UniCredit’s ratings are driven by its well positioned retail and commercial banking franchise in Italy, Germany, Austria, several East European countries, as well as Russia and Turkey.

The extensive ‘Transform 2019’ restructuring programme has been largely executed. Indeed, UniCredit is well ahead of its business plan in many aspects, especially in terms of non-performing-loan and cost reduction. The weak economic environment in Italy has weighed heavily on asset quality in the last decade, but the group has over the past two years tackled its asset quality decisively, and de-risking is running ahead of original targets.

The bank’s capital position is satisfactory and in line with management targets, though the capital build-up in recent years has been supported by rights issues and asset sales.

The ratings could be upgraded subject to further material improvements in the bank’s fundamentals, including asset quality, efficiency and profitability. Conversely, a further deterioration in operating conditions in Turkey is a key downside risk. Scope also flags that an Italian exit from the euro area or sovereign debt restructuring would materially raise uncertainty, with negative implications for the ratings. 

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