Egan Jones Just Downgraded Italy's Most Troubled Banks To BB+

Q. What is the last thing that panic driven market plunges need? A: The Truth, this time brough to you by the only credible rating agency: Egan-Jones.


  • Banca Monte dei Paschi: EJR lowered BBB to BB+ (S&P: A-) (BMPS IM)
  • Intesa Sanpaolo SpA: EJR lowered BBB- to BB+ (S&P: A+) (ISP IM)


On Intesa Sanpaolo:

Synopsis: Asset quality has improved but is still a problem. NPLs for the March quarter were 9.44% of total loans with reserve coverage of 51.9% (Year end December '10 NPLs were 9.36% of loans with 49.9% coverage). Capital is somewhat adequate with a capital/assets ratio of 8.6% of assets, however when unreserved NPLs are taken into account, equity is diluted to 5.82% of assets (December year end capital/assets was 8.31%, 5.47% with equity dilution). Greek sovereign exposure is stated at EUR 1.1B. We are downgrading to " BB+ " due to Italian sovereign concerns.

On Banca Monte dei Pasci, which is the oldest surviving bank in the world (h/t London Dude Trader)

Synopsis: Asset quality and capital are major concerns. Non-performing loans as of the March quarter were 5.44% of loans, up from 4.9% last year. Reserve coverage of 46% needs improvement. While POP holds " guarantees and mortgages " the value we believe is elusive and therefore applied only 30% of the guarantee to the reserves. Adding the additional EUR1.1B to reserves, coverage increases to 58% of NPLs. POP's 6.7% capital to assets ratio is diluted to 4.7% including the reserve shortfall. Real estate loans are relatively high at 50% of loans. POP has EUR14B in Spanish govt. bonds. We are downgrading to " BB+ " based on sovereign concerns.

We don't expect Banca Monte dei Pasci to be the longest surviving bank for much longer.


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