Rating action

Scope Ratings GmbH (Scope) has today affirmed the BBB+ issuer rating and BBB+ senior unsecured debt rating on Cassa Depositi e Prestiti S.p.A. (CDP). Scope has also affirmed the S-2 short-term debt rating. The ratings have a Stable Outlook.

Rating rationale

The BBB+ rating reflects CDP’s high integration with its public sponsor, the Italian Republic.

CDP is the Italian National Promotional Institution with a mission to foster the country’s economic development. It is majority owned and controlled by the Ministry of Economy and Finance (MEF, 83% stake), with a further 16% of shares held by banking foundations.

The MEF elects most of CDP’s board. It also sets the policy regarding the separate account activity (i.e. management of resources from state-guaranteed postal savings), which is then supervised by a parliamentary committee.

Even so, CDP’s management retains autonomy in setting strategy within the limits of its by-laws. Moreover, the power of the banking foundations to veto resolutions that require a qualified majority (such as changes in by-laws) ensures CDP can pursue its corporate objectives without excessive political interference.

The likelihood of exceptional support is high. This view is based on CDP’s strategic importance to the Italian state, the lack of a credible alternative, and the severe implications a default would have for the Italian economy and public finances. Scope maintains this view despite the absence of an explicit guarantee on all CDP’s liabilities.

Its long-held mission to support the economy through direct and indirect financing of private enterprises and public administrations has recently widened in scope. Activities now include technical advisory and third-party funds management, and its toolkit has expanded to private equity, venture capital and private debt financing.

CDP plays two roles in Italy’s National Recovery and Resilience plan: as a financing entity, through the allocation of resources for equity and debt financing and funds management, and as an advisor.

The ratings also acknowledge CDP’s strong stand-alone fundamentals in relation to other domestic financial institutions. Asset quality benefits from its material exposure to Italian public finance entities at both local and central governmental levels.

Its equity portfolio provides a reliable stream of dividend income in addition to diversifying revenues beyond government-related activities, though recently diluted by the loss of dividends from the Italian export credit agency SACE following its transfer to the MEF.

Outlook and rating-change drivers

The Outlook is Stable, reflecting the Outlook on the Italian Republic’s rating.

A change in the Republic of Italy’s rating could move CDP’s rating in the same direction.

A material reduction in the level of integration with the Italian Republic and/or credit support in the form of the guarantee on postal savings could move the rating down. 

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

Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Government Related Entities Methodology, 6 May 2022), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. 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 Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: the Rated Entity, public domain, and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Chiara Romano, Associate Director
Person responsible for approval of the Credit Ratings: Pauline Lambert, Executive Director
The issuer and the senior unsecured debt Credit Ratings/Outlooks were first released by Scope Ratings on 24 October 2017. The Credit Ratings/Outlooks were last updated on 1 September 2021.
The short-term Credit Rating/Outlook was first released by Scope Ratings on 1 February 2018. The Credit Rating/Outlook was last updated on 1 September 2021.

Potential conflicts
See www.scoperatings.com under Governance & Policies/EU Regulation/Disclosures 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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