DBRS Morningstar Assigns “B” rating, with a Stable Trend, to BMPS’s Senior Non-Preferred Debt

DBRS Ratings GmbH (DBRS Morningstar) has assigned a rating of “B”, with a Stable Trend, to Banca Monte dei Paschi di Siena SpA (BMPS or the Bank)’s Senior Non-Preferred Debt. DBRS Morningstar expects that any future issuance by BMPS of Senior Non-Preferred Debt, under the Bank’s EUR 50 billion Euro Medium Term Note Programme would be rated at this level. The “B” rating is one notch below BMPS’s B (high) Long-Term Issuer Rating and Long-Term Senior Debt rating, in line with the Framework set out in DBRS Morningstar’s “Global Methodology for Rating Banks and Banking Organisations”, dated 8 June 2020.

RATING DRIVERS

Any positive change in the Bank’s Intrinsic Assessment (IA) would have positive implications for the Senior Non-Preferred Debt rating. An upgrade of BMPS’s IA would require the Bank to resolve the pending litigation issues, successfully dispose of NPEs, restore its capital levels and improve earnings.

Similarly, any negative change in the Bank’s IA would have negative implications for the rating. A downgrade of the Bank’s IA would likely be driven by a significant deterioration in the Bank’s profitability as a result of the global COVID-19 pandemic or other potential headwinds on capital. A downgrade could also occur should the Bank experience severe delays in its restructuring plan.

ESG CONSIDERATIONS

DBRS Morningstar views the Business Ethics and the Corporate Governance ESG subfactors as significant to the ratings of BMPS. These are included in the Governance category. The Bank has suffered reputational damage from legacy conduct issues, in particular litigation risk linked to former capital increases, the conviction of the former executives of market-rigging and accounting fraud and the ongoing investigation regarding fraudulent sale of diamonds by Italian banks. In addition, BMPS is 64% owned by the Italian State because of a precautionary recapitalisation which is subject to an EU restructuring plan.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in EUR unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (8 June 2020)
https://www.dbrsmorningstar.com/research/362170/global-methodology-for-rating-banks-and-banking-organisations

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

The sources of information used for this rating include Company Documents, BMPS’s EUR 50 billion EMTN Programme dated 8 March 2020, and S&P Global Market Intelligence. DBRS Morningstar considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS Morningstar 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 12-month period. DBRS Morningstar's outlooks and ratings are under regular surveillance.

For further information on DBRS Morningstar 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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

The sensitivity analysis of the relevant key rating assumptions can be found at: https://www.dbrsmorningstar.com/research/372320
This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Arnaud Journois, Vice President - European Financial Institutions
Rating Committee Chair: Ross Abercromby - Managing Director - Global FIG
Initial Rating Date: January 18, 2013
Last Rating Date: November 19, 2020

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