S&P upgrades Banca Popolare di Sondrio’s credit rating ahead of expected merger with BPER Banca

S&P Global Ratings has upgraded its credit ratings on Banca Popolare di Sondrio (BPS), citing the bank’s expected full merger with BPER Banca within the next year. The agency raised BPS’s rating from ‘BBB-/A-3’ to ‘BBB/A-2’, while also improving its ratings on several specific types of debt, including senior and subordinated instruments. The outlook for the bank is now stable.

The upgrade follows a successful tender offer by BPER, which now owns about 58.5% of BPS. Even though BPER doesn’t yet hold the two-thirds majority typically needed for a full merger, S&P believes there’s a strong chance that shareholders will approve the move when it’s put to a vote. As a result, the agency now sees BPS as a core part of BPER’s group strategy and has aligned the two banks’ ratings more closely.

S&P maintained its existing ‘BBB/A-2’ rating for BPER Banca, also with a stable outlook, suggesting the acquisition is not expected to weaken the parent bank’s financial standing.

The ratings upgrade is rooted in S&P’s confidence in the strategic value of the merger. The agency highlighted the geographic and business compatibility of the two banks, the limited overlap between their operations, and BPER’s forecast of €290 million in synergies by 2027. S&P called this synergy estimate achievable, based on its analysis of both firms’ operations and market positions.

Importantly, the agency does not expect the deal to harm BPER’s asset quality, even though it increases the bank’s exposure to corporate and small/midsize business clients. The impact on capital is projected to be modest, possibly reducing BPER’s capital ratio by 30 to 40 basis points in 2027 compared to pre-merger expectations.

One potential challenge noted by S&P is maintaining BPS’s strong local franchise, especially in Lombardy, one of Italy’s wealthiest and most economically important regions. BPS has built strong community ties and business relationships there, which BPER will need to preserve during and after the integration process.

Overall, the stable outlook for both banks reflects S&P’s belief that BPER can handle the merger without major problems and will maintain solid financial health in the coming years.

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