Analisi di rating e aggregazioni bancarie. Maria Pierdicchi Direttore Generale Standard & Poor s, Italia

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1 Analisi di rating e aggregazioni bancarie Maria Pierdicchi Direttore Generale Standard & Poor s, Italia Presentazione del VI Rapporto FinMonitor Università Luigi Bocconi, 10 Febbraio 2006

2 Introduzione a Standard & Poor s S&P s Rating Services è una divisione del gruppo editoriale The McGraw-Hill Companies Oltre 140 anni di esperienza nel rating Con oltre rating nel mondo siamo l azienda leader nel settore 40 uffici nel mondo con dipendenti In Europa: 650 professionisti distribuiti negli uffici di Londra, Parigi, Francoforte, Stoccolma, Milano, Madrid e Mosca

3 Introduzione a Standard & Poor s rth America Atlanta, GA (CVC, IS) Baltimore, MD (IS) Boston, MA (CMS, CVC, IS) Centennial, CO (IS) Charlottesville, VA (IS) Chicago, IL (CMS, CVC, IS) Dallas, TX (CMS, CVC, IS) East Palo Alto, CA (CVC) Florham Park, NJ (CVC) Hightstown, NJ (CMS, IS) Houston, TX (CVC) Los Angeles, CA (CVC) New York, NY (CMS, CVC, IS) Novi, MI (CVC) Philadelphia, PA (CVC) San Francisco, CA (CMS, CVC, IS) Toronto, Canada (CMS, IS) Urbandale, IA (IS) Washington, D.C. (CMS) tin America uenos Aires (CMS) antiago, Chile ão Paulo (CMS) exico City (CMS) Offices Affiliates May, 2004 Europe Amsterdam (CVC) Frankfurt (CMS, IS) Hofheim (IS) London (CMS, CVC, Luxembourg (IS) Madrid (CMS, IS) Milan (CMS) Moscow (CMS) Paris (CMS, IS) Stockholm (CMS) Asia Beijing, China (CMS) Hong Kong (CMS, IS Jakarta, Indonesia Manila, Philippines Mumbai, India Seoul (CMS) Singapore (CMS, IS) Taipei, Taiwan* (CMS Tel Aviv, Israel Tokyo (CMS, IS) *50% Owned Affiliate. Australia Melbourne (CMS, IS) Sydney (CMS, IS)

4 Introduzione a Standard & Poor s Siamo globali grazie anche ad una solida presenza locale e ad un interscambio continuo di conoscenze, capacità e strumenti di analisi In Italia Struttura locale composta da 27 professionisti, basati nell ufficio di Milano, e in continua espansione Leader, con oltre 200 rating pubblici, nei settori finanziario, pubblico e corporate. Solida crescita nei prodotti strutturati Produzione di analisi e studi in italiano sui principali settori seguiti

5 Western Europe & EMEA Financial Institutions by S&P AAA AA A BBB 49 BB B CCC Others 199 Total ratings 530 Total public ratings 453 Investment grade 87% Sub-Investment grade 13%

6 Western Europe & EMEA Financial Institutions by Country France Germany Italy Spain Switzerland United Kingdom Russia France Germany Italy Spain Switzerland United Kingdom Russia

7 Lista rating Financial Institutions (1) Istituzioni Finanziarie Entità Rating a lungo termine Prospettive Agos SpA A+ Stabili A-1 Banca Agricola Mantovana SpA A Stabili A-1 Banca Aletti Spa A Stabili A-1 Banca Carige SpA A- Stabili A-2 Banca Fideuram SpA A+ Positive A-1 Banca IMI SpA A+ Positive A-1 Banca Intesa SpA A+ Stabili A-1 Banca Lombarda SpA A- Stabili A-2 Banca Monte dei Paschi di Siena SpA A Stabili A-1 Banca Nazionale del Lavoro SpA A- CW Positive A-2 Banca OPI SpA A+ Positive A-1 Banca Popolare dell'emilia-romagna SCRL A- Stabili A-2 Banca Popolare di Intra SCRL BBB- Negative A-3 Banca Popolare di Milano SCRL A- Stabili A-2 Banca Popolare di Vicenza SCRL A- Negative A-2 Banca Toscana SpA A Stabili A-1 Banca Cooperativa Valsabbina BBB+ Stabili A-2 Banche Popolari Unite SCRL A- Positive A-2 Banco Popolare di Verona e Novara SCRL A Stabili A-1 Carim - Cassa di Risparmio di Rimini SpA BBB+ Stabili A-2 Cariprato - Cassa di Risparmio di Prato SpA A- Negative A-2 Cassa di Risparmio di Cento SpA BBB Stabili A-2 Cassa di Risparmio in Bologna SpA A+ Positive A-1 Cassa di Risparmio della Provincia di Teramo SpA BBB+ Stabile A-2 Centro Leasing SpA BBB+ Stabili A-2 Rating a breve termine

