Summary: UBI Banca SpA

Strong franchise and market position in Italy. Prudent business strategy. Better asset quality than the peer average. Still-limited capitalization by our measures. Low profitability compared to that of peers. Coverage of nonperforming credit lower than the system average, although this is improving. Our outlook on UBI Banca SpA (UBI) is stable. This reflects our expectation that the bank will be able to gradually improve its risk-adjusted capital (RAC) ratio before adjustments to 5.0%-5.5% over the next two years, on increasing internal capital generation and gradual derisking. The outlook also reflects our view that UBI's nonperforming exposure (NPE) ratio will gradually decline, remaining slightly below the domestic average in the next 24 months. We would downgrade UBI if we saw its

...Outlook: Stable Our outlook on UBI Banca SpA (UBI) is stable. This reflects our expectation that the bank will be able to gradually improve its risk-adjusted capital (RAC) ratio before adjustments to 5.0%-5.5% over the next two years, on increasing internal capital generation and gradual derisking. The outlook also reflects our view that UBI's nonperforming exposure (NPE) ratio will gradually decline, remaining slightly below the domestic average in the next 24 months. We would downgrade UBI if we saw its combined capital and risk profile worsening. This could occur if its capital position weakened, leading its RAC ratio to decline below 5%, or if, contrary to past transactions, the bank entered into acquisitions that we considered detrimental to its financial profile, say by adding material NPEs. We could raise the ratings on UBI if we project that the bank will materially increase its subordinated liabilities to comply with its binding minimum requirement for own funds and eligible liabilities,...

Summary