Moody’s changed the outlook from negative to stable on seven Italian financial institutions yesterday (Tuesday), including covered bond issuers UniCredit and Intesa Sanpaolo, following a stabilisation of the Italian government’s creditworthiness.

A steadying in the country’s credit quality led Moody’s to change its outlook on Italian government bonds, rated Baa2, from negative to stable on 14 February.

However, the rating agency noted that the action on the sovereign will have no direct impact on the rating of other Italian banks, nor will it affect the negative outlook on the standalone credit profiles of most of the country’s banks or the Italian banking system as a whole.

The negative outlooks reflect Moody’s expectations of weak Italian GDP growth, asset quality deterioration, and weak profitability and uncertainties linked to how the European Central Bank’s comprehensive assessment of banks in Europe will affect those in Italy.

The seven financial institutions affected by Moody’s rating action are UniCredit, Intesa Sanpaolo, Banca IMI, Banca CR Firenze, Cassa Depositi e Prestiti (CDP), Cassa di Risparmio di Parma e Piacenza, and UniCredit Leasing. The rating agency affirmed their ratings at Baa2, with the exception of UniCredit Leasing, which is rated Baa3.