Scope Ratings has today upgraded by one notch, to A, Unicredit’s and Intesa’s ratings for senior unsecured debt not designated for TLAC and/or MREL. With this upgrade, these ratings are now positioned at the level of the banks’ existing issuer ratings. The ratings continue to have a Stable Outlook.

Scope’s rating actions follow the passage, in December 2017, of the 2018 Budget law, which introduces the possibility for Italian banks to issue a new class of non-preferred senior (NPS) unsecured debt, eligible for TLAC and/or MREL. In either liquidation or resolution, NPS securities would rank below the banks’ preferred senior unsecured liabilities, but above capital securities and other subordinated debt.

The agency noted that, in line with its bank rating methodology, the ratings of Italian banks’ NPS debt will be at one notch below the issuer ratings. Accordingly, the NPS debt ratings for Unicredit and Intesa will be A-.

Scope highlighted that the rating actions are in line with its bank rating methodology (last updated in May 2017), which takes into account, in a forward-looking perspective, evolving regulatory and legal developments across Europe. According to its methodology, when there is sufficient regulatory and legal clarity – as is the case with the new Italian law – Scope will notch down the ratings of senior unsecured debt eligible for TLAC/MREL. This occurs via a one-off uplift of one notch of the respective banks’ Issuer rating and ratings of senior unsecured liabilities not eligible for TLAC/MREL. The methodology notes that this approach “reflects Scope’s opinion that, while the credit fundamentals of the group did not change, going forward the Issuer Rating and senior unsecured liabilities not eligible for TLAC/MREL should benefit from the protection of a materially more ample capital structure in a default-like situation.”

The following ratings have been upgraded by one notch:

• Unicredit SpA: non TLAC/MREL-eligible senior unsecured debt to A from A-
• Intesa Sanpaolo SpA SpA: non MREL-eligible senior unsecured debt to A from A-

The following ratings have been assigned:

• Unicredit SpA: existing and forthcoming TLAC/MREL-eligible senior unsecured debt at A-
• Intesa Sanpaolo SpA: existing and forthcoming MREL-eligible senior unsecured debt at A-

All ratings carry a Stable Outlook. All other ratings of the two banks remain unchanged.

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed.

Methodology
The methodology used for this rating(s) and/or rating outlook(s) Rating Methodology Bank Ratings, May 2017 is available on www.scoperatings.com.
Historical default rates of Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA
Please also refer to 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 definition of default as well as definitions of rating notations can be found in Scope’s public credit rating methodologies on www.scoperatings.com.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The ratings were not requested by the rated entities or its agents. The rated entities did participate in the rating process. Scope had no access to accounts, management and/or other relevant internal documents for the rated entities or related third party.
The following substantially material sources of information were used to prepare the credit ratings: public domain, the rated entity and third parties.
Prior to publication, the rated entities was given the opportunity to review the ratings and/or outlook and the principal grounds on which the credit ratings and/or outlook are based. Following that review, the ratings were not amended before being issued.

Regulatory disclosures
This credit ratings and/or rating outlook is issued by Scope Ratings GmbH.
Lead analyst Marco Troiano, Executive Director
Person responsible for approval of the ratings: Sam Theodore, Group Managing Director
Intesa SanPaolo SpA: The senior unsecured (preferred, non MREL-eligible) ratings/outlooks were first released by Scope on 11.06.2014. The senior unsecured (preferred, non MREL-eligible) ratings/outlooks were last updated on 20.10.2015. The senior unsecured (non-preferred, MREL-eligible) ratings/outlooks were first released by Scope on 30.01.2018
UNICREDIT SPA: The senior unsecured (preferred, non MREL-eligible) ratings/outlooks were first released by Scope on 11.06.2014. The senior unsecured (preferred, non MREL-eligible) ratings/outlooks were last updated on 20.03.2017. The senior unsecured (non-preferred, MREL-eligible) ratings/outlooks were first released by Scope on 30.01.2018

Potential conflicts
Dr. Martha Böckenfeld, the chair of the supervisory board of Scope Ratings GmbH’s parent, Scope SE & Co. KGaA, is at the same time a member of the UniCredit Board of Directors as an independent non-executive Director.
Please see www.scoperatings.com. for a list of potential conflicts of interest related to the issuance of credit ratings.

Conditions of use / exclusion of liability
© 2018 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions 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 does not, 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 other 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 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 GmbH at Lennéstraße 5 D-10785 Berlin.

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