Morningstar DBRS Confirms Banca Nazionale del Lavoro S.p.A.'s Long-Term Issuer Rating at A (high), Stable Trend

DBRS Ratings GmbH (Morningstar DBRS) confirmed its credit ratings on Banca Nazionale del Lavoro S.p.A. (BNL or the Bank), including the Long-Term Issuer Rating at A (high) and the Short-Term Issuer Rating at R-1 (middle, both with Stable trends. BNL is the Italian banking subsidiary of BNP Paribas SA (BNPP or the Group). The credit rating action follows the confirmation of Morningstar DBRS' credit ratings on BNPP dated 17 June 2025 and considers BNL's credit fundamentals and financial performance in 2024. BNL's support assessment is SA1. A full list of credit rating actions is included at the end of this press release.

KEY CREDIT RATING CONSIDERATIONS
Morningstar DBRS has maintained the Bank's Support Assessment at SA1, which implies strong and predictable support from the Group. The credit ratings on BNL are positioned one notch below the credit ratings on BNPP, in line with Morningstar DBRS' credit rating approach for core banking subsidiaries located abroad in countries with low cross-border risk. On 17 June 2025, Morningstar DBRS confirmed BNPP's Long-Term Issuer Rating at AA (low) with a Stable trend. The SA1 designation considers BNPP's 100% ownership in BNL as well as the latter's strategic importance and integration in the Group.

CREDIT RATING DRIVERS
Given the SA1 designation, BNL's credit ratings will generally move in tandem with BNPP's credit ratings.

Similarly, a downgrade would result from a downgrade of BNPP's credit ratings, or if the Bank becomes a noncore subsidiary for the Group, or if BNPP materially decreases its level of support.

CREDIT RATING RATIONALE
BNL is BNPP's banking subsidiary in Italy, which BNPP considers to be a domestic market. At YE2024, BNL had EUR 93 billion in total assets. The Bank operates in retail and corporate banking with a nationwide franchise and a solid footprint across the central and western regions of Italy. The Bank has been part of BNPP since its acquisition in 2006.

BNL is viewed as a core component of BNPP's retail franchise outside of France. In line with BNPP's strategy, Italy is considered a key market for the Group together with France, Belgium, and Luxembourg. BNL is integrated into the parent company through shared systems, controls, management, and strategy, as well as treasury and risk management. Morningstar DBRS considers that BNL's franchise, product offering, and reputation benefit from being part of a larger group. BNL has also consistently benefitted from financial support from BNPP in various forms, and Morningstar DBRS expects BNPP to continue to support BNL when the need arises.

The Bank's results improved further in 2024 with its pretax income up 1.75 times year over year (YOY), driven by higher revenues and lower provisions and operating expenses. The Bank's net interest income increased by 11.2% YOY driven by better deposit margins and higher loan volumes. Fees and commissions increased by 5% YOY with a strong performance in financial fees, partially offset by lower banking fees. Similar to its parent BNPP, BNL has continued implementing cost efficiency measures, from business simplification to digital transformation. Accordingly, operating expenses declined by 2.9% YOY primarily driven by lower personnel expenses. The reported cost-to-income ratio was 64%, down from 66% a year earlier. The cost of risk decreased further to 46 basis points (bps) in 2024 from 53 bps in 2023.

BNL's risk profile has continued to improve, driven by a declining stock of nonperforming loans (NPLs). Total gross impaired loans amounted to EUR 1.8 billion at YE2024, down from EUR 2.5 billion at YE2023, thanks to a combination of NPL disposals and write-offs. As a result, the Bank's total gross NPL ratio decreased to 2.5% at YE2024, from 3.1% at YE2023, which is now more in line with domestic peers albeit still somewhat above international peers. In Morningstar DBRS' view, geopolitical tensions and potential U.S. tariffs pose a risk to asset quality; however, this should be partly offset by the benefits from lower interest rates and inflation. Also, BNL's improved earnings generation capacity and BNPP's support should provide some flexibility to absorb any potential deterioration in asset quality.

At YE2024, BNPP had provided EUR 11.4 billion in total funds to BNL, down 40% YOY compared with YE2023. As a result, BNPP's funds correspond to 12% of the Bank's total liabilities and funds. Deposits from retail and corporate customers, however, remain the main source of funding, accounting for 76% of the total liabilities and funds, reflective of the bank's retail and commercial franchise.

BNPP also remains committed to maintaining BNL's capital levels. The Bank reported a phased-in CET1 ratio of 12.4% at YE2024, slightly down from YE2023, and a total capital ratio of 16.9%, up from 16.4% at YE2023, which provides a good cushion above the ECB SREP requirements of 9.0% for CET1 and 13.25% for the total capital ratio.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025) at https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (23 May 2025), https://dbrs.morningstar.com/research/454637. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings, https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The sources of information used for these credit ratings include Morningstar, Inc. and company documents. Other sources include BNL 2024 Consolidated Accounts. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit the information it receives in connection with the credit rating process, and it does not and cannot independently verify that information in every instance.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are under regular surveillance.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

The sensitivity analysis of the relevant key credit rating assumptions can be found at: https://dbrs.morningstar.com/research/456368.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Sonja Forster, Senior Vice President
Rating Committee Chair: Vitaline Yeterian, Senior Vice President, Sector Lead
Initial Rating Date: 11 December 2017
Last Rating Date: 20 June 2024

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