Rating action

Scope Ratings has assigned a short-term rating of S-2 to IBL Banca SpA, with a Stable Outlook.

Rating rationale

In line with Scope’s rating methodology and definition, the short-term rating is loosely correlated with IBL’s issuer rating of BBB, which was affirmed on 21 July 2020 with a Stable Outlook¹.

Scope’s analysis considered IBL’s solid liquidity position, with a liquidity coverage ratio well in excess of requirements.

The core loan portfolio is mainly funded via a mix of customer deposits and central bank repos, backed by asset-backed securities.

The government bond portfolio is for the most part funded via repos, though IBL maintains a buffer of unencumbered bonds as a liquidity reserve.

Rating-change drivers

Factors leading to a potential change in the short-term rating mirror those for the issuer rating and include:

• A material reduction in the large carry trade in government securities;
   
• Volatility in the value of the government bond portfolio impacting the bank’s liquidity;
   
• A material increase in business model risk as a result of diversification efforts; and
   
• Any indication of Italy’s eurozone membership being at risk. 

Rating driver references
1. Latest rating action on IBL Banca

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) Bank Rating Methodology, 4 May 2020 is available on https://www.scoperatings.com/#!methodology/list.
Information on the meaning of each rating category, including definitions of default and recoveries can be viewed in the “Rating Definitions - Credit Ratings and Ancillary Services” published on https://www.scoperatings.com/#!governance-and-policies/rating-scale. Historical default rates of the entities rated by 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 definitions of default and rating notations can be found at https://www.scoperatings.com/#governance-and-policies/rating-scale. Guidance and information on how Environmental, Social or Governance factors (ESG factor) are incorporated into the rating can be found in the respective sections of the methodologies or guidance documents provided on https://www.scoperatings.com/#!methodology/list.
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 rated entity and/or its agents participated in the rating process.
The following substantially material sources of information were used to prepare the credit rating: the rated entity, public domain and Scope internal sources.
Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings 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.
Prior to the issuance of the rating or outlook action, the rated entity was given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.

Regulatory disclosures
This credit rating and/or rating outlook is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Marco Troiano, Executive Director
Person responsible for approval of the rating: Dierk Brandenburg, Managing Director
The short-term rating/outlook was first released by Scope on 13 November 2020.

Potential conflicts
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
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