8 Lista rating Financial Institutions (2) Rating a lungo term ine Entità Prospettive Istituzioni Finanziarie Credito Bergamasco SpA A Stabili A-1 Credito Em iliano SpA A- Positive A-2 Dexia Crediop SpA AA- Negative A-1+ Findomestic Banca SpA A+ Stabile A-1 Istituto per il Credito Sportivo A+ Negative A-1 Locat SpA A Negative A-1 MCC SpA A- Stabili A-2 Mediobanca SpA AA- Stabili A-1+ M ediocredito del Friuli - Venezia Giulia SpA A- Negative A-2 Sanpaolo IMI SpA A+ Positive A-1 Unicredit Banca d'impresa A+ Negative A-1 UniCredit Banca Mobiliare SpA A+ Negative A-1 UniCredito Italiano SpA A+ Negative A-1 Veneto Banca SCRL BBB+ Positive A-2 Istituzioni Finanziarie - Credito Cooperativo Banca Agrileasing SpA A- Stabili A-2 Banca di Bologna SCRL BBB- Stabili A-3 Banca di Credito Cooperativo dell'alta Padovana SCRL BBB+ Negative A-2 Banca di Credito Cooperativo Pordenonese SCRL BBB- Stabili A-3 Banca di Credito Cooperativo Trevigiano SCRL BBB Stabili A-2 Banca di Monastier e del Sile Credito Cooperativo BBB Stabili A-2 BCC Banca S. Biagio del Veneto Orientale BBB- Stabili A-3 Cassa Centrale Casse Rurali Trentine - BCC Nord Est SpA A- Stabili A-2 Cassa Centrale Raiffeisen dell'alto Adige SpA A- Stabili A-2 Crediveneto Credito Cooperativo SCRL BBB Stabili A-3 Emil Banca Credito Cooperativo SCRL BBB- Stabili A-3 ICCREA Banca SpA A Stabili A-1 Eurofidi Scpa BBB Stabili A-2 Rating a breve term ine

9 La scala dei rating di S&P e definizioni Un rating Investment Grade indica che il rischio sul capitale investito è limitato Un rating Noninvestment Grade o high yield indica che il capitale investito è esposto ad un rischio significativo Molti fondi di investimento non possono investire in bonds con rating non-investment grade Aumenta la probabilità di default AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC+ CCC CCC- CC C D Investment Grade Non-Investment Grade

10 Agenda Il processo di rating alle banche: procedura, metodologia e criteri

11 The Rating Process Requests rating Prepares documentation Possible Appeal Management meeting Assigns analytical team; Conducts basic research Committee decides rating Issue rating Surveillance

12 S&P Rating Progression

13 Bank Credit Risk Analysis Business Position Rating Economic Risk Rating Industry Risk Rating Market Position Rating Diversification Rating Management / Strategy Rating Financial Position Rating Credit Risk Rating Market Risk Rating Liquidity Risk Operational risk Earnings Capital/Financial Flexibility Support from parent bank Rating

14 Bank Credit Risk Analysis: Economic Risk Analysis KEY FACTORS TO ANALYSE Constraints on government s ability to pursue appropriate counter cyclical policies Country s political stability Dynamics of savings and investment Level and growth of domestic credit Structure and strength of corporate clients Financial strength of individual clients

15 Bank Credit Risk Analysis: Industry Risk Analysis KEY FACTORS TO ANALYSE Number and relative size of banking institutions Non-bank competitors Depth of public capital market Barriers to entry Trends in industry Customer price sensitivity Level of sophistication of customers Relationship between banks and corporate clients Type of regulation

16 Bank Credit Risk Analysis: Management and Strategy Analysis KEY FACTORS TO ANALYSE Management Factors Organizational structure Controls/information systems Performance vs. peers Credibility Succession Planning/Special Ownership Characteristics Strategy Realism, logic and risk Implementation

17 Bank Credit Risk Analysis: Credit Risk Analysis KEY FACTORS TO ANALYSE Structure of on- and off-balance sheet credit exposures Nature and risk of securities and loans Nature and risk of off-balance sheet exposures Diversification of credit risk Name Geographic location of risk Industry Monitoring of credit exposures Quality of credit risk management information available Problem loan management Reserving policies

18 Bank Credit Risk Analysis: Market Risk Analysis KEY FACTORS TO ANALYSE Management s philosophy regarding balance sheet structure and management Levels of interest rate, FX, and equity risks Role of Treasury Department; objectives and risk appetite Level of trading risk Hedging strategies Stress testing Back office and operations Audit function

19 Bank Credit Risk Analysis: Liquidity Risk KEY FACTORS TO ANALYSE Composition of bank s funding Diversity of funding sources Asset liquidity Liquidity policies

20 Bank Credit Risk Analysis: Earnings Analysis KEY FACTORS TO ANALYSE Net operating income analysis: level and trend Quality of earnings: core earnings vs. trading, etc. Diversification and stability of revenues Cost structure / Economies of scale Operating efficiency Internal capital generation Earnings level relative to risk

21 Bank Credit Risk Analysis: Capital and Financial Flexibility KEY FACTORS TO ANALYSE Ability to access markets in difficult environment Capital composition Capital relative to level of risk Strategic capital management Nature and extent of minority interests Dividend policy and potential for earnings retention

