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Moody's changes outlook on Banca Carige deposit rating

Moody's on Oct. 5 affirmed 's long- andshort-term deposit ratings at B3/Not Prime and changed the outlook on thelong-term rating to developing from positive.

The rating agency also affirmed Banca Carige's long-termissuer rating at Caa1, stand-alone and adjusted baseline credit assessments at"caa3" and long- and short-term counterparty risk assessments atB3(cr)/Not Prime(cr). Moody's maintained a developing outlook on the long-termissuer rating.

Moody's noted the persistence of Banca Carige's mainweaknesses, namely a large stock of problem loans, which representedapproximately 30% of the lender's gross loans as of June; a small capitalbuffer; a loss-making profile; and funding reliance on the . The bank's includes a reduction inproblem loans to about 20% of gross loans in 2020.

The developing outlook on the bank's long-term deposit andissuer ratings reflects opposing pressures on the ratings. The agency saidBanca Carige's credit profile could improve if the bank is able to execute itsplans and significantly reduce it stock of problem loans, while maintaining anadequate capital level and generating recurring profitability on a sustainablebasis.

Moody's noted, however, that the execution risk involvedwith Banca Carige's business plan is very high, as the plan will be carried outagainst a volatile operating environment and there is a risk of contagion fromproblems elsewhere in the banking sector, as well as heightened pressure fromthe ECB.