Rating action

Scope Ratings GmbH (Scope) has affirmed and published Intesa 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. Scope has also assigned first-time ratings to Intesa Sanpaolo Bank Ireland plc.

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

Key rating drivers

Business model assessment: Resilient (High). The issuer rating is anchored by the Resilient (High) business model assessment. With EUR 949bn in total assets as of Q3 2024, Intesa is Italy’s largest banking group. It has a well-rounded banking franchise, with commanding national market shares in loans and deposits complemented by an established insurance and wealth management business. Reflecting the breadth of its operations, non-interest income represents a comparatively high proportion of the group’s revenues. Despite having a presence in Central and Eastern Europe, Intesa’s operations are primarily domestic.

Scope does not expect changes to the group’s business model in the near future. Under the current four-year business plan, which ends in 2025, Intesa aims to further strengthen its position in the Italian market as a leader in ‘wealth management, protection, and advisory’. The group seeks to grow capital-light businesses and targets EUR 2bn in cost savings while investing EUR 5bn in technology and growth. Furthermore, Intesa aims to maintain sound asset quality metrics and has pledged a greater commitment to sustainability.

Operating environment assessment: Supportive (Low) Italy (Supportive low) is the group’s primary market, representing slightly less than 80% 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. The GDP per capita is in line with the EU average. Weak public finances, including 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 in downturns in the context of the rigid European fiscal framework. At the same time, structural challenges and an ageing and declining working population will continue to weigh on 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 appear well under control.

Italy is 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 the issuer is embracing changes to ensure the long-term sustainability of its business model. While tangible progress has been made it does not warrant further credit differentiation.

Intesa has developed front-end processes to transform its distribution model and facilitate its digital transition. In the future, it may be able to leverage its sizeable investments in digitalisation and sustainability to differentiate itself from domestic competitors. Intesa has a cloud-based digital banking platform, which is currently available to retail clients through Isybank, which will be gradually rolled out across the group. Intesa expects the use of cutting-edge technology to make a significant contribution to future revenues and cost savings.

Increasing the commitment to ESG is one of the four pillars of the group’s strategy. Within the environmental area, the group strives to reduce its own emissions and those related to its lending and wealth management activities (towards the net zero target in 2050). Interim targets have been set to reduce emissions in several sectors, including oil & gas, and automotive. The group has also committed to EUR 88bn in loans to support the green transition (EUR 76bn aligned with Italy’s recovery plan framework).

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 the group’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 capable of undermining the issuer’s viability.

In a higher interest rate environment, profitability has been boosted by the widening of commercial spreads as well as the very low pass-through rate on customer deposits. Cost efficiency has also improved due to synergies from acquisitions and investments in digitalisation. And after the balance sheet clean-up, provisions no longer constrain the group’s bottom-line profitability. For 2024 and 2025, management forecasts a cost of risk of 40 bps (including 10 bps for further de-risking). Scope expects Intesa to offset the impact of falling interest rates over the next two years through hedging and stronger fee and commission income, maintaining a return on average equity above 10%.

Intesa’s asset quality has improved significantly over the past decade. The group’s 2.2% gross non-performing loan ratio is now in line with the EU average. Like peers, the group has not reported material signs of deterioration in the quality of its loan book. Net NPL inflows remain at historically low levels, while the gross Stage 2 ratio continues to decline after peaking during the Covid-19 pandemic. Scope does not foresee a material worsening in Intesa’s asset quality barring a sharp macroeconomic downturn.

Intesa 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 47% of Tier 1 capital as of September 2024 (compared to 107% as of YE 2014). Scope estimates that the group would be able to withstand a full write-down of its domestic government bond portfolio and remain prudentially viable. Further, the group hedges most of the interest rate risk from its bond exposure, thereby protecting its capital position from price 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 Intesa maintains comfortable buffers to relevant regulatory requirements and should continue to do so. The group’s financial viability is largely resilient to tail-risk events.

Solid and recurring earnings support Intesa’s capital position and allow for a minimum dividend payout ratio of 70%. As of September 2024, the group's fully phased-in CET1 ratio was 13.9% pro-forma the inclusion of 9M 2024 profits net of a 70% dividend payout ratio, approximately 450 bps above the minimum requirement. The current capital ratios exclude a positive impact of approximately 120 bp from the recognition of deferred tax assets.

