The BBB rating is based on the low-risk business model of IBL, a leader in the Italian market for payroll- and pension-deducted loans (PDLs), which are high-margin, low-risk personal loan products with a long history in Italy. These loans have a complex structure, involving several players and a long origination process. IBL seems to have mastered the vertical value chain entirely, evidenced by the bank’s negligible credit-loss levels and high profitability across the credit cycle.

The Outlook is Stable, reflecting Scope’s view that risks to the current rating level are balanced. The Covid-19 lockdown, which is likely to drive a very deep economic downturn in Italy, will not materially alter IBL’s risk profile. This opinion is based on the bank’s low asset risk and strong lines of defence, which include high profitability and strong capital. IBL’s capital position is adequate, and will materially improve due to a reduction in the risk weight intensity of PDLs under CRD5.

The ratings also account for the exposure to Italian government bonds, mostly financed via short-term repos. These bonds represent a large risk concentration but do not pose a short-term risk to the group’s regulatory capital as most are in the held-to-collect portfolio. They could, however, become a drain on liquidity under stressed scenarios.
Aside from repo funding for the government bond portfolio, IBL funds itself through deposits and securitisations of its loan book, which have historically been retained and used as collateral for repo operations. TLTRO3 eligibility will structurally change the funding of the bank, allowing it to lower its cost of funding.

Scope’s analysis also highlights the key person risk regarding Mario Giordano, the bank’s CEO since 1998.

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