Moody’s says UniCredit’s rating could rise above Italy’s if it buys Commerzbank

MILAN, Oct 2 (Reuters) – Moody’s downgrades UniCredit’s credit rating if it buys Commerzbank, a rating agency said He said he would consider upgrading it to a higher level.

This move disturbed the German establishment, and Commerzbank said its strategy was based on independence. The acquisition would be Europe’s first major cross-border banking deal since the global financial crisis.

Moody’s said it would evaluate whether UniCredit’s standalone ‘Baa3’ rating, which is currently in line with Italy’s rating, deserves to be upgraded to ‘Baa2’ in the event of a deal.

As a result, it was stated that UniCredit’s unsecured debt rating would improve.

Moody’s said any upgrade “will depend on the combined group’s degree of international diversification, its exposure to Italian country risk and its post-acquisition capitalization, asset exposure, funding and liquidity.”

Italy’s poor credit situation has traditionally posed a challenge to Italian lenders’ international expansion plans.

UniCredit went through a long restructuring process and accumulated billions in capital above its minimum target before applying to Commerzbank.

In the event of a deal, a stronger footprint in triple-A-rated Germany, more diversified financing channels and lower direct exposure to Italy’s debt relative to equity would “loosen the real ties and correlation” between UniCredit and Italy’s ratings.

“In the event of a Commerzbank acquisition, we expect UniCredit’s currently very strong capitalization to be diluted but remain intact and at least consistent with management’s stated minimum 12.5%-13% CET1 target range,” Moody’s said. An important indicator of capital.

“Whilst any acquisition will likely reduce profitability in the short term given restructuring and other costs, in the medium term it will deliver higher returns through cost synergies in Germany and deliver a stronger combined franchise,” he added.

Meanwhile, Moody’s confirmed UniCredit’s ratings with a stable outlook.

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