Press Release

DBRS Morningstar Upgrades BMPS’s Long-Term Issuer Rating to BB (low), Stable Trend

Banking Organizations
May 17, 2023

DBRS Ratings GmbH (DBRS Morningstar) upgraded Banca Monte dei Paschi di Siena SpA’s (BMPS or the Bank) Long-Term Issuer Rating to BB (low). At the same time, DBRS Morningstar confirmed the Short-Term Issuer Rating to R-4. DBRS Morningstar also confirmed the Long-Term and Short-Term Critical Obligations Ratings (COR) at BBB (low) / R-2 (middle). The Bank’s Deposit ratings were upgraded to BB, one notch above the IA, reflecting the legal framework in place in Italy which has full depositor preference in bank insolvency and resolution proceedings. The Bank’s subordinated notes were also upgraded by two notches to B (low) from CCC. The trend on all ratings is Stable. The Intrinsic Assessment (IA) is now BB (low), while the Support Assessment remains SA3. A full list of rating actions is included at the end of this press release.


The upgrade of the ratings takes into account the improvements in BMPS’s fundamentals in the last few years. In particular, DBRS Morningstar views that the November 2022 EUR 2.5 billion capital increase has adequately restored capital levels and provided the Bank room to execute its latest strategic plan, which has already led to structural improvements in BMPS’s earnings generation capacity. Profitability has been somewhat weak, still affected by restructuring costs in 2022 to prepare for the substantial headcount reduction of 4,000 employees in December 2022. However, the latter was key to a structurally improved operating efficiency, which materialised in Q1 2023. Moreover, the rating action incorporates an improved revenue outlook, as BMPS is expected to benefit from rising interest rates in 2023. Finally, the upgrade incorporates the Bank’s much cleaner asset quality profile, with asset quality metrics in line with that of its domestic peers. While some deterioration is expected amidst the current environment, DBRS Morningstar considers BMPS as much better positioned than in the past.

The ratings continue to be underpinned by the stabilised funding and liquidity profile, although BMPS has not accessed wholesale capital markets in 2021-2022 as issuances grew to be expensive. However, following the capital increase, BMPS resumed market issuances in February 2023. Ratings also continue to take into account the Bank’s franchise as one of the largest Italian banks with a good domestic footprint, although BMPS’s reputation has suffered from legacy conduct issues.


An upgrade of the Long-Term Issuer Rating would require a sustained improvement in profitability whilst maintaining sound asset quality metrics and capital position. An upgrade would also occur should the Bank succeed in regularly accessing wholesale markets and resolve outstanding legacy legal issues.

A downgrade would occur in the case of a rapid and substantial deterioration in asset quality. Failure to maintain adequate liquidity or capital buffers would also lead to a downgrade.


Franchise Combined Building Block (BB) Assessment: Moderate/Weak

BMPS is Italy’s fourth largest bank by total assets and has significant market share in its home region of Tuscany. The Bank was subject to a precautionary recapitalisation by the Italian State in 2017. Following this, BMPS underwent a restructuring plan to improve efficiency with the closure of branches and headcount reduction. In addition, the Bank substantially reduced NPEs which, combined with organic reduction, resulted in a cleaner balance-sheet. The Bank remains owned by the Italian Ministry of Finance (MEF) with a 64% stake, which is currently looking for an exit solution. However, DBRS Morningstar also recognises that the Bank’s franchise has suffered reputational damage from legacy conduct issues, in particular litigation risk linked to prior capital increases. After failed negotiations between the Italian government and UniCredit to privatise BMPS, the Bank proceeded in November 2022 with a EUR 2.5 billion capital increase to restore capital levels which were previously very close to regulatory minima, with a pro-rata participation by the MEF. BMPS has had some changes in its senior management team with Luigi Lovaglio becoming the new CEO on February 7, 2022 and Andrea Maffezzoni the new CFO on June 14, 2022. Finally, the Bank presented its 2022-2026 business plan which projects profitability improvement based on a lower cost base driven by voluntary layoffs, simplification of the Group structure and further asset quality improvements.

Earnings Combined Building Block (BB) Assessment: Weak/Very Weak

BMPS’s profitability has been weak but now demonstrates some improvement in Q1 2023 and a more positive outlook for 2023. In 2022, the Group reported a net loss of EUR 205 million compared to a EUR 310 million profit one year ago. This was mainly due to around EUR 930 million of restructuring costs linked to the redundancy scheme that included a circa 4,000 employee headcount reduction in Q4 2022. Excluding this one-off impact, results were supported by higher revenues and lower operating expenses, which mitigated a higher cost of risk affected by provisions for the additional EUR 0.9 billion NPE disposal in 2022. DBRS Morningstar expects revenues to grow in 2023, driven by higher interest rates which should benefit net interest income and offset the end of the TLTRO III contribution while growing fee income. DBRS Morningstar also expects the Bank to maintain its cost discipline, further improving its operating efficiency and BMPS’s capacity to generate earnings. In particular, DBRS Morningstar expects this should provide room for the bank to absorb a potential deterioration in the cost of risk which could materialise in the current environment. In Q1 2023, the Group reported net attributable income of EUR 236 million, up from EUR 10 million in Q1 2022.

