Scope Ratings has today upgraded the Issuer Credit-Strength Rating (ICSR) of Unicredit to A from A-. Upgraded also were the ratings of Unicredit’s long-term senior unsecured debt – to A- from BBB+ – and Tier 2 securities – to BBB from BBB-. All these ratings now have a Stable Outlook. These rating actions conclude the review for possible upgrade initiated by Scope on March 8.

According to Scope, decisive strategic steps undertaken by Unicredit’s new top management team are putting the group on a visibly sounder credit footing. The completion of the EUR 13bn capital increase, together with the sale of Pioneer, Pekao and part of Fineco, provides the financial headroom to materially accelerate the de-risking of Unicredit’s balance sheet, raising coverage of, and facilitating sales of, non-performing exposures (NPEs).

The rating agency values positively Unicredit’s cleanup exercise in Q4 2016, resulting in a one-off net loss of EUR 13.6bn – including extra provisions for NPEs, integration costs, and several other non-recurring write-downs. As a consequence, Scope believes that Unicredit’s recurring profitability should improve markedly in 2017 and beyond, as cost of risk should materially decline – possibly as early as this year – and as the impact of further cost optimisation gradually materialises through to 2019.

The agency also highlighted that, with respect to asset quality, Unicredit now displays more reassuring metrics compared to those in the past, and to other Italian banks as well, with an NPE ratio of 11.8% and coverage of 55.6%. With the launch of FINO, Unicredit has already deconsolidated EUR 17bn in gross NPEs and its strategic plan is targeting further material NPE sales in the coming years.

At this time, Unicredit’s short-term rating remain S-2 with Stable Outlook.

The following ratings of Unicredit SpA were upgraded with a Stable Outlook:

• Issuer Credit-Strength Rating: A from A-
• Long-term unsecured debt ratings: A- from BBB+
• Tier 2 securities ratings: BBB from BBB-

Legal and regulatory disclosures

Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013

Responsibility
This report is issued by Scope Ratings AG, Berlin, District Court for Berlin (Charlottenburg) HRB 161306 B, Executive Board: Torsten Hinrichs (CEO), Dr Stefan Bund and Dr Sven Janssen.
The Lead Analyst for Unicredit SPA is Marco Troiano, Director.
Responsible for approving all rating actions: Sam Theodore, Managing Director.

Rating history
The rating history for each issuer and senior unsecured debt is available on the individual public rating cards. Please follow the links below:
Unicredit 

The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months. A rating change is, however, not automatically ensured.
The ratings for Unicredit SPA were not requested by the issuers (unsolicited rating) and were prepared without participation of the issuers.
Dr. Martha Böckenfeld, the chair of the supervisory board of Scope Ratings AG is at the same time a member of the UniCredit Board of Directors as an independent non-executive Director.

Key sources of information for the rating
Website of the rated entity/issuer | Annual reports/semi-annual reports of the rated entity/issuer | performance records | Annual financial statements | Data provided by external data providers | External market reports | Press reports | other public information
Scope Ratings considers the quality of the available information on the evaluated company to be satisfactory. Scope uses information and data that it considers to be accurate and reliable. Scope cannot, however, independently verify the reliability and accuracy of such information and data.

Examination of the rating by the rated entity prior to publication
Prior to publication, the rated entities were given the opportunity to examine the rating and the rating drivers, including the principal grounds on which the credit rating or rating outlook is based. The rated entity was subsequently provided with at least one full working day, to point out any factual errors, or to appeal the rating decision and deliver additional material information. Following that examination, the ratings were not modified.

Methodology
The methodologies applicable for this rating actions “Bank Rating Methodology” (May 2016) is available on www.scoperatings.com. The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s default rating, definitions of rating notations and further information on the analysis components of a rating can be found on www.scoperatings.com.

Conditions of use / exclusion of liability
© 2017 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings AG, Scope Analysis, Scope Investor Services GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope cannot, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided “as is” without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or otherwise damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party, as opinions on relative credit risk and not as a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings AG at Lennéstraße 5 D-10785 Berlin.

Rating issued by
Scope Ratings AG, Lennéstrasse 5, 10785 Berlin