UniCredit Group announced on Friday that Moody's affirmed UniCredit SpA's Baa2 long-term debt and deposit ratings and its Prime-2 short-term ratings.

Moody's also lowered the bank's baseline credit assessment to ba1 from baa3, resulting in a downgrade of subordinated debt. The rating agency's stable outlook was unchanged.

Two drivers were cited in the lowering of UniCredit's baseline credit assessment, including asset quality weaknesses depressing profitability and weakened capital adequacy. Moody's predicted persistently low profitability in 2014 and anticipated recovery in profitability starting in 2015.

The rating agency also said UniCredit has a weakened, but sufficient, capital buffer. UniCredit's problem loans as a proportion of equity and loan loss reserves increased from 62 percent in 2012 to 69 percent in 2013.

Moody's said UniCredit's baseline credit assessment could rise over time following the achievement of significant net profitability and a significant reduction of problem loans as a proportion of equity and loan loss reserves.

UniCredit Group is an Italian global banking and financial services company with approximately 40 million customers and operations in 20 countries. Its network spans 50 markets with more than 9,000 branches and more than 148,000 employees. The company's strategic position in Western and Eastern Europe gives the group one of the region's highest market shares.

UniCredit Group was the outcome of the 1998 merger of several Italian banks.