Italy’s leading banking groups downgraded

Moody’s has downgraded Intesa Sanpaolo and UniCredit, Italy’s two leading banking groups.

The move follows Moody’s downgrading of Italy’s sovereign debt last Tuesday, by three notches to A2, on account of a ‘material increase’ in funding risks for eurozone countries with high levels of debt.

Moody’s cut UniCredit’s long-term debt and deposit ratings to A2 from Aa3, but acknowledged its improved capital adequacy and liquidity profile. Asset manager Pioneer Investments and online bank FinecoBank are two of its subsidiaries. 

Intesa Sanpaolo, Italy’s biggest retail bank, which owns private bank Fideuram and asset manager Eurizon Capital, was cut to A2 from Aa3.

Generali, Italy’s biggest insurance group, had its rating confirmed at Aa3, with an outlook revised from stable to negative. Moody’s said it believes “Generali is somewhat insulated from Italian stress, but not entirely”.

As with all Italian banks, UniCredit and Intesa Sanpaolo are heavily exposed to Italian sovereign debt, so their downgrading was automatic. Both banks denied they have any funding problems. 

Italian state-controlled entities also had their rating aligned with Italy’s sovereign debt, including oil and gas group Eni, energy provider Enel and defence contractor Finmeccanica.

German Chancellor Angela Merkel and a spokesman from the European Commission both expressed confidence that Italy would overcome its problems if it continues on its deficit cutting programme.

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