Moody's on June 9 downgraded the long-term deposit ratings of Credito Emiliano SpA to Baa1 from A3.
The outlook on the rating remains negative. Moody's also affirmed Credem's "baa3" standalone baseline and adjusted baseline credit assessments, P-2 short-term bank deposit rating and Baa1(cr)/P-2(cr) long- and short-term counterparty risk assessments.
The rating agency said the downgrade reflects the Italian lender's reduced stock of bail-in-able senior unsecured debt, which leads to higher loss-given-failure for its junior deposits. The negative outlook reflects the expected continued decline in its stock of bail-in-able debt which, without significant issues of senior or subordinated debt, would result in a further increase in loss-given-failure for its deposits and a lower rating.
Meanwhile, the affirmation of Credito Emiliano's standalone baseline credit assessment reflects the bank's stable financial metrics, including its profitability, satisfactory capital and sound asset quality. Moody's noted that although the lender's profitability continues to be under pressure, it has remained resilient to the low interest rate environment.