Risk Combined Building Block (BB) Assessment: Weak/Very Weak

In recent years, the Bank has made significant progress in reducing its NPEs, mostly though disposals and securitisations. In 2020, BMPS proceeded with a large disposal of over EUR 7.0 billion of NPEs to the Italian state-owned bad loan manager Asset Management Co. SpA (AMCO). On top of this, BMPS managed to further reduce its gross NPE stock by around 20% in 2022 and Q1 2023 to EUR 3.3 billion thanks to an additional EUR 0.9 billion disposal in 2022. The gross NPE ratio stood at 4.1% at end- March 2023, whilst the net NPE ratio was 2.1%. DBRS Morningstar now views BMPS’s asset quality metrics as converging towards the domestic average and the bank as much better positioned than in the past. However, we expect a rise in defaults given the geopolitical tensions, rising interest rates and high inflation, especially considering BMPS’s relatively high exposure to SMEs.

Funding and Liquidity Combined Building Block (BB) Assessment: Moderate

BMPS’s funding position has stabilised in recent years and DBRS Morningstar expects it to remain stable. The Bank has not accessed wholesale markets over 2021-2022, as borrowing remained expensive. Following the capital increase, however, BMPS resumed market issuance in order to meet future MREL requirements, as illustrated by a EUR 750 million Senior Notes issuances in February 2023. The Bank also has significant exposure to central bank funding, and despite a EUR 4 billion maturing and a EUR 6 billion anticipated reimbursement of TLTRO III following the ECB change in the terms and conditions of the programme in November 2022, DBRS Morningstar expects ECB funding to remain an important source of funding for BMPS. At end-March 2023, the Bank maintained a sound liquidity position with an unencumbered counterbalancing capacity of EUR 25.1 billion, corresponding to about 20% of the Bank’s total assets. The LCR and NSFR were reported at 211% and 132% respectively at end-March 2023.

Capitalisation Combined Building Block (BB) Assessment: Weak

DBRS Morningstar views the bank’s capitalisation as solid. During the period 2020-2022, BMPS’s capitalisation remained weak with low buffers over regulatory requirement as capital ratios declined due to the de-risking process, the massive transfer of NPEs to AMCO, and the impact from COVID-19 and provisions for litigation risks. Nevertheless, the bank proceeded in November 2022 to conduct a EUR 2.5 billion capital increase with the support of the Italian government, the bank's main shareholder with a 64% stake, as well as private investors. BMPS reported a fully loaded Common Equity Tier 1 (CET1) ratio of 14.9% at end-Q1 2023 (proforma of the Q1 2023 profit) compared to 15.6% at end-2022 and 11.0% at end-2021. This provides an ample buffer of around 600 bps over the Overall Capital Requirement (OCR) for CET1 (phased-in) ratio of 8.8%. The fully loaded Total capital ratio stood at 18.5% at end-March 2023 (proforma of the Q1 2023 profit), compared to a minimum OCR for total capital of 13.51%. DBRS Morningstar notes that whilst capital ratios have increased mostly due to the capital increase, RWA reduction and improved capital generation since Q4 2022 also contributed to BMPS’s improved capital base.

Further details on the Scorecard Indicators and Building Block Assessments can be found at


Governance (G) Factors

The Governance factor does no longer affect the ratings or trend assigned to BMPS. However, we currently view the Business Ethics and the Corporate/Transaction Governance ESG subfactors as relevant instead of significant to the credit ratings, as we consider some of BMPS’s legacy issues to still carry a certain level of legal risk. The Bank has suffered a reputational impact from legacy conduct issues, in particular litigation risk linked to former capital increases. In addition, BMPS is 64% owned by the Italian State because of a precautionary recapitalisation. As a result, these risks are incorporated in the Bank’s Franchise and Risk Profile grid grades.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at (May 17, 2022).

All figures are in EUR unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (June 23, 2022). In addition DBRS Morningstar uses the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings, in its consideration of ESG factors.

The sources of information used for this rating include Morningstar Inc. and Company Documents, BMPS Q4 2022 and Q1 2023 Presentations, BMPS Q4 2022 and Q1 2023 Press Releases and BMPS 2022 Annual Report. 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.

The conditions that lead to the assignment of a Negative or Positive trend are generally 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: DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage:

The sensitivity analysis of the relevant key rating assumptions can be found at:

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Arnaud Journois, Vice President – Global FIG
Rating Committee Chair: William Schwartz - Senior Vice President - Credit Practices Group
Initial Rating Date: January 18, 2013
Last Rating Date: June 15, 2022

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