The issuer rating reflects BPS’ established retail and commercial banking franchise with solid market shares in the wealthy Italian region of Lombardy, which produces a moderately stable and predictable revenue and earnings stream. BPS has immaterial market shares in Italy but a dominant position in its home province of Sondrio and relevant market positions in the Lecco and Como provinces.

The recent improvement in our long-term sustainability assessment from ‘lagging’ to ‘developing’ acknowledges the group’s progress in improving its corporate governance, including its recent transformation into a joint stock company and managerial reorganisation.

While low by international standards, BPS’ profitability track record is better than the average for Italian banks. Stable revenues, good cost efficiency, a moderate level of loan losses and the lack of large one-off restructuring costs have helped the issuer maintain a positive bottom line for the past decade.

At the end of December 2021, BPS had a CET1 ratio of 15.8% on a transitional basis (15.7% fully loaded), which is well ahead of requirements. The healthy buffers to capital requirements, alongside comfortable liquidity and funding regulatory ratios, are a key support to the rating.

The Outlook is Positive, reflecting our expectation that the issuer’s credit profile will continue to improve over the next 12-18 months. We expect BPS’ strategic focus to start to shift from balance sheet repair to revenue and earnings growth.

This monitoring note does not constitute a rating action, nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Click here to access the full report.