Moody's on Oct. 4 downgraded Credito Valtellinese SpA's long-term bank deposit rating to Ba2 from Ba1, baseline and adjusted baseline credit assessments to "b2" from b1" and long-term counterparty risk assessment to Ba2(cr) from Ba1(cr), and placed the ratings on review for further downgrade.
At the same time, Moody's affirmed Creval's Not Prime short-term bank deposit rating and Not Prime(cr) short-term counterparty risk assessment.
The agency said the downgrade reflects the deterioration of Creval's credit fundamentals, particularly its capital and profitability, which have weakened due to the need to reduce the carrying value of the bank's loans and increasing provisioning requirements, respectively.
Meanwhile, Moody's said the placement of the ratings on review for further downgrade reflects its view that Creval's weakened risk absorption capacity will make it harder to further reduce its still very large stock of problem loans, which may test the bank's viability as a stand-alone identity. The agency noted that it aims to assess Creval's capital and funding, its measures to improve profitability and its plans to cut its stock of problem loans as part of the review.
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