Scope Ratings today upgraded Intesa ratings to A-, with Stable Outlook. These ratings were initially assigned in June 2014 with Positive Outlook and were placed on review for possible upgrade on 10 September 2015. Intesa’s S-2 short-term ratings and their Stable Outlook remain unchanged.

Scope noted that Intesa has delivered over EUR 2bn in profits in the first half of the year, driven by revenue growth, a very competitive cost-income ratio, as well as declining provisions for impaired loans. According to the rating agency’s analysis, the key to the improvement is the heightened contribution of fee revenues, which are growing 15% year-on-year.

Noteworthy is the strong performance of the insurance, private banking and asset management activities, which now contribute around a third of total bank pre-tax profit, a proportion that Scope believes is set to increase.

The agency also highlighted the stabilisation in Intesa’s asset quality, with decreasing inflows into impaired loans in the first half of 2015. After significant rises every year since 2007, Scope estimated that, at 16.9%, the gross impaired loans ratio as of June 2015 remains essentially unchanged compared to the end of 2014. This level is inherently elevated, but the agency believes a positive trajectory in the years ahead for asset-quality metrics. Nevertheless, the high level of impaired loans remains a negative rating driver for Intesa, according to Scope’s analysis.

Positive for Intesa’s ratings are the balanced business model, with strong market position in Italy, as well as the reassuring capital position, with good organic capital generation potential.

Scope also mentioned that the macroeconomic environment in Italy has improved since the initial rating assignment, with growth expected to further accelerate next year, which should support revenues as well as asset quality.

Upgraded to A- with Stable Outlook were Intesa’s Issuer Credit-Strength Rating (ICSR) and senior unsecured debt ratings.