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Dagong Europe assigns BBB credit rating to Italian bank

Xinhua, March 2, 2015 Adjust font size:

Dagong Europe has assigned a long term credit rating of BBB and equivalent short term credit rating of A-3 to Italian bank Banca Popolare di Sondrio (BP Sondrio), the Milan-based agency said in a statement.

In its first assignment of a credit rating to an Italian bank, the European branch of Chinese rating agency Dagong Global said BP Sondrio's development strategy has some strengths typical of traditional banking models in Italy.

BP Sondrio's target market is related to northern Italy, which has shown better asset quality performance than the Italian banking system on average. Retail clients make up most of its deposit base, providing a particularly stable and sustainable funding structure in the long term, Dagong Europe noted.

Yet, the credit risk remains the greatest challenge for BP Sondrio. "We caution especially on the bank's real estate portfolio, which accounts for about 30 percent of the loan book," a statement from the agency explained.

Dagong Europe expects Italy's economy to start recovery in the second half of 2015, hence asset quality to improve with a lagged effect. "Growth prospects remain limited and any larger-than-expected increase in provisions will negatively affect the bank's profitability," the statement said.

BP Sondrio's ratings carry a stable outlook, Dagong Europe added, reflecting its view on the expected stable financial performance, "with internal capital generation sufficient to cover potential losses from problematic assets, whilst keeping capital ratios at their currently sufficient levels."

BP Sondrio is a cooperative bank, where single shareholders have one vote. Currently the bank has about 185,000 shareholders and provides banking products mainly to households and local small and medium-size companies in its home territory, Lombardy region.

Dagong Europe was established in 2012 under and compliant to the European framework regulated by the European Securities Market Authority (ESMA). It counts on an international team with the mission to reflect the growing importance of Chinese investors in global markets and promote the flows of foreign capitals into China. Endit