Rating action

Scope Ratings GmbH (Scope) has affirmed and published UniCredit SpA’s issuer rating of A and preferred senior unsecured debt rating of A, both with a Stable Outlook. The ratings were previously only available to investors on a subscription basis.

The full list of rating actions and rated entities is included at the end of this rating action release.

Key rating drivers

Business model assessment: Resilient (High). UniCredit’s issuer rating is anchored by the Resilient (High) business model assessment. UniCredit is a large universal banking group with total assets of EUR 803bn as of Q3 2024. Its geographic presence spans Italy, Germany, Austria, and several Central and Eastern European countries. The group enjoys strong market positions: it is the second largest in Italy, the third largest commercial bank in Germany, the leading corporate bank in Austria, and one of the most prominent players in the CEE region.

Compared to some of its international peers, UniCredit lacks in-house asset management and bancassurance businesses. However, after years of withdrawing from attractive businesses and geographies, the group is now looking to broaden the scope of its business model by investing in capital-light activities such as asset management and life bancassurance.

UniCredit’s management team has expressed a clear appetite for inorganic growth when it creates value for shareholders. This is evidenced by the recent bid for Banco BPM and the build-up of a 21% stake in Commerzbank.

If successful, the Banco BPM acquisition would allow the group to consolidate its position as Italy’s second largest bank and reach a loan market share of 15%, with a strong presence particularly in wealthy northern Italian regions like Lombardy, Piedmont and Veneto. In addition, UniCredit’s asset management business could also be materially strengthened if Banco BPM’s existing bid for the remaining stake of Anima is completed. Conversely, the deal would increase the group’s dependence on Italy and its exposure to Italian sovereign risk. Weighing these considerations, Scope believes that UniCredit’s credit profile would remain unchanged.

Operating environment assessment: Supportive (Low). The assessment reflects Scope’s blended view of the different markets in which UniCredit operates.

Italy (Supportive low) is the group’s primary market, accounting for about 45% of the group’s revenues. As the EU’s third largest economy and second largest manufacturer, Italy has had a significant average trade surplus over the past decade. Its GDP per capita is in line with the EU average. However, weak public finances, underpinned by a high government debt of around 137% of GDP in 2024 and elevated annual funding needs, may constrain the government’s ability to deploy countercyclical measures during economic downturns in the context of the rigid European fiscal framework. At the same time, structural problems including an ageing and declining working population will continue to weigh on the country’s economic growth. Despite these challenges, the banking sector has been performing strongly, with high margins and low cost of risk driving high profitability in 2023 and 2024. Following a decade of balance sheet cleanup, NPLs are no longer a credit concern and remain well under control.

Germany (Supportive high) accounted for around one quarter of the bank’s revenues in 2023. As Europe’s largest economy, Germany benefits from high wealth levels and high economic resilience, although the country’s export-oriented manufacturing sector is facing multiple headwinds, with real GDP growth expected to stagnate in 2024 and 2025, leaving real GDP barely above its 2019-level. Despite these challenges, Germany’s fiscal position remains a key strength, with manageable fiscal deficits and a low debt-to-GDP ratio which provide substantial fiscal space. The political landscape is fragmented, with the traffic-light coalition breaking up and early elections scheduled for end-February 2025. The German banking sector is fragmented, with cooperative and saving banking groups enjoying large market shares, and aggregate profitability is low. The national legislative framework is predictable and stable.

Austria (Supportive high) accounts for just over 10% of the group’s revenues. The country has a wealthy, diversified and internationally competitive economy with GDP per capita significantly higher than the EU average. The government has a favourable public debt profile and private sector debt is low. Like in Germany, the Austrian banking system is highly fragmented and overbanked. Nevertheless, the sector remains solid, underpinned by robust capital and liquidity buffers. Strong profitability contributes to the sector's increased resilience to heightened geopolitical and credit risks, particularly in the commercial property sector. Compared to historical levels, however, the average NPL ratio is still moderate.

Italy, Germany and Austria are part of the European Banking Union, which has brought about a significant strengthening and harmonisation in bank regulation and supervision under the ECB’s Single Supervisory Mechanism, which Scope considers to be supportive of financial stability. The European Central Bank also shares with national central banks the role of lender of last resort, which limits liquidity risks for banks.

Scope arrives at an initial mapping of a- based on a combined assessment of the issuer’s operating environment and business model.

Long-term sustainability assessment (ESG factor): Developing. The assessment reflects Scope’s view that UniCredit is actively embracing changes to ensure the long-term sustainability of its business model. While progress made may be tangible it does not warrant further credit differentiation.

UniCredit is committed to increasing digitalisation, using technology and data to be at the forefront of new client solutions and to simplify back-end processes. The group’s investment in this area is sizeable and as progress is made, the improvement in relevant KPIs could become a differentiating element for the assessment.

