...Weak Asset Quality: BPER Banca S.p.A.'s ratings primarily reflect the bank's weak asset quality and the impact this has on its capitalisation. The gross impaired loan ratio of nearly 21% at end-June 2017 weighs heavily on the bank's balance sheet and negatively affects Fitch's assessment of the bank's profile and risk appetite. BPER announced a EUR1 billion extraordinary loan impairment charge (LIC) in August 2017 to strengthen impaired loan coverage and facilitate non-performing loan (NPL) reductions through disposals. Capitalisation Not Commensurate with Risk: Regulatory capital ratios comfortably meet minimum requirements, but Fitch Ratings believes capitalisation is not in line with the bank's risk profile, given the high proportion of unreserved impaired loans (109% of Fitch Core Capital (FCC) at end-1H17). NPL Encumbrance to Reduce: The EUR1 billion extraordinary LICs will result in a decline in the common equity Tier (CET1) ratio of about 200bp but will reduce the burden of unreserved...
