Milan, November 27, 2012 -- Moody's Investors Service has today placed on review for downgrade the Baa3/Prime-3 long and short-term debt and deposit ratings of Banco Popolare Società Cooperativa (BP) and the D+ standalone bank financial strength rating (BFSR), equivalent to a standalone credit assessment of ba1.

The review for downgrade has been caused by Moody's concern about (i) the deteriorating trend of BP's already weak asset quality, and (ii) the bank's low internal capital generation, against the background of the current recession in Italy. The review will focus on BP's ability to stabilise its asset quality and to ensure sufficiently high capital levels above regulatory requirements via internal capital generation in the case of a further decline in asset quality.

At the same time, Moody's also placed on review for downgrade the Ba1/Not-Prime long- and short-term debt and deposit ratings and the standalone BFSR of E+/b1 of BP's subsidiary Banca Italease.

RATINGS RATIONALE

BP's asset quality is weak and likely to deteriorate well into 2013, given that the Italian economy is likely to remain in recession through much of 2013. In September 2012, the bank reported very high gross problem loans of 16% of total loans (i.e. significantly above the banking system's average), amounting to 113% of equity and loan-loss reserves, with a low reported coverage of loan-loss reserves (around 27%), compared with 14% and 102% respectively at 2011 year-end (1). Moody's concern around this asset quality is exacerbated by significant concentrations to the real-estate sector. During the review, Moody's will focus on the expected trends in asset quality as well as any steps the bank is taking to address this development.

Moody's notes that BP's European Banking Authority (EBA)-compliant Core Tier 1 ratio (9.8%) is significantly above the minimum ratio imposed by the supervisors (BP was included in the sample of European banks that were subject to the 9% Core Tier 1 capital requirement imposed by the EBA). Nonetheless it is worth noting that BP's risk weighted assets (RWAs) have decreased significantly to around EUR58 billion (Q3- 2012; EBA-compliant Core Tier 1 ratio at 9.8%) from EUR90 billion (end 2011; with a Core Tier 1 ratio of 7.1%) mainly as a result of the adoption of the internal risk-based approach (IRB) for the computation of exposures. During the review Moody's will analyse the individual components of this regulatory capital evolution to fully assess the bank's loss absorption capacity.

With regards to profitability and the bank's ability to generate capital internally, Moody's notes the lacklustre performance of the bank between 2011 and September 2012, even when excluding the considerable goodwill impairment of EUR2.8 billion from the bank's 2011 net result: the bank's net loss amounted to EUR54 million in the nine months to September 2012 (as reported by the bank) against a net profit of EUR356 million in December 2011 (as adjusted by Moody's excluding goodwill impairment and other extraordinary items). Furthermore, the combination of BP's weak internal capital generation and poor asset quality has raised the barriers for BP to access the capital markets, increasing BP's dependence on the European Central Bank for funding (at EUR13.5 billion as of November or 9.9% of assets as of September 2012, which is significant). As part of its review, Moody's will also focus on the bank's plans and ability to improve profitability, as well as on the bank's funding flexibility outside of central bank funding.

WHAT COULD MOVE THE RATING -- UP/DOWN

At present, there is no upwards pressure on the ratings given the review for downgrade. However, Moody's might confirm the ratings if BP improves its standalone financial profile, including (1) a demonstrable and credible ability by the bank to materially improve its internal capital generation on a sustainable basis; (2) a short-term ability to reduce problem loans to levels that do not exceed the Italian average; and (3) a reduction of reliance on central bank funding without significantly compromising the bank's funding and liquidity situation.

Conversely, should the bank not be able to stabilise and reverse the deteriorating trends in asset quality and profitability, this could prompt a downgrade.

BANCA ITALEASE

The review of Banca Italease follows the review of its parent, BP, as well as the bank's need for parental support, given that Italease -- which is in run-off -- is structurally unprofitable and has poor asset quality.

An upgrade is unlikely in the near term given the review for downgrade however the ratings could be confirmed if improvements to its financial profile are achieved, including an improvement in the bank's recurring profitability and asset quality. The deposit ratings could be confirmed if the parent's deposit ratings -- which are on review for downgrade - are confirmed.

A downgrade of the ratings could be prompted by any of the following: (i) evidence that group support is diminishing, which Moody's however considers unlikely at present, (ii) rising pressure on the bank's real estate portfolio, (iii) a downgrade of the parent.

(1) Unless otherwise noted, data in this report are from Company data or Moody's Financial Metrics.

LIST OF AFFECTED RATINGS BANCO POPOLARE - Senior unsecured debt and EMTN, and bank deposits: Baa3; (P)Baa3 / RuR down

- Short-term debt and deposit: P-3 / RuR down

- Subordinate debt and EMTN: Ba2; (P)Ba2 / RuR down

- Tier III EMTN: (P)Ba2 / RuR down

- Junior subordinate EMTN: (P)Ba3 / RuR down

- Preferred stock: B1 (hyb) / RuR down

- Bank Financial Strength Rating: D+ / RuR down

BANCA ITALEASE

- Senior unsecured debt and bank deposits: Ba1 / RuR down

- Short-term debt and deposit: Not - Prime

- Subordinate debt: Ba3 / RuR down

- Backed Preferred stock: Caa3 (hyb) / RuR down

- Bank Financial Strength Rating: E+ / RuR down

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was Moody's Consolidated Global Bank Rating published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Carlo Gori Vice President - Senior Analyst Financial Institutions Group Moody's Italia S.r.l Corso di Porta Romana 68 Milan 20122 Italy Telephone:+39-02-9148-1100Johannes Wassenberg MD - Banking Financial Institutions Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Italia S.r.l Corso di Porta Romana 68 Milan 20122 Italy Telephone:+39-02-9148-1100(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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