MILAN, Nov 16 (Reuters) - Moody's Investors Service has
downgraded the long-term debt of Italian state-owned bank MCC
following the rescue of failing rival Banca Popolare di Bari,
the credit rating agency said.
MCC was also due to play a role in the rescue of Monte dei
Paschi (MPS) by UniCredit before talks fell
through and sources have said it could still be involved in
In a statement late on Monday, Moody's said it expected MCC
to report a loss in 2021 and 2022 because of the high loan-loss
provisions and restructuring charges linked to the acquisition
of Popolare di Bari.
Moody's cut MCC's long-term senior unsecured debt rating to
'Ba3' from 'Ba1'. The outlook is now stable.
Popolare di Bari, the biggest bank in Italy's disadvantaged
south, was bailed out by peers in a government-backed rescue two
years ago, after being laid low by the acquisition of a troubled
rival, mismanagement and a deep recession.
A depositor protection fund financed by healthy Italian
lenders injected 1.17 billion euros into Popolare di Bari with
the Treasury providing another 430 million.
Moody's said that expected losses would significantly erode
the bank's core capital buffer going forward.
"The acquisition of Banca Popolare di Bari has fundamentally
changed (MCC's) risk profile," the agency said.
"Prior to the acquisition, (it) was a small specialized
entity focusing on secured lending backed by public guarantees
and it has become a universal bank of a much larger size."
Asked to take on the southern branches of MPS as part of the
now collapsed UniCredit deal, MCC put up resistance, saying it
could not add more than 110 branches and that it was already
struggling with the integration of Popolare di Bari, sources had
The Treasury would have recapitalised MCC, two sources had
said at the time.
The Treasury is still looking to rid MPS of its unprofitable
operations and sources have said the sale of southern branches
to MCC is still on the table.
"The merger of two entities that exhibit very different
business profiles involves management challenges all the more so
since Popolare di Bari's failure revealed numerous shortcomings
that (MCC) will have to tackle going forward," Moody's said.
"The new entity will have to outline a new strategy
encompassing a wide range of activities, which will also entail
(Reporting by Valentina Za; Editing by Nick Macfie)