The ratings on Italy's UniCredit SpA, one of the largest pan-European banks, are supported by the group's strong franchises in Italy, the German State of Bavaria, Austria, Poland, and Central and Eastern Europe (CEE). In Standard&Poor's Ratings Services' view, the bank's business and revenue diversification, and its adequate credit loss-absorption capacity through operating income also underpin the ratings. The main weaknesses are weaker asset quality than peers', particularly in Italy due to high credit risk of Italian small and midsize enterprises, high economic risk in CEE and Commonwealth of Independent States (CIS) countries where the group has some holdings, and exposure to earnings volatility in market and investment banking activities. In our opinion, UniCredit's balance sheet is vulnerable
