Fitch downgraded Intesa Sanpaolo and UniCredit yesterday (Monday) and revised its outlooks for Banco Popolare and MPS from stable to negative after having cut the Italian sovereign rating on 8 March, with UniCredit covered bonds seen as the only OBGs likely to be affected.

The rating agency cut Italy from A- to BBB+, which affected banks with long term issuer default ratings at or above A- and banks with Support Rating Floors in the BBB range.

Fitch’s downgrades of Intesa Sanpaolo and UniCredit mirrored that of the sovereign, with the banks being cut by one notch from A- to BBB+, on negative outlook. The cuts were part of rating actions taking in seven Italian parent banks and one non-bank financial institution.

Banca Monte dei Paschi di Siena and Banco Popolare were affirmed at BBB, but the outlooks revised from stable to negative.

Barclays analysts had after the downgrade of Italy said they expect UniCredit covered bonds to be cut to A-, with no rating impact on other Italian covered bonds.

Florian Eichert, senior covered bond analyst at Crédit Agricole, said that Fitch’s rating actions on Italian banks is largely a “non-event” for OBGs since Intesa Sanpaolo covered bonds are not rated by Fitch and other issuers’ ratings remained unchanged, leaving UniCredit covered bonds the only ones to be affected.

“They will have to go down by the same number of notches as the senior (OBGs will move from A to A-) unless the bank decides to increase the committed OC level,” he said.