Research Update: Italian Iccrea Cooperative Banking Group Outlook Revised To Negative On Sharp Economic Contraction; Ratings Affirmed

We expect Italy to enter a deep recession in the first half of 2020, with a likely rebound during the second half and through 2021. Economic support measures by the Italian and European authorities will likely contain the rise in Gruppo Bancario Cooperativo Iccrea's (GBCI) loan loss provisions and ensuing pressure on its capitalization. This, coupled with GBCI's superior funding and liquidity profile, will likely support its creditworthiness, in our view. Nevertheless, we believe that downside risks for GBCI remain material, taking into account the group's high exposures to vulnerable small and midsize enterprises (SMEs) and its relatively modest business and revenue diversification. As such, we are revising the outlook to negative from stable and affirming the 'BB/B' ratings. The

...- We expect Italy to enter a deep recession in the first half of 2020, with a likely rebound during the second half and through 2021. - Economic support measures by the Italian and European authorities will likely contain the rise in Gruppo Bancario Cooperativo Iccrea's (GBCI) loan loss provisions and ensuing pressure on its capitalization. This, coupled with GBCI's superior funding and liquidity profile, will likely support its creditworthiness, in our view. - Nevertheless, we believe that downside risks for GBCI remain material, taking into account the group's high exposures to vulnerable small and midsize enterprises (SMEs) and its relatively modest business and revenue diversification. - As such, we are revising the outlook to negative from stable and affirming the '##/B' ratings. - The negative outlook reflects our view that the economic contraction could impair the group's asset quality, earnings, and capitalization beyond our current expectations....

Research Update