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Bond Market News
Banco BPM Upgraded to BBB by S&P
October 25, 2024
Banco BPM was upgraded by a notch to BBB from BBB- by S&P. The rating agency also upgraded the bank’s senior unsecured bonds by a similar measure and affirmed the ratings on all its subordinated debt instruments. The upgrade reflects strengthening of additional loss-absorbing capacity (ALAC) buffers by the bank, which provide protection to the senior creditors in a resolution scenario. The bank has accumulated a large cushion of ALAC instruments, raising its ALAC buffer sustainably above 3.5% of risk weighted assets (RWAs). Banco BPM’s ALAC buffer is expected to remain above 3.5% of RWAs and its ALAC-eligible issuances are forecasted to be in range of €1.5-2bn between 2025 and 2026, according to S&P. Additionally, Banco BPM’s strong position in wealthy northern Italy and a diversified business model are projected to support stability and generate a return on equity of 11-12% through 2025 and its risk-adjusted capital ratio is expected to remain above 7%.
Its bonds traded stable with its € 7.25% Perp at 105.2, yielding 6.23%.
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