Under our baseline scenario, the average return on risk-weighted assets (RoRWA) for the six Italian banks in our sample (Intesa Sanpaolo, UniCredit, BPM, BMPS, BPER, Credito Emiliano) will be around 2.7%–2.8%, off the 2024 peak of 3.2%. “But we are projecting an increase in cost of risk to around 40bp by the end of 2027 from current lows of 30bp,” said Alessandro Boratti, lead analyst for Italian banks.

On top of this, Italy’s fragile economic growth is subject to external risks, particularly on international trade and geopolitical developments. “Heightened financial market volatility and the potential for more severe bank levies are other downside risks for Italian banks,” Boratti said. “In a stressed scenario of weaker revenues and higher loan-loss provisions, average RoRWA could fall to around 1.3% in 2027.”

Although we expect a modest pick-up in default rates driven by a weakening corporate sector, asset quality should remain solid thanks to banks’ proactive risk management and early intervention measures. And capital buffers continue to be solid, offering protection against potential market or credit shocks. “We note that some banks are starting to use their excess buffers for M&A purposes, indicating that capitalisation may have passed its high point,” Boratti noted.

New measures included in Italy’s draft budget law – not included in our projections – may reduce banks' capital by around 15bp–30bp. “In this context we flag that the broader lack of legal predictability may become a structural issue for the sector and could weigh on investors’ sentiment over time,” Boratti said.

The stable Outlooks on UniCredit (A/Stable) and Intesa (A/Stable) indicate that overall risks are broadly balanced.

Download the Italian bank outlook here.

See also:
Updated rating report on Intesa, July 2025
Scope affirms and publishes UniCredit’s A issuer rating with Stable Outlook, December 2024