The group’s funding profile is well diversified, supported by a solid customer deposit base complemented by regular access to wholesale markets. The deposit base is very granular, with the majority covered by the deposit guarantee scheme (84% of household deposits, 64% including corporates). With the phasing out of TLTRO III and binding MREL requirements, the group has adjusted its bond issuance activity. Liquidity ratios sit comfortably above requirements despite the full repayment of TLTRO III funds.

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 scenario for the ratings and Outlooks is:

1. Ongoing efforts in sustainability and digitalisation could provide a competitive advantage over domestic peers leading to a more constructive view of the long-term sustainability assessment.
    
2. Evidence that the group can maintain strong earnings over the cycle combined with a reduction in the exposure to Italian sovereign risk leading to an upgrade of the earnings capacity and risk exposures 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/or higher exposure to Italian sovereign risk, triggering a downgrade of the earnings capacity and risk exposures assessment.
    
2. A significant erosion of the group’s capital metrics leading to a more negative assessment of financial viability management.

Subsidiaries and affiliates: ratings and Outlooks

Intesa Sanpaolo Bank Luxembourg SA: A/Stable.

The issuer rating and Outlook on Intesa Sanpaolo Bank Luxembourg are fully aligned with those of its parent, Intesa Sanpaolo SpA. Scope expects the bank to benefit from full support from its parent in case of need.

Intesa Sanpaolo Bank Luxembourg is a fully owned and integrated core subsidiary, with the parent defining its strategy. The bank is also an issuer under Intesa Sanpaolo SpA’s Euro Medium Term Note and Euro Commercial Paper and Certificate of Deposit programmes. Intesa Sanpaolo SpA fully guarantees both programmes.

Scope would review Intesa Sanpaolo Bank Luxembourg’s ratings if expectations of support from the parent were reduced or if the guarantees on the debt programmes were removed.

Intesa Sanpaolo Bank Ireland Plc: A/Stable.

The issuer rating and Outlook on Intesa Sanpaolo Bank Ireland are fully aligned with those of its parent, Intesa Sanpaolo SpA. Like for Intesa Sanpaolo Bank Luxembourg, Scope expects the bank to benefit from full support from its parent in case of need.

Intesa Sanpaolo Bank Ireland is a fully owned and integrated core subsidiary, with the parent defining its strategy. The bank is also an issuer under Intesa Sanpaolo SpA’s Euro Medium Term Note and Euro Commercial Paper and Certificate of Deposit programmes. Intesa Sanpaolo SpA fully guarantees both programmes.

Scope would review Intesa Sanpaolo Bank Ireland’s ratings if expectations of support from the parent were reduced or if the guarantees on the debt programmes were removed.

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/Stable. Intesa’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

Intesa Sanpaolo 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

Intesa Sanpaolo Bank Luxembourg SA

Issuer rating: A/Stable, affirmed

Preferred senior unsecured debt rating: A/Stable, affirmed

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

Intesa Sanpaolo Bank Ireland plc

Issuer rating: A/Stable, new

Preferred senior unsecured debt rating: A/Stable, new

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

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) 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 Rating if the Credit Rating 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
Intesa’s issuer Credit Rating/Outlook was first released by Scope Ratings on 11 June 2014. The Credit Rating/Outlook was last updated on 1 July 2024.
Intesa’s short-term Credit Rating/Outlook was first released by Scope Ratings on 11 June 2014. The Credit Rating/Outlook was last updated on 1 July 2024.
Intesa’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 1 July 2024.
Intesa’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 1 July 2024.
Intesa Sanpaolo Bank Luxembourg’s issuer Credit Rating/Outlook was first released by Scope Ratings on 12 December 2018. The Credit Rating/Outlook was last updated on 1 July 2024.
Intesa Sanpaolo Bank Luxembourg’s preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 12 December 2018. The Credit Rating/Outlook was last updated on 1 July 2024.
Intesa Sanpaolo Bank Luxembourg’s non-preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 13 December 2024.
Intesa Sanpaolo Bank Ireland’s issuer Credit Rating/Outlook was first released by Scope Ratings on 13 December 2024.
Intesa Sanpaolo Bank Ireland’s preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 13 December 2024.
Intesa Sanpaolo Bank Luxembourg’s preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 13 December 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.