Rating action

Scope Ratings GmbH (Scope) has today assigned a long-term issuer and senior unsecured debt rating of BBB+ in both local and foreign currency to Poste Italiane S.p.A.. Scope has also assigned short-term issuer ratings at S-2 in both local and foreign currency. All Outlooks are Stable.

The latest information on the rating, including rating reports and related methodologies, is available here.

Summary and Outlook

The BBB+ rating of Poste Italiane S.p.A. reflects the following drivers:

• Integration with the public sponsor: Poste Italiane’s credit quality reflects the group’s strong integration with its public sponsor, the Republic of Italy (BBB+/Stable), resulting from: i) significant ownership ties; ii) Poste Italiane’s contributions to government policies as Italy's universal postal provider and operating the largest service distribution network; and iii) material financial interdependencies between Poste Italiane and the sovereign. Poste Italiane plays a unique role in offering postal savings products issued by Cassa Depositi e Prestiti (CDP, BBB+/Stable), which are guaranteed by the Italian government.
   
• Control, regular support and likelihood of exceptional support: Poste Italiane’s credit quality reflects the Ministry of Economy and Finance’s legal control and oversight of its activities and finances. As the primary shareholder, it also receives annual dividends from the entity. The assurance provided by managing government-guaranteed postal savings and deposits bolsters the entity’s financial stability. Given its dominant market position as provider of diverse services through the nation's most extensive distribution network, Poste Italiane plays a vital role in supporting Italy’s socio-economic development and innovation. Additionally, Poste Italiane’s provision of postal savings products issued by CDP and guaranteed by the Italian State substantially heightens the likelihood for exceptional financial support in a timely manner, if needed.
   
• Stand-alone fundamentals: The BBB+ rating also acknowledges Poste Italiane’s stand-alone fundamentals. The business risk profile benefits from a diversified business structure, enabling the entity to navigate various market trends while maintaining solid operating performance and profitability. The business profile is bolstered by conservative cost management. Risks to the financial profile are low, attributed to the entity’s low financial debt levels and its favourable debt profile, with a fixed interest rate debt, a favourable maturity profile and zero exposure to foreign currency risks. This is further supported by ample liquidity buffers, access to external credit lines, and its strong ability to generate cash flow from operating activities.

The Stable Outlook reflects Scope’s assessment that risks to the ratings are balanced over the next 12 to 18 months.

The ratings could be downgraded if: i) the rating and/or Outlook on the Republic of Italy were downgraded; ii) there were legal changes leading to a significantly lower integration with the national government, for example via a divestment; and/or iii) Scope observed a significant and sustained deterioration in the business and/or financial risk profile.

Conversely, the ratings/Outlooks could be upgraded if: i) the rating and/or Outlook on the Republic of Italy were upgraded.

Rating rationale

The first driver of the BBB+ rating is the high level of integration of Poste Italiane with the Republic of Italy (BBB+/Stable), which underpins Scope’s adoption of the ‘top-down’ approach to assign the ratings.

Poste Italiane has been operating as a joint-stock company (Società per Azioni) since 1998, thereby falling under private law. As a significant Government-related entity (GRE) in Italy's postal, financial, and insurance sector, Poste Italiane’s ownership primarily rests with the Italian Ministry of Economy and Finance (MEF), holding a 64.26% stake in the company. This ownership arrangement consists of a 64.26% stake in the company, with the MEF directly owning 29.26% of the capital, while an additional 35% share is held through CDP (BBB+/Stable), which operates under the control of the MEF. The remaining 35.74% of shares has been publicly traded on the Italian equity market since October 27, 2015. As of June 2023, 11.85% is held by retail investors, 23.08% by institutional investors and 0.82% comprises Treasury shares.

Poste Italiane serves as Italy's universal postal provider, operating the country's most extensive services distribution network. The entity's operations extend beyond conventional postal services to include, among others, the distribution of postal savings products. These financial products are issued by CDP and are guaranteed by the Italian State, highlighting Poste Italiane’s unique involvement in the provision of specific financial services.

