Research Update: UniCredit SpA Outlook Revised To Negative On Deepening COVID-19 Downside Risks; 'BBB/A-2' Ratings Affirmed

Despite governments' measures to contain the COVID-19 pandemic and the unprecedented support committed to their corporate and household sectors, European economies, including Italy, face an unprecedented challenge. Even under our base case of an economic recovery starting in third-quarter 2020, we expect UniCredit SpA's earnings and asset quality to weaken meaningfully through year-end 2020 and into 2021, although it has a sufficient capital buffer to mitigate the effects. We expect UniCredit to show relatively high resilience to this external shock, but we see increased risks to its earnings and asset quality if the economic recovery is significantly delayed. We are consequently revising the outlook to negative from stable and affirming the 'BBB/A-2' ratings. The negative outlook reflects our view that

...- Despite governments' measures to contain the COVID-19 pandemic and the unprecedented support committed to their corporate and household sectors, European economies, including Italy, face an unprecedented challenge. - Even under our base case of an economic recovery starting in third-quarter 2020, we expect UniCredit SpA's earnings and asset quality to weaken meaningfully through year-end 2020 and into 2021, although it has a sufficient capital buffer to mitigate the effects. - We expect UniCredit to show relatively high resilience to this external shock, but we see increased risks to its earnings and asset quality if the economic recovery is significantly delayed. - We are consequently revising the outlook to negative from stable and affirming the '###/A-2' ratings. - The negative outlook reflects our view that the cyclical economic recovery could be substantially weaker or delayed compared with our current expectations, which would imply a far more negative effect on UniCredit's credit...

Research Update