Rating action

Scope Ratings GmbH (Scope) has today affirmed Poste Italiane S.p.A.’ s long-term issuer and senior unsecured debt ratings at BBB+ in both local and foreign currency. Scope has also affirmed short-term issuer ratings at S-2 in both local and foreign currency. Finally, Scope has also affirmed the rating of BBB- to the perpetual subordinated 8-year non-call hybrid securities issued by Poste Italiane S.p.A. All Outlooks are Stable.

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

• Integration with the public sponsor: The credit quality of Poste Italiane reflects the group's robust integration with its public sponsor, the Republic of Italy (BBB+/Stable)¹, resulting from: i) significant ownership ties; ii) Poste Italiane's contributions to government policies as Italy's universal postal provider and operator of the largest service distribution network; and iii) material financial interdependencies between Poste Italiane and the sovereign. Poste plays a distinctive 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 legal control and oversight by the Ministry of Economy and Finance over its activities and finances. 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. Furthermore, Poste Italiane's offering of postal savings products issued by CDP and guaranteed by the Italian State significantly enhances the likelihood for exceptional financial support in a timely manner, if needed. As the primary shareholder, it also receives annual dividends from the entity.
   
• 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 sustained operating performance and profitability. The business risk profile is bolstered by conservative cost management. The financial risk profile demonstrates low risk, due to the entity’s low financial debt levels and its favourable debt profile, with fixed interest rate debt, a favourable maturity profile and no exposure to foreign currency risks. This is further supported by ample liquidity buffers, access to external credit lines, and robust cash flow generation from operational activities.
   
• Hybrid security: The BBB- rating for Poste Italiane’s subordinated (hybrid) debt is two notches below the issuer rating of BBB+/Stable. This rating reflects the instrument’s deep contractual subordination, ranking just above ordinary share capital for repayment priority. The perpetual tenor of the debt and the discretionary option to defer coupon payments on each date contribute to this two-notch differential. Given these characteristics, Scope has assigned a 50% equity content to these notes.

Rating rationale

High integration with the Republic of Italy. 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 2024, 12.04% is held by retail investors, 22.87% by institutional investors and 0.83% comprises Treasury shares.

In the context of a EUR 20bn privatisation plan between 2024-26 announced by the government at the beginning of this year, the government could divest a share of its ownership of Poste Italiane. Details remain under negotiation, but Scope expects the Italian State to keep a controlling interest in Poste Italiane, and thus expects that the privatisation efforts will not materially alter the entity’s governance structure and strategic direction.

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.

Material link between Poste Italiane’s and the Italian State’s credit quality. 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.

Poste Italiane does not depend on direct funding support from the State to finance investment activities or repay its debt, however 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 2023 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 six years, Poste Italiane has contributed about EUR 76bn to the country's GDP and EUR 13bn to tax revenue. It is the largest national employer with an average employment of 187,000 generated between 2018 and 2023.

Strong fundamentals, profitable, well-diversified business, and very low financial risks. 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; Postepay services 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 high inflation and interest rates, as well as 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 11.2bn between 2019 and 2023, as well as robust EBITDA margins of around 25% over the same years.

Poste Italiane’s Mail, Parcels, and Distribution segment is transitioning into a comprehensive logistics player by 2025, responding to a 16% decline in mail revenues and volumes since pre-Covid levels with significant growth in the parcel business due to increased e-commerce activity. This shift highlights a strategic adaptation to evolving market demands.

Thanks to cost discipline measures to mitigate inflationary headwinds – particularly in the infrastructure sector - Poste managed to reach the breakeven point for this business line in 2023, one year ahead of initial expectations. The company aims to stabilise operating profits in the medium term via streamlining the distribution networks, growing its leadership in the B2C and B2B markets, as well as international segments.

The Financial Services sector – the second largest contributor in terms of EBITDA (25.2% of total) and net profit (39.7% of total) in 2023 – also recorded a solid performance. A series of offers dedicated to existing clients aimed at encouraging the investment of new liquidity in some postal savings products. This, together with higher rates of return for most products in the Postal Savings Bond segment, resulted in postal saving deposits rising by almost 9% in 2023, offsetting the decline recorded in the previous year. Net interest income continued to increase as well, growing by almost 18% in 2023. Despite challenging market conditions, the Insurance services sector – the largest contributor to overall EBITDA and net profit – demonstrated resilience recording positive net inflows of EUR 3.4bn in 2023, outperforming the national market, which reported negative net inflows of EUR 22.8bn in the same year. This was driven by high inflation and interest rates that reduced premium inflows and increased savers’ preference for financial products with higher returns.

Poste Italiane's robust operational performance yielded record-high earnings before interest and taxes (EBIT) of EUR 2.6bn in 2023, surpassing the initial EUR 2.5bn target set for the year. The company expects continued growth in EBIT, with a target of EUR 3.2bn by 2028.

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

Conservative financial management has effectively minimized debt levels – amounting to EUR 1.9bn as of 2023 – with no exposure to foreign currency risk, mostly at fixed interest, and a favourable maturity profile. Financial debt is only issued by the parent company of the group, Poste Italiane S.p.A. As of June 2024, financial debt includes bonds (48% of total), strategic loans from the European Investment Bank (40%), and loans from the Council of Europe Development Bank (12%).

Poste Italiane bolstered its equity significantly in 2021 following the issuance of EUR 800m perpetual subordinated hybrid bond, though the equity-to-asset ratio has been maintained at a modest 4% over 2019-2023. Although this does not impede operational capabilities, it indicates a restricted capital structure in relation to 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 4.8bn between 2019-2023. 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, providing a significant cover of total financial expenses (26x) and investment activities (3x).

Poste Italiane’s liquidity position is further supported by external credit lines and revolving credit facilities, totaling EUR 3.4bn. Combined with unrestricted cash and cash equivalents, total available liquidity for Poste Italiane amounts to around EUR 5.4bn, guaranteeing a comfortable coverage of total financial debt by almost three times.

Outlook and rating sensitivities

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

Upside scenarios for the ratings and Outlooks are (individually or collectively):

1. The Republic of Italy’s ratings and/or Outlooks were upgraded.

Downside scenarios for the rating and Outlooks are (individually or collectively):

1. The Republic of Italy’s ratings/Outlooks were downgraded.
    
2. There were legal changes leading to a significantly lower integration with the national government, for example via material divestment.
    
3. A significant and sustained deterioration in the business and/or financial risk profile.

Qualitative Scorecards (QS1, 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 ‘limited’ integration assessment for legal status, ii) ‘medium’ integration assessment for Poste Italiane’s purpose and activities; iii) a ‘high’ integration assessment regarding its shareholder structure; 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’ evidence of 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+.

The results were discussed and confirmed by a rating committee.

Environment, social and governance (ESG) factors

Scope considers the following ESG factors in the rating analysis.

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.

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 and fully decarbonize the investment portfolio by 2050. 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 2023, more than 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 during the rating committee were: i) Poste Italiane’s integration with the Italian Republic, including privatisation plans, ii) latest business developments, iii) latest financial and funding developments; and iv) characteristics of the hybrid debt instrument.

Rating driver references
1. Scope affirms Italy’s BBB+/Stable long-term credit ratings

Methodology
The methodologies used for these Credit Ratings and/or Outlooks, (Government Related Entities Rating Methodology, 4 September 2024; General Corporate Rating Methodology, 16 October 2023), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The methodology General Corporate Rating Methodology, 16 October 2023, quoted in the 1st line of this paragraph was used in part only, namely section 5 (Debt Ratings).
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: Jakob Suwalski, Senior 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, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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