banca Popolare Sant’Angelo well, as evidenced by inflows of customer deposits in H1. Over the next three years, Scope expects the bank to maintain an adequate level of profitability, with a return on average RWAs of around 1.5%, reflecting efforts to improve cost efficiency and revenue diversification.

As of June 2025, the group had a gross NPL ratio of 3.9%, not much higher than the national average and the bank’s target for 2026. The bank’s asset quality is supported by the high proportion of loans that are either secured or guaranteed (around 80%).

Since 2019, the bank has taken several measures to improve credit risk management and asset quality. These include strengthening the pre-approval process for loan underwriting, better monitoring through the implementation of CSE¹’s Credit Monitor solution, and the adoption of a new policy for the valuation of real estate used as collateral.

Financial viability management assessment: Comfortable (+1 notch). The assessment reflects Scope’s view that the issuer’s maintains comfortable buffer to relevant regulatory requirements and Scope expects it to continue to do so. The issuer’s financial viability is largely resilient to tail-risk events.

BAPS keeps healthy capital buffers. As of June 2025, the bank’s capital was comprised almost entirely of CET1 capital and with a CET1 ratio of 22.6%, the minimum buffer to requirements was over 1,000 bps. Management’s prudent approach to solvency metrics and limited organic loan growth opportunities in Sicily support capital accumulation. Scope does not foresee any material change in the bank’s capital ratios following the merger with BPSA and the increase in shareholder remuneration.

In August, the group unveiled a capital management operation called 'Germoglia', involving a new extraordinary dividend distributions over 2025-2026 of EUR 10m, a share buyback of EUR 10m, resetting the share price on the Vorvel platform from EUR 12.10 to EUR 18.50, and broadening the 'Radici' programme. This operation demonstrates the management's commitment to strengthening ties with members and the local economy.

BAPS’s funding profile is underpinned by a highly granular and stable deposit base. After repaying the TLTRO III, BAPS has drastically reduced the drawing from the central bank. Liquidity ratios remain well above requirements.

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 scenarios for the ratings and Outlooks is:

1. Balanced growth in scale that increases the bank's geographic reach and diversification could lead to a more positive business model assessment.

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

1. A material worsening of asset quality and profitability metrics could be negative for the earnings capacity and risk exposures assessment.
    
2. A material erosion in the bank's capital position, potentially due to significant losses or lower management targets, could lead to a lower financial viability management assessment.

Debt ratings

Short-term debt rating: S-2. BAPS’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 issuer rating of BBB-) reflects the bank’s solid liquidity profile and access to central bank funding (both LTRO and MRO).

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

Banca Agricola Popolare di Sicilia SCpA

Issuer rating: BBB-/Stable, affirmation

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

1. Consorzio Servizi Bancari (CSE) is an Italian IT company that provides comprehensive IT solutions tailored to the banking and financial sector for more than 50 years. The group serves more than 150 clients including banks, payment institutions and financial service providers. 

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, 18 September 2025), is available on 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 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 scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at 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 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 Outlooks and the principal grounds on which the Credit Ratings and 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 Credit Ratings/Outlooks were first released by Scope Ratings on 12 December 2024.

Potential conflicts
See 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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