22 Bank Credit Risk Analysis Standard and Poor s looks at banks as self-standing entities No specific system support recognized No specific sovereign support in Eurozone However regulatory environment is an important dimension Crisis Management and track record Other factors affecting problematic situations Quality and consistency of regulation Inspection and reporting Importance of regulatory changes

23 Bank Credit Risk Analysis In assessing creditworthiness and TBTF related issues we look at other factors Size / Diversification By product / Line of business Geographic Client clusters Franchise Brand Market share (Lending / Deposits) Market recognition and track records Attractiveness of Market share Larger and well diversified banks tend to benefit of such positive factors, even in problematic situations

24 Bank Credit Risk Analysis Italy track record in Bank crisis Historically bank crises have been facilitated by solidarity in the system an by Bank of Italy intervention before default occurs (special administration, acquisitions, use of interbank deposit scheme to support takeovers, etc ) The role of the Central Bank in inspection and the level and quality of supervisor is regarded as an aspect of the overall system

25 M & A Key rating factors in M & A Acquiring Bank Merged Entity Acquired Bank Management Asset quality Range of products / diversification Efficiencies Parent support Parent Sub (Cap) support

26 M & A Parent support may represent an important rating enhancement when a strong bidder acquires a weaker target How parent may affect sub Willingness and ability to support Potential diversion of income Capital

27 Agenda Case study: BNL (A-/CWPOS/A-2)

28 BNL: major rating factors Strengths: Sound domestic corporate banking franchise; Clear and consistently executed strategy focused on risk reduction and strengthening of domestic market position; and Adequate operating efficiency. Weaknesses: Modest retail-banking franchise; Vulnerability to the currently weak Italian economy due to still large corporate exposures and asset quality weaker than that of peers; and Still weak--albeit improved--capital base.

29 BNL: rating history during last year On July 2005, all ratings were put on CW Negative following announcement by Unipol that it would launch a mandatory offer for 59% of BNL's ordinary capital On January 11, 2006 all ratings were put off CW Negative. Long term rating was raised to A- from BBB+. The removal from CW follows the Bank of Italy's rejection of the mandatory offer made by Unipol. The raising of the long-term rating reflects the strengthening of BNL's financial profile in 2005, with significantly enhanced bottom-line profitability and asset quality. On February 6, 2006 all ratings were put on CW Positive following announcement by BNP Paribas that it will acquire 48% of BNL capital from Unipol and its allies and will launch an offer for the remaining part

30 Quality of assets still weak but recovering Asset quality remains one of the main weaknesses despite improvements in NPAs inflows and mastery of risk: single-name concentration risk is still significant, albeit declining gross doubtful-loan stock still represents about 8% of the bank's loan portfolio, though BNL managed to dispose part of it in 2005 Coverage rate has become far more satisfactory since IFRS adoption. It now reflects both the final recovery value and the carrying cost of NPAs (Euro billion) International and Large Corporate RWA 27.9% 18.9% 15.0% Large Corp. International % on total RWA Coverage Ratios of NPAs 62.7% 51.4% 45.6% 41.2% (Euro million) Net NPAs 3,199 3,126 2,804 1, H H 2005

31 Bottom-line profitability recovered after Argentina and credit provisions BNL earnings were very poor in the last four years mainly due to the Argentina crisis, large corporate failures and need to increase NPLs coverage rate % BNL cost-to-income and return-on-assets % Revenue generation remains relatively modest compared with that of peers H 2005 cost-to-income (left scale) return on assets (right scale) In 2005, a mid single-digit increase in revenues and growth of costs at inflation rate- before the impact of IFRS--should allow the bank to post a double-digit increase in gross operating profit

32 Capital position still weak BNL capital position stands at comparatively weak level but it has meaningfully improved compared with past few years, thanks to: - Increase in capital funds - Downsizing of RWA in non-core sectors - Securitization of performing loans The 1.1 billion capital increase made in November 2004 allowed the bank to offset the significantly negative impact of the firsttime adoption of IFRS ACE/RWA ratio 6.67% 5.10% 4.72% % H 2005 The anticipated recovery in bottom-line profitability starting from 2005 is expected to somewhat improve internal capital generation, which will be mainly absorbed by new lending production, thus keeping capital ratios in line with current levels

33 BNL: rating history during last year BNL ratings on CWPOS due to potential credit support resulting from ownership by more highly rated BNP Paribas Italy is a key strategic market for BNP Paribas that has significant stakes in Findomestic and CRF and a branch mainly focused on corporate banking S&P will look at the potential benefits BNL would receive from being part of BNP Paribas group: Improvement of operational efficiency Widening of product offer and enhancing cross-selling opportunities Boost BNL growing trend in earnings BNL A- long term rating could be raised for a maximum of three notches, up to AA- ; the extent of the upgrade depends on: 1. Strategic position BNL will have within BNP Paribas 2. Depth of integration within the group 3. Resulting tangible benefits

34 Conclusions We have a self standing approach This allows to differentiate more specific risk profiles especially in good stories Regulatory environment is a key rating factor European standards and policies tend to reduce national differences (IFRS, Basil 2, etc ) Any change in regulatory framework is carefully assessed in criteria