Poste Italiane contributes significantly to the stability of state funding by directing proceeds from both private and public current account deposits mostly into Italian government bonds and deposits managed by the MEF. This financial interdependence underscores the close relationship between Poste Italiane and the Italian Republic, emphasizing its pivotal role in supporting the national financial system.

The second driver of the BBB+ rating is the material link between the credit quality of Poste Italiane and that of the Italian State, resulting in an indicative rating level aligned with that of the sovereign.

Poste Italiane is the official postal provider in Italy and serves as the primary retail channel to fund public debt. It operates as the sole distributor of postal savings backed by the Italian State through CDP. Poste Italiane plays a vital role as a significant investor for the Italian Republic by actively engaging in Italian BTP placements and reinvesting proceeds from deposits in government securities. This crucial contribution helps maintain a stable funding base and mitigates refinancing risks for the State. Poste Italiane's active involvement in Italian BTP placements and reinvesting deposit proceeds in government securities enhances the likelihood of it receiving exceptional financial assistance from the state if ever needed, thus ensuring potential timely support.

While the entity does not depend on direct funding support from the State to finance investment activities or repay its debt, it receives some compensation for public service obligations. The latest Service Contract for 2020-2024 entitles Poste Italiane to receive EUR 262m (2.2% of 2022 net operating revenues) per year to compensate for the losses incurred in the provision of the universal postal service. In addition, national law allows the GRE to receive publisher tariff subsidies – ranging from EUR 50m to EUR 70m per year – from the Fund for Pluralism and Innovation in Information, funded through the national annual budget.

Poste Italiane fulfils a dual role combining corporate responsibilities and policy functions. Given its diverse products and services provided via the nation's most extensive distribution network, Poste Italiane plays a crucial role in supporting socio-economic development and innovation. Over the past five years, Poste Italiane has contributed about EUR 62.1bn to the country's GDP and EUR 10bn to tax revenue. It is the largest national employer with about 120,000 staff as of 2022.

Poste Italiane also played a vital role in Italy's Covid-19 vaccination campaign, offering citizens the ability to book vaccinations through its platform, call center, or ATMs nationwide. Additionally, the Group used its couriers to transport vaccines to various vaccination centers. Given these extensive ties to the government, Scope assesses Poste Italiane’s substitution difficulty as ‘High’. Therefore, Scope assesses the government’s willingness to provide direct financial assistance in exceptional circumstances as ‘High’, and, similarly, assesses a hypothetical default as having significant negative socio-economic, reputational, and financial consequences for the Republic of Italy. This in turn increases the likelihood of support if ever needed, supporting the BBB+ rating.

Finally, the rating incorporates an assessment of Poste Italiane’s stand-alone fundamentals as captured by Scope’s supplementary analysis of the group’s business and financial risk profiles, which has not led to an adjustment of the indicative rating, for a final rating of BBB+.

Poste Italiane's business profile benefits from its dominant market position offering distinctive products and services, accompanied by disciplined cost management. The diversified structure comprises four business units: the Mail, Parcel and Distribution unit provides mail, parcel delivery and contract logistics services; Payments and Mobile manages payments and electronic money services, as well as mobile and fixed-line telecommunications. Since 2022, Poste Italiane also offers retail electricity and energy products under this business line. In addition, the Financial Services division offers current accounts and investment products, provides asset management activities and acts as a third-party distributor of mortgages and personal loans with no credit risk. Finally, the Insurance Services unit offers insurance, retirement and investment products. Although Poste Italiane’s activities are directly exposed to fluctuations in Italy’s macro-economic and financial conditions, its diversified business structure enables the entity to navigate various market trends maintaining robust operating performance and profitability.

