Research Update: UBI Banca Ratings Remain On CreditWatch Positive Pending Intesa Acquisition, Despite Impact Of COVID-19

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 Italian and European authorities will likely contain the rise in UBI Banca's loan loss provisions and ensuing pressure on capitalization. This, coupled with its better-than-peers' underwriting standards, will likely support its creditworthiness, in our view. Nevertheless, we believe that downside risks to UBI's asset quality and earnings remain material, taking into account the bank's high exposure to the areas most affected by COVID-19 in Italy, in our view. At the same time, Intesa Sanpaolo is taking steps to initiate the announced exchange offer to acquire 100% of UBI. We are therefore

...- 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 Italian and European authorities will likely contain the rise in UBI Banca's loan loss provisions and ensuing pressure on capitalization. This, coupled with its better-than-peers' underwriting standards, will likely support its creditworthiness, in our view. - Nevertheless, we believe that downside risks to UBI's asset quality and earnings remain material, taking into account the bank's high exposure to the areas most affected by COVID-19 in Italy, in our view. - At the same time, Intesa Sanpaolo is taking steps to initiate the announced exchange offer to acquire 100% of UBI. - We are therefore maintaining all ratings on UBI on CreditWatch with positive implications. - The ongoing CreditWatch placement continues to reflect that we could raise the ratings by one notch to match our ratings on Intesa if we perceived that the tender...

Research Update