Fitch Ratings has assigned Banco BPM's S.p.A.'s (BBPM) a Long-Term Issuer Default Rating (IDR) of 'BBB-' with Stable Outlook and a Viability Rating (VR) of 'bbb-'.

A full list of rating actions is provided below.

Key Rating Drivers

IDR and VR

BBPM's Long-Term IDR is driven by its intrinsic credit profile as reflected in its VR. BBPM's ratings reflect the bank's t franchise as the third-largest bank in Italy with a reasonably diversified revenue mix, moderate risk profile, stable funding and liquidity, adequate capitalisation and asset-quality metrics that are close to domestic averages, albeit weaker by international standards.

The Stable Outlook reflects Fitch's expectation of moderate economic growth in Italy, together with the bank's adequate capitalisation and profitability, should allow BBPM to manage potential asset-quality deterioration with planned impaired loan disposals. The Short-Term IDR of 'F3' is the only option mapping to a 'BBB-' Long-Term IDR under our correspondence table.

Third-Largest Domestic Bank: BBPM's business profile reflects its second-tier domestic franchise, with a reasonable presence in northern Italy and fairly diversified business by product. In particular, the bank benefits from a well-established franchise in SMEs and small businesses in its home territories, which explain its significant share of loans in these segments.

Consistent Strategy: Senior management has depth and experience while BBPM's strategic ambition is coherent with its business model. Its strategy may be prone to shifts if integration opportunities that management considers value-accretive materialise.

Moderate Risk Profile: BBPM's risk profile is commensurate with its business model and benefits from its presence in Italy's wealthiest northern regions. Risk-taking and control processes are aligned with market standards and are pervasive across the group while risk governance is sound. Market risk appetite is average for a commercial bank, although exposure to Italian sovereign bonds is fairly high and accounted for close to 1.4x common equity tier 1 (CET1) capital at end-2021.

De-risking in Progress: Our assessment of asset quality takes into account a significant reduction in impaired loans over the past four years, and our expectation that the bank will maintain impaired loans at below 5% of gross loans and stable coverage at around the current 56% mark. In 2022, we expect the group to continue reducing impaired loans to offset likely new impaired loans that might result from the pandemic, weaker economic growth and inflationary pressures.

Diversified Earnings Base: BBPM's revenue profile is adequately diversified with fees and commissions contributing on average above 40% to total operating income the past five years, which compares well with that of most diversified banks in Italy. In 2022, we expect net interest margin to remain under pressure from low interest rates, lower contribution from the security portfolio, whose size was reduced in 2021, and intense competition. Over the medium term, we expect the group's operating profit to stabilise at above 1.5% of risk-weighted assets (RWAs).

Adequate Capitalisation: The bank's CET1 ratio of 14.7% at end-2021 provides sound buffers over the regulatory requirement of 8.52%. Capital encumbrance by unreserved impaired loans of 30% at end-2021 has materially improved on previous years (137% at end-2017), but remains above stronger domestic peers' and international standards. We expect it to be maintained around 20% after the bank's planned additional disposals for 2022. Our assessment of BBPM's capitalisation also considers the bank's commitment to keep its CET1 ratio above 14%.

Sound Funding Profile: Our assessment of BBPM's funding and liquidity profile considers an ample and growing customer deposit base, a well-diversified funding profile as the bank regularly accesses capital markets across its whole liability structure, and sound liquidity.

Rating Sensitivities

Factors that could, individually or collectively, lead to negative rating action/downgrade:

BBPM's ratings are vulnerable to a significant weakening of the operating environment in Italy, due for example to a resurgence of the pandemic or much slower economic growth than our forecasts and persistently high inflation. The ratings are also vulnerable to an increase in risk appetite, for example, due to a loosening of underwriting standards to facilitate loan growth.

Specifically, the ratings would likely be downgraded if the impaired loans ratio increases above 6% and operating profitability falls below 1.5% of RWAs on a sustained basis, especially if the CET1 ratio falls below 14% without the prospect of recovery in the short term, and capital encumbrance by unreserved impaired loans rises on a sustained basis.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Upside to the ratings is currently limited unless the bank's risk profile and financial metrics improve. In particular, it would require the impaired loans ratio to remain consistently below 4%, capital encumbrance by unreserved impaired loans to improve above our expectations and operating profit to rise above 1.5% of RWAs without more risk-taking, while maintaining the CET1 ratio at around 14%.


Deposit Ratings

BBPM's long-term deposit rating is rated one notch above the Long-Term IDR to reflect full depositor preference in Italy and the protection that accrues to this debt from less preferred bank resolution debt- and-equity buffers. This is because we expect the bank will remain compliant with its minimum requirement for own funds and eligible liabilities (MREL).

The short-term deposit rating of 'F3', is the baseline option for a 'BBB' long-term deposit rating, because the bank's 'bbb' funding and liquidity score is not high enough to achieve the higher short-term deposit rating.

Government Support Rating (GSR)

Fitch has assigned a GSR of 'ns' to BBPM to reflect our view that although external extraordinary sovereign support is possible, it cannot be relied on. Senior creditors can no longer expect to receive full extraordinary support from the sovereign in the event that the bank becomes non-viable. This is because the EU's Bank Recovery and Resolution Directive and the Single Resolution Mechanism for eurozone banks provide a framework for resolving banks that requires senior creditors participating in losses, if necessary, instead of or ahead of a bank receiving sovereign support.


Factors that could, individually or collectively, lead to negative rating action/downgrade:

BBPM's deposit ratings would be downgraded if the Long-Term IDR is downgraded.

The deposit ratings could also be downgraded by one notch, and be aligned with the IDRs, in the event of a reduction in the size of the senior and junior debt buffers caused by the bank no longer complying with current and future MREL requirements.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

BBPM's deposit ratings would be upgraded if the Long-Term IDR is upgraded.

An upward revision of the GSR would be contingent on a positive change in the sovereign's propensity to support the bank. In Fitch's view, this is highly unlikely, although not impossible.

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit

Date of Relevant Committee

07 April 2022


The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit


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