The group’s strategic awareness of environmental issues has also increased, as evidenced by the greater scope and more stringent targets included in its business plan. In 2024, the group set new 2030 net zero interim targets for high-emission sectors like steel, shipping, and residential and commercial real estate. In addition, the group remains committed to eliminating exposure to the coal sector by 2028, refraining from providing banking services to any coal-related projects.

The group’s presence in Russia is a source of governance risk. Although UniCredit has trimmed its exposure while seeking a solution that protects shareholder value, regulators have become increasingly vocal about a faster exit. Scope believes that an expedited sale of the Russian subsidiary would reduce, if not eliminate, any reputational and legal risks.

The long-term sustainability assessment leads to an adjusted rating anchor of a-.

Earnings capacity and risk exposures assessment: Neutral. The assessment reflects Scope’s view that UniCredit’s earnings capacity may fluctuate over economic cycles but is sufficient to cover expected losses. Asset quality is broadly in line with peers. Risks are unlikely to generate losses that would undermine the issuer’s viability.

UniCredit has the ability to generate adequate earnings over the cycle to absorb unexpected losses, especially in a normalised interest rate environment. After several challenging years, the group’s profitability has rebounded since 2022 on the back of higher policy rates. Results have also been supported by low credit losses (cost of risk below 15 bps since 2023), reflecting strong loan performance and strengthened origination.

Scope expects the group’s profitability to remain robust in the coming quarters, driven by revenue growth in asset management, insurance, and payments, while the cost of risk is expected to remain contained. The group’s commitment to cost savings and efforts to shift the loan mix towards more profitable segments on a risk-adjusted basis will also support performance going forward.

UniCredit’s credit quality remains sound, with a gross non-performing exposure ratio of 2.7% as of Q3 2024. Despite higher borrowing costs and sluggish economic growth, default rates have so far remained low even in the most vulnerable sectors, such as commercial real estate.

Scope does not foresee a material deterioration in UniCredit’s asset quality barring a sharp macroeconomic downturn. Except for the muted economic outlook in Germany, macroeconomic indicators point to resilience in the group’s other markets, which should support borrower creditworthiness. Should conditions deteriorate, the group has a cushion of EUR 1.7bn of additional provisions on the performing loan portfolio (management overlays booked since the Covid pandemic) to cover potential losses.

The group has a concentrated exposure to Italian sovereign debt, which may limit the upside to its rating. However, the size of the portfolio has declined significantly, representing around 73% of Tier 1 capital at September 2024 (175% at YE 2016). Scope estimates that the group would be able to withstand a write-down on its domestic government bond portfolio of more than 70% and remain prudentially viable. Further, more than half of the Italian government bond portfolio is held at amortised cost, which limits the sensitivity of the group’s capital position to spread volatility. In line with Scope’s Financial Institutions Rating Methodology, the rating on the issuer is not mechanically capped at the level of the sovereign.

Financial viability management assessment: Comfortable (+1 notch). The assessment reflects Scope’s view that UniCredit maintains a comfortable buffer to relevant regulatory requirements and Scope expects it to continue to meet these requirements in the future. The issuer’s financial viability is largely resilient to tail-risk events.

UniCredit displays industry-leading capital buffers (593 bp MDA buffer) thanks to strong earnings generation and the ongoing optimisation of risk-weighted assets. As of Q3 2024, the group’s CET1 ratio on a fully loaded basis stood at 16.1%, including accruals for the interim cash dividend and a share buyback. However, Scope expects the CET1 ratio to decline towards management’s target of 12.5-13% over the medium term as a result of increased distributions and/or potential acquisitions.

UniCredit benefits from a large deposit base and well-established access to bond markets. As of September 2024, the group’s funding and liquidity positions remained solid, despite a single digit decline in customer deposits from their peak and the full repayment of the ECB’s TLTRO III.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s view that the risks to the current rating are balanced.

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

1. A rebalancing of the group's operations toward more supportive markets, like Germany, leading to an upgrade of the operating environment assessment.
    
2. Evidence that the group can maintain strong earnings over the cycle combined with a reduction in the exposure to Italian sovereign risk triggering an upgrade of the earnings capacity and risk exposures assessment.
    
3. Demonstrated success in sustainability and digitalisation that provide a competitive advantage, leading to a higher long-term sustainability assessment.

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

1. A material deterioration in the group’s performance, combined with worsening asset quality and higher exposure to Italian sovereign risk, resulting in a downgrade of the earnings capacity and risk exposures assessment.
    
2. The materialisation of risks in connection with the group’s growth strategy, including M&A execution risks, could put downward pressure on the rating.
    
3. A significant reduction in capital buffers which could lead to a lower financial viability management assessment.

Subsidiaries and affiliates: ratings and Outlooks

UniCredit Bank GmbH: A/Stable

The issuer rating and Outlook on UniCredit Bank GmbH are aligned with the rating and Outlook of the parent, UniCredit SpA, reflecting Scope’s view that the bank would likely receive full support from its parent in case of need.

