(Finance) – DBRS Morningstar has raised the Long-Term Issuer Rating Of Bank Monte dei Paschi di Siena to “BB” (low). At the same time, it confirmed the Short-Term Issuer Rating at “R-4”. The trend on all ratings is “Stable“.
The rating upgrade takes into account the fundamental improvements of MPS in recent years, reads a note. In particular, DBRS Morningstar believes that the €2.5 billion capital increase in November 2022 has adequately restored capital levels and provided the bank with room to execute on its latest strategic plan, which has already led to structural improvements in earnings generation capacity.
Profitability was somewhat weak, still impacted by restructuring costs in 2022 to prepare for the substantial headcount reduction of 4,000 employees in December 2022. However, the latter was key to a structural improvement of operating efficiencywhich materialized in the first quarter of 2023.
Additionally, the action on the rating incorporates a improved revenue prospectsas MPS is expected to benefit from rising interest rates in 2023. While some deterioration is expected in the current environment, DBRS Morningstar believes MPS is in a much better position than in the past.
The ratings continue to be supported by the stabilised, financing and liquidity profile, although MPS did not access wholesale capital markets in 2021-2022 as issuance became expensive. However, following the capital increase, MPS resumed issuance on the market in February 2023. The ratings also continue to take account of the franchise of the bank as one of the largest Italian banks with a good domestic footprint, although the reputation of MPS has been affected by legacy conduct issues.