...VR Drives IDRs: Banca Popolare di Sondrio - Societa' Cooperativa per Azioni's (BPS) IDRs and VR reflect its recently strengthened capitalisation, which however, in Fitch Ratings's, opinion only temporarily compensates for increasing credit risk and the weak profitability of its commercial banking activities. Asset quality remains manageable but continues to weaken, hence the Negative Outlook. Strengthened Capitalisation: A EUR350m new share issue in July 2014 strengthened BPS's capitalisation. Its Fitch Core Capital (FCC) ratio is around 10% when the issue is included (end- 1H14: 8.5%). BPS's net impaired exposure amounts to about half its FCC, which is significant, but among the lowest for domestic peers. However, BPS's capital remains challenged by the prolonged asset quality deterioration, due to the recessionary domestic environment, and by any additional provisions which may result from the Asset Quality Review (AQR). Weakening Yet Manageable Asset Quality: BPS's gross impaired loans...