Since 2008, UniCredit S.p.A has held 100% of UniCredit Bank’s share capital. UniCredit Bank is part of the UniCredit group resolution perimeter under its ‘single point of entry’ strategy.

UniCredit Bank and its subsidiaries form the HVB Group, which provides financial services to retail, commercial and institutional customers in Germany. A stable contributor to the UniCredit group’s earnings, the bank is also a hub for the group’s markets and investment banking activities. As of year-end 2023, UniCredit Bank represented approximately 37% of the group’s assets. HVB Group is an issuer of Pfandbriefe, bonds and certificates.

Scope would review UniCredit Bank’s ratings if expectations of support from the parent were reduced.

UniCredit Bank Austria AG: A/Stable

The issuer rating and Outlook on UniCredit Bank Austria AG are aligned with the rating and Outlook of the parent, UniCredit SpA, reflecting Scope’s view that the bank would likely receive full support from its parent in case of need.

The bank is fully owned (99.99%) by the group. UniCredit Bank Austria is part of the UniCredit group resolution perimeter under its ‘single point of entry’ strategy.

As a member of the UniCredit group since 2005, UniCredit Bank Austria is responsible for the group’s operations in Austria, where it enjoys high market shares in corporate and private banking. The bank is a leading financial institution in Austria, with high market shares in corporate and private banking. As of year-end 2023, UniCredit Bank Austria accounted for approximately 13% of the group’s total assets.

Scope would review UniCredit Austria’s ratings if expectations of support from the parent were reduced.

Debt ratings

Preferred senior unsecured debt: A/Stable. The rating is aligned with the issuer rating and applies to senior unsecured debt ranking above other classes of senior unsecured debt.

Non-preferred senior unsecured debt: A-/Stable. The rating is one notch lower than the issuer rating, reflecting statutory subordination.

Short-term debt: S-1. UniCredit’s short-term credit rating is derived from the long-term issuer credit rating. The rating is consistent with Scope’s long-term/short-term rating correspondence table. The choice of the highest possible short-term rating (S-1 given the issuer rating of A) reflects the strength of the group’s liquidity profile and access to central bank funding.

Environmental, social and governance (ESG) factors

Please refer to the ‘long-term sustainability assessment’ under the ‘key rating drivers’ section above for the ESG analysis.

All rating actions and rated entities

UniCredit SpA

Issuer rating: A/Stable, affirmed

Preferred senior unsecured debt rating: A/Stable, affirmed

Non-preferred senior unsecured debt rating: A-/Stable, affirmed

Short-term debt rating: S-1/Stable, affirmed

UniCredit Bank GmbH

Issuer rating: A/Stable, affirmed

Preferred senior unsecured debt rating: A/Stable, affirmed

Non-preferred senior unsecured debt rating: A-/Stable, affirmed

UniCredit Bank Austria AG

Issuer rating: A/Stable, affirmed

Preferred senior unsecured debt rating: A/Stable, affirmed

Non-preferred senior unsecured debt rating: A-/Stable, affirmed
 
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 Outlooks, (Financial Institutions Rating Methodology, 6 February 2024) 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 Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation       YES
With access to internal documents                                     NO
With access to management                                              NO
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity 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 and/or Outlooks 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 Outlooks are UK-endorsed.
Lead analyst: Alessandro Boratti, Senior Analyst
Person responsible for approval of the Credit Ratings: Pauline Lambert, Executive Director
UniCredit’s issuer Credit Rating/Outlook was first released by Scope Ratings on 11 June 2014. The Credit Rating/Outlook was last updated on 23 September 2024.
UniCredit’s short-term Credit Rating/Outlook was first released by Scope Ratings on 11 June 2014. The Credit Rating/Outlook was last updated on 23 September 2024.
UniCredit’s preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 11 June 2014. The Credit Rating/Outlook was last updated on 23 September 2024.
UniCredit’s non-preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 30 January 2018. The Credit Rating/Outlook was last updated on 23 September 2024.
UniCredit Bank GmbH’s issuer Credit Rating/Outlook was first released by Scope Ratings on 4 June 2018. The Credit Rating/Outlook was last updated on 23 September 2024.
UniCredit Bank GmbH’s preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 26 July 2018. The Credit Rating/Outlook was last updated on 23 September 2024.
UniCredit Bank GmbH’s non-preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 4 June. The Credit Rating/Outlook was last updated on 23 September 2024.
UniCredit Bank Austria AG’s issuer Credit Rating/Outlook was first released by Scope Ratings on 1 June 2018. The Credit Rating/Outlook was last updated on 23 September 2024.
UniCredit Bank Austria AG’s preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 1 June 2018. The Credit Rating/Outlook was last updated on 23 September 2024.
UniCredit Bank Austria AG’s non-preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 12 July 2018. The Credit Rating/Outlook was last updated on 23 September 2024.

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
© 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions 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. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.