The ratings on Italy-based UniCredit SpA reflect the bank's solid franchise in Italy, the German State of Bavaria, the Republic of Austria, and Central and Eastern Europe (CEE). They also reflect its strong business and geographic diversification, good profitability at the Italian and CEE businesses, and good integration track record. The ratings are constrained, however, by the complexity of integrating and turning around banks operating in various regulatory and economic environments; structurally weaker asset quality compared with peers; and just adequate capital ratios. The group is also exposed to market risk and earnings volatility in its markets and investment banking activities. UniCredit's growth has transformed the group since the 2005 purchase of Germany-based banking group Bayerische Hypo- und Vereinsbank AG