Despite the uncertainty and volatility experienced in different sectors in which Poste Italiane operates due to higher inflation, rising interest rates and structural shifts in the use of some of its services such as mail delivery, the company has been able to maintain solid revenues over the years, averaging EUR 11bn between 2018 and 2022, as well as robust EBITDA margins of around 23% over the same years. The benefits of business diversification were evident in the Mail, Parcels and Distribution segment, where a decline in mail revenues and volumes by 16% and 11%, respectively, compared to pre-Covid levels, were compensated by significant improvements in the parcel business thanks to the growth in e-commerce. The positive expectations for the parcel sector led Poste Italiane to shift its strategy for the Mail, Parcel and Distribution segment towards becoming a full-fledged logistics player by 2025, expecting to reach the break already in 2023-24, after years of sustained losses. The segment, however, continues to be constrained by high infrastructure costs.

Similar diversification benefits were evident in the Financial Services sector – the second largest contributor in terms of EBITDA (28.4% of total) and net profit (41.2% of total) in 2022 – where a decline in revenue from postal saving deposits between 2021 and 2022 due to higher interest rates was more than offset by a significant increase in net interest income. Against market trends, also the Insurance services sector – the largest contributor to overall EBITDA and net profit – showed a strong performance, with positive premium net inflows increasing during 2023, amid the national life insurance market experiencing net outflows and increasing savers’ preference for financial products with higher return. The overall strong operating performance led Poste Italiane to revise the EBIT target for 2023 in November, increasing it from EUR 2.5bn to EUR 2.6bn, EUR 300m higher than the EBIT achieved last year.

Finally, Scope considers risks under Poste Italiane’s financial profile as low.

Conservative financial management practices result in minimal levels of debt – amounting to EUR 1.9bn as of 2022 – with no exposure to foreign currency risk, fixed interest rate and a favorable maturity profile. Financial debt is only issued by the parent company of the group, Poste Italiane S.p.A. Equity strengthened particularly in 2021 after the issuance of EUR 800m perpetual subordinated hybrid bond. Total equity-to-asset ratio remains limited at 4% over 2018-2022. Although this does not constrain operational activities, it indicates a restricted capital structure concerning the entity’s asset holdings.

The financial risk profile also benefits from comfortable liquidity buffers. The cash-pooling approach for liquidity management provides the unrestricted liquidity coming from self-financing, third parties funding and subsidiaries’ unrestricted cash to be centralised at the group level in the Mail, Parcels and Distribution unit. Total group cash and cash equivalents averaged EUR 4.6bn between 2018-2022. The unrestricted component of these funds – not subject by law or by regulatory limits to usage restrictions such as investments in euro government bonds or deposits with the MEF, as well as investments in separate managed accounts – amounted to EUR 1.9bn, still providing a comfortable cover of total financial expenses and investment activities by 28 and 3.8 times, respectively.

Poste Italiane’s liquidity position is further supported by external credit lines and revolving credit facilities, totaling EUR 3.4bn as of September 2023. Combined with unrestricted cash and cash equivalents, total available liquidity for Poste Italiane amounts to around EUR 5bn, guaranteeing a comfortable coverage of total financial debt by almost three times.

Qualitative Scorecards (QS1 and QS2)

Scope applies a top-down approach (QS1) in assessing the creditworthiness of Poste Italiane, which takes the public sponsor’s rating (Republic of Italy: BBB+/Stable) as the starting point and then potentially negatively adjusts it based on the assessment of: i) control and regular support; and ii) likelihood of exceptional support (QS2). The approach also includes a supplementary analysis of the entity’s business and financial risk profiles.

The adoption of the top-down approach (QS1) reflects the strong integration between Poste Italiane and its public sponsor, the Italian Republic, resulting from: i) a high integration assessment for ownership, ii) ‘limited’ integration assessment for Poste Italiane’s legal status; iii) a ‘medium’ integration assessment regarding its purpose and activities; and iv) a ‘high integration assessment on financial interdependencies.

