DBRS Assigns BB Rating to Intesa Sanpaolo AT1 Notes

DBRS has today assigned a BB rating to the Additional Tier One (AT1) Notes issued by Intesa Sanpaolo SpA (the Issuer or the Bank) under its USD 25,000,000,000 Medium Term Note Programme (MTN Programme). The program is for the issuance of either Senior, Subordinated or AT1 Notes. For the Issuer, DBRS’ existing ratings are A (low) for Senior and BBB (high) for Subordinated. Only the AT1 Notes constitute a new rating class for the assignment of DBRS ratings.

In assigning the BB rating to the AT1 Notes, five notches below the Bank’s Intrinsic Assessment (IA) of A (low), DBRS highlights that the AT1 obligations are deeply subordinated and constitute the most junior debt instruments of the Issuer. They are perpetual in tenor and can be written down in part or in full if the Issuer or Regulator determines there is a Trigger Event. The trigger level for write-downs is set at a minimum CET1 ratio for Intesa Sanpaolo of 5.125%. Noteholders could lose all or some of their principal as a result of a write down. While the notes can be written up in part or in full at the full discretion of the Issuer, there are required conditions of positive and distributable net income which need to be met. Intesa Sanpaolo can cancel interest payments on the AT1 Notes in part or in total and under some circumstances may be required to cancel interest payments.

The AT1 BB rating is five notches below Intesa Sanpaolo’s IA of A (low) and considers both the probability of the Bank tripping the capital trigger, as well as expected recovery levels. For more detail on this approach, see DBRS’ Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2015). Total notching from the IA for such instruments can range between 3 notches and more than 6 notches. In the case of Intesa Sanpaolo, the notching takes into consideration the sizeable buffer of 8.175% between the 5.125% trigger and the Bank’s current 13.3% pro forma fully loaded Basel III CET1 capital ratio.

The ratings assigned to the MTN Programme are subject to maintenance of the Bank’s IA of A (low). The Trend on all ratings is Stable.

Notes:
All figures are in USD unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (June 2015). Other applicable methodologies include the DBRS Criteria: Support Assessments for Banks and Banking Organisations (March 2015) and DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2015). These can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: Peter Burbank
Rating Committee Chair: Roger Lister
Initial Rating Date: September 11, 2015
Most Recent Rating Update: June 24, 2015

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