Press Release

DBRS Confirms Issuer Ratings of Banca Nazionale del Lavoro SpA (BNL) at A (high)/R-1 (middle)

Banking Organizations
July 15, 2019

DBRS Ratings GmbH (DBRS) confirmed the ratings of Banca Nazionale del Lavoro SpA (BNL or the Bank), the Italian banking subsidiary of BNP Paribas SA (BNPP, the Parent or the Group). The ratings include the Long-Term Issuer Rating at A (high) and the Short-Term Issuer Rating at R-1 (middle). The trend on all ratings remains Stable. Today’s rating action follows the confirmation of DBRS ratings on BNPP on July 12, 2019. A full list of rating actions is included at the end of this press release.

KEY RATING CONSIDERATIONS
DBRS has maintained the SA1 Support Assessment on BNL, which implies strong and predictable support from the Parent. The ratings for BNL are one notch below the ratings of BNPP, in line with DBRS’ rating approach for banking subsidiaries located abroad in countries with low cross-border risk. On July 12, 2019, DBRS confirmed BNPP’s Long-Term Issuer Rating of AA (low) with a Stable trend.

The SA1 takes into consideration the 100% ownership of BNL by BNPP, its strategic importance and integration in the Group.

RATING DRIVERS
Given the SA1 designation, BNL’s ratings will generally move in tandem with BNPP’s ratings. Positive rating pressure could arise from an upgrade of the parent BNPP’ ratings. Negative rating implications could result from a downgrade of the Parent’s ratings or should the Bank become a non-core subsidiary for the Group.

RATING RATIONALE
BNL is the Italian banking subsidiary of BNPP. At FY18, BNL had EUR 81 billion in total assets, based on its consolidated balance sheet. The Bank operates in retail and corporate banking with a nationwide franchise and a solid footprint across Central and Western regions of Italy. The Bank has been part of BNPP since its acquisition in 2006.

BNL is viewed as a core component of BNPP’s international retail franchise. In line with BNPP’s strategy, Italy is considered a key “Domestic Market” for the Group together with France, Belgium and Luxembourg. BNL is integrated into the Parent company through shared systems, controls, management and strategy, as well as treasury and risk management. The Bank’s franchise, product offering and reputation benefit from being part of the Group. BNL has also consistently benefited from financial support from the Parent in various forms. Going forward, DBRS expects BNPP to support BNL if needed.

At FY18, BNPP had provided EUR 14.9 billion in total funds to BNL, corresponding to 18% of the Bank’s total liabilities and funds. Deposits from retail and corporate customers, however, remain the main source of funding, accounting for 57% of the total liabilities and funds. The Bank also had EUR 10 billion of ECB funds, originated from its participation in the TLTRO II program.

The Parent also continues to protect BNL’s capital conservation with a non-dividend distribution policy. At FY18, BNL’s capital position included retained earnings of EUR 300.6 million. Total equity was down by EUR 508 million to EUR 5.3 billion, mainly as a result of the first time adoption (FTA) of IFRS9. The Bank reported a phased-in common equity tier 1 (CET1) ratio of 11.4%. The total capital ratio was at 12.9%, up from 12.4% in 2017, which provides a moderate cushion above the ECB SREP requirements.

For FY18, BNL reported consolidated net income of EUR 300.6 million, up from EUR 148.6 million in FY17, mostly driven by lower loan loss provisions (-34% YoY). The Bank’s net interest income remained pressured by the low interest rate environment and high market competition despite growing lending volumes, while income from commissions was broadly more stable. In line with the strategy outlined by the Parent, BNL continues with the implementation of broad-based cost efficiency measures, spanning from corporate simplification to digital transformation. For 2018, the Bank reported a cost-to-income ratio of 63.4% (62.2% in 2017). Although the Bank’s cost of risk reduced in FY18, at EUR 547 million it remains high.

BNL’s risk profile is still driven by the large stock of NPLs. Total gross impaired loans amounted to EUR 9.0 billion at FY18, down from EUR 11.3 billion at FY17, mainly due to NPL disposals and write-offs. As a result, the Bank’s total gross NPL ratio decreased to 13.4% at FY18, from 16.8% at FY17. With the IFRS9 FTA, the total NPL coverage ratio strengthened to 55.1% from 52.0% at FY17.

Notes:
All figures are in Euros unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (June 2019). This can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include Company Documents and S&P Global Market Intelligence. DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS’s outlooks and ratings are under regular surveillance.

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Lead Analyst: Nicola De Caro, Senior Vice President – Global FIG
Rating Committee Chair: Ross Abercromby, Managing Director – Global FIG
Initial Rating Date: December 11, 2017
Last Rating Date: July 17, 2018

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

For more information on this credit or on this industry, visit www.dbrs.com.

Ratings

Banca Nazionale del Lavoro S.p.A.
  • Date Issued:Jul 15, 2019
  • Rating Action:Confirmed
  • Ratings:A (high)
  • Trend:Stb
  • Rating Recovery:
  • Issued:EUU
  • Date Issued:Jul 15, 2019
  • Rating Action:Confirmed
  • Ratings:R-1 (middle)
  • Trend:Stb
  • Rating Recovery:
  • Issued:EUU
  • Date Issued:Jul 15, 2019
  • Rating Action:Confirmed
  • Ratings:R-1 (middle)
  • Trend:Stb
  • Rating Recovery:
  • Issued:EUU
  • Date Issued:Jul 15, 2019
  • Rating Action:Confirmed
  • Ratings:R-1 (middle)
  • Trend:Stb
  • Rating Recovery:
  • Issued:EUU
  • Date Issued:Jul 15, 2019
  • Rating Action:Confirmed
  • Ratings:A (high)
  • Trend:Stb
  • Rating Recovery:
  • Issued:EUU
  • Date Issued:Jul 15, 2019
  • Rating Action:Confirmed
  • Ratings:A (high)
  • Trend:Stb
  • Rating Recovery:
  • Issued:EUU
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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