Scope assesses control and regular government support for Poste Italiane as ‘medium’ (QS2) as a result of: i) the ‘medium’ government control over Poste Italiane’s strategic and operational decision-making; ii) the ‘high’ control over its key personnel, governing and oversight bodies; and iii) the ‘medium’ ordinary financial support.

Scope assesses the likelihood of exceptional support to be ‘high’ (QS2), reflecting: i) a ‘high’ assessment for strategic importance for the public sponsor; ii) ‘high’ substitution difficulty; and iii) ‘high’ assessment of the socio-economic, reputational and financial default implications in the event of a hypothetical default of Poste Italiane.

The assessments under QS1 and QS2 result in an indicative rating of ‘bbb+’ for Poste Italiane. The supplementary analysis of stand-alone business and financial risks has not led to any adjustment to the indicative rating, resulting in a final rating of BBB+.

These results were discussed and confirmed by a rating committee.

Factoring of Environment, Social and Governance (ESG)

ESG factors material to Poste Italiane’s credit quality are captured by Scope’s rating approach through several analytical areas.

Scope's BBB+ rating for the Republic of Italy, Poste Italiane’s public sponsor, includes an appraisal of ESG factors, which are weighted at 25% overall per Scope's ‘Sovereign Ratings’ methodology.

Governance factors are relevant to Poste Italiane's rating and are included in the assessment of integration with the Republic of Italy and in the assessment of Poste Italiane’s stand-alone profile. These factors are supported by a robust corporate governance structure, and a conservative approach to financial management.

Social factors are included in the assessment of Poste Italiane's strategic relevance. Scope assesses social aspects as relevant and positive for Poste Italiane’s ratings. Poste Italiane is the largest employer in Italy, with approximately 120,000 employees and plays a pivotal role in Italy’s socio-economic development. Its extensive service network combining digital and physical channels, enables the entity to engage extensively and effectively with local communities, guaranteeing their access to essential public and administrative services. During the pandemic, Poste Italiane played a crucial social role in Italy's Covid-19 vaccination campaign by providing citizens the means to book vaccinations through its platform, call center, or ATMs nationwide. Additionally, the Group's couriers were instrumental in transporting vaccines to various vaccination centers, underscoring its enhanced social function during this critical period.

In the rating process, Scope also analyses Poste Italiane's environmental policies. The company’s Sustainability Strategy includes the ESG Strategic Plan, focused on eight pillars contributing to the achievement of the United Nation’s Sustainable Development Goals. Poste Italiane has the objective to achieve carbon neutrality by 2030. Therefore, it is implementing several initiatives including the renewal of the delivery fleet with low-emissions vehicles, the installation of photovoltaic panels, the enhancement of building efficiency, the development of product offering aimed at enhancing customers’ sustainable behaviour, and the inclusion of ESG factors into its investment process. In addition, the “Green Delivery” model also allows for greater efficiency in Poste Italiane’s logistics as more parcels can be delivered to a single collection point, thus limiting the number of pick-ups and fleet movements. In 2022, 70% of Poste Italiane’s investments in assets were classified as ESG, signaling a strong commitment to sustainable development. ESG considerations are also into its asset management and insurance activities, reflecting a comprehensive approach to sustainability across all its operations.

Rating Committee
The main points discussed by the rating committee were: i) integration of Poste Italiane with its public sponsor, the Republic of Italy, including governance, decision making, strategic importance and financial interdependencies, ii) Poste Italiane’s business risk profile, including diversified business lines, and iii) Poste Italiane’s financial risk profile, including its liquidity and debt structure.

Methodology
The methodologies used for these Credit Ratings and/or Outlooks, (Government Related Entities Rating Methodology, 13 July 2023; General Corporate Rating Methodology, 16 October 2023), are 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: public domain and the Rated Entity.
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 and/or Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or 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: Alvise Lennkh-Yunus, Managing Director
Person responsible for approval of the Credit Ratings: Giacomo Barisone, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 1 December 2023.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings.

Conditions of use / exclusion of liability
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